Wow, a nibble, Not all of us are scalpers. A teenie isn't my gain or loss. It's my slippage. So are you going to harp on the demise of the ax due to decimalization, the growing influence of ECN's, GlOOOBALIZATION, or what? I will concede the complexion has changed since about 1970 with institutionalization (aka slow moving prey) Simply put (nothing to due with options) IF I had a daughter, I'd want her to marry a specialist. Stated another way, what entity is MOST married to the stock? Perpetually. The CEO? The BOD? The old boy network is still alive and kicking. I'll spare remarks about proxies. Too much typing. But take a simple opening gap, mulitply it by the number of shares outstanding, to arrive at the magnitude of the flick of a wrist. Lastly, a basic question, WHO are you trading against?
Volume does work in the way the OP says, but it doesn't work as well as following price. So, it's possible to use volume. It's even possible to use volume as your only indicator. It just won't work as well as price.
No follow-through today, sooooooooo, I'm gonna run with it. Flavor of the thread is VOLUME, not the specialist. However "it" does come from participants. That's you, me, and "him". Basic question: Does volume have PREDICTIVE qualities? You know, a conisistent, reliable edge we're "all" searching for to capitalize upon. Pssst, it might aid in the discussion if there is some clarification as to what timeframe this volume occurs. 1min bars. 30 min bars, published data pertains to a full session, but Barron's reflects a week. To re-state, does volume have PREDICTIVE qualities and over what timeframe?
Not with daytrading in my experience. I pay attention to volume only on the 5-sec chart and that's after I've already decided whether I want to buy or sell. I use it as a type of zoom-in feature, where instead of simply going short at previous resistance, I'm looking for some action at those levels. Early shorts liquidating for a loss, buy stops going off, fresh supply, etc. The volume, in this case, is heavily dependent on context and what's already happened. It's just giving me clues on what's happening in that instant so that I can get a better price. This helped me improve my Average Adverse Excursion from 1.5 points to just over three ticks. I surmise volume combined with open interest for longer trades can yield some value.
Your last two words, "some value". I'd concur with that, thus rendering "it" as a filter. OI only pertains to contracts. Some of us only deal in shares. One less unknown variable in terms of time decay. You brought up average adverse excursion. Good point! I religiously record my Maximum Adverse Excursion (ala' Sweeney) for each fill as well as Minimal Favorable Excursion (if it gets there). The latter suggests I'm truly green. Both help with expectations. Neither of course has anything to do with VOLUME. Now, for those who wanna beat a dead horse, let's take (4) permutations: 1. Price up/volume up 2. Price up/volume down 3. Price down/volume up 4. Price down/ volume down. Which of the four is consistently bullish? Which of the four is consistently bearish? I'm all eyes. Depends? Naw, that's an adult diaper. I wrote consistently. One last point. NYSE negoitated blocks, which often involves $$$$, only appears on the tape............. IF the specialist so chooses. Pssst, it's part of the rig. Covert volume? IF a specialist (other other ax) re-markets a block, how long does it take? 5 minutes? A day? A week? A month? IF it's more than a single session, wouldn't that skew "things"? Block comes in but parceled out. Volume involves TWO parties toward purported price "discovery".
From my observations: price up/volume up near resistance = do not short price up/volume up past resistance = breakout price up/volume down = consolidation or reversal price down/volume up = price down/volume down = Above two are better figured out based on how many are sold at bid and how many at ask. What I can't phantom is that how/why are large blocks sold/bought after hours. Who is behind this?
Nope, it's an AFTER the fact measure. It does NOT drive price. Certainly not the open. Open might create volume that otherwise wouldn't occur. Volume will influence certain particpants, perhaps including yourself. Price is price. It's what we all transact in. And........MAE, and MFE previously mentioned, as well as ATR, are all functions of price. As for "indicators", isn't that matter preference as to both which ones as well as default paramenters or tweaking? I personally use a 9 period ADX and a 20 day ATR. Nothing carved in stone about it and I'm failing to see volume's contribution to their outcomes.