Did any one try trading stocks based on unusual volumes either rising or falling? Does this work and is it consistent? Any advice is appreciated.
In my personal opinion, yes it does help a lot. Tell you the truth, I use volume as one of the indicators on taking the trade. Most stock, move more (either direction) when volume is higher than its avg. I scan for stock that have 150% volume or above of 50MA vol. It tells me if the volatility moving right direction. Plus, volume often confirms the fact that institutions are entering into the markets.
Attached is the look up table for entries and exits. It runs at an annualized rate of 2 1/2 percent a day everyday of the year. Compound the 2 1/2% a day for getting how good it is straight. Use a 3 beta universe. If you want the leading indicator of the volume which leads price, as you can see, just post to keep the conversation rolling. Unusual volume is a column on Qcharts only presently. the attachment shows you the maths behind unusual volume. the misnomer is from Qcharts and its utility is derived from the PVT strategy started in 1957. It may appear elsewhere in the future if the platform people get to some level of rediness. One killer platform being programmed now will have it in spades in the near future.
You are trading behind the HERD at this point. Look up "front running" to learn how to use volume as a leading indicator of price. Qualify your 150% if you will it is meaningless as stated. If you want the institutional story straight form the compilers go to either blocks player or the data feed for blocks player. Your conclusion regarding institutions are way after the price effect. maybe you should give citations to back up your comments for a while. trapping others in the myths of the markets is not a good way to treat others.
You beat me to it, Jack. I use Jack's correlation table in addition to using QuoteTracker with IB data. I sort my watchlist according to "vol %" to get unusual volume. At any point during the day I can see if the volume is unusually high for that time of day based on the table Jack posted. Very useful.
do i understand it correctly that one can make 2.5% per day by just blindly following the volume table? i would be happy making just 0.25%
Trading on any intraday peculiarity is generally not a good thing...there is nothing that you can "know" before others "know" it...Check movements previous to big volume changes, you'll see an obvious pattern...remember "buy on rumor, sell on news" - right? And, once again, this is stock "picking" - which means playing in someone else's Poker game, not your own...trade the same stocks every day, and let the others come into your poker game...so much easier...trying to "pick" stocks, with any criteria every day is generally a fool's errand, IMO. Don
It turns out to be better than that. You can start out at that level as a beginner type person who is in a learning process. What is nice about using the chart is that it is associated with a list and the price breakout follows the volume break out. Unusual volume sorts the lists so that you are playing the stocks in an orderly way. this means that you see when to enter, what is next, and how fast things are changing. After you get this stuff down, you can move on up to the next levels. You start with EOD at 2.5% a day and slip on up to double that through effectiveness and efficiency. Then you get to crossover trading where there is a timing pattern for coupling exits and entries to just creme the best of the moves with higher velocity trading. this is late entry and early exits. You are now at 5% and you are doing 60 trades a year instead of 40. the compound interest formula dictates that the exponent is much more important than the profit per cycle that is added to capital. After that you begin to consider making high velocity money. This is related to having a good culling process for the list where you run unusual volume. In 2007 we are going to make this part of the equities journal later on in the year. By then the new platforms at brokerages will be operating. Lets say you want to run the daily % up to double the 5%. you still use unusal volume but the list is culled and the fractal you are trading on is a faster fractal regarding all the other technical considerations. You can't use the conventional orthodoxy thinking for this stuff. the convnetional orthodoxy has to deal with fear, anxiety, and anger as components of the risk oriented paradigm. betting is risky and demand protection which leads to lessor profits. you know the spin down of this orientation. chack out the quant known as altucher who won't put stops in his scripts to avoid the spin down. To get into the double digits per day of profits range, you have to be adroit and prepped before open by using leading indicators of volume. Volume gives you a leading indicator of price and you also add in leading indicators of volume to make the ooperation quite smooth. We are within a couple of years of being able to back test this on commercial back testing. for now coding is required on intraday dta feeds where market sentiment and pace are part of the deal. each of these takes five degrees of freedom to perform and there is some overlap. I may be a little over the heads ofsome ET folk by now. but I just wanted to expand your horizon to something that is not just marginal like 0.25% a day. The future lies with pool extraction and its paradigm. i started there 50 years ago as did Darvas. this is not what people think about since it is not part of the financial industries conventional orthodoxy which is designed on betting and collecting commissions from all sorts of traders, investors and the herd who uses asset allocation. You may see some fear, anxiety and anger in response to these posts I make. It is an outcome of using the convnetional orthodoxy to measure pool extraction. 2007 and 2008 will be eventful as one paradigm begins to replace the other now that we have communications and data available in real time. Communications facilitates trading and data is a handy thing to have since it's coding gives you the leading indicators of price.
I assumed that he was not addressing "peculiarities". I agree with you WHOLEHEARTEDLY on the peculiarity thing. It would be playing poker and not with a winning hand, ever.