ES Volume Leads Price

Quote from Joe Doaks:

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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So here is the story of a person and his thinking that has turned into a belief system.

It happens to not be correct and the first chart he posted shows that it is not working.

He states the algorithm and it gets some repsonses from several people and a lot of laughs from others who did not post.

Then above when someone says something like: the king doesn't have any clothes on does he? He restates the algorithm to demonstrate that he has the thread title misunderstood as shown by how he states his algorithm which is incorrect.

The correct algoithm is as old as the hills and has been stated and inferred all over the place almost since any science of math has been applied to trading.
 
Do yourself a favor and translate the algorithm that was restated and see what would be going on with price as the volume rises and falls rhythmically over time.

This would be an idiot's delight for trading purposes.

Do the thinking slowly and when you have done enough cycles or half cycles of the volume's waves, make a note of when you first start laughing.

Use a piece of paper tpo make some volume vawes going across the page and then fill in the price movement by doing what the algorithm says will happen for price.

There is no way anyone who is inot trading cannot be laughing by this time.

reread all the posts of people who were sucked in by this mistaken algorithm.
 
Do you cats looking at realtime data ever compare your realtime data with backfilled/hindsight data?
Is your data provider good enough?
 
here is the middle paragraph stating the retated algorithm.

"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."

Any algorithm for volume leading price applies to any financially traded instrument.

ISIT POSSIBLE FOR ANY VOLUME PRICE ALGORITHM TO BE ASYMMETRIC?

having that answer you can easily see that the above algorithm is caput.
 
Now we can look at the algorithm and see that it has to be made symmetric and that simply means that so far half the algorithm is missing.

as it turns out it is better to just junk it and start from scratch. I don't think that the OP can even come close to that.

as austin says, most people who sit around criticising other never come up with any counter offering that are useful or help out.

This thread proves austin's assertion to be true so far now that we can begin to see what the foulup is in the mistaken algorithm.

The co critics of the OP are not going to be able to help him out either.
 
To make up charts to show an algorithmic relationship which is, in fact, true, you can use any chart.

Maybe some will be posted.

By starting with five or ten common price, volume patterns it will come out to be quite easy to do.

Do these three first:

FTP

SYM pennant

FBP

Again by doing these you easily see the mistaken algorithm does not work. If it did then all pennants would go into short trends on the BO of the pannant.

This makes the use of the mistaken algorithm particularly stupid and dumb as a practice.

7 more common patterns to go.

Why not throw a few into the picture to help get the mistaken algorithm off the table.

After the paterns we can look at indicators and their signals and see more and more about how these standard indicator signals do not work.


After that we can review about 80 edges that work in ways that are contrary to the mistaken algorithm and just about call it a day.

Once it is clear that the thread had a false start we can get down to business and post the precise algorithm that works in all markets on all fractal
 
Take a look at what the fundamental relationship is that exists for several of the market variables.

This interrelatedness is very consistent over all markets on any time basis simply because the psychology of the markets comes from human behavior.

how to people who trade come into synchronicity with the psychology of the markets.

It is anything but coming up with mistaken algorithms of any sort.

As a person looks at the markets what is one of the first things he notices?


How could the OP screw this up right from the start of observing markets.

for fun imagine his response to the volume on 27FEB07 where people using the P, V relationship instead were having the best days of their lives.

It is common for a growing trader to have better and better days as he gains EXPERIENCE.

The OP got to experience CAPITAL FAILURE on any day of his life like the27th.

He experiences failure EVERY TIME THE MARKET IS GOING DOWN.

Does he experience success when the market is going up? He uually experiences late entries....LOL..

There are now two things on the table:

What does the market do when volume is increasing?

AND

What does the market do when volume is decreasing.

We can get to the leading part later.

Attached is a chart that shows anyone who wants to digest it, what happens as volume leads price in the equties markets. Obviously, this works for either long or short trades but it is written for a LIST of stocks that were SELECTED for long trades. It makes more money per unit time on short trades as will be shown in a few weeks elsewhere.
 

Attachments

even though we have 7 pattersn left to go and 80 edges to examine, lets glance at the first paragraph that lead to the restatement of the mistaken algorithm.

Here it is:

"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."

Trading takes place in NOW and there is no need to do the stuff above in quotes.

To trade well and not have the characterisitcs posted by the OP, you need to just trade in NOW.

The paragraph above in quotes explains things about betting on information.

The future is unknown and it becomes known when the future moves into the present steadily and reliably with the passage of time which always moves at the same pace.

We trade price and to do that we like to have no risk at any time. There is just one way to do that small task. and it is done by beginners, intermediates and experts alike. And it is done aLL of the time. It is the SUFFICIENT condition for making money.

So what use is it to have an algorithm for the FACT that volume leads price?

If you have a signal from volume written on your log, you are in a good place. Knowing what volume signals to write down becomes a good quest. Especially since volume is leading price all the time. "leading simply means that there is an order of appearance in NOW. We have that down so lets move on.

These posts are just me planting Easter eggs all over the OP's landscape.
 
Here is the last of the three paragraphs in the restated mistaken algorithm post.


"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."

Well lets say it is just a style of posting.

A point is made that says price is where you look on achart (chart is implied) to do expert effective and efficient trading.

That may be part of the needs of trading.

the attachment above says otherwise. you simple watch a list organize itself according to the volume and that gives you some time before the price begins to move to make money for you.

It is kind of comfortable, supportive and confidence building to have the attachment laying on your trading desk and the appropriate lists on the screen sorting in real time. Charts, indicators, no they are not part of the attachment.

I sometimes do demos in real time by blcking out price and only using the parts of my chart being displayed to do the trading; price display is not needed nor available to make the points. After annotations of the trades then I let the price part of the chart be seen.

I can do this because I know volume leads price with signals (we can note those later) and there is a reelation ship of volume to things like pace and snetiment which are also not shwon on the price part of the chart.

The OP has ferakout trader characterisitics he tells us and he is using price to freak out on.

yuo may be able to see how and why he came up with a mistaken algorithm by now.
 
Dop the volume signals for the following patterns

Head and shoulders 6 trades.

doubles (bottoms and tops) 4 trades.

You are now being introduced to the exit part of the mistaken algorithm.

There are lots of linked profitable trades in these more complex patterns.

The mistaken algoirthm screw upall the short protions and the long exits before the short next trade link.

Five more patterns to go.
 
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