hi, how do you use exactly volume as an indicator when trading ES ? what is it that you look for when using last price, inside bid & ask, market depth, the volume bars on charts etc ... how is volume leading price ? etc ... regs, paulus
Hi paulus, there a lots of ways to use volume as an indicator. I use it to give me a bias, rather than to trigger a trade. My trading methods are all price-based. Anyway, to the point: attached is the last 8 trading days of the ES on a 10-min chart. Notice how about 5 days ago, price started creeping up while the on-balance volume (OBV) kept creeping down. In other words a divergence between price and obv developed. Sorry it's so dim, obv is the faint green line on the bottom. After this morning's rally I aggressively took every short my methods had to offer. The first one broke even, but I smacked the second one down like a bad dawg. Sometimes you will see obv break a trend line before price does. In that way it is sometimes a leading indicator. But again, price is king, I never let volume trigger a trade. It makes sense as an indicator to me because it is a separate piece of information, unlike price based indicators which seem to serve as guides to point out particular price patterns.
Volume profile and market profile. Combine both time and volume as indications of support and resistance.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=9727 http://www.elitetrader.com/vb/showthread.php?s=&threadid=18899
Volume indicates level of urgency. On a healthy bull move volume fluctuations correlate to price fluctuations. In a bear move the correlation is opposite. I consider a move where thee volume does not fluctuate markedly to be drifting up or drifting down and I would not want to be part of it. I would also take profits on positions if volume actiomn does notconfirm price action.
appears there is another OBV divergence on the 10 min NQ chart. This time price made a low equal to the last, but the obv made a higher low. This to me means the selloff this afternoon was light-handed. Thus i'll be especially aggressive with longs tommorow. e.g. pullbacks on the 1 min chart, 3 bar pivots, etc.
interesting post peterfigliozzi; i will certainly incorporate 'divergence-technique' into my trading regs paulus
An interesting feature of NeoTicker...you can display the volume of up/down ticks per time period. Many times the price bar is up, but the downtick volume is greater than uptick...a great "caution" indicator.