Home > Markets > Index Futures > Is volume analysis useful in index futures?

Is volume analysis useful in index futures?

  1. Hi,

    Assuming that volume analysis of various kinds is useful in technical analysis - would a market like index futures be any different than other markets like for instance commodities? Or single stocks?

    With index futures, you're basically trading a basket of stocks or an index, which is widely traded in multiple markets, i.e., various ETFs, the stocks composing the index, program trading/arbitrage, hedge fund managers hedging/offsetting positions, etc.

    In light of that, I've always been wary about reading too much into volume or making any inferences based on volume.

    Or are these markets so perfectly correlated that volume in the ES is representative of what's 'actually happening' in 'the market'?

    Any thoughts?

    Regards.
     
  2. While I find climatic volume to be of use in analysis, I imagine it's the MM's making up the majority of the volume and attempting to remain flat that causes the volume to be too constant and of less value in analysis than say in stocks. I'm speaking of that in the Nikkei.
     
  3. No
     
  4. YES!
     
  5. As there is a NO and a YES!, I'm going to go with MAYBE. Trading is just not that simple. Those that can mine data and get alpha from it, will profit. If you can "watch" futures and their volume and get profitable triggers from adding that to other information, that would separate you from the crowd.

    Whatever works.
     
  6. I'm not a fan of volume. (Joe Granville was always a big proponent of "On Balance Volume"... his own proprietary indicator if memory serves. It served him well when he first started touting it, but later led him astray to being wrong just about all the time.) Years ago I had my own custom volume oscillators which seemed to correlate well with important price turns. Then one day I realized they no longer did so, and I quit using volume entirely. Important swing/big highs and lows are made on light/heavy volume, so I conclude "no value/price correlation to volume studies".

    Some traders use "volumentric bars" (available option in most charting packages) for charting instead of "time periods".

    Personally, I suggest not wasting time on volume studies for the indices. But what the hey.... check into it a bit if you care to and maybe you'll find something worthwhile. Don't be surprised though if you come up empty. And keep in mind... you primary objective as a trader is to be in tune with PRICE... not volume.

    (Many traders see volume as the Holy Grail of trading.... and to poo-poo volume is trading heresy. I think proponents see what they believe they should see or what they want to see... but that's another story. Don't be surprised if you find disagreement with my views.)
     
  7. Consider the opposite. That all those market participants trading behavior’s distill into 6 points of information - ohlcv in time.

    If one isn’t discerning the significance, role and form of volume than perhaps the inferences one has can be expanded and refined.

    If one is looking for validation of their bias, they’ll never see that volume leads price - without exception.

    More so, they would have a vehemently negative reaction that such a possibility exists.

    Just because someone doesn’t understand a foreign language doesn’t have any reflection on that language’s utilitarian function to communicate meaning.

    Understanding volume is as comprehensive as understanding price action if not more so.

    There are the forms of the volume bars themselves as they relate to price, the relative comparison and contrast of volume bars to each other, the pace and change of pace by which a bar builds, the manner by which a volume bar builds, and the relative position of the volume bars to each other that comprise a trend segment to name but a few.

    One thing is certain, whether one sees these relationships on a chart, DOM, or T&S, once one sees it, it cannot be unseen.
     
  8. I'll try to make a more in depth comment later, but to clarify; this discussion is about whether volume analysis is different in a market such as stock index futures for reasons already mentioned as compared to a single stock or commodity.

    I think raw volume on a 1-minute bar is flawed, but what might be interesting is local peaks in volume or a skew between bid/ask volume, i.e., delta...

    I am however not convinced yet that it might be useful in stock index futures, but I keep an open mind for further studies...
     

  9. It is to me, and to those of my colleagues who trade index futures.



    I trade mostly NQ (not ES at all); I can't comment on any comparison with individual stocks, since I've never traded one in my life ... but I do sometimes trade oil futures, too, and I use volume for that.



    Call me naive and/or isolated (and I'm not saying this facetiously or rhetorically: clearly I am naive on this point, and I'm certainly pretty isolated, compared with many traders, which was the primary reason I joined this forum) but I honestly wasn't aware that there were experienced traders who were "not convinced that volume might be useful in trading index futures", and am genuinely slightly surprised to hear it.

    I can't really add anything else helpful, because Sprout has already said everything I'd have said (but much more succinctly and precisely than I'd have managed ... no surprise, there).

    Mostly, I'm posting just to record my "pro-volume vote" in the conversation. :)
     
  10. I'm one of those. Seems I read somewhere that traders looked to volume as "confirmation" of the move. Funny, I don't believe in that either.

    Even if there is a correlation of volume to price (and I've just ignored it because of co-correlation elsewhere)... traders don't need volume to "get it right". I suspect the notion of "volume confirmation" causes traders to miss more than it helps avoid losing trades. (I recall thinking many times when I was still using my volume oscillators... "I didn't buy/sell because volume wasn't right or didn't "confirm".... and it turned out I should have made the play and volume considerations had put me incorrectly off of it. So somewhere along the line I had the epiphany, "Volume? Pfft! Stop wasting time on it.")

    So... lemme throw out a challenge to all the "volume devotes".... graph up some plays in which volume played a big role in the trade and explain why you think volume consideration was vital. Send me PMs, and I'll try to show where you could have made the same play sooner or coincidentally from the price charts alone. If you are right, I'll admit to being wrong. (While you're at it, please also send graphs of good trades you missed because of your consideration for volume.)
     

  11. No, indeed ... I don't think anyone's suggesting that, though, are they?

    I'm certainly not, anyway: I traded successfully for years before I really "discovered" volume, and I used to trade spot forex originally, which doesn't even have volume available (apart from the broker's own volume, which is useless nonsense, and the corresponding futures' volumes, I suppose, in the limited cases where there are "corresponding futures".)

    But observing that people can "get it right" without volume is surely a long way from believing that "volume can't be helpful" or not acknowledging that volume "might be helpful" (which was the statement that surprised me)? [​IMG]
     
  12. We'll see who responds to my challenge. The questions to be answered... (1) "Is volume helpful in improving overall trading results.. i.e. making more good trades and avoiding some losers, (2) is volume consideration non-conclusive/ineffective and a waste of time, and (3) does volume consideration actually hinder success by resulting in more missed profitable trades"?
     
  13. 1. Without a doubt. The importance of volume in making a proper analysis goes all the way back to The Dow Theory. In the case of manipulated stocks, it is of utmost importance.
    2. No, no, and again,no!!
    3.See no.2
     
  14. You may be right about that, but the OP's original question was about "the market in general"... i.e. "stock index futures".
     

  15. To some extent, perhaps ... but we'll inevitably be dealing with a tiny group. (I suspect there must surely be several others, here, in the same position as me: not allowed to show our empoyers' charts to anyone online, according to our NDA's?).

    My own original experience with volume was that I switched from trading EUR/USD and GBP/USD to trading Euro and Pound futures: I traded in exactly the same ways, doing exactly the same things as I had previously, but basing all the trade-entry decisions from constant-volume bars instead of from constant-time bars, with a statistically significant improvement in my results, with both instruments, over each month of the first 6-month period (during which I ran both sets of charts side-by-side). That was good enough for me. :)



    It was, to me.



    It isn't, for me.



    It doesn't, for me.

    But none of that is actually helpful to you because of course it's anecdotal and unevidenced: you have to exclude me from your research anyway, because I'm both unwilling and unable to prove it (either in public or in private). [​IMG]
     
  16. Oh sure... weasel out! :)

    With your being an institutional, I wasn't expecting input from you.

    I don't really expect anybody to respond... mostly because it's more trouble than it's worth. But we'll see.
     
  17. Right, but I just mentioned stocks for the sake of it.
    More strongly than I said in my first post, the climatic volume in index futures is extremely valuable. But again, I'm talking about the Nikkei. However, as I remember, years ago when I examined ES, I found that the same held true.
     
  18. I couldn't disagree more.
     
  19. Would like to hear why, if you have a second.
     
  20. Markets make highs/lows on both high and low volume.... and ever measure between. Anything you think you get "exclusively" from volume, you should have already seen in price. It's conventional wisdom that "volume leads price" (it doesn't for the general market), but I can see how some might think that.

    As I've said before, I'm a K.I.S.S. trader. Volume considerations merely muddy-up trade decisions.
     
  21. That can be true for the index. But it would be a very rare exception for that to be true for index futures.
    Volume can't be used exclusively, as you said.

    You often use K.I.S.S. I think I once knew what that stood for. Would you please refresh my memory?
     
  22. Some of the traders use time based chart ie one candle is completely formed after say 5 mins.
    And they might include volume bar below the price chart.

    All my charts are volume based.
    eg for ES , one candle is completely formed after 2000 contracts.
    In that sense, volume analysis is included in my chart analysis.
     
  23. Keep It Simple Stupid. It's my philosophy.. "If I can't explain the trade in 10 words or less, I've probably got it wrong." You know, Occam's razor kind of thing...
     

  24. Mine also - I don't have volume shown separately below the chart, as some people do: I simply define the formation of the chart's bars according to numbers of contracts transacted.



    Indeed - exactly so.

    I spent quite a lot of time looking at volume, and all the trading literature about volume, really from Wyckoff onward.

    Unlike the "trading literature" on other aspects that I've studied, I didn't enjoy it.

    My own feeling about volume, in general (though I can't substantiate this or offer realistic evidence for it, at all) is that for me, using constant-volume bars gives me probably about 75% of the available benefits of "using volume professionally" with about 1% of the extra work. Which suits me. :)
     
  25. I guess you are trying to say KISS
     
  26. Yes, and I think you will find a significant difference in how volume visibly varies among time based, constant range, constant tick etc. charts. What stands out on one may be flat on another.
     
  27. No. KISS can be a noun or a verb... or the name of a rock band.

    K.I.S.S. is none of those things.

    I remember some sage guidance about trading... "Go over your work and simplify as much as you possibly can. Then, simplify again."
     
  28. Right! Now I remember. Thanks.
     
  29. I think you did more than "mention" it... more like shouted it. But that's OK.

    :)
     
  30. Nah, didn't put it in italics.
    I grew up in the time and place where manipulation was the name of the game. If you couldn't read charts, and the volume therein, you were out of the game in no time! Volume was available in time based charts only. There were no constant volume, constant range or constant tick charts in those days.
     
  31. Neither did I. It was just the quote function.
     
  32. What, if any, has been your experience with volume in constant range, constant tick or price change charts?
     
  33. For those who are interested, DbPhoenix posted about twenty chart examples of volume analysis in the context of buying and selling climaxes and withdrawals of supply and demand here. Is it absolutely necessary? Maybe not. But for those who understand that volume is a measure of trading activity and not some mysterious indicator, it sure is helpful, particularly if one understands that price moves differently when only a relative few traders are involved than when a great many are trading, particularly at important levels.

    And, no, volume neither precedes nor follows price; they are simultaneous since volume is a measure of transactions, and if there are no transactions, there will be no volume. Granted a large amount of volume will attract attention and perhaps a greater number of transactions, but that's a different dynamic.
     

