Up/Down Volume & Adv/Dec

Discussion in 'Technical Analysis' started by tokyotrader, Jul 22, 2005.

  1. I did a search and read some older posts on these issues, I also googled them. (for your reference, my knowledge level: newbie)

    I would like to know/discuss the validity of how these are calculated. An indicator such as OBV, in my opinion, is severely flawed because it attributes ALL volume to "up" or "down" based on today's price relative to yesterday's closing price.

    While I could not find a good definition online, I am under the impression that up volume would be all the vol from stocks where current price > previous day's close(or previous period's close?), and down vol would be all vol from stocks where current price < previous day's close(or previous period's close?).

    If this is correct, then I would imagine it runs into the same problem as OBV. Let's say MSFT closed 0.03 higher today than yesterday and did 60mm shares - then all 60mm would be put into up vol? But MSFT gaining 0.1% isn't really indicative of market strength. It just as easily could have closed 0.03 lower.

    I guess my concern is that up/down volume is misleading because of how it is calculated. Wouldn't it be best to filter out all of the junk in between? There are a variety of ways to do this, whether we want to set a fixed absolute % gain/lost mark, take an average of % gained by winners/losers and then filter out 1 sigma, etc. We could classify these as "neutral" volume and leave them on a separate line from our up/down volume.

    I then ask if the same thing applies to adv/dec issues.

    With a large basket of stocks(for example, the DJI), would it be beneficial to monitor the cumulative vol done at ask relative to the cumulative vol done at bid and attribute this as up and down volume, or is this just somewhat of a bastardized version of $TICK(I)? Trades done on the inside could be monitored separately but not included in the calculation.


    Thanks for your help and hope my explanation wasn't too confusing. I am trying to find ways to fine tune $ADD, $TICK, $TRIN, $VOLD.
     
  2. what does the $add and $vold measure?