Most lose money with or without volume.
As to Price being the derivative of Volume? Better read Jack's stuff.
As to Price being the derivative of Volume? Better read Jack's stuff.
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Is Vol. Really Important ?
- Thread starter Babak
- Start date
Which is why I think this sort of thing is nonsense:
"The only fundamental factor that really counts in the stock market is The Law of Supply and Demand" - Richard D. Wyckoff
I agree with you Babak... doesn't volume represent the buying AND selling of the stock? How can that be a bullish or bearish signal? If price rises, even on LOW volume, doesn't that mean that the demand for the stock, at the current price level, was high enough to continue to push the bid and ask up? And if price falls, even on LOW volume, doesn't that mean that the demand for the stock at the current price level was so poor that the sellers had to continue to lower the ask in order to attract buyers? But an either case price can simply reverse itself on the next bar regardless of the "strength" or "weakness" of the volume underlying the current price bar.
Plus how do we know the reasons behind who is buying and who is selling?A buyer can be anyone wanting to enter the market long, or someone wanting to cover a short position. Likewise, a seller can be someone who wants to exit their long position, for whatever reason that may not be even related to the stock's current price movement, or someone who wants to enter with a short position.
Maybe I don't know what I don't know, but for every thread or article I've read about volume being sooo important for price movement, I can look at any given EOD chart and point out instances where price rose on low volume (and continued to rise without a significant change in it average volume), price rose on high volume (and continued to rise even on a lower average volume), price retraced on low volume (then resumed its upward trend), and price retraced on high volume (then resumed its upward trend).
does Ed Seykota, Marty Schwartz, Richard Dennis or any of the other "Market Wizards" use volume as an analytical tool to base their buy/sell decisions? I even have Livermore's book "How to trade in stocks" that he wrote shortly before his death in the 1940's and volume is not even mentioned except for the sake of buying/selling stocks with high liquidity.
Anyways, great thread!
"The only fundamental factor that really counts in the stock market is The Law of Supply and Demand" - Richard D. Wyckoff
I agree with you Babak... doesn't volume represent the buying AND selling of the stock? How can that be a bullish or bearish signal? If price rises, even on LOW volume, doesn't that mean that the demand for the stock, at the current price level, was high enough to continue to push the bid and ask up? And if price falls, even on LOW volume, doesn't that mean that the demand for the stock at the current price level was so poor that the sellers had to continue to lower the ask in order to attract buyers? But an either case price can simply reverse itself on the next bar regardless of the "strength" or "weakness" of the volume underlying the current price bar.
Plus how do we know the reasons behind who is buying and who is selling?A buyer can be anyone wanting to enter the market long, or someone wanting to cover a short position. Likewise, a seller can be someone who wants to exit their long position, for whatever reason that may not be even related to the stock's current price movement, or someone who wants to enter with a short position.
Maybe I don't know what I don't know, but for every thread or article I've read about volume being sooo important for price movement, I can look at any given EOD chart and point out instances where price rose on low volume (and continued to rise without a significant change in it average volume), price rose on high volume (and continued to rise even on a lower average volume), price retraced on low volume (then resumed its upward trend), and price retraced on high volume (then resumed its upward trend).
does Ed Seykota, Marty Schwartz, Richard Dennis or any of the other "Market Wizards" use volume as an analytical tool to base their buy/sell decisions? I even have Livermore's book "How to trade in stocks" that he wrote shortly before his death in the 1940's and volume is not even mentioned except for the sake of buying/selling stocks with high liquidity.
Anyways, great thread!
I have tried many times over the last few years to incorporate volume studies, indicators, or filters into my trading, and have never come up with anything I could consistently use.
I have thought that the biggest reason for this would be that when you see a big volume move you don't know whether it is an opening or closing trade in the case of futures, or in the case of a stock or etf index, is high volume in a rally profit taking or new purchases or shorting the highs - in a sell off is it new shorts or is it short covering or is it buying at the lows?
I have thought that the biggest reason for this would be that when you see a big volume move you don't know whether it is an opening or closing trade in the case of futures, or in the case of a stock or etf index, is high volume in a rally profit taking or new purchases or shorting the highs - in a sell off is it new shorts or is it short covering or is it buying at the lows?
I would argue that this is my $.02 but in fact, I find this to be an absolute market truth. From my orientation, the market has a finite set of independent variables. Time being one with which 2 other variables can be measured against. Since this thread is about volume, I'll mention a particular truth that I have acquired some knowledge and experience with.
By considering volume, knowledge with respect to a money making context can be acquired by considering a few Q's. I develop Q's, and then ponder as a means to keep my mind busy on working on processing and building an answer/truth that I can validate and solidify with experience. It is typically a longer process than I would like (1-2 weeks) but I am always pleasantly surprised by the truth that I suddenly just know. Oddly enough, you do and always know when you know.
