Quote from Thunderdog:
Fair enough. The only question remaining (for me) is whether this volume analysis has actually enhanced your overall bottom-line trading performance. I generally understand the theory you have described, and I had my own theories in the past about volume as a meaningful variable. Unfortunately, in my own case, the theory did not pan out all that well in tangible dollar figures. And so, to restate my question: How would your recent perormance have compared had you ignored volume? Have you ever scrolled back and objectively identified where your entries and exits would have been without volume? And if so, how does it compare? I'm genuinely curious.
Thunder,
Again, good questions. Here is what this has all done for me.
I now have a pretty mechanical way to define my trading sets up that flow in order from 8:30-3:15. I would say it averages between 15-20 setups a day in the time frames I am using.
Also, just to mention, I am not looking to "scalp" a few ticks on trades...I have no problem with scaling out of postions to reduce risk in this way, but these are not the moves I am looking for on winning trades in the day timeframe.
So in setting up a plan that would provide a healthy balance of trade opportunites vs. appropriate win/loss levels, my approach generates about 15-20 trades a day.
That said, I have also evolved in my trading where I prefer to take less trades rather than more trades, relative to my trading goals. I certainly had a problem at one time overtrading, and for me I found a direct correlation between more trades and more losses.
Also, I do think it is hard to sit intensely at the screen all day long, and I found that my best trading always involved fewer trades with bigger gains that lined up with the bigger and smaller pictures together.
Also, I found I was much more comfortbale trading less, and only when everything lines up, even if I missed some moves along the way. Finally, I didnt want to be in a position where missing any one trade could have a major impact on my overall trading goals
So, to answer your question, I have a very good idea about how each setup everyday falls in line with the big picture analysis I mention, without definitive records........I have no doubt, the good trades I miss are virtually offset by the small losess I would take in less than ideal big picture coniditions.
Another way to put it, is if I sat at the screen all day and took every one of my trades I almost have no doubt that the winning and losing trades in poor big picture condtions would about even out, and it would be an overall unproductive effort in the long run
On the other hand, when I now sit down at the screen, I can see the mechanical set up, always know the big picture context, and then trade only when everything lines up.
In the end, I take less trades, it is less stressful, and with the odds more in my favor, I achieve my daily/weekly goals.
But that is the way it works for me. I would simply prefer to trade less often given the variety of setups that evolve in the trading session for my trading timeframes, and the big picture of price and volume gives me a way to take only the trading setups that I feel are likley to be the best ones.