  34. Not enough to comment - sorry.

    I have very little personal experience of range bars.

    I also have a slight residual prejudice against tick charts because of my perception that they don't distinguish between small and large orders being transacted. I do see that they may still be better than timed charts, though ... and my initial studies of price action were from Bob Volman's books and the ongoing charts he regularly makes available for his readers, and he does actually use tick charts. This was "back in the day", i.e. before I discovered Al Brooks and developed my English literacy enough to be able to understand what he was talking about (which wasn't trivially easy for me, to put it mildly!).

    I wish, with hindsight, that I'd switched from timed bars to constant-volume bars at a much earlier stage of my trading career. But I'm stubborn, obstinate and difficult to teach: I have to work everything out for myself, more or less from scratch, and teach myself.

    As they say at the Royal Society (in London), Nullius in verba ("take nobody's word for it"). [​IMG]
     
  35. One problem for some traders with volume in index futures is that some vendors and brokers mix in rollover volume with auction volume, which, of course, is wrong and makes accurate analysis impossible.
     
  36. True. That's why I have a Buy and Sell volume frame on my constant tick chart.
    But even then a big bar could be a large number of small trades. That can be clarified in T&S if one wants. But given the attempts of MM's to remain flat, I really can't give that much weight to such volume indications, as they are in effect cross trades. Only when large volume occurs where it should do I take it into account.

    TV.JPG
     
  37. A tick, as you know, is simply a record of a transaction. It is only when the ticks are combined in some way that they become an "indicator". As such, they are expected to perform a function for which they may be ill-suited. What matters to the price trader is not so much the volume accompanying the transaction, the tick, but rather where all of this is taking place, i.e., in what context. e.g., a buying or selling climax. Combining ticks serves no purpose, as far as I've been able to see.
     
  38. Ditto that!!
     
  39. This is all correct... except for the part, "it sure is helpful".

    It isn't.
     
  40. Sorry if I misunderstand, but it seems these two statements are contrary.

    Perhaps you believe, as I once did, that tick charts are too detailed. I think one can find that that same price movements found in daily and intraday charts, along with the accompanying volume, can be found in tick charts.
     

  41. The word "all" was used deliberately to note that the character of a particular transaction will depend in large part on what happened prior to the transaction. "All" may therefore include the previous day's activity, or that of the previous week.
     
  42. Oooh... you were doing so well... until you said this. That's just blarney!
     
  43. They are not contrary if one views price movement during any given trading session as continuous. All charts are tick charts. The differences in charts that have not been cluttered have chiefly to do with the degree of zoom. Yes, literal tick charts are very detailed, which is important if one wants to know what's going on. But at some point, the price activity trails off the left-hand edge and one loses the context. In this case, zooming out in order to encompass a larger portion of the activity is appropriate, even if the ticks tend to resemble a line.

    One can of course resort to bars of one sort or another, but doing so tends to disrupt the continuity, and the trader starts focusing on the bar rather than on price (e.g. most of what's written about intraday trading).
     
  44. I would hope you post your findings on here, while of course trying to protect the identity of any any members since it will be through PM. The reason I say this is because on several occasions, I have attempted to ask the member, @Sprout to show stats of his very careful analysis, and he never replies with said stats. I see when members ask for help, he is quick to show them his method with this lovely in depth bar analysis, but I never see those members coming back to say how much money they are raking in.

    It all leads me to believe that as you say, sometimes it results in trades being missed because of analysis. Any time you add in one more consideration, unless it improves the win rate drastically, it will often mean winning trades are skipped.

    I remember how smart I thought I was when I discovered cumulative delta. Jesus, here was something that would tell me if the buying or selling was aggressive and surely this would indicate with a high degree of accuracy where price was heading! I'm sure some people on here know how this ends.
     
  45. Perhaps if one is scalping. Otherwise it pays to know the context.
     
  46. I'm willing to enlighten "where to fish", but I'm not going to "bait your hook and cast your line for you", too.
     
  47. More blarney. Sorry.
     
  48. Yes, of course. I doubt that anyone uses single tick charts. I think many who trade ES use constant tick charts ranging from hundreds to thousands of ticks in order to maintain a view of context, and in order to apply TA.
     
  49. Does he ever get around to talking about taking actual trades? From what I remember here at ET, he was very good at telling you where you could have, or should have entered, after the fact.
     
  50. I use 5s and 10s charts, which enable me to follow the ticks while also providing context. And I trade the NQ so I have no idea what those who trade the ES use. As to "applying TA", I analyze the price action. If by "TA" you mean indicators, I don't use them.
     
  51. Volume, tick and time are the partial derivatives of a function price. As w/ all partial derivatives equation, you can take them to zero to trade w/ the other. If you can use all 3s, more power to you.
     
  52. Fine, I thought you were talking about single tick charts. 5s or10s charts for NQ would be fine I'm sure, but would be to short to maintain a view of context for something as active as ES. You just need to find the proper setting according to the activity of the contract.

    No, I don't either. Don't even consider indicators to be TA.
     
  53. "Bingo!!" (IMNSHO.)
     
  54. The NQ is active enough :). At the beginning of the session I don't need more than a half-hour, and the 5 or 10s suffice, unless one is trading off tiny charts. After that, it's chiefly management.
     
  55. (^^^Here's where we need a "Like" for a piece of a post...!)


    It's going to be a nasty day (for me) but this note will be the string around my finger -- if not today, "soon". :rolleyes:
     
  56. OK, Buckeroo. Bring it!

    (I've eaten crow before... though not lately!) :)
     
  57. It's, like, "the fourth quarter of 2017..." and I JUST discovered a little Microbloatsoft tool called {Guess what!!} "Snipping Tool". OH JEEZ. This is in W7 FWIW. But it's handier-than-snot for creating real quick .pngs from what's on your screen(s). Even has a little 'highlighter' thingie.

    I'm probably the last one to learn of this ... :rolleyes: ...just not something I used before. Now, I'm probably dropping half-a-dozen .pngs a week for this and that....!

    Google will probably handle any questions. (But I'm probably the last one to know....!)
     
  58. Or what they need to see, to hopefully make sense of a nonsensical situation. So what is logical for the Price Volume trader?

    Statement: Price alone is useless without volume, as is volume without price.

    Is the above statement logical?
     
  59. Congrats. That's a REALLY good question!

    Answer.... the only thing that really counts is PRICE!!!!! I'm 100% sure of that for "the market in general and stock index futures". While I suspect it's also true for individual stocks (with much disagreement from the peanut gallery)... I'll hedge on that for now.
     
  60. Learning english, understanding Al Brooks, understanding volume for successful Trading, that is a trifecta in spades!


    If there ever was a magic key to unlock Aha's, these two sentences point to it.

     
  61. Volume is dangerous (as mentioned above) when activity is light: *anyone's* agenda can turn the market.
    That said, the story told with volume in the ES today is more plain than I've seen it in a while -- which, with everyone having a non-market (read: Vacation Weekend) agenda -- is almost surprising. Still, the following scenario(s) jump out rather plainly...

    ESDec22nnCapture.PNG

    The yellow circle appears as a cusp point: will the selling volume (of the last 10-15 minutes) continue the ES slide through the day? Or will the "11:30 Euro-turn" prevail, and with Europeans (down more than U.S.) now out of the U.S. trades, will we (the ES) turn back upwards to end the day flat-or-slightly-up?

    Dunno! But what the situation would drive me to do right now is, SIT ON MY HANDS. At a cusp, I don't want to be long *or* short. I want to be out.

    Anywho -- in pricing, I tune my candle-"view" to have long tails (wicks) correspond to market turns. When these wicks correspond to volume surges, that shouts loudly of the actors' agendas. It's those agendas I need to watch -- it's about the only tells available, with floor trading closed.
     
  62. Structure the statement with "IF's", "Then's" will allow one to test the logical operators of True, False, AND, OR.

    Via testing, and using the market's granularity one can work out the function of price as a derivative of volume - volume being defined as the quantity and quality of transactions and the ratio of participants to size that supply vs demand liquidity in any given timescale.
     
  63. Although my interpretations are different, I respect yours and am delighted to consider the close of the European markets nor the participants whom consider such things (which I have not done up until now.)
     
  64. Am I the only one here who swears by time-based charts? Price and time. Those are the twin pillars on which all else rests.

    Setting aside the lofty (empty) rhetoric, my preference for time-based charts stems from the fact that, in this algo-driven market, the one universal denominator is time. That’s the page I want to be on.
     
  65. I do agree that the day before the weekend isn't the best way to illustrate something, but I fail to see what you are trying to show. (not too surprising because to be honest, I find it hard to understand what you say sometimes given the way you write)

    But what stands out for me is that you don't make any mention of trades. You mention at one point "as soon as the volume stops, so does the price decline". Can we then infer you to mean that you go long? I hardly want to put words in your mouth, but the volume analysis, if it is to be useful, needs to provide a trade. If you want to see when selling stops, this mean that you also need to wait for one more bar to finish, in order to see the volume for that bar in fact is lower than the next bar, and then more often than not, you might have already missed the turn, if in fact there is a turn.

    Case in point, your last example. Big down red bar along with very high volume around 11:10. Then the next bar is a green bar, lower volume... do we go long since the selling stopped? At 11:34, which is off your chart, the ES made a lower low since selling wasn't in fact over.

    So my point is that your example doesn't really show anything when the name of the game is to put on a trade and make money.
     
  66. A year ago, when I started to make my 10 year ET membership a habit, you showed yourself to be classless. Haven't seen you since. That's nice. But, 'it's a free country" so, go where you wish. But, for me, simply, F.O.A.D., or, :finger:.

    (D'ya get that??) :D
     
  67. I do find volume an important element of my trading for certain conditions, more so with equities than futures due to the fixed number of shares (float). Looking at the equity charts gives me a better read on an index at times. I know some futures traders that do very well that don't look at volume at all.

    Indexes are just averages - you often see changes in the equities before you see it on the index. I consider it an edge to keep up with the more liquid stocks in the indexes. I have caught plenty of big turns and continuations this way when the Index lagged the developing strength or weakness developing under the hood.

    The indexes move like the last box car on the train - the box cars up front are the leadership stocks, they always get there first. Volume leads price - at the big reversals and continuations volume is everything - it is the wind in the sail.
     
  68. also winston churchill upon receiving request from his Generals for armaments to win the war, receive a voluminous stack of paper told them to put the requests on one sheet of paper.
     
  69. Maybe LL has already hit the famous line but if not....drumroll please. Trading is part art and part science.
     
  70. Hello. I found this picture off a different trade site during a previous selloff during 11/29. Does this count as volume confirmation? A lot of buyers and sellers would generate a much volume, but without price change. The candle after the green bar, the red doji, had the highest volume not counting the early part of the day, where volume is usually the highest. It was also very close to the day's low.
     

