does volume head price or price lead volume?

Whether or not a "signal" is "generated" depends on the trader, what he's looking for and at, and how aggressive he is. Your arrow is the most aggressive entry: there's a potential selling climax and a buystop can be placed above those bars in the crook of the swing. Or one can buy at the first higher low. Or the second. Or one of the breakouts above one of the swing points. Unless one waits to buy the top, each entry carries slightly less risk but also provides slightly less profit.

I know Db got tired of trying to explain "volume" to people who used it as an indicator rather than as a record of transactions and eventually started using "trading activity" instead in order to get people to think of the relationship between effort and result rather than of what they viewed as indicator-driven movement. Once one understands this relationship, the question posed by this thread -- and most other common questions about "volume" -- become moot.

LC

 

You are a thinking man BB.

 

The moment that an order is accepted and it appears on T&S it is volume.
It does not matter how it got there.

 

Fearless9, that's what I meant, have a look at paragraph 3-4 or just read the whole article

http://www.investmentrarities.com/09-11-06.html

 

WAKE UP

Volume is the MAJOR indicator of the Professional trader.

1 You have to ask yourself why members of the self-regulated exchanges around the world like to keep true volume information away from you as far as possible. The reason is because they know how important it is in analyzing the market. -- Tom Williams

2. Price and volume are intimately linked. For the correct analysis of volume, one needs to realize that the recorded volume information contains only half of the meaning required to arrive at a correct analysis. The other half of the meaning is found in the price spread (range). Volume always indicates activity going on, the corresponding price spread shows the price movement on that volume. CAUSE and EFFECT.--Tom Williams

3. When elephants walk through your front lawn they leave footprints. Volume and the corresponding price action are the footprints of the Professional , or Smart Money, Trader. The actions of these Professionals move the market. It is therefore, their actions that the retail trader must track. To say that price rises on demand (buying) and falls on supply (selling) is obvious on its face. However, one needs to examine actual volume to really see what is going on.

"An example of a telltale sign of a forthcoming market drop is to look for spikes in volume on an UP bar with a wide spread, especially with a closing price in the middle of the bar and the market in an uptrend. Because of the size that professional money trades with, they must sell their positions into an up move so they do not push the price down when they are distributing their positions...".--Todd Krueger TAS&C Oct. 2006

In other words, true market weakness will appear on Up bars and true market strength will appear on Down bars. Another example would be,I f you see volume that is ultra high, accompanied by narrow spread into new high ground, then you can be assured that this is a 'buying climax'. Why the narrow spread? If there was all that buying on all that volume, wouldn't the spread be large? The reason is because the Market Makers, who have the luxury of seeing both sides of the market, can see large amounts of Sell orders into the buying. The also know WHO the sell orders are from. The retail (herd) is buying as the Smart Money is selling. Hence the Market Maker's perception of value is lower than the publics and thus they are willing to keep the spread narrow. Meanwhile, the herd thinks they are getting good fills. Then price falls.

Markets are manipulated by the Professional trader. With an understanding of BOTH Price & Volume the small retail trader can learn to see and follow these professionals. Through an understanding of price and volume the small lot trader learn not to be part of the herd.

 

um hum lets also not forget that as a stock goes higher the volume tends to decrease because the stock becomes more expensive and people are able to purchase fewer shares.

 

There are so many important clues offered by volume that it is hard for me to believe that some people choose to ignore it. This is what makes a market, fortunately. People disagree on almost everything.

 

Name those "IMPORTANT CLUES" for us.

Here is an important clue for all those that THINK volume is any good for a daytrader. WRONG. Ask yourself what you are doing in a job being a daytrader. What is your job? Are you a trader or a indicator wizard? Many fail to understand this = Trading is about trading, NOT about why. Price rules all else, think about that for a moment>>>>> without price there would be no game.

Price "movement" is the cause of all else. WHY should you care WHY price goes up or down?
EXAMPLE: You are long in ES ( i am talking ES daytrading, not a position trade in IBM), ok, you are long and sitting on a small profit. What are you looking for? i mean seriously, What are you wanting to happen? You want price to MOVE, you want action, you want blood, either the other guys or you are willing to give up your own. you are in a game of winning or losing. Ok, that said, DO you really care WHY price moves? When you watch the chart what is the first move on that chart that gets your attention? What is the first thing you observe? RIGHT, PRICE and price only.

I guarantee you that when you are in the mkt and price starts zipping along YOU will not pay attention to a silly volume bar. All those fancy dancy pretty lines and colors on the chart are there to impress your ego and to impress your girlfriend if she drops by. Your kids might think you actually learned something in college even if nothing else than making a pretty chart. Your wife will be less impressed unless you make enough to remodel the kitchen with an unlimited budget.

come on guys, price is what you are supposed to be watching, not colors change on a chart. VOLUME is a second hand used car in the classic car mkt.

Please tell me you have decided to be a trader and gave up always asking why. YOUR JOB is to be a trader, forget why. you will do a lot better.

OK, that guy that said he had important clues why volume is the answer..........Whip it on me , i am wanting to listen.

 

Back to Barrett-Jackson classic car auction on SPEED............. heavy dollars for the muscle cars. Man many people have to much money. HA ...

 

So you like to react rather than anticipate. That's OK. It's probably more exciting that way.