Does volume figure into your trading?

Discussion in 'Trading' started by Joe Ross, Jan 26, 2009.

  1. It didn’t in the past because volume was a day late and a dollar short, when trading the daily charts. But these days, where volume is live, it does count.

    Here’s a simple idea that works well for indexes. Most people ignore volume as an indicator. I think it’s overlooked and I will show you here how to use it to figure out possible turns in the market. The concept is that of a volume spike. If you will look at just about any weekly chart of the S&P 500, you will see what I'm talking about. Note the volume spikes that occur at the turning points in the market. This occurs when large numbers of contracts change hands. Usually it happens when the smaller trader gives up and sells his contracts. If enough traders do this at once and the price is right the professionals will come in and snatch up those contracts.

    Therefore you have this large volume that occurs right at the bottom of a decline as the market is churning. The contracts move from the weak hands (the man on the street) to the strong hands (professionals).You need to look for volume that is larger than the last 10 bars volume. This is not cast in stone but is generally a good average to go by. You might decide that 8 bars are enough. It also helps if the volume is substantially larger than the previous volume and is accompanied by a large downward move in price. I wouldn’t necessarily trade this as a standalone indicator but use it as a general warning of a possible change in Market direction. Does this work with intraday charts?

    Absolutely. Volume is important.
  2. Yes. Price and Volume is all I use.

    Volume has always worked. Volume represents a leading indicator of Price.

    Any market. Any time frame - provided sufficient liquidity exists.


    - Spydertrader
  3. Lucrum


    Me too.
  4. BallBag


    That's true.

    Everything else is fairly typical of your particular brand of half-witted vendor drivel.
  5. I only use price on a simple arithmetic chart with candlesticks (6months/daily) I don't use anything else. I never cared about volume but since I trade primarily forex now it is a moot point anyway.
  6. Redneck


    Personally - I've never found volume to be of any use

    Take Care
  7. Spot on. Lots of good nuggets of info on ET today.
  8. Price + Volume + Experience is a great recipe for success. But to each his own.
  9. The importance of volume is relative to the time frame used.

    The longer the time frame, the more important volume becomes.

    i.e. a day trader who scalps 10 slices a day is probably less concerned about volume that a swing trader
  10. Kovacs


    Yes, I pay attention to volume.

    On retracements during a trend, I'm looking for short-term volume clusters and spikes near soft S&R on the 5-second chart to enter a trade.

    Once price arrives at a major level (30min+ timeframe), I'm looking for the same volume clusters and spikes for a retracement and a possible reversal. At the very least, if I'm in a winning trade, I'll get out as stop losses and laggard buy/sell stops are hit.

    If the price is trading between two narrow levels (in today's environment, about 4-6 points), I use the same principle to trade the range until there's a break. Once there's a break, if I manage to get in, I'll stay until all those who didn't get out and are holding onto losers hit the pain threshold and puke up their contracts, which registers as a volume spike and is often at a major level (session high/low, settlement, etc).

    I find it helps me get in at better prices so that I can afford tighter stops.
    #10     Jan 26, 2009