So why is volume "really" important. The simple answer is without it, price cannot change. As a result, the absolute value of it with respect to a second independent variable definitively results in the absolute volatility of any observation period.
I find the second variable that provides context for volume to be the bsize/asize. These threshold values in some sense can be thought of as hurdles, the market builds volume to jump over each and every hurdle "continually". What is variable is that the hurdle size is biased towards the market direction but that is probably a bit more sophisticated and OT. The desired result is that each hurdle jump marks a change in price (ie. a discrete incremental completion of a single money making event).
The truth I have regarded is that every change in price was precipitated by the accumulation of transactions whose aggregate volume contributed to either the bid volume exceeding the bid size or the ask volume exceeding the ask size. Whichever happens first results in a price change. The accumulation of sets of the above event results in the period's volatility. One can simply verify the above by tallying things so to speak. Just to avoid any confusion, if T&S is ticking at the same bid and ask, I regard this as the same price (ie. market depth - bid/ask price has not changed). Thus a change in price is an event in which the bid/ask level has changed. Just from the above single truth, a myriad of avenues of truths can be further pondered.
So where is the money making??? There are actually many, in one particular mechanical instance that I sometimes choose for continuous extrapolation, I simply continue in the direction of the bid volume ask volume disparity/ratio imbalance (a single boolean condition). I guess if I were a scalper (which I am not), this is the truth I would choose and use ad nauseam. As an example, it mechanically yielded 16.75 ticks yesterday per contract (2.68x the H-L). I don't ordinarily use the paradigm since I consider the paradigm to be a real POS (182 actions), "screwed" so to speak on the efficiency scale. It is only worth noting due to the scalability of the per contract extrapolation potential but even so, there is an inherent "do not disturb the market" limitation bounded by bid/ask sizes (ie. where slippage resides).
Nonetheless, if this sounds absurd, regard it as such and ignore it. Otherwise, read the above a few times, be encouraged by the yield that exists from the single above truth, and then consider doing some pondering with what you deam to be where you are stuck. It may take some time, but trust that your mind will sort out what is what (ie. what is truth, what is not), and just go from there. Presumably, it will be pleasantly surprising. There are many truths fortunately that permit profit extrapolation. Above is a single profit extrapolation instance of using volume. It has more than a few truthful extensions and monitoring it allows you to make decisions before price changes, hence it is leading in my truthful opinion. Any other thoughts/ponderances/truths...
Regards
M4K!
By considering volume, knowledge with respect to a money making context can be acquired by considering a few Q's. I develop Q's, and then ponder as a means to keep my mind busy on working on processing and building an answer/truth that I can validate and solidify with experience. It is typically a longer process than I would like (1-2 weeks) but I am always pleasantly surprised by the truth that I suddenly just know. Oddly enough, you do and always know when you know.
So why is volume "really" important. The simple answer is without it, price cannot change. As a result, the absolute value of it with respect to a second independent variable definitively results in the absolute volatility of any observation period.
I find the second variable that provides context for volume to be the bsize/asize. These threshold values in some sense can be thought of as hurdles, the market builds volume to jump over each and every hurdle "continually". What is variable is that the hurdle size is biased towards the market direction but that is probably a bit more sophisticated and OT. The desired result is that each hurdle jump marks a change in price (ie. a discrete incremental completion of a single money making event).
The truth I have regarded is that every change in price was precipitated by the accumulation of transactions whose aggregate volume contributed to either the bid volume exceeding the bid size or the ask volume exceeding the ask size. Whichever happens first results in a price change. The accumulation of sets of the above event results in the period's volatility. One can simply verify the above by tallying things so to speak. Just to avoid any confusion, if T&S is ticking at the same bid and ask, I regard this as the same price (ie. market depth - bid/ask price has not changed). Thus a change in price is an event in which the bid/ask level has changed. Just from the above single truth, a myriad of avenues of truths can be further pondered.
So where is the money making??? There are actually many, in one particular mechanical instance that I sometimes choose for continuous extrapolation, I simply continue in the direction of the bid volume ask volume disparity/ratio imbalance (a single boolean condition). I guess if I were a scalper (which I am not), this is the truth I would choose and use ad nauseam. As an example, it mechanically yielded 16.75 ticks yesterday per contract (2.68x the H-L). I don't ordinarily use the paradigm since I consider the paradigm to be a real POS (182 actions), "screwed" so to speak on the efficiency scale. It is only worth noting due to the scalability of the per contract extrapolation potential but even so, there is an inherent "do not disturb the market" limitation bounded by bid/ask sizes (ie. where slippage resides).
