Volume Analysis

Discussion in 'Technical Analysis' started by -EntropyTrader, Aug 17, 2003.

  1. Volume validates price. So how does one engage in volume analysis? Looking for some simple and effective strategies.


    I use classical TA in addition to MA analysis. Price, Time, and Volume – those are the basics – my analysis usually covers the first two but not volume, and I suspect I’m missing out on something very basic.
     
  2. RAMOUTAR

    RAMOUTAR

    IMO volume not only validates price, but it dicates price. OBV and VWAP are great indicators of volume bias. When I scan the very first thing I look for are strong volume deviations. I compare closing volume to the 30 day average volume, and I focus on stocks that had large increases or sharp drops in volume. I see volume as the stock heart rate. There are many threads on here that cover volume, I've talked about volume, VWAP, OBV and how I use them in MA as well.
     
  3. Thanks for your replies. I was using an MA on volume, but didn’t find it to be very useful as MAs tend to lag. I’m going to experiment with OBV, A/D, and VWAP now. OBV and A/B supposedly act as leading indicators.
     
  4. Elder’s description of OBV:

    Anyone have any objections to this indicator?
     
  5. A/D (Accumulation/Distribution) = (Close-Open)/(High-Low) * Volume
     
  6. Comparing A/D to OBV, A/D seems to provide more depth.
     
  7. I have been following the A/D as of late and find it to be much better than OBV in confirming price direction which the different oscillators I use show.
     
  8. Yeah, OBV seems simple mathematically and looks like it trends much better on the one year charts that I usually look at. However, I prefer the additional depth that A/D provides since it accounts for the strength of the day’s direction.
     
  9. All I have been using lately is this:

    http://www.cyclopstools.com/index.php

    You can set the new high/low or breakout filters to screen based on the 3 day avg volume. It has cut the amount of charts I look at on a daily basis by 80%.

    I agree with you on volume. I think the majority of price action is random, so if you can use volume analysis as a tool to identify non-random movement I think your chances of success with certain type of trades (breakouts/breakdowns, etc.) is improved significantly.
     
    #10     Aug 17, 2003