First, of all Im going to have to start out by agreeing with you (no it doesn't pain me to do that) In the end, I too believe you have to keep trading as simple as possible, play the odds, and have the discipline to carry out something very simple, consistent, and basic.. This is exactly the way I trade. In fact it would amost seem too simple if I described it here. That said, my plan also leaves room for discretion. For example if I am in clear chop in my timeframe, I might not take a trade. If Ive had several winning trades in a row, and the trend has run far, I might not take the next trade, or if certain volume or big picture developments are clearly in place I may not take the next trade, but such discussion if for another time, and in the meantime, I do agree the simpler you can make this the better. Whats funny is the volume and big picture issues I am discussing here are very simple, and will only compliment, and not distarct from a simple plan. I read another one of your posts, again, about how it is price that creates volume, and not visa-versa. You used an example of a $5,000.97 handbag not drawing any sales, and therefore it was the eventually lowering of price that brought in heavy volume, and I wanted to express an alternative view here that might better get to the heart of what I am trying to suggest here, even though we will both end up in the same place from a final trading perspective. A stock, or futures market is a dynamic dual auction process, compared to the more singular price of a product in a store, so lets put your handbag example in the context of a more dynamic auction. First, going with your exact example (which is entirely correct about lower price bringing in a heavier volume of sales), wasnt it the lack of volume at $5,000.97 that caused the manager to lower price in the first place?.. If volume was high at this price, there would be no need to lower price at all, and in this more static example, price would have stayed the same....Therefore, if you were watching volume of handbags at $5,000.97, you never would have "shorted handbags," and this would have told you where price was likley to remain for a while until volume dried up later. Now, if you turn the handbag example into a more dynamic auction, lets say price moved more freely around based on all the buyers and sellers out there, and lets the store put the handbags out at a bargain price of $2000.00... At heavy volume, price is too low, so it goes up to $3000.00 again on continued heavy volume...so at $3000.00 we know the product is still selling strong...Does it make sense that if price suddenly drops to $2,500, it will likley at some point go up to $3000.00 and likley higher because volume was still nice and high at $3,000. Therefore as the price drops to $2,500, you are suggesting the drop in price will bring in heavy volume which is not true..In this case it brings in heavy demand, and very low volume cause the price wont stay at this bargain area price long. It is only when price eventually reaches $5,000.97 that volume shuts off, and this is the sign lower price will in fact bring the heavy volume you suggest in your example. Therefore, to say price leads volume is not entirely correct..........price leads to supply and demand in a dual auction priocess, which could mean either higher volume or lower volume, and this is why volume can be used as an indication regarding the likley future direction of price.
EMC, I don't quite follow some of the basics of your first few posts. I don't follow the identification of patient participants vs anxious participants. I'm also confused by your image with a caption in the volume pane that reads: "Patient buyers halt the upmove to big picture swing point". Can you explain how buyers halt an upmove? Are you saying that since vol is low, buyers are on sidelines, so they are halting the upmove by not acting? Passively halting the upmove? So, not so much a halt to the upmove but just refusing to continue it? EMC - Can you recommend 2-3 of your favorite books? What are you favorite trading books that either deal with the material in this thread or just other books? I'm interested in understanding volume more. I trade AHG (Anek's Holy Grail) and am currently trying to work volume into my analysis. I believe that volume will increase my accuracy. I can see this with decreasing volume in a pullback signaling I can go long, etc (Basic stuff). I'm not interested in depth, but I'm interested in what you can tell me about volume but break it down more pls.
Interesting statement but I am pretty familiar with the the way larger institutions trade and 99% of them aren't using Volume as the foundation of their basic decision making processes. It is slowly being added into their tool box but very very very few use it correctly.
Traders, independent or institutional, for the most part aren't comfortable with the concept of Constant Volume Bar (CVB) Charts to eliminate the natural noise that is created by minute or tick charts. When you think about it CVB charts are one of the cleanest ways to view any chart environment. Consistent Bars . . . consistent oscillations . . . consistent extremes & consistent profits . . . not a variable to be found anywhere. Randomness quieted . . . Chaos calmed.
ProfL, First, I want to repeat, I consider myself to be just one of the many "small traders" out there that has figured out some things over time. I am not well versed on exactly how large institutions trade, but Im wondering if they are trying to apply market profile concepts in some way in relation to volume? I have studied market profile for quite a while, and find that for many it is very difficult to put into practical use, because the prevailing wisdom is that everything snaps back to some type of value, etc. I have found the whole area of initiating and responsive price action (or what I keep calling patient and anxious buyers and sellers) to be of much more practical value. But getting back to your commnet, and others listed in this thread, I still agree that nothing is more important than price when it comes to trading decisions, but on some level you also need an "edge" if you believe trading is a probability game, so volume is something you can add to the mix for this purpose..
