jjf, There is no doubt the "right price trading plan" can take advantage of these unfolding developments. On the other hand understanding how these developments unfold can help with making better price based decisions.
I only use what I can trust and that is price. Volume as it is presented contains the unknown variable of purpose. clearing or entering?
Short covering and/or new longs are both buyers and the key is always if they are patient buyers or anxious buyers?.......Short covering and new longs do not have to be immediately bullish for price, no. The bullish result for price would take place if these are the final patient buyers in an area, or if these are anxious buyers.
Charts (Constant Volume or Share Bar Charts) where Price and Volume are merged into a single bar eliminates the variable aspect of volume. It turns it into a constant as long as the software you are using builds the bars consistently.
Experienced traders worth their salt can trade their "PLAN" with price only, we all know that. Could traders that need a crutch to lean their inexperience on by using volume even imagine they are imagining any value in using volume as "AFTER THE FACT"? No one, NO ONE, can tell you what the next tick in price is going to be. Clowns rattle on about volume usage like politicians and Larry Kudlow, they try to drill it into you when the better of us know the real drill is about a con.
Prof, Im curious, I use Share Bar charts for all my entries, exits, etc for the main reason they "speed up and slow down according to volatilty" which is very important for what Im looking to do from a trade management standpoint etc. Is this the key advantage of turning volume into a constant, or are there other key aspects of Share bars charts that I am not considering? Thx.
No, that is the key to using volume on your charts but remember that the bars MUST be consistent. Example: You create a 500 Constant or Share Volume Bar Chart. The software creates the bars and let's say the current bar has 420 contracts in it and an order goes through the system for 200 contracts. The correct way to add this to the bar would be to add the first 80 contracts to the current bar and starting the new bar with the remaining 120 contracts. some lazy software companies slop the whole 200 contracts onto the bar with 420 making it 620 instead of doing it CORRECTLY and consistently. You have to ask because your software company will more than likely lie to you about this process. I personally know that MultiCharts and Ensign both do it correctly and of those two, MultiCharts is the professional choice. Ensign was the first software company to create these for me when I developed them but they are more for traders watching a couple markets only. I've been told a couple others create the bars correctly as well but have never been able to personally confirm it.
BH, I agree with you about price but a CVB Chart is a perfect union of price and volume. No variable aspect to volume whatsoever. Perfect flow and oscillations of price at any increment. You can't address that until you see it and use it. I also agree with you in regards to predicting the next tick but when one is able to read the smooth flow of pure price oscillations then your trading probabilities increase exponentially.
I agree with this completely.....What I think everyone not using CVB should do if nothing else, if take your current charts, trading plan, etc. and see how they look with appropriate CVB charts? See if this can improve what you are doing now, or not? I had no idea some software "fudges" a little bit on the accuracy of plotting these bars....I use TS, and have no idea if they do it right or wrong?..Thank you for the info.