  71. Gotcha of course this is AFTER the PA but here is how i would look at this chart for actual trading purposes:

    Example #1 Prior to his first example we see a tight trading range. Towards the end of that range but just before the BO south on the big red bar with high volume we see 3 bear bars with tails on top in that tight range. This at least for me indicates an impending probable BO south. However, most BO's fail but they can be good enough for a scalp. I would have shorted on the close of the bear bar (with the big tail on top) one bar before the big bear bar with high volume that he highlights. This trade would have only been for a scalp unless the PA on next bar or two after the big volume bar gives me a reason to hold the trade for more gain. That is, to continue to hold I would have to see a low close on the big volume bar or a decent follow thru bar after the big volume bar. As it turns out the big volume bar closed up (see tail) so i am exiting at that close or on the next bar. That is my scalp down.

    Now when i see the close of green bull bar AFTER the big volume bar I am thinking big vol bar is a failed BO. The market is probally going back up to the top of the range. Why? Well the big vol bar had no follow through. The next bar is a bull bar. These two things tell me that some buyers have entered in otherwise the BO south would have had a good follow through bar. So, I am out of my short scalp and now I go long on that first bull bar after the big vol bar or I may wait for one more bar. It too was a bull bar. I'd then bet we are going back up towards the top of the range.

    I'd go long place my stop 2 ticks below the tail of the big vol bar. Seven bars later on that red bear bar i would either decide to exit take my profits as I would be expecting a PB next on the agenda OR I might say to myself "self we just had four consecutive bull bars since the big vol bear bar then a doji then another bull bar followed by a bear bar and even it has a tail on the bottom, indicating still some buying pressure. So, i would reason we are probally getting a PB Next BUT it is doubtful the PB will reach my stop (because 4 consecutive bull bars with buying pressure is there) so I think I will hold my position and scale in long as we go down on this PB. That is, i would be averaging in as the market went against my paper profit from my first entry. That is ok as long as no scaling in happens below my stop.

    Once the Pb ended I would be then holding for a second leg up towards the top of the range, which we got. After the first 7 bar PB it went up to form a double top at the very top of the range . It did have an an additional very small PB in that second leg up. But i would have held thru that tiny pb because prior to it there was ANOTHER three green bull bars with gaps. So we got 4 or 5 bull bars on the first leg up now 3 more bull bars so I am not jumping ship just yet.

    This is followed by a double top. That is my exit point. Why would I exit at the DT? There are 4 reasons. 1) a double top formed. 2) Price is at the top of the previous range. 3) the channel is still down (context) 4) at the double top we just formed a wedge top i.e. 3 pushes up from his highlightED big bear bar. ALL that together is enough to make me jump ship and exit.

    Anyway this is how i would be looking as trading this sort of PA as it unfolds. That can be traded this way without ever seeing the high volume on his first example. Why? Well.. most anytime you have a bigger bar than previous bars and it is breaking out of a range you know that it is doing so with relatively big volume. It is rare occasions that it would be otherwise. So one doesn't even need the volume bars but if it gives some confirmation comfort then one can look at the them. I just know that usually when i see a big bar on a BO most of the time is is going to be formed on higher volume that the previous bars.

    I could take each of his examples and show how I would see them and how I would reason any trade but only if there is an interest to see it as takes me awhile to type. Some think I am a clown..a jerk..a troll. I may be any and all of them. Who knows? But i don't mind sharing my thinking if folks can look beyond my foolishness and see my reasoning. ROFLMAO
     
  72. Ok context first. You got a tight channel down. It has at least 3 pushes down so it is a wedge bottom. You have to look at bear channels as bull flags in the larger scheme of things. That simply means that if this prolonged tight channel functions as a bull flag then chances are the BO will be to the upside, when in fact a Bo happens. If the Bo is south then expect at least two more legs down and simply a larger bull flag forming.

    However, this BO was first indicated by bull bar you have shown with the low price. Thus we have a potential reversal bar at a wedge bottom. But notice I said POTENTIAL reversal. MOST reversal attempts fail. You have to wait for more info to decide if this reversal attempt is likely to succeed or not. All reversal attempts will have an attempt to make them fail.

    So, the next bar (the famous doji bar on higher volume) IS the attempt to make the reversal fail. The bears who have been strong in the context (indicated by bear channel down) want to continue making the market slide south. So, they are battling the bulls on the doji bar. The bulls are pushing back hard. Hence we get higher volume on that doji as opposed to the vol on the reversal attempt on the prev bar. Who is gonna win? Don't know yet. Must wait for more info. The next bar is a good bull bar on a little less vol than the doji so bears aren't quite as agressive as price actually moves up on lower vol than the doji.

    If you are feeling cocky you can go long on the close of that bull bar after the doji once you see it has closed high. Or you may choose to wait for one more bar to well sort of confirm the reversal.

    Certainly by the close of the second bar after the doji you will want to be long as the reversal has been confirmed by PA and the bears for the moment are capitulating as we see less volume as the market creeps up with not so much pushing from the bears going on.

    Again look at context. Market has been in a bear channel for a while so it is probably going to form a range now. So you will be looking to exit at any reasonable point of resistance. Since this was a successful reversal i would expect two legs up and would probally add on to my position on first PB expecting a second leg up. My stop would be at the bottom of the reversal bar as I would consider this a swing trade on an intraday time frame (i.e. two legs up)

    So i suppose your question may have been why the bigger vol on the doji after the reversal bar? How does that confirm? Well it confirms bears are pushing hard to keep the bear channel headed south but bulls also are pushing back hard. The next two bars show who wins. Time to take a position.
     
  73. While there are some parts of your analysis with which I agree, and some points that I would not choose to apply, I think it is outstanding that you went into such a detailed explanation of your step by step analysis. I have seen very few examples of such on ET, and I would think that those new to TA would find such explanations extremely informative. And I would think that starting some sort of educational TA thread would be welcomed by many. I have often thought of starting one myself but as slowly/poorly as I type what you posted above would take me a whole day to type.
     
  74. Everything in trading...is a tool. of a tool. of a tool. -- and how you apply it, and understand it, and interpret it,
    Nothing is an exclusive measure gauge all by itself. Everything is kind of interconnected in helping you make that judgement call.

    Trading the market is truly part art, part science, ;) -- and all of this isn't just philosophical hyperbole,
    If you have a square, black and white mind and personality...trading is not for you.

    Make Trading Great Again 2018...High-Five`
     
  75. While I wrote the above based on reading just one of your posts, and so I could be wrong, but I get the feeling you have done more study and work than most on the subject and would therefore be one to provide worthwhile commentary(not that I'm one to judge mind you!!).
     
  76. To, me it sees like volume analysis is one of those things that's simply accepted as truth without further question or even proof of it's utility. It just seems logical that it has to have some kind of value, right?

    It's evident in this thread from your answer here and from many other posters.
     
  77. Interesting. I do happen to have volume charts in addition to my time based charts, but I wouldn't consider this to be volume analysis per se, although you're certainly using an aspect of volume in your analysis.

    Mind me ask what kind of settings you use on your volume charts? Are these 'fast' charts and/or 'slower' charts?

    I use 500V charts or less on ES.
     
  78. I do.

    What I don't like about volume charts and tick charts is that they're not consistent from day to day. A time-based chart is always 390 minutes. But I do think V/T charts can improve on execution.
     

  79. I don't trade ES (but that certainly sounds pretty fast, to me?). I routinely use two different "speeds" (for NQ, and for CL); with apologies I'm not really supposed to give details. o_O
     
  80. I think you will find that volume was recognized as a valuable part of TA as early as The Dow Theory. In the early 1900's it was not just accepted as such, but was studied in detail and presented in many books showing its value.
     
  81. Interesting discussion for sure.

    BUT, the main part of this discussion seems to have missed most people posting. In the opening post, I clearly said:

    Assuming volume analysis is useful - would it be any different in index futures than say single stocks or commodities?

    To repeat myself. The reason I'm asking is that I'm curious if volume transacted can be reliable for any type of analysis when it's a market that's traded in so many other markets as well. If someone sells a large amount of contract in the futures market, might that not be countered with a large 'buy' in the cash market as program trading? And vice versa?

    Or are all these markets so perfectly correlated that the volume in ES can be used as a accurate proxy for what's happening in all these markets?

    I hope my question is making sense.
     
  82. Only have a second, so I'll be brief in saying that, yes, arbitrage taking place throughout the day will be printed on the charts. However, such is a one shot occurrence that will not have an effect on what the trader is most concerned, being the trend. Will try to answer about index futures vs stocks later.
     
  83. It does. It’s dependent on liquidity.

    The cash leads the futures from the dynamic you describe. Future’s being used as a hedge for the cash. The YM leads the ES (at time of change.)
    The above assertion is unconventional and most likely met with disbelief to the point of ridicule.

    It’s difficult to discern unless one calibrate’s their display of market information. This would include (but not limited to) multi-timeframes, DOM, T&S, and OTR charts. All swept from coarse to finer detail of observation as volume and PA dictate.

    So what about spreads?

    Ever notice on the DOM as price is coming up to a wall and either reverses, eats through it or blows right past as if it wasn’t even there? One wall exists in the perceptual frame one is observing, the other operate under different contexts. Both equally valid and paradoxically both representive of participants getting their needs met.

    Some see it, some don’t, some will, some won’t. A trade is always setting up, to each their own - it’s what makes a market.
     
  84. Yes. You would want to do your analysis on the underlying index volume, not the futures volume.

     
  85. Of course, volume is useful/valuable in any traded item. But it must be kept in mind that volume in each is conditional, and may or may not have an effect on the trend. That which is of no consequence to price movement can be ignored.
    As to volume in index futures being an indication of movements in other markets, that can be yes or no, or the opposite, such as an increase in the value of the yen can spark a movement in the Nikkei futures, or then again the Nikkei futures may ignore the yen's movement. Volume in stocks may be generated by manipulation, cross trades etc. etc.
    In short, I question the value of trying to interpret the effects, or indications, on one market based on the volume or price movement of another. I think you would wind up chasing your tail in doing so. The proper reading of the market in question is really all you need to focus on. On the other hand, markets do not change direction on a dime. So in some cases you can use the indications of related markets in your analysis of the market you are trading. And, the volume in each will have its value in your analysis.
    Sorry if this doesn't answer your question, but my concentration on typing has worn out.
     

  86. Not sure it's wise to blindly assume anything in this game. If the proponents of volume find it difficult to express themselves adequately,...what chance does anybody else have?
     
  87. Well maybe some of us do find it difficult to be convincing even regarding something we know from years or decades of experience to be true and of value. Come to think of it, I'm a proponent of sex, but would find it hard to explain to a virgin!!
     

  88. Not much ... which is probably why it's still regularly being discussed with such a wide range of views being expressed (some of them apparently fairly entrenched ones).

    In my opinion, there's quite a wide variety of reasons why its proponents, collectively, find it difficult to express ourselves, but those don't answer your perhaps semi-rhetorical question, itself doubtless based on an entirely valid observation.
     
  89. It isn't so much that we find it difficult to express ourselves as the efforts invariably are heavily trolled and eventually wind up as arguments, and who has the time or the motivation to divert their attention away from their trading in order to carry on pointless and endless mudslinging. I've provided a link to what I consider excellent explanations of at least some aspects of volume, but I can't force anyone to read them. They do however exist for those who are interested enough and curious enough to invest the time.
     
