Daytrading- Big Picture and Volume Analysis

07-14-08

Here is how the Big Picture and Volume come together, and how it helps with watching developments for the next trading day.

There was a very big rally during the afternoon on Friday, and we can see by volume analysis how the patient buyers, stepped in and halted the upmove.

They halted the upmove right in line with a big picture pullback to swing area, which falls right in line with expectations, and now we have a clear 1255-1240 bracket to monitor, in line with a much bigger macro downtrend described in an earlier post.

Therefore, Mondays trading now has context in the bigger picture. If price rallies, we can watch volume to see the developments for the patient sellers above.

If price drops we can see if the swing point holds, or if the macro down trend continues.

Again, Im not discussing anything to do with trading strategy at this time. Also, dont think of this information as a prediction tool. In stead this information can be very useful to tie into a trading plan that searches for high probabaility setups in line with big picture developments.

To me, there is a big difference between trying to trade in accordance with the mind set of "predicting" where price is going to go vs. the mindset of trying to take high probability trade setups over and over again in accordance with good trade management rules.
 

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bighog


Registered: Aug 2005
Posts: 1293


07-13-08 07:02 PM

The best indicator of volume is how many times a week you can get laid and what was the volume of additions/deletions to your bank and retirement accounts. Any other use of volume is a waste of time.

Summer time TV is bad so i come to ET and find this dribble again from some clown that is gonna make us all rich .

I wonder how this clown explains big moves on globex overnight sessions when the market is as thin as twiggy. Volume is after the fact, as you read his ramblings it is very apparent that is the case.
 
Quote from EMC2Trader:

Bdon

At some Im sure I will express my thoughts on how trading is nothing more than a probability game. Nothing is more important than price action, but volume viewed the right way, along with the bigger picture of price action, can in my opinion, definetly shift the odds in your favor with a good trading plan.
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When you trade in short time frames, price and volumes count, not always when you trade long terms based on fundamentals.
 
Quote from HedgefundTrader2:

When you trade in short time frames, price and volumes count, not always when you trade long terms based on fundamentals.
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Price and Volume always count - in every market, and on every time frame. When trading on fundamentals, the trader may not see the effects of the Price Volume Relationship, but it is always there.

- Spydertrader
 
Why does volume matter on a short time frame? Lets say on a 5 minute chart for ES. The guy did say he traded the ES and not stocks.

Am i right or wrong in assuming the conventional wisdom of daytraders in general have ZERO real clue to what will happen in the next days mkt? I mean: How can using volume be of ANY value in telling me what price is going to do on the next tick, etc? All volume tells me is what just happened. Please enlighten me, i could use more money. Thks

On a 5 minute chart i ned to watch what? Come on guys, face it volume is late, it is calling the points scored in a basketball game after the ball whooses down the basket.

PS: if i see levels of support/resist that i am eyeballing do i care how much volume gets me there ? When price moves, that is all i want, all i need. KISS, HOGGIE likes bacon but if i get bacon from one traders hide on the other side of the trade or a hundred of them. Who cares, all i know is it did what i saw the setup etc and thats good enough for me. I trade, i am not into reinventing the wheel.

See ya tomorrow, time to pop in a movie. PSS: drag racing on, movie can wait. drag racing was a hobby back in the day. HA Been watching the girls USA Baseball team get ready for the Olympics, great bunch of gals, they are a well honed bunch . Great to see that.
 
Quote from bighog:

All volume tells me is what just happened. Please enlighten me, i could use more money. Thks
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So if you are in a heavy downtrend on a 1 min chart, and price is pulling back with decreasing volume, you can make the observation that demand is getting low. You can use volume to tell you price is hitting an 'inflection point' where buying volume is low and selling volume is also low. It is at this point where the odds are in your favor that the trend will resume and selling will commence since demand has halted. Will it resume ? Not always, but you can bet its better than 50 / 50.

You are correct. Volume only tells you what has happened. But with past price action, you can make a reasonable assumption on which way price will go. That is one way you can use volume.

Volume will never tell you what is about to happen, b/c in the past example, buyers can jump into the market during this inflection point and overtake sellers, and instead of the trend resuming, you see price reverse.
 
Quote from bighog:

bighog


Registered: Aug 2005
Posts: 1293


07-13-08 07:02 PM

The best indicator of volume is how many times a week you can get laid and what was the volume of additions/deletions to your bank and retirement accounts. Any other use of volume is a waste of time.

Summer time TV is bad so i come to ET and find this dribble again from some clown that is gonna make us all rich .

I wonder how this clown explains big moves on globex overnight sessions when the market is as thin as twiggy. Volume is after the fact, as you read his ramblings it is very apparent that is the case.
More...


