question about constant volume chart

Discussion in 'Strategy Development' started by flyingforget, Jun 8, 2008.

  1. the trade volume varies from day to day

    so If I creat a strategy on constant volume chart

    what is the weakness of it ?

    thank you
     
  2. C- kid

    C- kid

    volume is useless, it only matters for execution

    NOT for analysis
     
  3. astral

    astral

    Hmm..volume is not a must, but you're wrong there, C-kid. It is the best indicator because it translates. Let's say you would automate your trading based on bars, there would be glitches in your system, no doubt. However, using a additional parameter (volume previous bar > or > or =) makes it possible to "debug".

    Open your mind just a little bit more.

    As for constant volume bars:confused:.. It tells you little to nothing. But, this is an opinion.
     
  4. The potential weakness in a CVC - constant volume chart - is how the system performs when there are many candles printing (lots of volume) vs. low amount of candles printing (low volume).

    Since the amount of candles you receive is a function of the amount of volume being traded, I could see this as a possible weakness on a CVC system.

    It could be also be a strength. Just depends.
     
  5. As always, the weakness will be you I am afraid.
    However, without knowing what it is that you are trading, you will wind up with a smoother chart that is more in tune with the orderflow of the instrument than say a time based chart.

    You will lose any volume based analysis since you have normalised it.

    Here is a thread that will help you ......
    Why do people use Volume, Range and Tic charts?

    regards
    f9
     
  6. thank you fearless

    I have read the topic before

    but I do not know how many volume people use

    when they creat a constant volume chart
     
  7. Tune the chart to your desired average true range (ATR) by adjusting the number of contracts that define a period.

    If you prefer a constant volume chart with a 10-tick ATR over one with a 4-tick ATR that would be similar to choosing a 5-minute chart over a 1-minute chart for the reasons of speed, range, and/or noise.

    I happen to prefer tick charts because I like to watch volume separately.

    Tick and constant volume charts often capture relatively slow and inactive periods better than time charts.

    Volume clearly works for some traders and not so much for others. It's good to educate yourself about the different options, but in the end you need to decide what works for you and not worry about what the pricks on ET think or say. When you find the right kind of chart for your way of looking at the world, the chart will speak to you.
     
  8. Tums

    Tums


    You can try this method:

    Do a constant time bar translation... say you have been trading on a 5 min chart. This resolution on ES will give you 81 bars.

    1) Find a "normal" volume day. (i.e. an average day)

    2) take the volume and divide it by 81. This should give you a contract size that translates to approximately the same number of bars in a day as if you were using a 5 min bar chart.

    3) You can use this contract size as a starting point. Try it for a few days, adjust the volume up or down as you see fit.
     
  9. Tum,it is a good idea to caculate the average trade volume