  90. Ain't that the truth!!!
     

  91. It's a fascinating subject.
     
  92. Yes, it is, especially as it is a dynamic expression of the forces of demand and supply, or, if one prefers, buyers and sellers. One can do without it, of course, and trade based on price alone, but why?
     
  93. The chance to appreciate a mesmerizing sunrise or sunset. The chance to appreciate variety of visual or performance art that can be internally moving.

    Music follows fundamental maths yet produce an never ending variety of form open for appreciation or ‘turn that noise off! !!’

    For any who have observed evidence of higher order amid a seemingly background field of chaos, it adds more fire to the belly to understand more.

    There’s a point that verbal language fails to communicate feeling yet feeling can reveal fundamental truths.


    This short vid has a bit of backstory and music. There is another without either that is equally as moving.

     

  94. Gorgeous.
    :)


    (...when a "Like" jus' won't do.....)
     
  95. Short answer: "Absolutely."
    As noted above, the (ES) futures mkt is largely a resource for hedging activity -- and in that way, plays out the hedgers' read of the market en mas. The volume transacted is helpful (and recorded! So it's in historical data.), but the volume on-the-bubble is also helpful: take your DOM ladder and sum the contracts showing on the bid as against the ask: whichever side is higher gives you the real-time guess of the hedgers as to which side they think the market is turning. (There's your counter-intuitive market tell for the day.)
     
  96. I've found volume analysis to be perhaps the single-biggest indicator of short-term price direction I;ve encountered in forty+ years, and despite all the structural market changes (HFT, etc.) it has always held up.

    When I was a sprout, I had a crap job in lower Manhattan, I'd take the 4/5/6 for like 2 hours to get there (Jesus, I was pumping gas all night long in the Bronx, then 2 hour subway to my day job -- the stuff you can do when you're a sprout!) and I would buy a WSJ on my way to the subway stop to read on the ride. There was always a chart of the Dow along with the bars of volume at the bottom, and I began to see patterns in those bars that were great for short-term timing.

    Over the years, I refined it quite a bit, and as I have said, despite structural market changes, those volume bars have held up. I use them on 5 minute charts a lot now too -- it;s NO DIFFERENT than tape reading in the old days or the noise (ar absence of) of the pits or floor - no different.

    A few notes though. It works on any time frame, from minutes to years. If using futures. you have to look at total volume, not contract volume. Also, often, related markets give better indications that the actual market you are looking to trade. In other words if you are trading ES futures, you might want to look at what's going on in the volume SPY ETF. Also, you;re better if you can be looking at the volume of a "purer" market. So, say, for inverse vol, you might be trading SVXY but you probaly will get better volume bar signals from XIV, the latter not having options and the volume not as polluted by conversions/reversals/boxes there.

    I have some notes on the subject I'll see if I can upload the here. Just bear in mind, it;s just notes, a work-in-progress, as it were. I suppose there's a lot more I could add to it when I sit down and do that some day, but here's a start, a trailhead on the idea anyhow.
     
  97. I went back to Wednesday's ES trading (Thurs/Fri more typical lighter holiday action being less reliable) and so after excluding the heaviest volume during first and last 30 minutes of RTH trading there was 4 swing lows to examine. The first one a LL was confirmed by strong downside volume. The next 3 were lackadaisical signaling likely no follow through. Then again the pivot highs had blah volume too. Therefore it stayed for the most part range bound the rest of day.

    But there are any number of ways to use volume besides this. ES volume.png

    To me if I was only "allowed" one data point to trade with obviously it would be price. If two then price and volume. And three would be price, volume and momentum. IMO they are the 3 horsemen. All that is needed.
     
  98. ES 12-15.JPG Volume can useful. However, observing it and correlating it to PA can sometimes interfere with decision making as it becomes another factor one has to take into account before making a decision.

    Price can only go up or down or stay the same. That is called the DIRECTION of price. Price cannot go sideways. Only up or down or stay the same. It can of course form a sideways range as it moves up or down. But, price itself goes UP or Down or stays the same through the medium of time. When it moves it does because a transaction takes place. That transaction can happen on low volume or high volume or volume level in between those extremes.

    So, when price moves it can be important to know "how" that move transacted. Volume is activity. And activity is $$$. Institutions are "big" money so "big" activity so big $$$ are going into the market. Generally, you want to follow what they are doing. However, they do not always do their buying and selling in big chunks. Hence you have to correlate price with volume and make a determined guess. If price is going up, even on low volume, then bullish institutions have the upper hand over bearish institutions. At ANY moment in the markets there are bullish and bearish institutions. That includes all the algos..HTF's..etc and more traditional type institutions.

    Some times the pressures are about even and at other times one side has the upper hand. That is the side a trader wants to be on.

    Therefore, while it is important to observe PA it is also important to observe "how" that price action took place. Study my previous post on the explanation of increasing vol on a doji.

    Look at the ES on 12-15-2017 RTH 5 min chart below.

    The chart is without volume. This type of PA is what is called a small PB bull trend. While it seems like a slow grind up it is actually one of the strongest type trends. Look at the GAP up open. Over 10 points. Now the task at hand is to determine if this trend up will continue or reverse. What kind of day will we have? It becomes useful to see that gap up as ONE big bull bar. That means that overnight the market trended up.

    Now what happens after that big BULL bar up (i.e. the gap) is of prime importance. If you see that gap up as ONE big bull bar you can readily see that it closed rather high up on the imaginary bar. Otherwise, you will think it close low on the first bar. See what I mean?

    So, we have a big bull bar closing on its high on the opening bar. Is that bullish? Could be but maybe not. It depends on what happens next over the next few bars. Tentatively it IS bullish. But the bears will try to reverse it. That first big imaginary bull bar is in effect a BO of the previous days close. Most BO's fail. So you gotta wait to see if this one will succeed or fail before taking a position.

    The next bar is a doji but with a bull body. Then we get a bear bar..small but notice tail on bottom. Bears are trying to reverse the BO but not having much success as the tail on the bottom shows buyers still buying. The fourth bar is a rather good looking bull bar. The fifth and sixth bars are both bear bars. This is the second attempt of the bears to make the BO fail. Bears trying hard to push price down. They want that opening gap to fill. The 7th bar is a bull bar the 8th a bull doji. Notice the context. A big bull BO then a tight sideways range as both the bears and bulls are fighting it out. Bulls want the trend up to resume and the bears want it to fail. So where is the most pressure? It is quite obvious at least to me. Big bull bar (imaginary ROFLMAO) on the open closing high. 2 bear attempts to make the BO fail but the best they can do is get a little sideways range.

    Finally we get a third bear attempt on the 9th bar. They can't even push price back down to the bottom of the tight sideways range.

    I am ready to pull the trigger. Are you? If I see a BO of this tight range by 2 or 3 ticks I am long before you can say hogwash. On the 10th bar we see another strong bull bar. That was my long entry bar early as the bar was forming it's BO above the small range. The fact that it (10th bar ) closes high and is a big range bar is important. To me that means i should probally hold on thru any PB as the odds heavily favor a bull trend all day and it will most likely be a small pb bull trend that will stay above a 20 ema. So on pb's I add and just keep building the position. Initial entry stop is below that big bull bar (2 ticks below) i.e. Bar 10. I just keep adding as market grinds up and raise stop to two or 3 ticks below the last swing low. Especially, if i see it stays above the 20 ema. It never broke below the ema until around 2 p.m. I would exit 3 bars later on those three bull bars after 2 p.m. Figuring we might see a little drop before the close.

    Why this chart when this thread is about using the volume in an index. Well my next post will explain as i will post the same chart with the volume showing. But first gotta do a little Christmas shopping. Will post same chart with vol and comments a little later.
     
  99. It looks to me the higher volume bars you indicate were used by buyers stopping the down moves
     
  100. If you want consistency , get a job bagging groceries.

    I thought we were looking for predictability.
     
  101. Ok the imaginary big bull bar (opening bar) closing near its high on big volume. That indicates buying pressure. But now look at the opening bar as it really was, not imaginary. ROFLMAO! It is a big gap up bar on very high relative volume. But it closed near its low and closed at the same price it opened at. However, it opened gap up just over 10 points. But the entire range of bar 1 (excluding the gap up) was only about 2.5 points. And then we got BIG relative volume. So what does that tell me? What does it tell you? It tells me that a lot of buying and selling was going on. However, the gap is not filling. The bulls are winning otherwise the gap would begin to fill on such high volume.

    Bar two still has fair relative volume. The next several bars form a tight range and do so on LESS volume. The next bar with large volume is bar 10. The bull BO bar (bar 10) was also highly indicative of buying pressure and it closed near it's high. Bars 11-18 (the first real PB) are made on smaller volume.

    So, to the left we see a strong opening gap bar then a large bull bar (bar 10) so it is unlikely this PB will be deep. It could be but the context clearly says there is a lot of buying pressure. At bars 19 and 20 the PB ends and the trend up resumes so the PB was basically an 8 bar bull flag. The PB is gradual and made with small bars and also stays above the EMA. At this point probability favors a second leg up. I would be buying all the way down in the PB. In addition, the low PB never comes close to the BO point of the previous tight range that developed right after the open. All these factors indicate bullish or buying pressures. By bar 19 or 20 one should be long again with more contracts added during the PB or going long if one missed the first leg.

    Bars 24 and 25 are both decent bear bars made on increasing volume. The market has been going up for 25 bars and all PB's are staying well above the EMA. This is by now an established Small PB bull trend. That means that buying on or adding on to an existing position on all PB's is probally a good tactic to use. The stopless can be raised to 2 or 3 ticks under each swing low as those lows are formed. This is likely going to be a grinding Small PB Bull Trend most of the day. And it was. And most of the day was made on non-consequential volume from bar 26 onward. This type of trending day was established early in the session.

    The point I make is that we only had 4 or 5 significant volume bars most all day yet the trend was up from the get go. However, by looking at the volume bars its does help one to sort of stay on track with the where the transaction pressure is taking place.

    That said, once you trade enough of these sort of senarios it really isn't necessary to even look at volume as one can pretty much ascertain, and I might add with quite some accuracy, that bars 1, 10, 24 and 25 were probally made on increasing volume. The one exception might be bar 1 as that could have been made on lower volume so I might would take a peak at volume on this one bar. When I see it to be large volume I then know a lot of buying pressure is there or it would have filled more of the opening gap. I prefer most of the time NOT to have volume bars on my chart because it just means another data point to consider before I make a decision to buy or sell. It is just adding another component that adds more complexity. I don't generally need to know the volume because I can usually look at a larger bar and just know that it was probally made on higher volume. Why complicate my decision making? The two MA's and PA are enough. I don't need any thing else.

