It seems there are those who are just arguing concepts of supply and demand for the sake of theoretical accuracy, which really has nothing to do with how a trader observes supply/demand in the more concrete sense. To think of every transaction = supply and demand reaching equilibirium, even at the most transient/abstract level, is not an accurate description of price dynamics when it comes to financial markets except on a purely academic/theoretical sense. It is analogous to believing in a strong form random walk theory of market efficiency which leaves no room for us traders to do what we do. I don't see the purpose in arguing the above -- how does this aid in one's trading? Do you really believe that at each and every trade that crosses the tape that an equilibrium point between supply and demand is reached, however temporarily?
Exactly. For my trading I would substitute the word setups for equities in the above sentence. I see a possible setup but the volume pattern does not conform to what I'm looking for I will probably not take the trade. Ive found that when volume confirms the setup it has better odds of working. Another filter.
Excellent Point! When considering demand and supply, it may be useful to relable it as buying/selling interest, and the forms that this can express itself as. The distinction between the passive and active side of transactions/volume is an important one with regard to who is in control of the tape. The net buying/selling pressure is a function of the progressive relationship between buyers/sellers. The market goes through phases where one or the other is dominant as well as transition phases at certain points of the cycle. Much can be learned about the duration of these phases and what variables tend to activate buying/selling interest. The terminology of supply and demand clearly has different connotations to different people as I found out when I touched on these issues last year. My perspective reflects an intra-day focus on volume in the index futures (primarily the ES).
the remainder..... b) "At this time when new information arrives, it is observable as the how the information affects the size of the nearby groups. No one need track the new information per se. What is important to do is observe the size of the groups near the trading price. Long before the trading price changes it is very apparent that there is nothing that can stop the pending change coming up for the very reason that the smallest nearest group is dissolving to no size at all." - Is this in regards to only an EOD/swing perspective, or also short-term? So, let's say an uptrend is forming. When you say the smallest nearest group(assuming the current owners I try to post with a neutral bias and lets use you common example. to begin - I know this cannot be known until after we see which group just look at your screen where dom is or where one line on your trading platform has the Bests. There are four numbers, two prices and two volumes. - bids or offers size is dissolving) is dissolving to no size at all, No not at all. Bids or offers are not being filled. For a trend to rise, the asks have to dissolve. The the smaller group of ask orders are being filled. The closest sellers (owners) who are "asking" have to dissolve for the price to rise. How can you or babak not get to any understanding of this price consideration and learn that it is not a "value" consideration that is being dealt with. We are discussing trading here and how the market is operating. Trading. Actions of the market. Not the opinions of the entity itself. Opinions do not count only orders count. you mean that they are pulling their offers back(cancelling, amending to a new, more favorable price), right? No not at all. We are looking at the other side of the trade. It does not matter that this sort of thing is going on on the uncontrolling side of the market. In fact, look at how high money velocity skill traders operate. Who is it that is filling the asks? It is definitely not what Babak is stuck on. Who makes the market move? Smart traders do. When I hit T what happens. I get filled immediately and take the ride. The word for snow falling down hill was spoken of. WOW. Is this snow falling down hill? What you see is people takiing on trades will orders that get filled on the other side of the owners. In any trend owners are leaving and new money is COMING INTO THE MARKET TO OWN. Traders to own simply meet the price of those in control. That is the smaller group is in control and in a rising trend it is the sellers who are eaten up by those who are willing to pay the price. I have tried to suggest that the current system of providing data really sucks because some of it is hidden from the purchasers of commercially available software. The Sidney market is a forerunner of things to come for example. So then, any suggestions how to filter for this type of activity on the ES, YM? someone who knows how to make red things to take you to those places may answer you. this is a CW thread on swing and position trading. the bottom line for the answer id the Gaussian volume explanation where you see R2R and B2B mentioned. For trading EOD and so on it is all there as well. Go to the previously cited locations to get all the filters. They all are posted in various places. This is all a replay of years and years of posting. It just turns out babak got a wake up call somewhere and he has decided to not do the challenge this time out. He is going to continue to be right one more lap in his career. At the same time(step 8), more and more traders start getting anxious, lifting whatever the nearest offers are(chasing price), and hence the volume velocity picks