More than happy to explain the way I look at this further. No I am not saying the buyers passively halt the upmove by not acting...In fact it is exactly the opposite. If price is moving up, this means for the time being the patient sellers are winning the tug of war with the patient buyers, and you can see this with heavy volume extremes (similar to the hand bag example I just discussed in an earlier post) If the patient sellers are winning the tug of war waiting for higher prices, then many of the patient buyers have turned anxious, because each time price declines, they cannot get their lower prices, and therefore they continue to help the auction higher. So, the low volume pullbacks represents anxious buyers, and price continuation. Then, one of the ways an up price move can end is if the patient sellers dry up (handbag example with a $5000.00 price =no more activity), or if patient buyers take back, or even up, control with the patient sellers. When this happens, you see a volume extreme during the pullback in price, and this is what I mean when I say patient buyers have now halted the up move. The volume extreme shows this, and shows the buyers are now back to being more patient and less anxious. I hope this makes it more clear. With respect to books, I would recommend Mind over Markets by Dalton for Volume, and Trading in the Zone by Douglas for the psychological issues about trading. I happen to have my own "book" so to speak, of how I tie all this together into a full trading plan, and Id be happy to tell anyone more about it who is interested and contacts me, but on this thread, Im really just trying to provide and explain some valuable trading information that anyone can put to good use no matter what trading plan they use. If you are daytrading, and simply can learn to trade more in line with the bigger picture and volume, I believe you are more likley to increase your chances for success than if you go against these two areas, and hopeully this discussion, and some of the charts I will post going forward, etc. can be helpful in explaining and demonstrating this.
Womb, Thanks for the thx...As I tried to state in my first post, I do feel I have some information that can be of help to others from my own little perspective of things, and Im sure others here have great information to offer as well. I don't claim that the way I look to trade is any type of Holy Grail, or any better than any other way to trade. It is simply one style, that may or may not fit for anyone else, and simply contains some key universal elements of other sound trading approaches. Like I said in the last post, I have put together a way I tie this all together with trading setups and trade managment, and I actually list every single trade setup, entry and exit so you can see how these setups continue to perform over time, and for anyone interested, Id be happy to tell you more. But, basically what I am looking to do in conjunction with Big Picture and Volume in Place, is go with the flow of price action, and I use a multiple timeframe approach to do this, and one of the keys I use is not to try to pick a top or bottom in my large timeframe!. So like you, i will look for momentum setups with the bigger picture, and also deeper pullback setups with the big picture, but what I dont do is try to predcit these points (ie. Fib retracements, etc.) I have found buying on pullbacks in many of the conventional ways to be very frustraing, so instead I let price action dicate the nature of the pullback using multiple timeframe analysis. But in the end, I am very patient to just wait for what I consider to be high probability setups over and over again, and also like you said, I believe much more in consistent execution with an edge, over any type of predictive approach to what will happen next, as I have no idea what will happen on any trade. The only thing I know on each trade is how I will look to manage it according to my rules.
My comment wasn't directed at you but trading as a whole. It looks like you have a decent start at looking at the consistent and flowing relationship of price/volume.
good morning and fwiw I view the whole trading thing as a journey with the power of reasoning being the navigator. As I have moved on I have discarded more and more until all I am viewing each day is price on a singular fast chart with highlights picking out the turning points. My traveling companions have included indicators, volume, multiple frames, different frames, market delta, market profile, comparisons of different instruments. All these now lie beside the road I have traveled waiting for me to turn back and scoop one up and take it on the journey with me. Pick me, pick me they cry ... but their cries are in vain from such a distance that I can barely hear them now. regards f9
Quote from EMC2Trader: But getting back to your commnet, and others listed in this thread, I still agree that nothing is more important than price when it comes to trading decisions, but on some level you also need an "edge" if you believe trading is a probability game, so volume is something you can add to the mix for this purpose.. >>>>>>>>>>>>>>>>>>>>>>>>>>> Why are you unable to find your "EDGE" from the most important component as you state? You are saying you could trade with price alone if you had to. Well that begs the question of why are you not able to trade with price alone? I will answer that question for you. The answer is because you do not know how to trade and are looking for the answer from a computer that spits out "INFORMATION OVERLOAD". Sure with todays computers there have been tons of cottage industry sprung up to tell everyone how to trade with all the new goodies. That begs the question: Why are there still so many losers when all the clowns out there have figured out all the answers? First we are told what works with no actual plan to TRADE with that information. Sounds like we have traveled down this road before. Have you ever considered to get into the "DIET" industry? The mkt is bigger.