    But this in no way means volume is not a factor in the indexes. It is and it can be helpful in interpreting price action. As far as the individual volume in the many stocks or their sectors that make up an index I certainly would not try to see, or understand, which one, or which ones, are driving the ES. That would, for me, just complicate matters way beyond what I need to know. I just need to see the price of the basket and at times the activity recorded as the basket goes up or down in value. I do not need to know, nor even care to know, the "why" of the move. There is always a bullish AND a bearish interpretation of every news event. All I need to know is what price did and how it did it. I simply don't care about the why. Furthermore, I USUALLY only need to see "what" price did. An occasional look into "how" it did what it did is justifiable...in my books ...but EVEN THEN not something i wish to make a component of every trade.

    Bottom line; volume can help with trading the indexes but once you get enough under your belt, trading PA, you probally won't even need to look at volume except on occasion, and just briefly, and usually just for clarification purposes.

    Hope this helps. Bye

    ES 12-15 w vol.JPG
     
  102. Thanks for the analysis volpri. I wanted to wait to reply until I could reply properly.

    Excellent observation here. I would say though that at one point, you do have to start wondering why the bottom isn't breaking if it keeps getting pushed down. Yes it broke, but my first instinct isn't to show a breakdown, since as you say, most BO's fail.

    Your analysis of the short and then long is very good, but one thing that is in the back of my head is that your'e waiting for these bars to close, so see how they close. You want to see the volume, you want to see if they close on a high or low, etc., and all of this is sucking away the opportunity of getting into the trade. I mean if you short that BO south, and wait to see what happens after the big down red bar, well, you're practically at your entry if not already a few ticks in a loss. Yes, after that big red bar, price stayed within the range of that red bar, but so often the reversal can happen so quickly, and if you wait for that next bar to close, price might already be above the red that you're wait to gauge the strength of.

    Another thing I notice is that so often, price will test the area where it broke out from. So yes, you have the big red down bar, then 2 inside green bars, but once it hit the high of that red bar, it could have rolled over right there and not gone back inside the range and ultimately testing the opening high.

    This is excellent. I'm not sure if I have the skills to predict when price will breakout or not, but you provide some good analysis for why you favor exiting at this double top rather than holding for a breakout and getting a few more ticks. Its interesting that later in the day when we tested the lows, around 11:10, we have a very severe break lower, which by that point was a double bottom at 2684.75. So really, when a high or low breaks I have no idea how to predict.

    Yes, getting back to the original discussion about volume, this is what I was looking for someone to comment on. I see @tommcginnis blew me off, which is fine, but clearly he made no mention of where his trades would go in relation to these volume bars, and hence how he actually uses the volume bars. Perhaps its too basic to say this, but a high volume bar should indicate either a move is happening, or the opposite. In this chart we are discussing, every high volume bar in fact produced a reversal of the direction of the high volume. But obviously, you can't go fading every high volume bar. Sometimes the high volume bar is stops being run, hence the large volume and no follow through, and sometimes the high volume bar is a move, that continues. But if you can't use a high volume bar as a filter which increases your win rate, then what is the point? This is after all the discussion at hand.
     
  103. Oppps... when I posted my reply to you volpri I didn't even see all the additional material in this thread and all the charts. So perhaps my reply is useless.. will have to catch up with this thread now.
     
  104. I would tend to argue against this. I watch the DOM, and my platform shows me a running total of the 10 Bid and Ask levels. I think the algos and HFT firms very nicely fill in any imbalance. If they create an imbalance, it is usually very far away from the inside bid and ask, and it is also often times there to disguise the actual intent. I think its far too simplistic to say oh look, there are a total of 8000 contracts on the bid, and only 7000 on the ask, so it means price will go up because there are more buyers. I don't think, from my observations, that this will in any way help you with anything more than a 60% win rate. Most observations that are talked about hover around the 45%/55% usefulness rate.
     
  105. Thanks for your kind words. Most of the time I seem to be scorned and laughed to oblivion for the trading ideas I share so it is refreshing to get my ego built back up a bit ..ROFL.

    However, I horse around too much to be taken very seriousley. Nevertheless, I do enjoy sharing abit, once in a blue moon, things, from especially a strategic or tactical nature, that have impacted my trading. Trading is very personal. I guess because we are all snowflakes (i.e. Unique) ROFLMAO! Principles can be universal but the application of the principles vary depending on the context in which they are implemented and the implementers w.v. ..comfort level..risk aversion...etc ..ad nauseum.

    I've thought about starting a thread but I may not be able to handle my detractors with my failing, fragile ego. I readily admit I am also guilty of "stirring the pot up" so to speak, so alot of it may simply be ME.

    Maybe my occasional injection of something will end up being useful to someone and will suffice, at least for now. But who knows one bright cheery morn I may awaken in a real chirpy mood and start the "mother of all threads" ROFLMAO. NEOFLTAO (Now Everyones On the Floor Laughing their A$$ Off.)
     
  106. Volpri is to be congratulated for doing an excellent job of analyzing his chart in terms of candlesticks and candlestick volume. However, there is an alternative and perhaps simpler means of analysis looking only at price and volume (some might also find it to be easier).

    Since this is an index futures contract, there are no gaps per se except for Friday close to Sunday open, and not always even then, and if one wants the "full picture", including the overnight activity can be helpful, as can be the context provided by the previous day's end-of-day activity.

    In this case, an expansion of volpri's chart, there is a relatively minor "cascade" just after 1400 resulting in what appears to be a "selling climax". There is nothing to be done here since the downtrend is still intact. This is followed by a volume climax and a simultaneous test of the "selling climax" low (volume climaxes and selling climaxes need not be simultaneous and in fact often occur separately, the price climax serving as a wake-up call to those who've been asleep at the switch). To many price traders, this would be enough to warrant a long entry, but others would wait until the stride is broken. There is another test at about 1800 which doesn't go anywhere, but neither is the stride broken, so price could well continue its decline. In any case, there's no reason to do anything but watch.

    The stride is broken at about 2000 and price drifts sideways. There is a very minor test of supply after 2100, but there is no selling interest (if there were, price would fall). Absent selling interest, price rallies then digests its gains until about 0800 (most traders have been asleep until now, but the prelude to the beginning of NY "real-time hours" provides important information).

    Price then continues its upward bias, tests the top of the multi-hour range, and thrusts upward into the open (note that if one opens his window, what appears to be grind is actually a series of thrusts and retracements). The volume displays a surge of trading interest. That the interest comes chiefly from buyers is indicated by the fact that price rises (if it were coming from sellers, price would fall). Finally, after lunch, the stride is broken, which many would use as a signal to exit and stand aside for either a signal to short or a signal to participate in a continuation. As to further volume indications, there's no need for any. Price itself with its thrusts upward, shallow retracements, and unbroken stride suggests the continued move upward. Until the stride is broken, volume is largely irrelevant. However, at those junctures where buyers and sellers are each attempting to assert their dominance, volume -- i.e., trading interest and activity -- can provide an important component to one's trading decisions.

    upload_2017-12-24_9-35-55.png
     
  107. It's been chewing on my subconscious since you posted this....

    When there is a big spike in volume, is there not a big movement in price? Expressed another way.... is there ever huge volume without big/significant price movement?

    If my premise is correct, then the volume spike which accompanies a turn in market direction is merely ancillary... saying the same thing as the price move. And as such, consideration of the volume is of no value.

    I know... I disagreed with you yet again and got your knickers in a twist. But before you pop a vessel, give it some thought.
     

  108. Between 03:00 and 09:00 you've put in a horizontal line at approx 2661, 'digestion' below and 'continuation' above.

    This is also known as a cycle - accumulation, mark up, distribution, mark down.
     
  109. Yes and no. Accumulation takes place on the way down. The surge in buying is part of what retards and eventually halts the decline. It can continue at the bottom if price moves sideways for an extended period rather than reverse. How long this period lasts will depend on the extent and severity of the decline, e.g., 2008-'09. Distribution, of course, takes place at or near tops, which is why they become tops. Unfortunately, accumulation and distribution are most often detected in hindsight. More frequently, these sometimes lengthy sideways "ranges" are a search on the parts of buyers and sellers for value (if buyers and sellers disagreed on value, price would not likely be moving sideways).

    But none of this has anything to do with volume unless one wants to get into identifying accumulation and distribution via the volume/price patterns in a range, but that's a subject unto itself and may not be pertinent to the thread.
     
  110. First let me say I am observing buying/selling pressures all throughout a range to try and acsertain probable BO direction. So, I am forming a bias as the range is forming. That can be useful but also troublesome if the bias ends up being wrong. However, I am well aware that I will be wrong probally around 40% of the time. That is the context.

    In this case the bottom isn't breaking down because the bulls keep pushing in back up. However selling pressure keeps pushing it back down. Bears want a BO south while bulls want a BO north. This will continue until one side wins and the other gives up at least momentarily. Each bar at the top of the range is a BO failure. Each bar at the bottom of the range is a BO failure. Each time the bulls and bears were attempting to make the market BO. So, these are all attempts at BO's that failed. That is why I say most BO's fail. It would probally be better to say most BO attempts fail. Sooner or later one will succeed. That is the nature of the market. Which will? Only PA can indicate that and give some measure of probability.

    So, how many BO attempts were there in this tight range? Count them. At least 40. That is alot. So, the probability favors a successful BO occurring soon. The problem then becomes when that BO happens HOW FAR will it go? No one knows! However, again i will form a bias as to the distance or THE continuation of the BO depending on the actual PA of the individual bars of the BO. That is, after the BO happens I try to ascertain how far it will go or the probability of it continuing or just failing as the others and simply broadening the range. That is why the close of a bar is quite important to me.

    So, as a range is forming I look at the range and attempt to ascertain which side appears to be stronger. In this tight sideways range I see far more bear bar sequences than bull bar sequences and more tails on tops of bars after their closing. In addition, most of the larger bars are bear bars. This means, at least for me, there is more ease of movement south. Nevertheless, I understand that the market can do and at times will do the exact opposite of what my bias is telling me. Therefore, i am also prepared to take an opposite stance if the BO is different than what I thought it would be. I pay close attention when the market surprises me. Many times that surprise will be followed by a great move in the unexpected direction. Some traders would say don't form bias's. I guess if that is what they want to do that is ok too. I don't use indicators other than a 20 ema and an 89 sma so 90% of my focus is on what is happening in the context and the individual bars. I am not saying it is the best way to trade but it is how I do it. On occasion I will look at volume but for the most part don't need to. I once heard a trader say "the best indicator for price is price itself." I heard that years ago and it has always stuck in my mind. I cannot get rid of it.

    So in this case I am short on the close or shortly there after on that bear bar just before the HIGHLIGHTED big bear. Why? Well a tight range with 40 or more failed BO attempts and prior to my entry bar there were 9 bars with tails on top and the previous bar to my entry bar was an attempt by the bulls to arrest this selling pressure of those 9 bars with tails and this attempt by the bulls failed is obvious by the close of my entry bar. BECAUSE IT CLOSED WITH A BIG TAIL AND IT WAS A BEAR BAR. Hence, I would enter at the close of the bar before the highlighted bear bar because the prev bull bar was not successful in reversing this selling pressure of those 9 bars. My exit would be at the close of the highlighted bar. Why? Because since by the close of that highlighted bar the price was up off the low thus showing buying. So, I would probally scalp out. Because the price action indicated buying pressure by the close I would probally scalp out. However, if that close had been on the low of the highlighted bar i would not scalp out yet but hold for probable further decline and I would consider the BO to probally have two legs down. In a such a case i would most likely add on to my position in any pb. But it didn't close on the low so in my thinking best to scalp out.