up? color=green] Yes you have this part straight. The prior low volume hold off between the nearest groups to trading price has been resolved. the smallest group which controlled was filled and those on the other side saw trading price move away from them. Anyone who wants to come off the sidelines has to correct their prior viewpoint to begin to make money. Obviously the small contolling group wre of the wrong viewpoint regarding price and they were sidelined as a consequence. This thread could have developed into a terrific and keen and precise explanation of how to position trade for high velocity profit taking. For each and every step of getting into the ball game, volume plays an extremely important role. I definitely misunderstood the question: "Is volume really important?" some how I thought the thread would address each and every place it is important and as a consequence the initial statement woiuld be completely realligned so the person could begin to get into the ball park. Well that is not going to happen for a lot of reasons. I think Nononsense or Nitro coined this the avalanche effect in another thread? Be cautious when you get roped into some of that stuff [/B][/QUOTE]
Spy your post is obviously, to me, the beginning point of he answer to the posed question on the thread. Quality stocks that perform according to the P, V realtion is the primary consideration. The universe is a set of performing stocks selected from all available. The more specific money making aspect of this is then handled. By narrowing the high quality selected universe to stocks using volume as a basis, you get to play in the high velocity money making game. This is where all the DJ and S&P stocks fail the quality test for making high velocity money. To nail down a universe that gives you 10% every long half cycle in a matter of a few days, you need to understand how the range of daily volumes that work best is obtained. Is this stuff really beyond the understanding of ET types? I do not think so. Why can't people consider how to have a universe of stocks that make money like crazy? What volume range of values is the location of stocks that will make you the most money in the shortest times? Why can't people get to a place to understand the answer to that question? Who cares? My criteria is simple. A quality universe as you described is futher evaluated to determine that it performs in a volume range from DU to Peaking volume at least 5 times in 6 months. Performance is as illustrated in your chart. Taking 50% of the potential profits is the goal. DU defines the entry and Peaking volume defines to exit. To play the high velocity money making game question 1 is: what is the volume range to use in your universe? Answer it is the set of volumes that are possible for you to enter and exit without affecting the market with a particualr stream of capital that represents how you divided your capital to be able to focus on given streams of capital in rotation through the normal long half cycleof normal trading. A common limit for a trading stream is the capital required to trade 100,000 shares without affecting the market. If you trade over 10% of an issue in a day you will begin to affect the market with your series of partial fills. This tells you that it is unecessary to get fills by dropping a bomb on the market. Taking a few hours is okay for this type of money making. So you can view this post as a collection of unproven assertions and just like a statement of theory. That is your problem. On the other had you can say several things about your current trading status and make adjustments. As your success grows you will need to divide your capital into more streams. When commissions equal your salary, consider not continuing to work but going full time. To get commissions up you need to trade as frequently as possible so get your universe to operate more briskly by choosing a volume range that is brisk in your quality universe. Enter late and leave early to increase cycles per unit time. both are safer anyway and your equity curve is steeper. do cross over enteries by judging money velocity to determine how late to enter. the rule is exit as money velocity falls below the increasing money velocity of the best stock fighting for your capital stream that day. don't mess around make those puppies perform. When block size enters the picture and you are axiting one stockwith partial fills, be sure to keep close control over money velocity and still do not violate the 10% of cummulative volume being traded that day. By this time, being retail, you will have your broker's ID if you are not electronic, this means you are phoning the desk and usuing his ID. You will also have the right to determine commissions. I make it a rule to double them on profitable exits and to only pay paprer costs on washes. The extra is referred to as a "bone' and it is "thrown'. Your accountant will not like you very much; your broker will. Invitation only boutique brokerages are best. There is more to investing than just swing and position trading. Full time assistance is not uncommon when you are in the groove. Why? There is a stream of aggressive accounts coattail trading you every step of the way. You do not know what being "pushed" means until you see the accounts trading behind you out od a west coast boutique literally making the market once you are "positioned". No one but no one will be stepping on your feet since they know what is very good for them. Your records will always show abundantly and clearly that any SEC bullshit is unfounded and broker lawyers deal will all of that at thier expense. It is too bad that this thread cannot get off the ground.
