Volume -- I'd like to learn more about it

I’m a later-comer to the interpretation of volume. Although I’ve seen some heated discussions about volume here on ET, I’d like to direct a couple of questions to members who keep an eye on it and are glad that they do.

My immediate goal is to find out more about accumulation (or the lack of it) during sideways movements. Would you be willing to share your approach? Do you use a specific indicator? Or perhaps a combination of indicators? I run Metastock, and there are several available. Or have you devised some other method that isn’t proprietary?

Failing all else, could you point me in the direction of further information, either here at ET, on the Web, or in books? I am aware of DB Phoenix’s work but haven’t taken a look at it yet.

TIA

 

You have to understand that whenever possible accumulation is done in silence with every effort made to avoid attracting attention. If blocks are hitting the tape/offer is being lifted it is because they want you to see them, e.g at the markup phase or they no longer care that you can see them. either because it is over or because they feel they don't have time to screw around.

That said a friend who knows more about this than me looks at OBV vs a moving average of OBV. Katsanos's VFI and FVE also look promising. Tracking freefloat turnover is also important. there are other thingsto watch for. DBP mentions some in his (iuseful) writings.

 

any comments on OBV vs Chaikin Money Flow?


OBV formula:

To the previous interval's cumulative OBV amount:

If the current interval closes higher than the previous interval's close, ADD the current interval's volume amount,
or
If the current interval closes lower than the previous interval's close, SUBTRACT the current interval's volume amount,
or
If the current Interval closes at the same level as previously, do not change the cumulative OBV amount.


Chaikin formula:

Sum of "number of intervals" of Accumulation/Distribution values
divided by:
Sum of "number of intervals" of Volume amounts

 

As I understand it OBV was made simple because it was hand calculated and so can be improved upon using PC number crunching.

Do a search on google or TASC for some articles (and cut and paste code for MS TS etc) by Katsanos as he developed VFI/FVE to overcome some of the shortcoming e.g from gaps and give an indicator that was viable for intraday.


I am not an indicators based trader but I actually do use CMF for fast moving intradaty futures (HSI), it is about the one indicator I do use. If you exagerate the scale it is very good for identifying the end of short covering after a sell off which is basically a divergence where price is still going up, volume is falling away. You can identify it with the naked eye when you are watching, but very importantly, out of the corner of your eye when you are not using CMF. It is just a visual aid.

Bottom line. I am not sure that any indicator will tell you anything that you can't get real time from looking at price and volume action, except the indicator usually has a lag which means that with daily charts the trade has already moved away from the dramatically skewed risk: reward you can enter with using non lag real time. I look at brokers technical analysis and it indicates an entry 2 or 3 days after I am in or recognising that I have missed the trade they are only now pushing. Same with indicators. They do have uses for scanning though.

everything is the wrong way round from face value in the stock market. A stock that looks like it is being bought is being sold and vice versa.

Disclaimer: I am sure there are indicator based traders whose stop is larrger than my account. this is just my view.

 

You might want to take a look at the Yahoo Wyckoff board. Check out the files section, there's a lot of stuff there. Also search for msgs by David Weis, Cofferspeculator, and Pete_cm for some good analyses.

H


http://finance.groups.yahoo.com/group/Wyckoff-SMI/

 

Read this thread. It is very good and not only for day traders.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=63202&perpage=6&pagenumber=1

 

I understand why they would want to conceal their activity. And yet what you say also accounts for the congestion patterns where volume increases steadily and noticably. So, for lack of an ability to see what is invisible, I'll have to settle for those.

Interesting. Are you at liberty to discuss the lengths of these moving averages? Or, if you can only speak in broad terms, do you think that lengths like those used in the garden variety MACD would work?

I'll go after it this weekend.

Many thanks!

 

=============
Satzburg;.
Its secondary to price;
pay more attention to it on sell volume however .

Its not near as precise as price, like DIA lacks 1 million being 3 month average of 6.56 million.[indicator]
OBV can help, don't use it myself as much as volume bars.

Hardly bearish volume on uptrend DIA, even if move is extended some. Can hint of weak move.

Perhaps more useful on entry because price can go a long time,
up or
down on average/below average volume, frankly.

 

Wilco. I'll copy it over to my own machine.

Thanks.

 

Right. I recall that Wyckoff has quite a bit to say about volume, but I had forgotten about him. Thanks.