    I hope that explains my thinking. Again some of it is gray area because i pay close attention to "how" a bar is formed during the 5 minute process. That too influences my decision. However, in this case I am looking at something that has already happened without the benefit of seeing just how each 5 minute bar was formed. Did it make its high and low quickly? Grudgingly? Did hoover around the high of the bar most of the 5 minutes and just before the close makes it's low? Or did it make it's low first? Observations like these can only be made live as the bar is forming.
     
  111. It could be of some value if it confirms price or probable price action. Take for instance a doji bar on extreme high volume. What does that tell you? What would the same doji bar without a peek at volume tell you? What if it is extremely low volume on the doji. What does that tell you?
     
  112. That is viable way to trade. I just prefer looking mostly at RTH as that is when most activity is present but i also look at the OVERNIGHT session especially before the open of the RTH. Usually i am looking for patterns formed during the overnight. It is kind of a prep for the open of the RTH. But my detailed analysis is usually only done in RTH because I ain't staying up all night to watch the overnight session.
     
  113. Leaning back on Ye Olde Price Theory... I always think in terms of the neighborhood farmer's market: can I tell a tale about what (price; volume) I see in front of me, that I might see in a farmer's market?

    So! Big spike in volume + [no] price movement = two converging, offsetting, agendas, executing simultaneous in the market. To wit: from a steady state, a rickety pick-up truck pulls up, loaded to the gunnels with *ripe* (read: "use-or-lose") tomatoes. Result?? Out come the Sharpies as everyone attacks their tomato price/pound signs to lower lower lower.

    Then suddenly! Up pulls an *empty* pickup truck, with the words "Jockamo Upper Crust Pizza*" on the side, and out comes a nervous-scared looking crew with orders to "Buy every tomato you can see" as they just got orders to serve 3,000 people, "if [they] can handle it."
    Result??
    Total offset to tomato truck; all the Sharpies get re-capped; no prices change; LOTS of tomatoes change hands.

    In the financial markets, it's an order to liquidate ("Sell down to x-minus-10points, then let it recover, unless you hear otherwise.") meeting an order to build ("Buy at x up to x+10, but if it drops, don't let that opportunity get away...")

    The discernment of offsetting agendas (via volume) is what lends confidence (or caution!) to notions of the market's near-term direction. Loss of selling pressure versus met/exceeded buying pressure? It's all right there, laid out.
     
  114. Nothing of value.
     
  115. Theoretically there can be a big volume spike with little change in price. If that occurs, then the volume means nothing. Then again, how often does that happen?
     
  116. Actually it tells you that a great many traders are involved in these trades and, presumably, their outcome. This phenomenon is common during churning. This may mean nothing to you, but that does not mean that the volume is of no importance in the absolute.
     
  117. "
    As depicted above, three times on Friday by 12 noon.

    (But again, volume tells (at least half) the tale.)
     
  118. It can be "important as all get out in the absolute" (whatever the Heck that means)... but is it important to a trading decision? I say NOT!
     
  119. And for you it is not. That doesn't mean that it's of no importance to anyone.
     
  120. Not a matter of "for anyone". It's a matter of "is or isn't"
     

  121. :wtf:
    Cracks me up.
    :D
     

  122. This is the exact point where we disagree. Your premise seems to be that anyone whose experience leads them to a different belief-set from your own is, by definition, "just wrong".
     
  123. Nope. That's not what I said at all.

    I say, "volume considerations are at best coincident... at worst, encourages erroneous trading decisions.".

    The way YOU use volume (as a "bar filler"... a substitute for time) doesn't apply to this discussion. I get it that "you use volumetric bars, you're successful, therefore volume is worthwhile... but this thread is not about how you use volume.

    The conventional wisdom on volume... "after considering price info, some factoring-in of volume is beneficial in making a decision as to buy/sell/hold." I say it correctly is not.
     
  124. Net volume at consolidation price is low and time spent at consolidation price is relatively short .
    This is good.
     
  125. If relevant, you'd get the same info from price alone (whatever "net volume" is?).
     
  126. "Absorption" does apply to the ability of buyers to absorb supply and sellers to absorb demand, but it also applies to the dynamics of accumulation and distribution. But this thread isn't about any of that so I used "digestion" in order to avoid getting into a lengthy explanation of something that may be of no interest. One could also use the term "ranging".
     
  127. I meant a market profile view of Volume at Price ......more typical is the Time at Price profile.
    I will come up with a chart example and post it.
     
  128. If you're talking about "high volume at certain prices in the profile", I understand what that means. If I get your meaning, it is also irrelevant.
     
  129. Arguing trading is like arguing religion. (Good idea to avoid both)

    I hear a lot of gum flapping, but I don't see any proof or examples....
     

  130. What you actually said was: Not a matter of "for anyone". It's a matter of "is or isn't".

    Which was why I said that your premise seems to be that anyone whose experience leads them to a different belief-set from your own is, by definition, "just wrong" (and I'm still saying it, now - because that still seems to me to be your premise [​IMG] ).



    Not an argument I've actually adduced (and not a logical or reasonable one, in my opinion.)



    Fair enough ... I'll leave you to it, then. ;)
     
  131. Nope. Just saying, "if you think volume is additive in helping you make better trading decisions, you haven't figured it out yet".

    So... here's a little helper for everybody...

    If you believe in volume analysis... when you're ready to make a trading decision, consider what you'd do without the volume consideration. Would it be different? Would it be right? Which turned out to be correct... price consideration alone or price + volume? (Don't just go on one or two examples... log 10-20 of them and then see what you think. That's how I came to the conclusion that "volume is useless at best, harmful at worst".)
     
  132. I dont communicate well. I'm just stating the obvious that volume analysis can , may, be more useful in , or at least draw you to stocks like XNET and WEED.TO
    It does not mean that SOXL isnt fantastic because it does not display similar volume characteristics.
    Clearly, trading any of these profitably is a seperate issue so in that regard it does not help.
     

  133. Ok buddy:cool:
     
  134. Laissez Faire originally asked,

    "Assuming that volume analysis of various kinds is useful in technical analysis - would a market like index futures be any different than other markets like for instance commodities? Or single stocks?"


    The answer is; yes and no or same same but different. Certain aspects of volume will be consistent across all markets and others will not. There is total volume, there is delta-bid/ask volume, there is the volume of larger traders, iceberged volume, hft volume, there is the speed of volume, there is the range created by the volume, the price level volume occurs, the time of day when it occurs - news or report generated, etc. It depends on how far down the rabbit hole you want or have resources to go.

    Scapathagos had a problem with Laissez Faire's assumption in the original question (is volume necessary to trade profitably?) and has ended up fueling a nice discussion on how others use volume. I think there are numerous traders like Scataphagos that do not use volume and are profitable just using price action. Other's like Xela swear by it. Then there are those who can trade an instrument without using its price action or volume. Everyone's trading style is different and thus anyone who lasts in this business ultimately settles into a certain style of trading and certain instruments that fit their style.

    Since Xela can't post her charts because of signing a NCNDA I'll post one using volume bars for her :)

    Instrument: NQ
    Bar Segment: 3000V
    Event Trigger: Speed Threshold of traded volume

    Each event occurred at a turning point in the market or low risk entry point.

    NQ Volume Speed.PNG

    Supply and demand is all there is, everything else is just a giver of confidence.

    They







     
  135. Certainly worth considering as a great idea. I will try this.
     

  136. The three points of reference that you highlight, can you confirm your own trading direction for each one? Are you selling on two occasions?
     
  137. Polaris,

    I'm just showing where an acceleration of volume occurred and marking the highs and lows of the price range that the volume created. How one would choose to trade that event would be more a question of one's individual trading style. The speed of the volume is the event, the range of the resultant bar and its location at that point in the trading day are secondary.

    They
     

  138. Hi They.

    Thanks for the reply. I just thought it was strange to find more reason for sells in a raging bull market.


    Polaris.
     
  139. Looking at some charts to verify the theory, I think Scat makes a good point.
    Volume considerations may make you late to the party.
    I began my trading adventure many years ago as a firm volume believer, then I became a disbeliever, then I took it up again looking at it in a different light. What now? Will I become a disbeliever again?? :(:(:(
     
  140. It isn't so much a question of belief or disbelief but of appropriate application. Volume is trading activity. If there's very little volume, there's very little trading activity. Perhaps one's trading doesn't require a lot of participation on the part of others. If so, there's no reason to pay much or any attention to it. However, if one wants to see a lot of participation, such as many do with breakouts or reversals, then volume becomes more important. Compare, for example, trading at 0200 with trading at 1400 (NYT).

    Everyone makes his own choices, of course, and there's no particular reason for anyone to try to convince anybody of anything. However, it is important for those who debate these questions to understand just what volume is and what it represents. Otherwise, yes, it is useless.
     
  141. Why not? You figured it out already once before. :)
     
  142. I could write 5 pages here regarding volume. But my typing being what it is, it would take me 3 days. So I'll be brief.
    The current discussion in this thread seems to have switched to volume spikes. Yes, there usually is a big movement in price. But you must take into consideration the position within the trend where it occurs, as it can have opposite implications. Additionally, you can have large volume on no or little change in price. In stocks, that could be a cross trade, and can be ignored from a TA point of view as it does not effect supply and demand or alter the trend. In futures such could be a MM attempting to remain flat, and again having no effect on the trend.

    If there is a change in or reversal of the trend that is accompanied by large volume, it most certainly is of value, as it validates the indications of the price movement. Without such, the move would be questionable. That is not to say the the move may not work out, as increases in volume often occur on the 2nd move in the indicated direction.

    A point other than spikes which you would find useful is that even though volume is low, it may be several times higher than immediately preceding volume which can provide valuable information regarding the current price movement. Additionally, the lower the volume the better is of great technical value in many cases. Volume can very often clarify the price movement to where mistakes can be avoided or opportunities are not missed.

    I could go into detail about the above and also many other uses of volume. However, few are interested in such, so I won't. But as you are not now using volume, may I suggest that you spend a few months doing detailed research on the subject. I imagine you have studied such in the past. But maybe this time around you'll see it in a different light. In fact, I'll refund the money you paid to read the above if you do not find that adding volume to your analysis has not improved your performance significantly. And it will certainly not be detrimental to your K.I.S.S. strategy!
     
  143. @Scataphagos
    I got that next to last sentence wrong. Should be:

    In fact, I'll refund the money you paid to read the above if you do not find that adding volume to your analysis has improved your performance significantly.
     
  144. The only reason I watch volume is to see if the position I want to take can be taken in a short time and without moving the market too much. I mainly trade index futures.

