Volume

Discussion in 'Risk Management' started by accutrader, Mar 20, 2010.

  1. I use range bars. A common scenario is as follows: An index will say be moving down. There will then be a bar that closes up with substantially higher than normal volume. The next bar will be a down bar at much the same price as the prior bar. The index will then continue down.

    My interpretation is that the higher than normal volume on the one bar must be due to big money going short even though the bar closed up. Is my interpretation correct and, if so, how can big money control their entry so that they don’t overpower the direction of the bar?
     
  2. Something known to me as "Climax" comes to mind- or some near term Capitulation..does this sound right ??
     
  3. speres

    speres

    You do need to see the results from the effort, so you have big vol on the up bar, are they selling into the up bar,adding to existing shorts, or covering on the down bar thats now closed up?so the smart money is selling into the percieved strength and hence the next bar is down, down trend continues.. Do be careful though, this could also be smart money covering their shorts, the action would be a bit more climatic, look where the vol is happening, is it at support? is the high vol bar a wrb? Is there strength of weakness in the background? has price just broke a supp level?
    Its all good seeing the high vol bar but it needs to be read in context of where price is..
     
  4. Speres – The high volume bar came at 9:38:42 eastern on TF #F on Friday. TF had dropped a couple of points from opening. The high volume bar was not at either support or resistance. I agree that the high volume bar needs to be read in the context of where price is but in this case it was close to opening, no direction had been established and there was no sup/res near by.

    The subsequent fast drop suggests the high volume was caused by big money going short on the bar which closed up. Waiting to see what happens means missing the move.

    Your reply poses a fundamental problem with volume. Is big money opening a position or closing an existing position?

    You asked if the bar was a wrb. If you mean a wide range bar, that does not apply as I use constant range bars.

    I still have my original question “How can big money enter so that they don’t overpower the direction of the bar/”
     
  5. accutrader, with respect, the way you have asked the question shows your limitations on reading volume.

    Can you post a chart and I'll see if I can help you dig a bit deeper. In fact if you can, post 2 charts: one with premarket trading and one RHT.

    I've just got a little time to kill so don't hang about.

    Is it eSignal you are using? And what is the range you are using?

    And you are in luck. I have invited Spider to come and show you some hot Hershey PV skills too so you should get a well rounded opinion between both of us as his style is not my style.
     
  6. I've been trading Emini TF (formerly ER2) since the day it was born. One thing I quickly learned was that if you don't see support/resistance nearby in its own price action...TF more often than not will react to the price action of other key markets.

    Simply, if other key markets are reacting to their own support/resistance areas...TF will do the same via correlating it's reaction, more often than not, to other key markets even though TF is not at/near a support/resistance area of it's own.

    TF did such on Friday morning between 0935am - 0940am est along with getting confirmation (explained below).

    That's easy...the prior trading day. :cool:

    They entered the prior trading day as in Mar 18th within the 681.20 - 680.20 price area along with providing support the first hour of trading with good market participation...the bulk of that price action occuring in reaction to those 1000am est key economic reports. In addition, later in the same trading day, the bulk of that price area provided a resistance in the p.m. trading session with good market participation.

    Now take a look at Emini TF on Mar 19th (the day in question) where it traded at between 0935am - 0940am est prior to pushing down hard.

    My point is that sometimes we need to sit back and take a look at the bigger picture and that requires looking at the prior trading day along with monitoring other key markets support/resistance areas while trading the Russell Emini TF. Such has worked very well for me since I started trading TF.

    Simply, it's common for big money market participants to react to key economic events et cetera...when they do...it pays to remember where they were reacting.

    Note: I don't use constant range bars nor volume. In contrast, I prefer volatility analysis to understand key changes in supply/demand.

    Mark
     
  7. Mark,
    Are you saying if the TF spikes abnormally and the NQ, ES or YM are not...that the TF will 'settle back down' to appropriate level?...are these the markets you watch in tandom while trading the TF?...also, noticed the TF volume has really grown, actually back to ER2 levels on CME?...the TF volume is actually now more than the YM
     
  8. Can you post a chart and I'll see if I can help you dig a bit deeper. In fact if you can, post 2 charts: one with premarket trading and one RHT

    xspurt - Thanks for your comments
     
  9. You might want to set the Bar Coloration of your Volume Pane to match that which exists in the Price Pane of your recently posted chart. I do not use Range Bars.

    - Spydertrader
     
  10. Note: I don't use constant range bars nor volume. In contrast, I prefer volatility analysis to understand key changes in supply/demand.

    Mark

    Thanks for the comments. Would you mind providing some more details on what you mean by volatility analysis?
     
    #10     Mar 21, 2010