How to read this VOLUME chart ?

Discussion in 'Technical Analysis' started by etradeqeko, Aug 9, 2018.

  1. Hi guys,

    How to read the VOLUME in this chart which is being displayed in the bottom chart in the attached screen shot ?

    1. What do each of the 2 colors depict in this chart (the VOLUME section at the bottom) ? I do not get it ..

    2. Is this the actual traded volume or is it only bid and ask volume ?

    3. Is the volume twice the actual volume ? i.e. is each contract bought and sold considered one volume tick or is considered 2 ?


    Thank you

    volume.PNG
     
    murray t turtle likes this.
  2. I've never seen volume bars of different colors. Adds confusion? Yet another reason to disregard volume completely for making trading decisions.
     
  3. This is IB TWS by the way.
     
  4. Maybe it's just pretty colors to delight your senses and keep you from boredom.

    Try changing the color scheme to "hollow" and "solid" instead of red/green.... see if there are still similar cryptic changes. (I prefer cyan color with hollow/solid on a black background.)
     
  5. When the price bar is green, close higher than open, then that volume bar is also green. When the candle is red ( close lower than open) then that volume bar is also red. It is attempting to code volume red or green depending on whether the price was bullish or bearish for that candle.

    Volume here should be contracts traded whether they were bought or sold.

    Whether that is helpful for trading is another question...
     
    SmallFry likes this.
  6. drm7

    drm7

    1. The colors correspond to the colors of the candlesticks above. Red means the price dropped during that time period, green it rose. Some believe that the red/green provides valuable information - i.e. decreasing volume in a downtrend implies that the trend may be coming to an end. Do a search for "Wycoff method" or "VSA" on here and you will find many threads on the subject.
    2. Volume is total contracts actually traded.
    3. Volume is counted only once, not once for the buy side and once for the sell side.
     
    etradeqeko likes this.
  7. i think if the bar is red/down then volume is red
     
  8. Ditto. (Embarrassed I didn't see that. Forgot my Yogi-ism, "you can observe a lot just by watching".)

    Helpful for trading? I think NOT. (Volume considerations are not part of K.I.S.S. trading methodology.)
     
  9. Simples

    Simples

    For more about what is recorded in the chart, you need to look at the specific instrument and how that data gets recorded.

    1. Colours on volume usually follow colour of candlestick body, ie. the direction of price from open to close during the session. So if price closed lower than open, the prevailing direction during the entire bar was down and red colour is shown. Reverse for green (or black) and close above open.

    2. OHLCV charts and data usually records actual transaction price/volume aggregates (high, low, sum), and offers no concrete information on bid-ask.

    3) Each and every transaction has a buyer and a seller, so counted once in volume, though each transaction may have a volume of 1 or greater as well, so cannot usually be used to measure number of ticks or transactions directly.

    In general volume can be used to see "real activity" per time and/or price level. To start: Look at the form of the candlestick containing the most volume. It is a red bar, but could there be buying interest there as well? How can you suspect so? Observe: It is the most significant bar in the chart, as it has most volume. What could the implications be if there were buying interest there, even though it was a red bar?

    The next largest volume bar has a candlestick mostly red. Also understand that price moves to where there are interest in making the most real transactions (price discovery).

    When low volume (little interest), price may break away from current price area and movement (trends).

    Jack Hershey documented a full and complete methodology still to be found on ET, regarding how to interpret and trade based on volume. Look at my post history for more pointers.
     
    Last edited: Aug 9, 2018
    Sprout and etradeqeko like this.
  10. yes this is important: the market's job is to make transactions and it will go to the area where highest transactions were made. this is the reason for breakout pullbacks and testing of extremes since these are the places for highest transactions
    once the transactions are not being made/becomes less then it will test up and down:
     
    Last edited: Aug 9, 2018
    #10     Aug 9, 2018
    SmallFry likes this.