============================================= - I know this cannot be known until after we see which group just look at your screen where dom is or where one line on your trading platform has the Bests. There are four numbers, two prices and two volumes. - bids or offers size is dissolving) is dissolving to no size at all, No not at all. Bids or offers are not being filled. For a trend to rise, the asks have to dissolve. Then the smaller group of ask orders are being filled. The closest sellers (owners) who are "asking" have to dissolve for the price to rise. How can you or babak not get to any understanding of this price consideration and learn that it is not a "value" consideration that is being dealt with. We are discussing trading here and how the market is operating. Trading. Actions of the market. Not the opinions of the entity itself. Opinions do not count only orders count. ============================================ Sorry, I meant to say only offer size is dissolving. ************************************************** you mean that they are pulling their offers back(cancelling, amending to a new, more favorable price), right? No not at all. We are looking at the other side of the trade. It does not matter that this sort of thing is going on on the uncontrolling side of the market. In fact, look at how high money velocity skill traders operate. Who is it that is filling the asks? It is definitely not what Babak is stuck on. Who makes the market move? Smart traders do. When I hit T what happens. I get filled immediately and take the ride. The word for snow falling down hill was spoken of. WOW. Is this snow falling down hill? ************************************************** I am confused here still. I am trying to understand your use of the word "dissolve." I can only picture two ways the ask can "dissolve," or to cause to disappear or vanish. This can occur by current owners cancelling their outstanding asks or amending them to more favorable asks, or it can occur when prospective buyers come in and lift the best offer. Which are you referring to? -------------------------------------------------------------------------------- What you see is people takiing on trades with orders that get filled on the other side of the owners. In any trend owners are leaving and new money is COMING INTO THE MARKET TO OWN. Traders to own simply meet the price of those in control. That is the smaller group is in control and in a rising trend it is the sellers who are eaten up by those who are willing to pay the price. I have tried to suggest that the current system of providing data really sucks because some of it is hidden from the purchasers of commercially available software. The Sidney market is a forerunner of things to come for example. -------------------------------------------------------------------------------- Ok, so my timeframe is short-term(intraday). The trends that I see may just be noise to others trading on a longer time frame. Is your statement a blanket one covering all time frames? The way you state the above seems to be what Babak is saying how every transaction has a buyer and a seller. In this case, owners are leaving(sellers) and new money(buyers) is coming into the market to own. But you differentiate by arguing the importance of how this occurs, Babak just assumes that since the transaction has a buyer and a seller, it cannot have any implications for what is happening? !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! You are right, Babak. As such, I have edited my post and removed my comments on intraday bid/ask analysis.
Lamont, As I mentioned in my silly post about watermelons, financial markets are nothing like other markets (grocery store or painting auctions). Whereas in a painting auction you're bound by a finite good (one painting or a million watermelons) in the financial markets you are not bound by such limitations (I gave the example of Baidu's first day). Whereas in financial markets you have a non-perishable good (GE certificates from the early 1900's) that is not so in other markets. Whereas in the financial market you have price discovery every second of every minute, that is not so in other markets. Whereas in other markets a good must be 'created' in a cycle of harvest (or production) the financial markets do not operate this way. Whereas in the financial market you have 100% standardization (one share of Baidu is always the same as another) you do not have this in other markets (a watermelon has qualities as does a painting). Etc. These differences in the nature of the instrument being traded, cause a real difference in the way that they are 'traded'. tokyotrader, that way lies madness.
Jack, You condescendingly repeat that I'm wrong. Fine, I don't insist that I have the truth or brag about my experience, or the millions I've pulled out of the market, etc. Could you atleast move beyond this and explain why I'm wrong? I can respect those that disagree with me and offer another viewpoint. Its hard to do so when someone continues to say one is wrong but then offer no coherent reason why. Jack, if it isn't clear to you now that your language is a stumbling block for everyone then I really don't know what to tell you. Calling step 8 'gobblidigook' was a result of your incoherent and muddled method of expression. A clear, analytical mind can not help but express itself in the same manner. A muddled and confusing manner of expression is a sign of a muddled and confused mind. I've followed you around the net and have read people say they don't understand you or have trouble with your language EVERYWHERE you have ever posted. This is not isolated to ET, its not isolated to me, its about you. As traders we must stop denying truths and take responsability for ourselves. I invite you to do so and recognize that this is about you; that you and only you have the ability and responsabiltiy to effect change. Its not too late. Its never too late. Carpe diem Jack. Example: http://www.trade2win.com/boards/archive/index.php/t-3783.html btw this is the last time I will read/respond to your posts as you write incoherent babble worthy of Bill Williams (do you know him? you would get along swimmingly!) and you do not respond to questions or comments [example1: you mentioned that I'm trying to uphold conventional wisdom when in fact you're the one upholding the conventional wisdom when it comes to volume! and when this is pointed out, you evade Example2: you claim the 'smart money' trades the MiniDow futures, when you're called on it, you evade]