How predictive is volume to index futures?

Ok I understand the chart for stocks, interesting perspective. Is there an equivalent chart for futures ?

As cd, mentioned, "For ES we use the same approach to do 20 to 40 trades a day where the segment profit is less than 10%, of course."

As I am concentrating on futures, this could be quite helpful.

EDIT: To be clearer, i am interested in understanding how this or a similar chart could be used to make so many round turns on ES or NQ, as it is currently setup, i dont see how it can be used for futures (at least to make 20-40 trades).

Thanks!
i

 

You use volume in the same way for some things.

The best example is the PM breakout around settlement.

Commodities serve as "protection" or "insurance" in several applications. That establishes a lot of the float.

I mentioned previously and in another thread how the confluence of several things go together to be able to understand the key driving forces of the markets.

you can take the stock catenary shown and apply it to the day.

It is slightly different for Forex and commodities, however.

In commodities, by looking at the volume per unit time, you get a measure that is a catenary as well. Consider this the pace of the market over the day. I use ten paces as the underlying and I arrange them as two extremes and four pairs in the middle ranges. Their names are Extrodinary, High, Medium, Low, Dry Up, and Very Dry up. I use a sample of bars (5 min) that is 1600 and I get the break points and it adjusts itself for seasonal variations because of the sample size.

From this many things can be determined. I will post three charts to describe these things. What you will then see is a new view of how the market operates and how it is possible to differentiate among the types of trading days that come along.

Look at thunderdog's commentary on the place he got himself into. You can also look at bigdog and Hype. Look at trade zone too. they are all on the outside of thinking about how the market day goes AND taking into consideration that this daily sequence imposes limitations on what is possible during the day and how one day varies from the next.

Knowing what is possible and knowing the type of day is helpful. Not knowing it puts a person on the outside and disables the opportunity for him to do many things that make money. this is where fear and anger come from in the dispositions of traders. People do get to places where they always are in fear and they are angry about not making money when they see, after the fact, that it was being offered.

On a volume chart, it is a good idea to annotate it with the market pace and to have the pace delineations adjusted with a 1600 bar sample. This is the pace window in time.

I will post the three charts in the next three posts. then we can move on from there.

 

first chart (PDF)

 

second chart

 

third chart.

for those who attended or have videos of the four day meeting at UA in JUN 06, these charts are the first three illustrations of 25 in the saturday 8:30 ES-PV videos. It is in two parts as I remember.

 

Typical for a carnival barker.

"You guys are lost until you come into my tent."


Come on Jack Hershey , quit saying everyone is stupid because they have not swallowed your bullshit.

Spare the rest of the crowd from your babble.

................................................................................................................From a previous Jach post....same ole crap

In your case, we have seen through a couple of handles that your opinion is kinda shakey for making use of anything you have said.

In my case, with respect to volume, you probably can't make use of anything. It is not that what I post is an opinion because what I post usually are conclusions that are proven.

You do not "get it" most of the time. I figure that it is because you cannot think critically and as a consequence you post stuff that shows you cannot think much at all.

See if you can rise to the occasion and let us know where your head is on what constitutes a proof. my assumption is that you are poorly trained and are not a person who has been able to make use of much of anything that you have or has been given to you. You do make a good example of what can go wrong in the growth process.

 

Hi i,

I don't want to reveal the instrument/timeframe I am working on, but the general idea is that the relationship between the last bar's return and the next bar's return depends on the last bar's volume.

So I break down the day into timeframes. I look at historical volume over a few years for that time of day and find the cutoffs to break it into quartiles. Then it turns out that there appears to be different relationships for different times of day. Say a high volume move in the morning doesn't tell you anything, at lunch time it tends to partially reverse in the next bar, but in the last 2 hours it tends to continue in the next bar.

When I say it is non-linear, that basically means sometimes you get a rule that works on medium volume but not low or high volume. Or it switches from medium volume predicting reversal to high volume predicting continuation.

I did this with old data to come up with the rules that looked good statistically and tested it out of sample in recent data. Some of the rules broke but a lot of the strongest ones held.

 

Okay.

Just as for position trading stocks, volume plays a role in commodities as to just what when and where things are possible.

Try to digest the three charts from the viewpoint of market operations and skill requirements to trade the parts of the day.