    For the rest volume has NO VALUE AT ALL FOR ME. And I trade long enough, and with above average performance, to be sure that I don't need volume at all.

    There can be a rise in the price if volume rises, but there can also be a rise in volume when the prices rise.
    What was there first: the chicken or the egg?
     
  145. Thanks for your offer, but I concluded years ago that volume consideration for trades was at best coincident and at worst harmful.... which is why I posted to OP, "don't waste your time on it."

    I know, it drives volume believers nuts when I say it's irrelevant/harmful. But I messed with it for quite a few years... and thought about it a lot since. At this point, and keeping with K.I.S.S. discipline, I can't even imagine how volume consideration might be beneficial to trading. IOW.... (1) volume is neither definitive no additive in value, and (2) by the time you get volume info, you should have already received it from the price charts.

    Therefore, "why bother"?
     
  146. You have the best notion... they are coincident and therefore volume is redundant.
     
  147. That's "volume", yes.... but just the size of the bid/ask on the DOM. Good to know if you're trying to trade size in a thinner market. However whatever the bid/ask volume on the DOM, it doesn't add to picking a winning trade or avoiding a losing one.
     
  148. OK. Again I couldn't spark your interest in a valuable part of TA. . Maybe someday we'll agree on something!:)
    Oh well I got 4 likes after writing all that, so it wasn't a complete waste of time!
     
  149. You must be trading institutional size to move the market in an index future. Like in the 100's of contracts at a time......
     
  150. As the years gone by me, my attitude changes as well. I now see how just about anything in trading to be an added filter to reduce the number of trades. I think many "NEED" an excuse to take less trades, let's face it, most traders over trade either cause of emotions or too many signals to pull the trigger. So by adding volume, we can form rules to take less trades.

    You are right IMHO, volume goes up /down as price goes up/down, does it mean anything which is similar to flipping to get a head/tail. I find it difficult to see a huge bar knowing there can be hardly any volume in it or can be very heavy volume in it. as for myself, I will use volume to exactly reduce trades waiting for divergences of price going higher on less volume, I view volume as "interest" or people's desires to be involved to make a difference, only use it for entries in scalping, day trading or very long term commodity trading, but exits I don't use as my level of patience of being in anything that has much of a retracement-I have already exited.
     
  151. Exactly right!

    I understand why we don't want to be guilty of "overtrading" (and just what determines "over"?)

    Adding volume consideration is "one more variable to line up in the trader's mind". The more variables you need to convince a trader to make a play, the fewer trades he's going to take. But that isn't necessarily good. The key is "trade well". How often doesn't matter if there is proper rationale behind the play. (One can, of course, trade less frequently and still trade less well.)

    An analogy. Years ago I was a professional bowler... always in a bowling center. On time a person said to me "Bill* must be a really good bowler. I see him in here practicing every day". My response, "He's only average. He practices a lot but doesn't have good technique. He's going to get only so good with what he does." IOW... and as in trading, if you don't have good technique (thought) behind your trades, you're going to get more losers than you should... hence "overtrading".... not to mention the missed gains.

    * I used to offer a bet to average bowlers that they couldn't throw the ball between the 4 & 6 pins 10x in a row without hitting one of them.... more difficult than it looks, as the margin for error is less than hitting a single pin. Bill is the only one who ever took my money on that! What often happened after someone tried a couple of times and failed, they'd make me the same bet. LOL... that was a no-brainer. :) But I digress.
     
  152. Of course the chicken. For without the chicken there would be no egg. ROFLMAO
     
  153. Fair enough.

    I appreciate the causality dilemma, however
    unless you are a creationist, the egg came first laid by a proto chicken. Hard shelled eggs came into existence much earlier than chickens from an evolutionary biology POV.

    There are no size limitations nor requirements for being trapped traders on the wrong side of the market. There’s always bigger fish who have different ideas in mind.

    Even whales come in different sizes and enjoy different diets. Biodiversity is good.

    All living forms had a form that came before, the form in existence now and the form yet to be.
     
  154. That's why I, till now, never had a problem.
     
  155. It's an inappropriate question. Price and volume are simultaneous. One does not create the other. One does not come "first". Volume is nothing more than a manifestation of trading activity. If one does not care about the level of trading activity surrounding his trade, there's no reason for him to concern himself with it.
     
  156. BINGO
     
  157. An insightful podcast that continues the ecological analogy.

    https://www.bloomberg.com/news/arti...s-original-theory-for-how-markets-really-work
     
  158. No, price can exist without volume as you can have a price that's not transacted (yet or ever), but volume can't exist without price.
     
  159. Wrong... you can only have potential next price or actual last price. Same with volume.
     
  160. ¡MERRY CHRISTMAS!

    May you have much volume and good prices in 2018.
     
  161. An alternative perspective,...

    ESH8-1D30m5m-171221.jpeg


    Starting from the ending PA of the prior day, we have a short carryover. The overnight session was generally long with a new long traverse starting at 5:35 am pst with increasing volume above the red pace line of 2k contracts.

    This trend segment has a peaking volume at 5:50 am pst which becomes the pt2 of a larger channel as a volatility expansion. However this bar is not entirely long. The close of the bar is close to the 50% mark which is evident of a non-Dominance short traverse and is an anticipated retrace. The 6:05 bar XO the RTL yet returns to the Dominant direction. This is the FBO of this RTL. Volume is generally up at close to 2k contracts which on a normal day is slightly higher than average. This indicates the possibility that the day will have a larger than average participation.

    The 6:15 bar XO the RTL is XO which also tested the high of our pt2 but with decreasing volume compared to it. The bar initially was long but reversed to close near it's lows but found support at the prior bar's low and forms a StB (Stitch Black) with that bar. This particular price form is found frequently near the end of trend segments regardless if the trend segment is long or short.

    This could be non-Dominant traverse expanding this small long channel and with the upcoming US open we anticipate rising volume up until the open at 6:30 pst. We fan the RTL. The 6:20 bar is an XR (Translation Red) and forms our three points to establish the next trend segment. A RTL short is drawn. Since this bar XO's the fanned RTL we have a BO of the RTL but not of the lateral established with the H and L of 5:50bar. This is a non-Dominant traverse expanding our channel. We know this from volume decreasing compared to the prior bar. The 6:25 bar is a Hitch but XO of our RTL short. Since it is an IB (Inside bar) there is the possibility that the short trend segment will reassert itself. A fanned RTL short is drawn establishing a new possible pt3 short.


    The open at 6:30 has price continue short within our defined trend segment and breaks the low of the prior bar. However larger volume comes in to reverse this price direction to XO of the RTL short. This bar initially is a FBO of the prior two bar's low and completes the non-Dominant trend segment short. Since price reverses off the low a new fanned RTL long establishes a wider channel trend in that we have a Dominant trend segment (long), a non-Dominant trend segment (short) and a return to Dominance on Increasing volume. It also XO's the lateral boundary of the 5:50 bar's H.

    However, increasing short volume comes is causing it to reverse off the high. This is not a cause to shift the current bias until it XO it's own open changing it from one form of OB (outside Bar) to it's other form. Since OB's are workhorses and indicates two directions by which one could profit off the open, we wait to see what the next bar brings. Since there was a carryover short front the day before, we anticipate looking for a short entry off the current highs as PA presents itself.

    Since this was the third peak in a volume formation, (the trough at 6:20 was assigned as a peak since it broke the long's RTL. This is a little confusing in that the volume bar itself was a trough but the PA broke the prior's bar's low and the established RTL long), this form when combined with acceleration is known as a PP1 (pre-primary band). The next bar is assigned as a new P1 but we don't yet know which way.

    We now move to assigned bar numbers. The 6:30 bar is 1 and bars are assigned incrementally to up to and including clearing and settlement at bar 81.

    Bar 2 starts as a SYM (symmetrical pennant) these bars are generally the market catching it's breath before deciding what to do. We describing price and volume bars with consciousness but really it's the market's participants behavior we are quantifying. The SYM is long initially and is contained within our established long trend channel. However short volume overwhelms the longs to break the L of the Bar1 and XO our RTL long and green BM (bookmark) failsafe. We reverse short, annotate the RTL short and place a BM at the High of this bar just in case. The volume is high and surpasses 12k contracts testing the low pt1 that our pre-market long channel established. There is a retrace of the low which is the non-Dominant sentiment of this bar. The volume is less that the prior bar so even though it's a high volume bar it's price form is XR and volume form is T1.

    Bar 3 opens and continues the down thrust only breaking the prior low if one were to deGap the bar forming an XR in form. If one doesn't deGap then it looks as it looks and is an IB. The high of this bar with a deceleration of volume pace and the RTL short gets an updated annotation of increasing volatility by accelerating the RTL. Since price is off it's lows, we are in a non-Dominant traverse of this current short trend segment. A BM is placed at the low.

    Bar 4 opens as a SYM. Since it has crossed the accelerated RTL short we hold until it crosses it's open. The Dominant traverse has evolved into an A turn (D-nD) into a non-Dominant traverse. This could extend the retrace of the Dominant short and with the bar itself becoming a XB on decreasing volume, the Dominant Short is still intact. However since the bar XO the accelerated RTL short yet just touches the RTL short defined by bar1 and bar2 on decreasing volume, we anticipate increasing volume to arrive but uncertain of the direction.

    Bar 5 opens as an XB, XO's the RTL short (the line isn't extended to see it explicitly) and quickly reverses short. In doing so, it has XO the RTL of the non-Dominant long. This is occurring on accelerated volume from the previous bar yet decreasing volume when the volume bars of the trend (composed of the Dominant short, non-Dominant long) are compared. The bar itself forms an OB on increasing volume. This is a progression of trend. Unless more short volume arrives this trend is anticipated to reverse soon.

    Bar 6 opens as an XR, on decreasing volume and then retraces until it crosses it's open and with increasing long volume presents as a long bar. The high establishes a new RTL short, the form in comparison to the prior bar remains as an XR but the sentiment has changed within the bar itself for no increasing short volume has arrived. This is a possible FBO with a continuation short. We have to look at the initial price action of the next bar to determine.

    Bar 7 opens and continues short so it could be a fan of the RTL short, however it quickly retraces to the open and reverses long with increasing volume pace. Since it has XO the RTL short with increasing long volume, this is a BO of the T1 of the RTL short. We are now long. There is risk here in the context shifting rapidly. However since we are reversing long at a low, it's quick to see if we break the previous bar's low and thus drawdown is minimized.

    Bar 8 opens and the shorts attempt to reassert their Dominance, however without backup the move grinds up on increasing long volume pace. This could be a case where the RTL of the prior Dominant short reasserts itself and a fan of the RTL short would contain this. However since price has XO a RTL short and is increasing we hold long.

    Bar 9 and Bar 10 are IB of the H and L of Bar 8, therefore price is contained within a lateral yet we have earlier established a RTL long sentiment trend segment. This movement within the lateral is the non-Dominant traverse. This is confirmed with Bar 11 BO of the lateral. The price action within a lateral requires a different kind of logic. To get into that here would be adding more complexity. A shorthand is to ignore PA within a lateral and catch the BO of price in whichever H and L horizontal boundary it crosses.

