This is an oldy but a goody as some Traders use price and some do not. Those that do either use volume to predict price or they use volume to support price moves. It all seems very confusing and all I know is that volume can move without a price move, but price cannot move without a volume move. So, which leads what. Does price lead volume or does volume lead price?
You should show some chart examples or go to Dbphoenix old threads here at ET and use charts from the threads to show what exactly is confusing you. Without charts...it will continue to remain a confusing subject for many. http://www.elitetrader.com/vb/showthread.php?s=&threadid=33766 http://www.elitetrader.com/vb/showthread.php?s=&threadid=29005 I see more arguing, debates, misunderstandings or unclear (confusing) about this particular topic in threads where traders aren't posting chart examples in comparison to threads where chart examples are being posted. Mark
I trade fulltime for a living and have so for years, and I can honestly say I've never used volume as any substantial part of my trading system, either EOD on stocks or intra-day on the futures markets. I know people who read the bid/ask and Time & Sales data and are very successfull with it, but just looking at volume in the standard oscillator panel has never been something that seemed "mission critical" to me. I just glance at it for confirmation on moves when EOD trading stocks, and don't look at it all when trading the Russell intra-day. My logic has always been, more often than not I can pretty much tell you what volume is doing by looking at price. If the market is moving sideways in consolodation, you most likely have low volume. Obviously on huge moves, there's going to be volume in the market if it's a sustained move. You could say that it's worthwhile to look at for confirmation on breakouts, but I don't worry about trying to catch breakouts, so it's a moot point for me anyways. I personally don't think looking at a standard volume pane "leads" price with enough CONSISTANCY to use it as a trigger, but it makes for a nice confirmation after everything else tells you to enter, and is worth looking at for divergences on exits when trading EOD. I've found intra-day volume analysis to be sketchy many times though, but that's just my personal experience. That being said, I personally think OBV is an extremely usefull tool in trading EOD. Then, combine all of this with the fact that if you're trading currency pairings volume becomes kind of a moot point, there's no reason to build a system around it.
thank, I missed this. With what I just learn from future thread now I understand why Jack was ridding so hard on DB, it's not that he was wrong, it was more like he was missing 1/2 of a picture. And with viewers of his picture in thousands that could become thousands of viewers missing the complete picture.
A critical question is this. When you are making 401K or IRA fund decisions, how do you do that without volume information? Duh!
I have been doing a lot of thinking about this subject lately. Lets say price has been moving up then stalls out. It sits there for awhile with 100 on the ask and 100 on the bid. Obviously price is not going to change until one of these is taken out. If the bid and ask size dont change, hypothetically, the the first one of these taken out will cause the price to move in that direction so the first one to have sufficient volume to take out the orders will move. No? Yes? So it seems to me that the volume has to come in first to cause the price to move. Of course if there is 50 on the bid and 100 on the ask then less volume can cause the price to go down but the same would apply if there was 50 on the ask and 100 on the bid so if we cancel these two out assuming that it happens an equal number of times over the long run then those times when size is equal would determine the result and those times when size is equal the one with the most volume will move first as a result of the greater volume.
Hiigh volume = Public Public = weak hands. Bugs at the porchlight. Public includes institutions under the guise of fiduciary responsibility. Depending on size, slow moving prey. Higher volume satisfies the primal insitinct of safety in numbers or, in some cases, feeling left out. Bait. Problem is, somebody is selling INTO sttength. Busy tape, in the context of "smart money" isn't accumulation, it's distribution. Merchandising of paper. In some cases years of accumulation disposed of in a matter of days or weeks. In a high volume scenario, buyers are entering fresh risk for one reason, an expectation of higher prices. In contrast, sellers are, in varyuing degrees: 1. Taking profits. 2. Stemming losses. 3. Selling FROM accumulated inventory 4. Short selling. (wtth a maximum nominal potential of an unlikely 100%) NEWS items, whether valid or not, obviously induce volume. Timing and release of internal content are by design Volume without price progress is CHURN. .Churn doesn't autoimatically mean tops, but........most tops are comprised of churn. Volume excludes gap maneuvers. Multiply the outstanding by the dollar amount of the gap. Walla, you've got $millions BEFORE there's any volume. Then there's the "quality" of volume. Large blocks often reflect boundaries of extended moves.; But that's speciialist establishing/unwinding tax segregated accounts. On an intra-day basis, locals will push price until volume dries up. OBV may have been state of the art in 1962, but it's 2007. Allocatiing ALL volume in one direction (or the other is hardly precise). Market profile (frequency distribution at regular price points would be nice but not readly available). Formula ((C-O) / (H-L)) x V comes a little closer to accuracy. Give me a "quiet" breakout ( with partial fills) anyday. I want high volume when I want the fuck out . YOU'D be better severed watching volatility rather than volume. At least the former HAS some predictive qualities. Unfortunately, high volume generally means lower volatiltity. The only volume that puts money in your pocket is the volume you transact in. That includes poisition size. Now................I need the usual smart ass remarks from trolls to brighten my day since I've donated a day's income to MLK for the 21st time. I guess we shall overcome, tommorow.