ES Volume Leads Price

J

Joe Doaks

It is well known on ET that for ES, volume leads price. Those of you who are old sparkies will remember the mnemonic "ELI the ICE man". You will also remember the mnemonic for the resistor code BBROYGBVGWGSN, but that is not for this modern politically correct audience.

No matter, I have prepared a little chart of ES which I shall post each day to prove the truth of the rule to those fools who doubt it, colloquially known as the B-Team, although they are such a rag-tag bunch that they wouldn't even qualify to be water boys. The chart is one minute, the algorithm is that three successive volume bars down on flat or rising volume indicates an upcoming short (red line) and vice versa for long (green line). I selected three bars because using only one or two bars is impossibly messy.
 
Hmmm. Evidently not a good day to prove the point. Only obviously right one time out of ten. An anomaly. Monday will look better.
 
Quote from Joe Doaks:

Hmmm. Evidently not a good day to prove the point. Only obviously right one time out of ten. An anomaly. Monday will look better.
More...

There goes a month of profits on an anomaly... . Yes, it leads at times but I doubt there is an edge from taking every signal. Just code it, I am sure it would be simple and see how it looks. The real pie is combining it with some other types of factors that filter out most of the bad signals. Use the logic as a base and build from it. Keep the posts coming
 
"...three successive volume bars down on flat or rising volume..."

Can you please clarify what you are saying here ? It seems to be a contradictory statement: 3 volume bars down on...rising volume. Maybe another graphic would help. I got nothing from the first one because I can't tell what we're supposed to be looking for. Thanks.
 
Quote from Joe Doaks:

Hmmm. Evidently not a good day to prove the point. Only obviously right one time out of ten. An anomaly. Monday will look better.
More...

LOL, I'm glad you caught that, I was about to mention it to you.

Your technique kept shorting the UPTREND (that's OK, so did I :p ). Your technique might be right on the days when the market trades back-and-forth, but on the trend days it's gonna get cha.

Nice idea, keep running with it.

JJ
 
Quote from apex82:

There goes a month of profits on an anomaly... . Yes, it leads at times but I doubt there is an edge from taking every signal. Just code it, I am sure it would be simple and see how it looks. The real pie is combining it with some other types of factors that filter out most of the bad signals. Use the logic as a base and build from it. Keep the posts coming
More...

A few at ET has coded it and there's no edge.

Yep, combine it with something else and the performance does improve...a little.

However, it is important he discover's this on his own to help him understand when to apply it and when not to apply it.

Thus, there is a reason why the chart reflects a day not to apply this technique.

Mark
 
Trader416, I always hesitate to post in a liberal arts forum because the use of technical language always confuses readers. To "lead" in my world would mean the same as to "presage", "augur", "forecast", or "predict" in your world, except that in my world we expect rigid determinism, as we cannot tolerate stochasticity when it comes to the operation of, say, a refrigerator.

When we say "ES volume leads price", we mean that volume declines before price declines, and that volume rises before price rises. This is most clearly evident at the tick level, but that is not where most of us trade, hence the one minute example.

It is one of the fundamental tenets of ET's officially approved intraday trading method. We must have such leading indicators because we cannot trust price itself in our trading. The leading action of volume is only one of many non-price indications we use to distract ourselves from deceptive price action.
 
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