Nonetheless, if this sounds absurd, regard it as such and ignore it. Otherwise, read the above a few times, be encouraged by the yield that exists from the single above truth, and then consider doing some pondering with what you deam to be where you are stuck. It may take some time, but trust that your mind will sort out what is what (ie. what is truth, what is not), and just go from there. Presumably, it will be pleasantly surprising. There are many truths fortunately that permit profit extrapolation. Above is a single profit extrapolation instance of using volume. It has more than a few truthful extensions and monitoring it allows you to make decisions before price changes, hence it is leading in my truthful opinion. Any other thoughts/ponderances/truths...
Regards
M4K!
As the thread proceeds it is getting clearer and clearer where the reasoning of people for making money either falters or is not buttressed with a solid foundation of how the market works.
To cut to the chase and just lay it all out is a grand possibility. And a costly one to most readers (pondering is the advantage of reading).
I assume Babak, davelansing and sundown are still at inquiry for learning to make money. I certainly am.
Thier common mistunderstanding (this is a negative comment on the substance of their posts) is the basis of their future considerations. As such they are denigned further progress on their paths.
Were one to consider what volume among active traders represents, they and others could not draw the connclusions that they do.
This is NOT an arrogant post on what people do to think, it is simply a posting about how to get on track to make money by reasoning in the soundest possible ways.
Years ago in ET I posted a scene of how trading occurs. It could be considered a playout of what an informed trader (Larry Harris, Chapter 10) experiences knowledgeably in his trading ventures. I was accused of being incompletee and not finishing the illustration.
Rehashing this stuff is not productive; it is clear to me that my efforts at contributing were not allowable nor acceptable.
Therefore, I will stay within the bounds of reasoning here largely.
The focus of these guys is incorrect and they got there using CW. If and when they look more closely where they look they are going to see something quite to opposite of what they reason to be the case.
The trite comment about equal buyers and sellers is known to all but the talking head mentality.
I commented in this thread that the volumes posted for trading only represent the minority of the two sides of trading. Further, I stated that the record rarely show what side of the trading the posted volume conveys.
We all know two parties on opposite sides make a trade happen. This thread is about swing and position trading and as yet has now gone into the realm of the universal concepts related to volume for any condition, situation or circumstance.
All traders have views about their interests in a particular entity they wish to trade. Those on opposite sides of a trade share few common views. Those on one side or another, as a group, often have most of the elements of their views in common agreement. There are two groups and within each group common views prevail. The groups have largely opposite views.
If you can follow the above thoroughly, then you are ready to learn about making money.
Think carefully about one other element of this situation. All of these people are interested in trading the entity. The rest of the world is not.
As much as I want to I will not depart here into the essential ways money is made in markets. I will focus on the failure of reasoning of Babak, davelansing and sundown. Those I am not focussing on have other difficulties by en large so they get their turns later. (three exceptions so far).
By knowing and understanding the above, you are in a position to learn how volume works. Knowing how volume works, you can anticipate the market and maintain a high money velocity.
High money velocity in swing and position trading means 11.1% every 6.6 days for a period of 6 months and a 20 % increase after that initial period.
Volume is determined by one factor.
It is the extent of mutual agreement of the two distinct groups that make up the active interested traders of the entitiy. The views of the two groups differ widely on everything except the value of the entity. the value at which it is worth owning for new owners and the value at which it is worth selling for old owners.
Old owners and new owners have enterly different emotions realted to their places at the front of the lines they are quequed in according to their propensities to take actions.
So to trade well and make money, you must examine the opposite side of the coin on mutual agreement. You must examine how disagreement persists.
The extent of dissagreement and the counter the extend of agreement active informed participants in trading is like the dynamic balance of chemical reactions and the maths of this subject is the source of adroit management of making money.
Dry Up (DU) volume was invented and so was the 8 value scoring system to deal with dissagreement of traders in the marketplace.
All entities can be calibrated to measure this dissagreement. Having this calibration and knowing the answer to the three scoring questions:
1. Where in the cycle is the stock?
2. What is the next step of the cycle? and
3. How fast is the cycle moving?
So what affects the extent of the dissagreement. The minority group is the only group that has any power to change the extent of dissagreement.
How do you measure the size of this power? How can you affect it? How can anyone affect it? The algorithm thread is now waking up to the basis of how mechanical trading systems also misjudge the opportunity.
Imagine for a moment if I were to go to Vegas and run a desk at a Prop trading operation for 2 weeks. Of course I can't because you have to turn pro to do it...lol.... I cannot afford to be a pro.
By knowing how to detect the dissagreement coming to an end, you are able to always have the market "push" your entry for a swing trade. How you measure all this stuff has been put on an excel sheet in the MSN site.
The first step is to know down cold how the volume of an entity works as measured historically. Obviously you don't look at every possiblilty. You just simply select a universe that meets the "know down cold" specified criteria for volume.