    Bar 11, the magic bar. The doji. The doji represents simultaneously, indecision, pause for breath and a precursor to a increasing volatility. Price could BO either way and since we are seeing decreasing volume long it could be the pt3 of a new fanned RTL short. This is only if we see increasing volume pace short and price XO our RTL long.

    Bar 12 gaps down and can trap the trigger happy into the idea that short is Dominant. However, without it's first leg it goes long from the open and arrives with increasing volume long and with 12k contracts worth of larger players are entering. We get a slight retrace as the high of the bar.

    Bar 13 continues the increasing volume long pace as the second bar without it's first leg. We accelerate the RTL long since we tape the FFF (faster fractal first). This is the third P1 of this trend segment which is another PP1. What comes after a PP1 is an assignment of a P1 to the next bar that passes our screening.

    Bar 14 gaps ups, starts short XO of the accelerated RTL yet reverses long and stays within the RTL long. However since this is on decreasing volume and it's H creates a pt3 for a new RTL short we are now short. We'll use this or the next bar as our new P1. It's a risk but just as buying at a low gives a close 'line in the sand' the same is true for selling at a high. The angle of the RTL would require a lot more volume long to arrive to continue the markup.

    Bar 15 gaps down, retraces to a high before reversing past it's open. Since it by virtue of the geometry, the defined sentiment annotated by the RTL's - we are short. Since this is the last bar of this narrative, we exit flat.

    The commentary is similar for the rest of the chart. Perhaps this can illustrate the use of volume and price in bar-by-bar analysis to know where one is in trend at any particular point in time.


    ESH8-171221-pg1.jpg ESH8-171221-pg2.jpg ESH8-171221-pg3.jpg ESH8-171221-pg4.jpg

    Merry Christmas !!
     
  162. In futures, there is open interest besides volume. It puzzles me whether one should consider both open interest and volume in futures analysis. Which is more important consideration? Open interest or volume?
     
  163. If this is the case, then you should be easily able to marshal plenty of cites from Business Schools, academic journals, corporate white papers and such, that agree and adhere to the notion that volume just doesn't matter. It's a global world! And except for North Korea, they all pretty much uphold ideas like rational actors, efficient markets and, WHEN ANYONE HAS AN EFFECT FROM THEIR BUYING/SELLING IN THE MARKET, a description of how that volume will be made-up/absorbed/dissapated as the market seeks its EMH steady-state.

    So, of the 10,000 -- 100,000?? -- 10,000,000* Business Schools around the globe? Post away on ANYTHING that supports volume being redundant to price. Ohmilord, this'll be a Christmas to remember.


    * [You *do* hear Dr. Evil in there, right?? "Ten million Business Schools..."]
     
  164. Your loss, Toots.;)
     
  165. Don't adjust your monitor -- you have entered The Twilight Zone.
     
  166. I have no idea what all that means... but it definitely deserves a like.
     
  167. Looks like Jack Hersey stuff
     
  168. I'm hearin' Jerry Garcia:

    "Anyone who sweats like that must be al-righttttt."

    :);):)
     
  169. I think many might feel since price is in part caused by volume and yet when you see a huge bar and don't have "Market profile", you can't tell if there was volume all the way through one bar or volume at bottom and or top. But as in any indicator, trendlines to mark S&R or monkey throwing darts, can be way to reduce trades and must be done IMHO, of back testing and studying the stats. Just by themselves, nothing works all the time nor work never of the time. I lean on as prices drop against strategy system to add to position whereas many rather add on as trades becomes positive, each new rule either adds or takes away signals. Does any of it make a difference? It can if your back testing shows it will over ten plus years.

    I believe that providing you can read charts well, make one system when there is divergence based on higher highs and less volume to buy at Ganns' 50% retracement or sell at 50% retracement might in certain timeframes, both could be profitable or both can be losing trades.

    I this newer traders would do better that less is more and as your experience expands, more favorable signals added because the stats makes the decisions.

    So can you make a living in sport of Bowling? I think bowling has become less and less of dying sport, but those who never went, just like trading, skills make the difference.
     
  170. They are two different animals and can't really be compared. There is a way to analyse price movement using OI, but as I remember from decades ago OI is announced only weekly, but maybe that's changed. If not, using such for short term trading would not really work. And, in any event, IMHO OI analysis is really just guessing what the longs and shorts are doing. I have no 'open interest' in it!!

    If you have to ask which is more important, I would guess that you have not given much study to volume. You may want to do so for a few months, and if you come to understand its value, you'll never enter a trade without considering it.
     
  171. Yes, but it wasn't a great living. Lots of fun for a guy in his 20s.
     
  172. No, not really... quite the opposite in fact. Eliminating volume considerations from my trades has been a big help. HIGHLY RECOMMENDED!
     
  173. Fortunately, if one is trading price, no guessing is necessary: if buying interest outweighs selling interest, price will rise; if selling interest outweighs buying interest, price will fall. And that's all there is to it. One needn't trade price, of course. Many retail traders don't. They trade indicators. In fact, one can hardly see price on their charts, to the extent that there's really no need even to plot it, much less volume.

    As to studying volume, I recommend the section posted here from The Richard D. Wyckoff Method of Trading and Investing in Stocks. It's only eight pages, and will answer many questions.
     
  174. I trade with scant conscious reference to volume on index or other futures.

    A friend uses volume in nearly every trading decision.

    We are both scalpers to semi-swing traders. Occasionally taking a large trade. He is I guess somewhat Wyckoff founded.

    So without using volume and sufficiently capitilized to avoid ulcers, fair money is made. We did a similar dollar value on the same subset of instruments over the six months I selected, all things considered we were putting in similar time and effort. Illness and personal life stuff affects things however, keep calm and carry on etc. and it rebounds.

    Looking at below it is a proxy for my health, mood and ability to filter outside influences. I decided to plan and take a big swing trade in Feb during a major house move & decoration.

    In April I decided to start using volume as my friend did, it did not go well. I was impressed by his ability to call breakouts however.. he has been using volume for five years, a month was not enough time to adapt. I got frustrated and switched back to my old ways.

    It is difficult to switch horses mid-race, mental conflict arises and the resultant bad days are obvious.

    upload_2017-12-26_10-41-52.png

    Once you accept that a partial grasp of the variables is sufficient it calms the mind. Is volume necessary to make good money at a retail trader level? No. At an institutional level? Probably, at least to justify the trades to investors and regulators.

    Of course this is specifically Futures.
     
  175. Necessary? No. Useful (in re the title of the thread)? Yes. What is more important, however, is that you are at least open-minded about it, a rare quality on ET.
     
  176. Indeed, my open mind is somewhat hangover affected today.

    Remembering I am anonymous, not a vendor I decided to leave the left axis in though once can be certain accusations will happen. Beginners need to see it actually can be done in retail. Whether or not it is they who can do it, another matter.

    I would hazard however that had I started integrating volume at the beginning a few years back, I'd probably be more polished.
     
  177. It is his RDBMS system - which is a natural extension and refinement of his earlier stuff.
     
  178. Have you explored much of Gann’s work? Any particular reference you would recommend for a beginner to understand his method from a bird’s eye view?
     
  179. I quickly discovered (unless one’s automated) the necessity to refrain from trading fast timeframes while incorporating new material. It’s too tempting to apply bits and pieces of a method without being firmly grounded in the basic concept and principals.

    Others might have more success doing it but I’m more of a methodical plodder.
     
  180. Good post. I wonder if the proponents of volume in this thread can match your performance?

    Everyone is of course welcome to voice their opinions, but I think a strong opinion should be backed by strong results. I am not saying people need to post blotters or results to participate in a discussion, but I hope those that are voicing very strong opinions one way or the other actually know what they're talking about. :)
     
  181. Anyone can be a madman on the internet or course hehe. My friend who uses volume a lot makes great money, he has an edge over me swing trading. He also have more years of course. Maybe I will see a new trick someday he is blind to or maybe not. We are in a kind of an arms race of friendly competition and that helps one push harder.

    Its Christmas, good cheer reaches even the more cynical hearts :)
     
  182. Volume alone? not helpful.

    Volume used in combination with support/resistance, supply/demand awareness? Absolutely.

    It does not matter if we're talking index futures or any other instrument where volume can be adequately measured. Volume used together with other insights can be very useful in identifying surges associated with market makers probing the stops of weak holders. It's creepy how these can become interesting reversal points.

    Good traders don't really need volume, but it can sure help ;)

    We need look no further than today's example on the ES. Every day has a story:

    [​IMG]

    this nonsense is fractal - it plays itself out across multiple timeframes - here is today again, only this time on 1min chart:

    [​IMG]
     
  183. I’m surprised no one has brought up cumulative delta, a volume-related construct that I find splendid, when used in concert with support/resistance levels, for establishing a directional bias.
     
  184. Probally because they have been arguing about if volume helps or not. LOL
     
  185. It was mentioned on page 1.
     
  186. Dear tfp
    Retail is a very small percentage of the activity. They don't care about our potatoe chip money. It is one firm trying to take money from another firm. Sometimes we get caught with our pants down so to speak (our tiny little stops) as THEY battle it out but they aren't out to cleanse us from the market. They basically ignore us.

    P.S. they don't have an xray or scanner machine like airports. They could care less what flight retail is on....they want the entire fleet of planes. Retail gets a free cup of water and maybe some peanuts or pretzels in flight but fleet owners are even cutting back on the free peanuts trying to save $ for the next big fight ...not with retail but with another institution.
     
  187. Not sure about your clarification re: retail - I don't care about retail and neither does institutional money - so perhaps we agree.

    When I shared in my chart a reference to 'retail stop cleanser', I was actually reflecting on another ET forum where everyone (all the retailers) happened to be bullish and long ES Friday before New Years holiday - and everyone unfortunately pretty much got clobbered...

    What we do care about is institutional order flow - it's actually the only thing that matters ;)
     
  188. I did some volume analysis through Volume Profiling but frankly I think it is BS, it's just "en-vogue" nowadays. There is so much information that is either not going into the volume or blurs the volume analisis. For example:

    1. There are options on everything, swaps, forwards, custom OTC derivatives that don't show in volume of whatever it is you are trading
    2. There are arbitrage algos everywhere bluring the image
    2. There are plenty of day-traders fighting each other that blurs the volume
    3. In stocks there dark pools
    4. In currencies most trading is done OTC on interbank, not futures
    5. In bonds there are primary dealers etc, not only secondary futures market.
    6. In index futures you have underlying stocks' volume that is not directly included in futures

    You never know if the surge in volume is from short, mid term or long term trader. Anything you see (price, volume) is already historical information the moment you see it.

    Also keep in mind another important aspect: Occasionally there is a strange yet meaningless (from volume analysis standpoint) market behavior, for example when suddenly particular ETF(s) decide/s to rotate out of one pool of stocks into something else, because it met some preprogrammed criteria or whatever. If you try to read too much into it you will be left confused.

    I guess volume analysis is as good as anything else (astrology included) so trade accordingly.