Volume: How can it be used in trading?

[Timmy]

engulfing swallow

African or European?

 

[ThingyMajiggy]

I think it will take out the top of the last bar shown within 12 minutes. Did I win?

You cheated : but yes you win, it took out the top in the next 4 minutes though, so I'll deduct some points for that.

African or European?

Definitely African, much more effective, its when you get a mixture of them both that its a real gem, The Afripean, winner through and through.

 

[tech/a]

I dont trade crude so havent looked we know it has taken out the high.
The last bar shown shows a great deal of selling.
Youd then be looking to see if the next bar or 2 were inside bars and/or very low volume.If this is the case then selling had ceased and the low of the last lowest bar would become the trailing stop.

So I would say volume dried up
and range.
It would be likely that any rise then came from lower volume.

 

[ThingyMajiggy]

I dont trade crude so havent looked we know it has taken out the high.
The last bar shown shows a great deal of selling.
Youd then be looking to see if the next bar or 2 were inside bars and/or very low volume.If this is the case then selling had ceased and the low of the last lowest bar would become the trailing stop.

So I would say volume dried up
and range.
It would be likely that any rise then came from lower volume.

This is what it did after that candle, the candle itself looks different for some reason, must be a fault in the data or something I dunno.

 

[tech/a]

So next bar the one after the arrow.
Volume dried up and range tightened
Old resistance became support and there was a wide range thrust to create a new high.
So there was a good entry signal and a perfect stop at the low of the bar after the arrow.

 

[Dracuu]

You cheated : but yes you win, it took out the top in the next 4 minutes though, so I'll deduct some points for that.

I didn't cheat. I have just been trading for a very long time.

In my early days I did a lot of Gann type analysis and that taught me to put a lot more weight on time rather than price.
In this case a market had been trending up for a long time but the retracement was very quick so I thought it would most likely just continue up and due to the strength it has already shown the continuation would be strong.
Strength is shown in time not price. I don't look at volume all that much.

 

[ThingyMajiggy]

I didn't cheat. I have just been trading for a very long time.

In my early days I did a lot of Gann type analysis and that taught me to put a lot more weight on time rather than price.
In this case a market had been trending up for a long time but the retracement was very quick so I thought it would most likely just continue up and due to the strength it has already shown the continuation would be strong.
Strength is shown in time not price. I don't look at volume all that much.

Interesting, obviously works for you if you've been doing it for a very long time?

At what point determines whether its a fast or slow pullback? eg. you said that was a fast pullback, how many more bars would make it a "slow" pull back and make you think things aren't quite so strong? Just curious

You are one of the Gann believers obviously? You think he was a successful trader? I'm not having a go, just noticed there is a split camp as far as Gann goes, I haven't looked into it, never really interested me much, looked like a load of rubbish in my opinion, yet to be proven that it works....but thats just me. Happy to be proven wrong.

 

[Dracuu]

At what point determines whether its a fast or slow pullback? eg. you said that was a fast pullback, how many more bars would make it a "slow" pull back and make you think things aren't quite so strong? Just curious

I look for previous ranges to repeat. The previous retracement lasted about 3 bars and then the last bar on the chart did slightly more than that previous range but it did it in one bar. I see that as a strong market where most people would see that as weak market especially if you give a lot of weight to volume (which I do not).
If it went down for say 5 bars and the same or more distance in price then I would say it is weakening and probably wouldn't expect as strong a move up.

You are one of the Gann believers obviously? You think he was a successful trader? I'm not having a go, just noticed there is a split camp as far as Gann goes, I haven't looked into it, never really interested me much, looked like a load of rubbish in my opinion, yet to be proven that it works....but thats just me. Happy to be proven wrong.

I have studied pretty much every single bit of information I could get my hands on regarding Gann. I purchased all original copies of every single thing he published and studied every aspect in depth for about 6 years. It actually consumed me but that is a long story and for that reason I actually try to keep out of all the Gann discussions.

Do I think it works? I don't believe the mystical or planetary aspects have any credibility at all and forget about 1x1 lines and 1x2 lines etc. or 33%, 50% retracements etc. but I believe the basic stuff like counting time periods or measuring distances in price (all the market cycle stuff) is without a doubt very useful if done correctly.

There are heaps of other things that are really useful like recognising leading and lagging markets and seasonal cycles etc. Overall I would recommend to anyone that they become familiar with his basic techniques as I am sure it will help them.

 

[satanoperca]

Can I ask why is volume always looked at in isolation of the individual stock being analysed and not in relation to the over volumes of the market?

So XYZ has a large volume day and so does the XAO, is this different to the XYZ has a low volume day while the XAO does not? Or XYZ has a large volume down day while the XAO has a high volume up day.

Just been researching and trying to get a feel for VSA, but finding that it is only looking a one face of the coin.

Cheers

 

[tech/a]

Can I ask why is volume always looked at in isolation of the individual stock being analysed and not in relation to the over volumes of the market?

So XYZ has a large volume day and so does the XAO, is this different to the XYZ has a low volume day while the XAO does not? Or XYZ has a large volume down day while the XAO has a high volume up day.

Just been researching and trying to get a feel for VSA, but finding that it is only looking a one face of the coin.

Cheers

The XAO/XJO is an index of a group of shares.
It is chart is a depiction of the price action of those shares in accumulation.
XYZ share is controlled by the individuals investing or divesting in it.

Commonly both will or will not be correlated.
VSA is the study of supply and demand in various timeframes depicted by volume and bar range (In general terms).
Not a comparison of various constituents.

