How predictive is volume to index futures?

[bronks]

Quote from 5Pillars:

It is NOT the total volume traded during a price move (up, down, sideways) that is the factor to guide your trade decisions imo - it is the "NET" affect of the volume traded and who is in control of price (buyers or sellers). This is exactly why I embrace Cumulative Delta analysis during all price movements - to measure who is ACTUALLY in control at every moment (and to what degree of control).

The point I was trying to make was simply that volume analysis is taken as grail in some parts around here, with some even saying it leads price. IMO, volume is like an indicator, sometimes working sometimes not. I do use 2 volume filters; one for cumulative direction (trending) and one for a stop filter once in a trade. However, NOTHING works as good or reliably as knowing your price levels for your instrument. I put on trades (orders) at levels way before price action or volume comes into play.


Price Action-- there's another buzzword lately. Doesn't everybody know that you need to be well versed in EVERY aspect of trading to make money? To disclude one action from another is just not sound.

 

[Cocaine]

What you are describing is an inferior way to trade. Now inferior doesnt mean unprofitable but you are clearly not in sync with the market if you are not reading price action constantly throughout the day. The markets are dynamic and unless you keep up, you are just passively seeing if levels will hold or not. I'm sure if you understood price action very well, you would see a mile ahead when your trades will and will not work out (the passive orders) and you'd probably greatly improve your results.

Quote from bronks:

The point I was trying to make was simply that volume analysis is taken as grail in some parts around here, with some even saying it leads price. IMO, volume is like an indicator, sometimes working sometimes not. I do use 2 volume filters; one for cumulative direction (trending) and one for a stop filter once in a trade. However, NOTHING works as good or reliably as knowing your price levels for your instrument. I put on trades (orders) at levels way before price action or volume comes into play.


Price Action-- there's another buzzword lately. Doesn't everybody know that you need to be well versed in EVERY aspect of trading to make money? To disclude one action from another is just not sound.

 

[bronks]

Cocaine,

Levels for entry
PA for manage
Volume for hints

 

[forexfox]

Quote from dandxg:

BTW price and volume work well for me, to each his own. [/B]

How do you use volume please?

 

[dandxg]

Quote from forexfox:

How do you use volume please?

I use it to show divergence from price. I don't have time to mark and post a chart sorry. Let's say the market sells off on heavy volume like in ER2 this morning and then it pulls back on decreasing volume to whatever S/R you like, fibonacci works sometimes. Just put a volume histogram in the lower half of your chart and watch it for yourself. Volume is the accelerator pedal of the market, If price goes up on declining volume and stays that way, it isn't long before it reverses unless volume picks up to compensate.

For starters Techniques of Tape Reading by Graifer and Schumacher is a good value. There is a nice lady that used to trade on the floor of CBOT Lisa Edimier, I believe, that has a totally free site that shows volume at price which is a part of market profile that is helpful for S/R areas. It's chart-ex dot com. I say nice because it's free, useful, and she took 1/2 an hour out of her day to talk to me about the site and how she uses the info.

Point being volume isn't the grail by any means but if you told me I could only trade with 3 things it would be

1. Price
2. Volume
3. Some form of S/R

Good luck

Lastly, there is a lot of good info on trading with price and volume at traderslaboratory dot com. Hopefully its not spamming just trying to help.

 

[lindq]

Quote from forexfox:

How do you use volume please?

It depends on the strategy. A momentum trader going long, or someone playing a long bounce off support, is going to like to see increasing volume. For obvious reasons. Falling volume generally signifies lack of buyer interest, not a good sign for a long position. But waiting for volume confirmation on a short term trade often means waiting too long. Which is why some use it, others don't. As for me, I monitor it as just another element to think about, but it doesn't usually determine whether or not I pull the trigger. And I think you'll find that others feel much the same way.

Also, if you are just starting out in futures, there is a very good chance that you are overtrading, trying to dominate every little move in the market. Excellent returns are made by futures traders who make one trade a day, or a few a week. Be cool, and pick your battle zones. You don't need to be in on every little skirmish. It will chop you up.

 

[romanus]

Quote from dandxg:

Let's say the market sells off on heavy volume like in ER2 this morning and then it pulls back on decreasing volume to whatever S/R you like, fibonacci works sometimes. Just put a volume histogram in the lower half of your chart and watch it for yourself. Volume is the accelerator pedal of the market, If price goes up on declining volume and stays that way, it isn't long before it reverses unless volume picks up to compensate.

BINGO !!!!!!!!

 

[slapshot]

Quote from hypostomus:

no one ever thinks to ask if the volume was mostly at the bid, mostly at the ask, or somewhere in between. As if it made no difference.

Accumulated volume in bars longer than seconds in index futures is highly misinformative.

1) Thank you for illuminating the most important part (for me) of price action via the DOM bid/ask. It is the only true way to know if a price move is just a headfake that will reverse or if it will follow through. And how much power is likely to be behind said move.

2) I would like to gently and respectfully disagree with the "misinformative" statement - actually it is quite useful on most timeframes if you don't expect too much from it.

* * Was the volume high vs. the bar closes high?

* * Was the volume high vs. the bar closes low?

* * Was the volume low vs. a high close bar?

* * Was the volume low vs. a low close bar?

To me, these are pretty darn important clues about what may happen next (in context with S/R, Trend, etc.).

 

[slapshot]

Quote from austinp:

[B
In all reality, newer traders learn to reach success much faster with least amount of tools on a chart. Strip it down, accelerate the learning process. [/B]

This is the most truthful statement ever uttered on ET.

 

[syswizard]

Accumulated volume in bars longer than seconds in index futures is highly misinformative.

yeah, but for that duration, it's called NOISE.
Trading NOISE ? That's known as scalping.
It's not a bad approach, but just "looking" at volume on a chart along with price action is not smart IMHO....an indicator which COMBINES both of these if much "smarter"....and less subjective.