Futures Volume at Price is Useless

TTT · Jul 30, 2018

In the thread the secret of daytrading have given some good ideas. In general Padu if it is not profitable to move to swingtrading

bone · Jul 30, 2018

I would be concentrating on the top ranked correlations to your trading product of choice - both positive and negative. That would be a hellavu lot more productive than volume that’s for sure.

I can’t recall ever giving a shit about volume when I scalped Treasury Bonds in the pit - but I sure as hell was looking at the Cantor Fitzgerald OTR cash market screen, and the Yen, the Dollar Index, the S&P 500, Gold, and Crude Oil up on the big boards.

Volume is a red herring. It’s not going to help you in the here and now. But if the third month Eurodollar is following the Yen tic for tic - that’s helpful in the here and now. If CL and 6E are Trading tic for tic... That’s tangible. That’s tradeable.

themickey · Jul 31, 2018

Hi bone, If they are correlated tic for tic, what are you watching for from there? For one to move apart to give a signal of change coming in the other?

bone · Jul 31, 2018

themickey said:
Hi bone, If they are correlated tic for tic, what are you watching for from there? For one to move apart to give a signal of change coming in the other?
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For intraday Trading lead - lag behavior would be important. In fact, “lead-lag” is a fairly common HF Algo strategy. These correlated strategies can hold up for days, weeks, months... as I recall the Eurodollar - Yen correlation held up for a few years in 90’s.

I’m not suggesting that correlations are the be-all-end-all holy grail - but it’s one example of how a smart trader can dig deeper and do the work to find out what’s driving order flows.

eurusdzn · Jul 31, 2018

So given a data set of 25 semi conductor stocks , 70 percent similarly participate in a signal meaning it isn't noise and stock(x) lags stock(y) 65% of the time . Wouldnt a relationship like that disappear quickly and actually not exist for the amateur.

SimpleMeLike · Jul 31, 2018

bone said:
I wanted to put forth the opinion that futures volume at price is wildly over-rated as a technical indicator. There are two reasons for my thesis: 1. Somebody took the other side of the trade, and most importantly 2. regulated futures exchange volume at price is usually a very incomplete picture because simultaneously you have analog OTC cash and derivatives markets trading turnover that you have no clue about.

As a side pocket note, before I proceed further yes I have used the Market Delta Volume plug-in study for TT X-Trader in the past and yes I have in the past made extensive use of the Bloomberg terminal volume studies of which there are many.

Let me expand on #2 above. How many CL scalpers would shit their pants if they had a WebICE Swaps feed and could see the 2K, even 5K blocks that get traded within a cent or two of the last futures price print? During US trading hours, especially in the morning it is a common occurrence. There are also plenty of bilateral physical crude oil swaps being traded that don't financially clear LCH or CME.

Let's say you're scalping ZN. The last price print in the futures is 119-12.5. Again during US trading hours, especially in the morning there could be literally hundreds of millions of dollars of swaps in addition to the on-the-run and off-the-run cash Treasury markets trading concurrently with the futures.

And I think that similar things could be said for ES and dark pools or 6E and the cash markets - maybe to a lesser extent for the dark pools but it's still a factor.

To look at regulated futures exchange volume at price is in my opinion at least a limited view into what is being turned over at that valuation.

The only real use I have for regulated futures volume is to determine if a specific contract expiry is liquid enough to model and trade - and for this purpose all I require are the daily settlement sheets.

Having said all that, if you've been making money hand over fist for the past ten years using a volume study please keep right on doing what you're doing.
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Thanks Bone,

In my keep-it-simple opinion, using Volume is a useless indicator and thought.

Watching the candles and price is all I need. Who cares about the number of contracts. Just need price to go up or down

bone · Jul 31, 2018

eurusdzn said:
So given a data set of 25 semi conductor stocks , 70 percent similarly participate in a signal meaning it isn't noise and stock(x) lags stock(y) 65% of the time . Wouldnt a relationship like that disappear quickly and actually not exist for the amateur.
More...

Sounds like an ambiguous example - I couldn’t possibly answer.

What if an amateur found out that, say, for the sake of discussion the share price of Rio Tinto led the ASX 200 index 85% of the time?

What if that amateur found out that, for the sake of discussion, Gold futures led the share price of Rio Tinto 80% of the time?

tiddlywinks · Jul 31, 2018

Just want to point out the topic is about Volume By Price.
VbP is a specific methodology of analyzing volume.
It is not same as talking about standalone volume or the usefulness of such.

I use Volume. Similar to what someone else said... a price pane and a volume pane is all I need!

As for VbP, I'm in agreement with bone with a small caveat... It's usefulness is an acquired taste. I actually use one piece of VbP, that being naked POC values. In my usage, these price levels, naked POCs, tend to act as magnets. VbP and/or POC (point of control) may or may not be available on the platform of your choice.