 

[The Edge]

Monday 14 June 2010

Santoperca:

Volume is an important component that reveals the quality of the supply and demand characteristic(s) of a stock, even an average. It is to be viewed for each stock selection as a clue in assessing the quality, or lack, as a market move is underway.

If price were at/approaching a point of resistance, for example, you want to see an increase in volume, [effort] that tells you there is strong interest existing in the effort to continue higher. If volume decreases at an area of resistance, [volume goes with price, so you may likely see a smaller range, indicating buyers' inability to extend the range higher, and/or sellers meeting the effort of buyers, keeping the range narrow], the lower volume tells you that there is not a lot of, or not enough effort to break through the resistance area. This would also reflect a lack of demand when demand is required to make its presence known.

As this is occurring, what the volume is on the underlying index is of no consequence for the individual circumstance.

 

[tech/a]

Monday 14 June 2010

Santoperca:

Volume is an important component that reveals the quality of the supply and demand characteristic(s) of a stock, even an average. It is to be viewed for each stock selection as a clue in assessing the quality, or lack, as a market move is underway.

If price were at/approaching a point of resistance, for example, you want to see an increase in volume, [effort] that tells you there is strong interest existing in the effort to continue higher. If volume decreases at an area of resistance, [volume goes with price, so you may likely see a smaller range, indicating buyers' inability to extend the range higher, and/or sellers meeting the effort of buyers, keeping the range narrow], the lower volume tells you that there is not a lot of, or not enough effort to break through the resistance area. This would also reflect a lack of demand when demand is required to make its presence known.

As this is occurring, what the volume is on the underlying index is of no consequence for the individual circumstance.

Hmm dont agree with this.

This i presume is a perfect example??

 

[tech/a]

And this--perfect according to your description tremendous volume on the breakout!!

 

[satanoperca]

Commonly both will or will not be correlated.

This is the part I will further investigate.

Cheers

 

[tech/a]

I actually find its not as clear cut as 90% of traders think.

 

[tech/a]

This is the part I will further investigate.

Cheers

If one is heavily weighted in an index then it is likley.
if not it may not have an effect.

 

[Trembling Hand]

If price were at/approaching a point of resistance, for example, you want to see an increase in volume, [effort] that tells you there is strong interest existing in the effort to continue higher.

Nah that is exactly what makes resistance; a large amount of supply.

If volume decreases at an area of resistance, [volume goes with price, so you may likely see a smaller range, indicating buyers' inability to extend the range higher, and/or sellers meeting the effort of buyers, keeping the range narrow], the lower volume tells you that there is not a lot of, or not enough effort to break through the resistance area. This would also reflect a lack of demand when demand is required to make its presence known.

Cannot agree either. If price approaches an area of old resistance and there is low volume that indicates a lack of supply. Thats a very good signal. Resistance holds when the buyers are continually overwhelmed by sellers. No sellers to supply the resistance means a good chance that any further buying will push through without any further resistance. thus higher prices to come.

 

[Trembling Hand]

This is the part I will further investigate.

Cheers

volume and the indexes are very hard to read as the price of an index is cap weighted yet the volume is not.

Its possible to have a high volume day in the sml/mid-caps of the index yet an average day in the top 20 of the XAO. What would you take from that? The volume will be large but the move or effect on the price of the index will be minimal because the top 20 make up 70% of the index.

Another problem with index volume will for example happen on Thursday when the SPI futs roll and you will have 3 months of arbitrage being unwound on the open. What will you take from that high volume event? It will be the highest volume day for three months yet its not what it seems to be.

 

[tech/a]

High volumes in an up move generally signal supply.
There are exceptions.
In a down move Buying but there are exceptions.
The secret lies in the next few (2-3) bars.
They will disclose what the volume was.

Note in both examples volume dries up AFTER the move up showing clearly no demand.
The test in the first example is on high volume and clearly shows supply.
The market just then falls away as expected.

 

[The Edge]

Tuesday 15 June 2010

Sorry gents, we disagree.

TH: Your first negative makes no sense to me. If volume is weak when approaching an area of resistance, the market activity is saying there is not sufficient buying effort to break through the overhead supply. If the volume is strong and the range size increases, there is a greater likelihood that resistance will give way. Knowing where the trend is at the time is also important as an aid in
assessing the situation.

To your second comment, price approaching resistance on smaller volume is not necessarily a lack of supply. It would more likely be a lack of demand, and the size of the range for that day would confirm it. Supply is already proven by virtue of the existing resistance. The burden is on buyers to increase their volume effort to break through the old supply. Less volume = less buying effort.

tech/a: Increased volume in an up move is a clear demonstration of buyers being in control. The location of the closes would confirm that, as well. If high volume were to be supply, there would be no uptrend.

It is agreed that a decrease in volume would be indicative of a lack of demand, in an uptrend, where the range is generally smaller. The same decrease in volume, but with a wider range bar to the upside would be a lack of supply, as what buyers there were encountered little resistance.

There are no "secrets" in reading price and volume analysis. It is a matter of hands on experience, like anything else.

Sorry, but your second paragraph is not clear to me.

Reading volume is more of an art form that cannot be reduced to a formula.
At times, it can appear to be confusing, but when kept in context with the prevailing trend of the chosen time frame, volume falls into an identifiable intent/meaning. The higher the time frame, the more reliable the read. Once one gets into very small intra day readings, there is a lot of "noise" and it can be less reliable.

Cheers!