If you wish you can go through known posters, their problems and their successes and see from these sheets just why they are where they are. trading to make money is very tough for some people simply because they see markets as offering edges and they do not realize that only some things are possible at some times. Not to go into it, but you can see why thunderdog is shooting the blanks he mentions. You can also see why Hype is trading in freakout mode as well. If you got the allenhobbs excel before it was deleted more recently, you can see how he violated his rules by going further into each day with losses and trying to recover them by increasing contracts from 3 to 6 to 9 and occasionally 12, right when the market was shutting down and the signal to noise ratio was maxing. he didn't have a chance from the time he added one contract and started "over trading" (his words).

Soak up the three charts and do it with the understanding that volume leads price.

By having the pace rays on the volume chart you get to "change gears" for trading as the day goes by. Keepeing the sheets in plastic and using them for debriefing is very helpful.

This leads us to the main event. the main event is the cycle of trading using the P, V relationship. this is the device that shows the compatibility of the unusual volume sheet and the Jokari window of price volume. I will post a write up on the jokari window which presents the P, V relationship three different visual ways.

Concept, at some point for the trader, becomes equivalent to what it takes to drive a car under any road and traffic conditions automatically. None of the people I've ask you to track have any driving skills vis a vis the P,V relationship. they have boxed themsleves into variious corners since. so to speak, they have no night vision and are operating in the dark.

The picture of a trader who knows how to use volume is that he knows that he knows a few seconds into the new forming bar. this is hard to fathom simply because it is very counter intuitive. This makes it mostly unbelievable to people who have not gone through learning to think critically.

The markets are simple to trade and a high money velocity of trading is the result.

A bridge must be built from where you are now to that place of easy simple trading. As in driving to get low insurance rates the learner must acquire skills as dictated. The ingredients for this are well understood. In the finacial industry, however, the membership in AATPA is a joke. Check out Steven Streigel at the traders expo next to prove this to yourself.

In trading, a trader knows the jokari window so that he applies it automatically and instinctively as though he were in a mode of sports memory. What this means is that he "knows that he knows" instinctively and with certainty. It is, in fact, a binary application where when you have one condition you know that you know the other and only other condition is not in effect.

Certainty is the result of applying the jokari window. Certainty is what makes money.

What this looks like on charts is a visual display of the jokari window on a volume chart. I commonly use the term Gaussain to describe what is on the volume chart. I use it on three levels (multifractals concurrently). As usual the next graphic actions coming up may be put on the chart in the near term future as an additional comfort. You can google WMCN on ET to see the details of this concept.

The mental application of critical thinking is to understand and apply the principle that as time passes alternatives are eliminated and only one remains and you know that you know BEFORE any action is required. Is is most like you are sitting in the very near term future to know that you know and you operate soon in the present your trading execution platform.

As in listening and speaking you do not "think' about things; you simply execute speaking and listening unconsciously. The Jokari window is the unconscious mechanism that the trader uses to listen to the market and then speak through the execution platform.

Here in this thread I will attempt to install the Jokari window in any one (in their mind so they can think critically to make use of it) who entertains an installation process. I have to go find the Jokari window writeup and see if it fits on ET. If anyone has it please pop it up in this thread.

In the meantime, it is possible to see if your mind is presently empty, filled with myths or permanently damaged so that installation is not possible. You can read past comments of most to see examples of emptiness (those at inquiry); filled with myths (read marketsurfer or thunderdog or bigdog) or damaged (T28, original, bigdog, etc.)

 

At a low level when watching intraday price action, price is the "what" -- volume is the "how" (I don't much care about the "why", "who" or "where").

Volume tells me whether or not supply and demand are in balance at a particular price level. Big volume represents buyers and sellers coming to an agreement at that price (with exceptions for periods with a lot of stop-related transactions). Increasing price range on relatively low volume tells me that supply and demand are not in balance and may continue to move in order to find an equilibrium.

For example, when evaluating a possible move to the upside it's more important to me to determine that participants are not selling than it is to determine that participants are buying (or vice versa for down moves). Volume tells me how successful buyers/sellers are.

 

Thanks Black and Jack, will have to look into wat you've both said in more detail, very interesting input!

Thanks,
i