How predictive is volume to index futures?
- Thread starter Susannah
- Start date
pabst, Well all i can saw is being raised next door on the South side of Chicago with Leroy Brown as a neighbor it was hard to think about being like the rich North side kids. . 
MandelbrotSet
Registered: Dec 2007
Posts: 1285
04-26-08 12:31 PM
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Quote from ehorn:
My experience is the following:
Volume is a leading indicator of price.
Volume provides context as to where price is within a cycle or trend (Dominant or Non-Dominant movement), where it is going, and when it has reached its destination.
Volume can be seen prior to price movement and projects price volatility as well as price continuation and change.
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Learning how to read volume adds immesureably to a traders' success in the markets.
When markets are range-bound, volume tells you so.
When markets are breaking up or breaking down volume confirms this.
When markets are extremely bullish or extremely bearish volume always keeps you on the right side of the markets.
Thanks for your post ehorn, good luck in your studies, susannah.
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Gee, thanks for confirming that price leads. Price tells you when you are in a range. How can volume do that as you say?
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Correct, when mkts are breaking up or down, volume will follow price. Nothing confirms price but price itself, thks again.
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So you also say when mkts are bullish or bearish volume keeps you on right side of mkt. What tells you first if mkt is in a bull or bear? I rest my case. Time for shopping..
MandelbrotSet
Registered: Dec 2007
Posts: 1285
04-26-08 12:31 PM
--------------------------------------------------------------------------------
Quote from ehorn:
My experience is the following:
Volume is a leading indicator of price.
Volume provides context as to where price is within a cycle or trend (Dominant or Non-Dominant movement), where it is going, and when it has reached its destination.
Volume can be seen prior to price movement and projects price volatility as well as price continuation and change.
--------------------------------------------------------------------------------
Learning how to read volume adds immesureably to a traders' success in the markets.
When markets are range-bound, volume tells you so.
When markets are breaking up or breaking down volume confirms this.
When markets are extremely bullish or extremely bearish volume always keeps you on the right side of the markets.
Thanks for your post ehorn, good luck in your studies, susannah.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Gee, thanks for confirming that price leads. Price tells you when you are in a range. How can volume do that as you say?
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>..
Correct, when mkts are breaking up or down, volume will follow price. Nothing confirms price but price itself, thks again.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
So you also say when mkts are bullish or bearish volume keeps you on right side of mkt. What tells you first if mkt is in a bull or bear? I rest my case. Time for shopping..
Before answering the thread's question on volume, it is worthwhile to repeat a KISS approach to trading which can be reduced to a two part process.
1. You must have an accurate methodology which you must be able to rely upon and which needs to be a day trading sequential system wherein you are buying upmoves and selling downmoves serially as in a connecting continuum or chain (CL, YM, ES, etc), open to market close.
2. Once that is in place you should next practice your trading drills on a simulation platform using your current live market but only moving to live actual realtime trading as your drill experience in simulation mode improves. This is your operating procedure.
So to underline the power of a complete process, IF in the first part, the methodology, to the high standard and purpose needed, is not in place, you do have the means to be successful.
In the past I have posted that volume can give useful clues but is not necessary for an accurate system. That remains so. But when that is so you are effectively relying on price only, either directly or interpreted through indicators.
Now to volume. To use a volume system you need to nail down volume so as to know what exactly you are reading from it. Raw volume, that is simply volume per time bar, either on a 1m or 5min bar, is flawed. The 5 min bar if used (eg YM, ES, CL) is very blunt and appears to require for some, indicators, channels plus DOM/T&S in addition to volume for those promoting or using a volume system. If you use price and raw volume (eg on 1min bars) and nothing else, you are left with a flawed proposition also. Inside a 1m bar a reverse can or often does occur when you have to wait to read volume at bar end in relation to immediately preceding bars. Add to that, that your volume reading may be mistaken on occasion.
Volume can be used very effectively in micro trading (buying the upmoves and selling the downmoves sequentially as in a daily market from open to market close eg YM, ES, CL) but accurracy is absolutely essential. You need to know more from volume than just raw volume. Volume, I am saying, holds more answers than just raw volume, and those are the answers I use when I use volume.
1. You must have an accurate methodology which you must be able to rely upon and which needs to be a day trading sequential system wherein you are buying upmoves and selling downmoves serially as in a connecting continuum or chain (CL, YM, ES, etc), open to market close.
2. Once that is in place you should next practice your trading drills on a simulation platform using your current live market but only moving to live actual realtime trading as your drill experience in simulation mode improves. This is your operating procedure.
So to underline the power of a complete process, IF in the first part, the methodology, to the high standard and purpose needed, is not in place, you do have the means to be successful.
In the past I have posted that volume can give useful clues but is not necessary for an accurate system. That remains so. But when that is so you are effectively relying on price only, either directly or interpreted through indicators.
Now to volume. To use a volume system you need to nail down volume so as to know what exactly you are reading from it. Raw volume, that is simply volume per time bar, either on a 1m or 5min bar, is flawed. The 5 min bar if used (eg YM, ES, CL) is very blunt and appears to require for some, indicators, channels plus DOM/T&S in addition to volume for those promoting or using a volume system. If you use price and raw volume (eg on 1min bars) and nothing else, you are left with a flawed proposition also. Inside a 1m bar a reverse can or often does occur when you have to wait to read volume at bar end in relation to immediately preceding bars. Add to that, that your volume reading may be mistaken on occasion.
Volume can be used very effectively in micro trading (buying the upmoves and selling the downmoves sequentially as in a daily market from open to market close eg YM, ES, CL) but accurracy is absolutely essential. You need to know more from volume than just raw volume. Volume, I am saying, holds more answers than just raw volume, and those are the answers I use when I use volume.
It's a public board, f9.
He should no more tell you how he uses volume than I would ....
... but
Sure, I subscribe to the following implementation:
http://www.elitetrader.com/vb/showthread.php?s=&postid=1372283&highlight=gaussians#post1372283
Volume for analysis. One of those key trading words people like to throw around with authority. Use it at your own peril. ALL ES moves; up, down, sideways - have been met with high, med, and low volume. Just watch a low volume run sometime. Every time volume comes in to kill it, it continues. The fucker can go for a while. I can just see the volume analyzers scratching their heads goind wtf?!
And volume leads price? Now, there's a real nugget..... whew.
And volume leads price? Now, there's a real nugget..... whew.