First, of all Im going to have to start out by agreeing with you (no it doesn't pain me to do that) In the end, I too believe you have to keep trading as simple as possible, play the odds, and have the discipline to carry out something very simple, consistent, and basic.. This is exactly the way I trade. In fact it would amost seem too simple if I described it here. That said, my plan also leaves room for discretion. For example if I am in clear chop in my timeframe, I might not take a trade. If Ive had several winning trades in a row, and the trend has run far, I might not take the next trade, or if certain volume or big picture developments
are clearly in place I may not take the next trade, but such discussion if for another time, and in the meantime, I do agree the simpler you can make this the better.
Whats funny is the volume and big picture issues I am discussing here are very simple, and will only compliment, and not distarct from a simple plan.
I read another one of your posts, again, about how it is price that creates volume, and not visa-versa. You used an example of a $5,000.97 handbag not drawing any sales, and therefore it was the eventually lowering of price that brought in heavy volume, and I wanted to express an alternative view here that might better get to the heart of what I am trying to suggest here, even
though we will both end up in the same place from a final trading perspective.
A stock, or futures market is a dynamic dual auction process, compared to the more singular price of a product in a store, so lets put your handbag example in the context of a more dynamic auction.
First, going with your exact example (which is entirely correct about lower price bringing in a heavier volume of sales), wasnt it the lack of volume at $5,000.97 that caused the manager to lower price in the first place?..
If volume was high at this price, there would be no need to lower price at all, and in this more static example, price would have stayed the same....Therefore, if you were watching volume of handbags at $5,000.97, you never would have "shorted handbags," and this would have told you where price was likley to remain for a while until volume dried up later.
Now, if you turn the handbag example into a more dynamic auction, lets say price moved more freely around based on all the buyers and sellers out there, and lets the store put the handbags out at a bargain price of $2000.00... At heavy volume, price is too low, so it goes up to $3000.00 again on continued heavy volume...so at $3000.00 we know the product is still selling strong...Does it make sense that if price suddenly drops to $2,500, it will likley at some point go up to $3000.00 and likley higher because volume was still nice and high at $3,000.
Therefore as the price drops to $2,500, you are suggesting the drop in price will bring in heavy volume which is not true..In this case it brings in heavy demand, and very low volume cause the price wont stay at this bargain area price long.
It is only when price eventually reaches $5,000.97 that volume shuts off, and this is the sign lower price will in fact bring the heavy volume you suggest in your example.
Therefore, to say price leads volume is not entirely correct..........price leads to supply and demand in a dual auction priocess, which could mean either higher volume or lower volume, and this is why volume can be used as an indication regarding the likley future direction of price.