volatility analysis

Discussion in 'Technical Analysis' started by sgsaxton, May 7, 2006.

  1. Hi
    I trade the Eur/Usd (forex) and have been studying price action of late. Accumulation and distribution, S/R levels etc. The more I get into this, the more I realize that trading without volume leaves one at a large disadvantage. Since its not available, I was wondering whether or not volatility could be used in the same fashion in order to give one a clue as to what is going on?

  2. (1) You could try using a CME currency's volume as a proxy for the cash market. (2) Volatility and price movement will matter more because that's what will ultimately alter your account balance. (3) Consider limiting your FX-trading to the most active times of the day.
  3. Two things:
    If I were to us the futures market to predict the cash market, wouldn't that be like watching a the trailer in order to tell what the car would do? Don't the futures markets react to what the cash markets are doing?

    If the market is consolidating, surely there has to be something inherent in the price behavior which would indicate whether or not accumulation or distribution is taking place?
  4. I prefer volatility instead of volume especially since it gives more info about the type of volume even for trading instruments that don't have a volume graph.

    Also, I recommend using the CME EuroFX EC futures if your determine to use volume and don't have a way to measure volatility.

    If the CME EuroFX EC futures is not suitalbe.

    You could use the inverse price action of the U.S. Dollar Index.

    Also, you could use WRB Analysis (it represents volatility and volume) via comparing the body of a wide range candlestick interval (bar) to a prior wide range candlestick interval (bar).

    Simply, Wide Range Bodies (WRB's) are volume spikes eventhough Forex doesn't have volume.

    WRB also gives you a better picture of the s/r zones along with representing changes in supply/demand.

    Once you begin learning how to visualize volume in the price action of the WRBs...

    You can then move into using long candlestick shadows (like hammer patterns) as another source of WRB Analysis about the volatility or volume.

    See the Trading Hammers (revisited) thread for info...


    Back to the U.S. Dollar Index (not the futures)...

    Almost all the profitable Forex EurUsd or profitable CME EuroFX EC traders I know are using the info from the price action of the U.S. Dollar Index to help with their trading (retail traders and institutional traders).

    It was a few sucessful institutional traders (close friends) that showed me the importance of having the U.S. Dollar Index as a price action source to help with trading either EurUsd or EC.

    P.S. I mainly trade EC instead of EurUsd.

    (a.k.a. NihabaAshi) Japanese Candlestick term
  5. SGSAXTON--------------Two Things: (1) Sometimes the currency futures influence the cash market. You can use basis levels from the futures to forecast the cash market. (2) Ancient Chinese Proverb: "One man's distribution is another man's accumulation". If a market "flatlines", wait for the breakout instead of being concerned with the reasons for the flatlining.
  6. Thankyou both.
    You've given me alot of food for though, so I'm off to do some homework.
  7. hello ..

    We have all have pass a problem like the one explained in the attached picture .. I know that all trying to find a solution for such problem ..

    I know that this kind of problem is all about reaing the Chart Structure ..

    I know also that this problem happens as we can't READ what is going behind that picture : Is there a Demand / Supply ? Is thier any shift or imbalance in the Supply / Demand Curve ?

    We sometimes fell in a congestion area .. right ? but : What will do here : buy or sell ? som will say : wait and see the breakout !!!
    I say : Ok ... but : don't you agree that we can read the market within that congestion and know the Balance of Supply / Demand to know where is the market really is positioned ..

    Again : those Two Problems must have a solution .. It is all about Reading the Supply / Demand Curve ..

    I have searched a lot lot lot lot lot lot lot ..
    I found that VSA ( Volume Spread Analysis ) and VA ( Volatility Analysis ) have the RIGHT KEYS ..

    I'm trading Forex .. and as you know that there is no clear volume .. so : I'm trying here to turn on the light to the concept of VA ( Volatility Analysis ).

    I'm really have no Clear Idea about VA .. So : I come here to get some help / clues / hints ..

    I know that VA shall help to clear this mind ..
    I'm wainting your ALL help .. especialy those EXPERTS in VA .

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  8. inet



    Where the realtime Dollar index chart can be found?


  9. Your data provider should provide realtime U.S. Dollar Index/futures charts.

    If not and the U.S. Dollar Index is become important to your trading...

    You should consider switching data vendors to one that offers and usually its an extra fee they charge to have access to realtime U.S. Dollar Index data.

  10. I find trading simulation software useful for answering these kinds of questions. I find simulation results and parameters vary from security to security. I find no single best answer for all cases.
    #10     Dec 1, 2007