Well, to be called a clown right off the bat is probably a bit harsh, but that's fine, because you have every right to comment and a criticize as you see fit.

I think it would have been alittle bit more fair to consider that maybe I use Volume and Big Picture analysis in a very effective way in my trading plan, and alternatively maybe I have no idea what Im talking about, so at least that starts me out as a 1/2 clown, which isnt nearly as bad.

Two things we agree about... I do not use volume analysis at all on the Globex session, for the exact reason you state. Also, I too am very bored with summer TV as well.

Well three things we agree about....You are entirely correct that volume analysis, and quite frankly all analysis is after the fact.

I have never mentioned one word about predicting a thing in the market, and my trading approach ties in "after the fact volume and big picture analysis" with higher probabaility trading setups according to what this analysis says is taking place in the market in the present tense, and on a higher timeframe.
 
Quote from wiesman02:

So if you are in a heavy downtrend on a 1 min chart, and price is pulling back with decreasing volume, you can make the observation that demand is getting low. You can use volume to tell you price is hitting an 'inflection point' where buying volume is low and selling volume is also low. It is at this point where the odds are in your favor that the trend will resume and selling will commence since demand has halted. Will it resume ? Not always, but you can bet its better than 50 / 50.

You are correct. Volume only tells you what has happened. But with past price action, you can make a reasonable assumption on which way price will go. That is one way you can use volume.

Volume will never tell you what is about to happen, b/c in the past example, buyers can jump into the market during this inflection point and overtake sellers, and instead of the trend resuming, you see price reverse.
More...

This is exactly the way I put volume to use, and let me give an example of how "volume telling me what has happened" set up trades for me on Friday in the ES.

Clearly the market was pushing lower early.. For my purposes, and in the timeframe I trade, a market will continue to push lower, until the patient buyers dry up below, or the patient sellers stop the fall above.

On Friday, the first thing that happened is the patient sellers stopped the fall. Does this mean I jump right in and buy, Absolutely not! Does this mean I predict the down move is over? Absolutely not! What if the patient sellers are just temporarily halting the decline? Again, I never predict.

Next price moved down to the lows and volume dried up. Although the two volume occurances back to back provided some clues that the down move may be over, I still dont buy here. Why? Because in my trading plan I dont try to pick tops and bottoms in the timeframe I am trading on. But clearly, after the fact volume analysis has pointed to a high liklihood that conditions are changing.

Finally, when price starts to rally later, coupled with patient sellers and anxious buyers acting in harmony in the present tense, after two significant volume occurancs in the past tense, this set the stage for long entries according to the way I look to execute my trading plan, and I considered these long trades higher probabaility trades based on the "past action of volume."

Did i have any idea the market would run up as far as it did. Again, of course not, but to me, a good trading plan allows you to capture big gains when they occur

Such volume analysis happens over and over again in the markets, and to my way of thinking this provides one type of way to develop an "edge" as a trader, of course, according to your trading approach.
 
emc

Thanks for taking the time to post.

I completely agree that trading is a probability game no-one knows which way that next tick will go.

I've used volume in the past and understand what you are talking about but practically it didn't really help me with any of my set ups.

What setups do you look for when trading?

I simply use SAR [for stops and targets] and momentum [for direction].

Cheers
 
You two guys are just blowing a lot of smoke in your shorts. I have said many times using volume is a wasted effort for daytrading and one real solid reason for that claim is because watching a screen for a whole day is boring, it is a chore, it is hard and to sum it up it is HARD to do and stay focused enough to make money in a difficult game. That my friends is why yours truly trades so simple it is scary to the uninformed.

You guys claim to draw out all that info on a 1 mintue chart about volume, orders in, orders out, etc, etc, etc. HOGWASH i say. A 1 min chart is trading noise. What you clowns say is relevent is rubbish. Talk all you want, claim all you want. To say you even need rubbish info is nothing but causing "INFO OVERLOAD" to think about. Trading the ES is not firing a machine gun, it is about what is coming relative to the odds. How in the hell is all that so called info you claim to extract out of volume gonna do any good even if it was possible?

Trading a wicked witch like the ES combined with some of the sharpest minds in the trading world is about : DO NOT THINK, Just PERFORM. One of the challenges of trading is setting some losers straight. I might have helped one or two here or there but i do know this for a fact..........many are just caught up in one of the traps of trading and that is to over intellectualize a simple game. Think less, look for what is important and do not over burden yourselves by trying to explain to others the rubbish you claim to draw from old stuff. The next tick is what matters not the last one.
Myself i do not trade for ticks, handles is my game boys, handles is my game.
 
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