Volume As A Short Term Indicator

Discussion in 'Technical Analysis' started by Norm, Aug 23, 2005.

  1. Norm


    It seems to me that volume for common stocks picks up just prior to intraday prices swings. This appears to be true for swings of .25 to 1.00 percent or more. Maybe this is market makers accumulating inventory or selling short in anticipation of the moves.

    Any comments on the use of volume as a short term indicator.

    Also, what is the best way to get fast volume information. I use IB and the charts lag by one minute. Watching the trades on their market screen may be ambiguous, such as when someone constantly refreshes a bid or ask that is being hit. Is Level II time and sales the way to go?

  2. Babak


    IB charts lag? by up to a minute?! This is news to me.
  3. Norm



    I am not certain about the delay. However, the charts seem to remain unchanged for about one minute and then a new point appears to get ploted. Of course, it inherently takes time to accumulate volume data, as the trades are reported.

    Each volume bar represents the voume during a small increment of time. I am guessing that this imcrement is about one minute. In one minute, an opportunity could have come and gone.

    I doubt if any other online broker does better with their volume bars. It is likely to be about the best possible. I am just wondering if there isn't a quicker way to view volume data realtime.

    Please understand that I use IB and I am very happy with their commissions, software and support.

  4. Do an ET search on Volume. It's a passionate issue and lots is said about it.

    FWIW... I'm in the camp of "volume considerations in any timeframe are hazardous to your wealth", but that's just me.
  5. OK, I'll elaborate my view....
    a. SOMETIMES there is a volume spike on reversal
    b. Sometimes a swing high/low occurs with increased volume.... sometimes on decreased volume... sometimes on "same as it's been" volume.
    c. Usually, you have to wait for the volume bar to be completed before you see the spike, so it's a lagging indicator.
    d. Even when you think volume is "saying something to you", the same message should be broadcast by price action.
    e. You don't get paid for having your trading decisions "in tune" with volume, MACD, sentiment or any other extrapolation. You are rewarded for having your trades in tune with PRICE. So, that should be the focus.

    If you're going to be moved to act only on "reversal + volume spike", you're going to miss a lot of opportunity. Therefore, take it out of the equation and you should do better overall.
  6. I find volume as indicator works better after hours

    in some markets .... ( excluding news items or

    time zone changes when spikes are to be expected
    compared to prior bars )
  7. I know there is another thread on volume which I am trying to read through, but is intraday volume for YM (or any index for that matter, not stocks) at all important, or is price more reliable?

    Could someone post an intraday index chart and mark on it how they use volume?

  8. =============

    Norm, it can pick up prior to a good move;
    GE has had 5 times approx daily volume &price gone no where also. So you have to watch out for hi vol churn also.