bighog, Let me "whip this on you"...(sheesh) I was a futures floor trader for a number of years. One of the favorite trick of the locals was to trade ONE contract back and forth between us to get higher (or lower) prints on the board. Why do you think we did this and why was it generally profitable? Because some guy(s) sitting out there watching price only thinks, "Oh my god - the price is going up, I'd better buy now before the market gets way for me!" So, in comes the paper, and who do yuo think sells to that fool? We do. And where do yuo think the price goes after that buy order has been filled? Back down. Ocassionally, some wiseguy thinks he'll outsmart the floor and sell into that price rise. No problem, since there was never any real buying in the first place (i.e. NO VOLUME), the order not only doesn't get filled, but price gets offered down in front of it. Then, if the guy still needs to sell, we get a bargain price. And where do you think price goes after that sell order is filled? Why, back up, of course. The moral of the story is that if these fools watching only price had called down to the floor to see what was going on (in other words, found out what the VOLUME was), they never would've been sucked into these dumb trades. But, like you, almost none of them bothered to consider the volume driving price, and we got to do this over and over and over and... When the brokers for the commercials came out and bid/offered, weren't filled, and then hung out, if price came back to that level we would always ask, "Are you still there?" We want to know HOW MUCH (oh, there's the VOLUME again) is still bid for or offered. THe great thing about ET now, as opposed to when I joined, is that it demonstrates daily that it's now filled with newbies, kids, and people who have little if any understanding of markets. THat used to bug me, but now I like to have them on the other side of my trades. So please, continue to pay no attention to volume and watch Elliot Wave and price-based TA indicators!
I know this is a waste of time but its Sunday morning and not a whole lot going on. I trade intraday off a 5 min. chart so these comments apply there. I dont have much experience with larger time frames so not sure if they apply to all frames. Clues: If I am in a trade and its going my way then starts to pull back a bit I am glued to volume. If it is declining I am pretty sure I am in a retrace and not a reversal and am more inclined to hold. If volume suddenly picks up and is the wrong color, time to exit. I have noticed that a swing move almost always ends on a bar that has lower volume than the previous couple of bars so if the present low volume bar is the longest in the move I am not in too big a hurry to exit when it starts to pull back. If the volume is lower than the last long bar in the trend I am looking for an exit. If price is consolidating for quite awhile and volume drys up and then starts increasing gradually I start looking for the breakout in the direction of the increasing volume. If I am watching a retrace and am wanting to get in I am watching volume to see when it is going to (prorata volume) exceed the volume of the last bar. If volume is consistent below a certain level I do not trade. I am sure there are plenty of ways to trade without volume but I want all the information I can get.
PointOne actually expected a reply from someone after i sent the post and said "REACT" . HA, you are observant. Truth be known, i do anticipate MOST setups because just be definition itself.........a breakout trader in looking, waiting, anticipating price to go in a certain direction, even if price is bracketed. The term "REACT" is more what is done once the fill is confirmed and the mkt is going to do what it will do. Once filled we let our intuition and skills of trading take over. getting in and out of a trade is the easy part, the nuts and bolts is what we do in between entry and exit. Volume is not in the intuitive brain matter, price rules up there also. thks ps, Carroll Shelby sold his cobra, 5 Million ... :eek:
bearbelly I will agree that volume is ok to use as a "lookback" indicator. Yes, we all know volume can be looked BACK upon and viewed as a confirmation of price action> EXAMPLE: When we see price in a narrow range it is obvious the volume is down because price itself is telling us the players are in agreement, in limbo waiting for a report, are at the water cooler lining up dates, are out to lunch, etc, etc. So, to look at volume WITHOUT price action is useless, Correct? To observe volume "intrabar" is more likely to give one a headache rather than insight. To say one can project price action from observing volume intrabar can be again just a confirmation of what price is doing. I fail to see where observing volume is going to "LEAD" price. Think of it this way: say i am a BIG trader and i want to make some money, i am willing to bet the farm on the next trade................. What am i going to bet on? Price movement or a assumption that volume is about to pick up? Right, either way i am going to play price moving. I am only concerned with where price goes, not how many believe in it or follow or do not follow. Ever been STOPPED out on tiny vol? If you answer yes to that question, your (mine) trade was wrong, clear as day it was wrong. Ok, done with this subject, thks for the fun. I have a new strategy i want to play with (along with the stuff that has been battle tested). This new year is my new toy. Bears and Pats.........pats want revenge from 1986 i think they last played in super bowl.
Volatility analysis resolves this problem and indicators not needed. There are price action only traders (no traditional indicators) that use volume and are profitable at it. I've seen some of these guys with my own two eyes doing their thing via volume analysis which was more like supply/demand analysis when I started asking questions. Those price action only traders that were not profitable via using volume are usually the ones saying its not needed or they are very experience traders that have traversed into other things that's more useful than volume. Someone saying its not needed is different than someone saying its not useful. Therefore, as more trading experience is gained (years later)... Price action only traders eventually understand the real causes of the price action and no longer need volume because more often than not... They are now profitable via something else (most likely more reliable) that has replaced volume analysis. Thus, if your profitable via using volume, don't waste your time debating with someone that's profitable without the need for volume. Also, from what I've learn about the backgrounds of some of these guys that eventually traversed from volume into a substitute for volume as a price action only trader... These are traders that have some association as/with floor traders, institutional traders et cetera in their backgrounds. Look at it this way, on a 1 to 10 scale about the importance of volume and volatility for price action only traders from my own personal experience... (I don't care if someone agrees or not) Volume = 6 Volatility = 9 I'm one of those price action only traders that started with volume and it was very useful (profitable). However, after the years, I traversed into volatility analysis, market seasonal cycles, intraday tendencies et cetera... I no longer need volume to make profitable trade decisions nor is there any merits in me debating with someone that uses volume as a profitable trader. Yet, if your not profitable and your using volume as a price action only trader... Your doing something wrong in your volume analysis. Don't spend time debating. Instead, ask those traders for help that are currently using volume profitably. Last of all, the question by the thread starter is this... Does volume lead price or price lead volume???. My answer...best to spend your time determining what really moves prices and when it tends to occur. Mark
Mark, A great post! Yuo have always been one of the real thinkers here on ET - I always enjoy reading your comments, and have never failed to get something meaningful to consider from them. Good posts in this thread by you, too, Bear!
trader86 How could you be so wrong? No one follows tick diddling that the small locals do. How many locals blow out in a year? How many blow out in only a month ir so? Come on 86, get a life dude. ..