Volume level capture as a great trade setup

Discussion in 'Technical Analysis' started by Liberty Market Investment, Sep 17, 2019.

Do you trade volume setups?

  1. Yes

    42.9%
  2. No

    57.1%
  3. Sometimes.

    0 vote(s)
    0.0%
  1. Being a trader and a couch for LMI, I'd like to share one of my favourite trading strategies. All material is based on Volfix trading platform, which you get for free when you trade with LMI.


    I personally am a big fan of highly volatile markets. They are interesting in that the movements are fast, and it immediately becomes clear whether you made the right decision or not. Such markets are not suitable for a beginner: too big risks and a poor risk-to-profit ratio. However, having mastered the trading system, it is quite possible to look at deals related to volumetric level capture.


    Markets such as gold, oil, thin indexes (NQ / YM), as well as some currencies and other similar instruments like to expand after sharp seizures and rejections of the levels, accompanied by volumetric injections. Going directly from the volume is usually a bad idea, because often the movement does not stop immediately. But the call after confirmation is quite an acceptable setup for yourself, if you get used to it and get your eye on it.


    Take gold as an example. For long-term players, the 1350-1360 zone has always been a “point of attraction” for sales, as can be seen from the price reaction on the weekly chart over the past 4 years.


    [​IMG]


    On the daily chart for February 19, 2019 there is a confident uptrend, explained by the desire of the players to bring the price closer to the zone indicated above:

    [​IMG]


    Please note that the day I marked (February 19) is accompanied by a wide range and the largest volumetric delta for the entire period of the impulse. This is a typical culmination of a “mature trend”, when the mass of retail buys everything that is possible on the market, and the market maker confidently substitutes his take-profit limits for these purchases.


    So, everyone who wanted to do so, have already bought gold. We are waiting for what will happen to the price. Let's consider how the next day, February 20, developed in dynamics. First, let's analyze the globex.


    The nature of the globex is directed, “sawtooth” up. Correction waves in amplitude approximately correspond to trend ones. Intraday volumes begin to appear on the highs of the market.

    [​IMG]


    Against such an alarming background for buyers, two events follow that aggravate the situation even more:

    1. Before the opening of the American session, again on the very highs, a flash volume appears on the ask - a limited coverage by the market maker, which prevents the subsequent upward movement.

    2. In the box chart we see the “filtered” hourly volume in front of the 1350 resistance zone known to us.
    [​IMG]

    Opening the session and even more so the first significant volumes, as mentioned above, is not the best time to make trading decisions. We are waiting for the development of events, and most importantly - the reaction of prices to volume.

    [​IMG]


    What do we see? Three very interesting things:

    (1) Further massive infusion of volumes under the support level, and

    (2) quick reaction of the price down. It is clear that the volume of the day remains at the top.

    (3) Longs below correspond to an insignificant 15-minute volume (blue “filter”, after which the price rests against the Globex balance).


    At the close of the session, the so-called “level acceptance” begins to take shape - a local balance, where the longs show weakness in the form of an inability to divert the price into the global balance. It's time to think about shorts!


    Next is a technical matter. We enter the local balance highs, the stop can be placed slightly above the lower border of the Globex balance:

    upload_2019-9-17_23-32-57.png


    The next day showed that we were not mistaken:

    [​IMG]


    Later it turned out that the day of February 20 became a reversal on the day, after which the fall continued for another 2 months.

    [​IMG]



    So, we have examined in detail the volumetric level capture setup. Such scenarios are played during reversals from significant levels, our task is to correctly analyze the senior timeframe and use the volumetric layouts on the younger one in time.


    I hope the material in this article will be useful for your trading. Please share your opinion in the comments. Do you trade U-turns? Do you use volumetric analysis tools to determine your entry point?


    Good luck to everyone and get funded soon!
     
    Last edited: Sep 17, 2019
    murray t turtle likes this.
  2. %%
    YES, on U turns;
    especially tech stocks/related ETFs in last quarter +1st quarter. If NasdaQ is to thin for you;QQQ is plenty liquid.:D:D,:D:D:D:D:D:D Havent checked out silver chart today, but saw in MCD/FOX news; its up nicely; TSLA is STILL in a polar bear trend/chart ;[>>-26% YTD + 191% debt]
     
  3. Yeah, we do recommend our traders to watch for volume both in the futures and in the corresponding ETF. ES/SPY, NASDAQ/QQQ, etc. This makes the volume picture complete.

    Btw. both futures, ETFs and stocks are available for analysis in Volfix platform :)
     
    murray t turtle likes this.