Ok.. so I have read more times than anything else of the value of using volume in my charts. Reams of sound advice.. unassailable wisdom.. The only thing is.. I keep adding the volume study to my charts for a while, but for the life of me.. for every instance I detect of it being relevant.. there is another of it meaning nothing whatsoever. A move upwards, supported by a volume spike.. and then a sudden equally violent pullback, but with almost no volume comparatively.. etc etc.. So, what's the point? My screens real estate is valuable to me, so I always end up scragging the volume pane and managing without once more. Then, after some time has passed.. and I read more wise words about volume from pro-traders, I start to feel anxious again.. worry that I would clearly be doing better if I used it.. so once more I squeeze it in.. and the cycle continues.. lol Go on.. tell me.. I know you wanna.. Neil
I use volume only to guage strength of the move. What are you using it for? I recall reading somewhere that too much volume kills the move. The first sharp dip always finds buyers and the first sharp rise always finds sellers. I usually watch the price and volume after a spike and buy the second bounce from support or sellshort the 2nd failure at the high if the volume is at least over 1/2 what it was on the last attempt. If its more I typically will open a larger position. If it's a lot less I put less stock in the direction and in the support or resistance level and either pass the play or keep my position small. Just my 2-cents. I'm no expert. I swing trade multi-day so perhaps there's better use of volume for daytraders but I've picked the final direction quite well doing this. Now if I can just find my stop strategy (other thread)
hmmm.. not using it at all in fact, basically confused by all the ways it could perhaps be used. I mostly watch price action and resistance/support areas looking for change of direction setups.. when I look back over my trades and pull up the volume studies I usually just find nothing that I feel would have helped confirm or deny the trades that I made, at least not consistantly.. Thanks for the input tho.. will keep examining this issue. Have been reading your stop loss thread with interest.. trying to figure the best strategy for that myself, its a toughie alright.. One thing that remains constant for me now however, in any stop strategy is to KEEP my stop, whatever it may be.. that I have learned well above all else.. never ever blow my stop... ever.. Neil
This is purposely overly extreme but here's what I mean: A stock opens at $15.00 and rises quickly to $16.00 on high volume. If a sale suddenly goes through at $15.50 for 100 shares and then the next 2 hours it trades back between $15.90 and $16.00 I don't see $15.50 as support. This 100 share example is over simplified but makes my point. Very low volume on a pierce of support or resistance is not a major indication in my mind of the previous line being violated. Its more likely to just be the market maker running up to nab my stoploss than an indication that the stock has eclipsed the "magic barrier" in one direction or another. I'm sure the pros here will explain better uses of volume but this has been working for me on finding direction pivots by identifying strength of resistance and support levels.
i agree with u over volume - looked at it once a long time ago - couldn't see the point - and never looked again - but i keep hearing how key volume is volume seems to me to be a lagging indicator - maybe even contrarian - since by logic a reversal must start with low volume - and by the time everyone joins the train, there is no one else and the move may end take a strong rising day - which would therefore be supported by high volume - but who cares - you know the market is rising and not retracing - because it isn't interesting a swing trade thinks volume is for intraday - i trade intraday - and figured volume was for swing traders!
There are four things, I look for when I look at volume. a.. Price's moving higher, volume should be rising with price. (basis stuff) Right out of the book. Price's will stop soon and then go into a correction, volume should be light at this time. Trend should start heading up again too higher levels. sorry about the face it should be ok b.. Price's moving higher, this time volume start's to get lighter and lighter as price move up. Bad stuff. Sell Sell !!! c.. Price's moving higher, market volume activity become's extreme or as you say starts to show high spike bar's, then this could also be the end of the move up. Extreme high volume after a long decline, is a real good indicator of bottom. Just like when it comes in at the Top!!! d.. There is one more volume activity that I look for. This one is when you see large bar one day next day small bar, next day large bar next day small. When you see this volume action coming-in as price's are falling, the move is ending!! Shares are being pump-down, and won't last long. Same action if shares are in a rally. AT the end of the rally you see this action. Neil, I hope this is some help. It has work for me for years. It's only a very very small part of what I look for, I see this volume patient so easy and fast, that it give's me lots of time to see my real setups for trading.
I use volume blow-offs for entry points on smallcap or OTC issues only. Large caps are just too thick, imo, to accurately read.
I agree...volume for an intraday trade can be one of the most misleading indicators there is. I use it mostly for setups. That is, mainly with support and resistance with monthly, weekly and daily charts. I use it to determine if there is an increase or decrease of buyers in the stock. Intraday on the other hand, is another story....I use bollinger bands, 20 day ma, and candlesticks to rely on. I look for pivot points, support/resistance levels and keep a sharp eye on what the indices are doing. I have seen stocks during intraday trading defy completely what the volume is telling you it should do. None the less, I still use it....why? Volume doesn't seem to lie when there is selling...so if I've gone long on a stock and I see a little red volume bar...look out brother....I hold these truths to be self evident.....IT ALWAYS SEEMS LIKE IT TAKES A WHOLE BUNCH OF GREEN UP VOLUME TO MAKE A STOCK MOVE UP IN PRICE, BUT ONLY A COUPLE OF TICKS OF RED VOLUME TO MAKE IT PLUNGE DOWNWARD!
"IT ALWAYS SEEMS LIKE IT TAKES A WHOLE BUNCH OF GREEN UP VOLUME TO MAKE A STOCK MOVE UP IN PRICE, BUT ONLY A COUPLE OF TICKS OF RED VOLUME TO MAKE IT PLUNGE DOWNWARD!" That point I completely agree with.