So volume is the principal criteria for selecting a universe of tradable stocks.
People who do not know anything about volume cannot make high velocity money. I have always suggested that when you open a book go to the index and see if there are a lot of citations on volume. if not do not buy the book.
Obviously the 1000 pages of so of my past comments on volume are helpful in view of nothing in books so far.
One of my stock trading limitations is 100,000 shares of a stcok from those in my universe which is based upon vo9lume. My exits and entries on such a limitaions average 20 blocks in and 30 blocks out, all are determined by volume in the context of a volume criteria of not trading more than 10% of the cummulative trading on the day of entry or exit.
I will post in this thread occassionally. My posts are all based upon personal operating experience over nearly fifty years of trading. What you read in books you will notice were written relatively recently. Obviously, my money velocity shows that in 50 years I have come to own the world except for one thing. I lsot track of how many times I took my initial investment (300 bucks plus three years of 50% of salary) out of the market.
Get it straight as soon as possible that volume drives most of the big decisions you make for swing and position trading when you get to the point of learning how to make money with a high velocity. If your reasoning about things is like Babak, davelansing and sundance you will be prevented from learning about how the market works for you to make money.
I have made two posts here. Begin to start to compare thoughts on volume, if you do not get it straight you are not going to make money. It has nothing to do with competition it only has to do wih knowledge, skills and experience.
All of this is directly transferable to any trading fractal in any market.
To cut to the chase and just lay it all out is a grand possibility. And a costly one to most readers (pondering is the advantage of reading).
I assume Babak, davelansing and sundown are still at inquiry for learning to make money. I certainly am.
Thier common mistunderstanding (this is a negative comment on the substance of their posts) is the basis of their future considerations. As such they are denigned further progress on their paths.
Were one to consider what volume among active traders represents, they and others could not draw the connclusions that they do.
This is NOT an arrogant post on what people do to think, it is simply a posting about how to get on track to make money by reasoning in the soundest possible ways.
Years ago in ET I posted a scene of how trading occurs. It could be considered a playout of what an informed trader (Larry Harris, Chapter 10) experiences knowledgeably in his trading ventures. I was accused of being incompletee and not finishing the illustration.
Rehashing this stuff is not productive; it is clear to me that my efforts at contributing were not allowable nor acceptable.
Therefore, I will stay within the bounds of reasoning here largely.
The focus of these guys is incorrect and they got there using CW. If and when they look more closely where they look they are going to see something quite to opposite of what they reason to be the case.
The trite comment about equal buyers and sellers is known to all but the talking head mentality.
I commented in this thread that the volumes posted for trading only represent the minority of the two sides of trading. Further, I stated that the record rarely show what side of the trading the posted volume conveys.
We all know two parties on opposite sides make a trade happen. This thread is about swing and position trading and as yet has now gone into the realm of the universal concepts related to volume for any condition, situation or circumstance.
All traders have views about their interests in a particular entity they wish to trade. Those on opposite sides of a trade share few common views. Those on one side or another, as a group, often have most of the elements of their views in common agreement. There are two groups and within each group common views prevail. The groups have largely opposite views.
If you can follow the above thoroughly, then you are ready to learn about making money.
Think carefully about one other element of this situation. All of these people are interested in trading the entity. The rest of the world is not.
As much as I want to I will not depart here into the essential ways money is made in markets. I will focus on the failure of reasoning of Babak, davelansing and sundown. Those I am not focussing on have other difficulties by en large so they get their turns later. (three exceptions so far).
By knowing and understanding the above, you are in a position to learn how volume works. Knowing how volume works, you can anticipate the market and maintain a high money velocity.
High money velocity in swing and position trading means 11.1% every 6.6 days for a period of 6 months and a 20 % increase after that initial period.
Volume is determined by one factor.
It is the extent of mutual agreement of the two distinct groups that make up the active interested traders of the entitiy. The views of the two groups differ widely on everything except the value of the entity. the value at which it is worth owning for new owners and the value at which it is worth selling for old owners.
Old owners and new owners have enterly different emotions realted to their places at the front of the lines they are quequed in according to their propensities to take actions.
So to trade well and make money, you must examine the opposite side of the coin on mutual agreement. You must examine how disagreement persists.
The extent of dissagreement and the counter the extend of agreement active informed participants in trading is like the dynamic balance of chemical reactions and the maths of this subject is the source of adroit management of making money.
Dry Up (DU) volume was invented and so was the 8 value scoring system to deal with dissagreement of traders in the marketplace.
All entities can be calibrated to measure this dissagreement. Having this calibration and knowing the answer to the three scoring questions:
1. Where in the cycle is the stock?
2. What is the next step of the cycle? and
3. How fast is the cycle moving?
So what affects the extent of the dissagreement. The minority group is the only group that has any power to change the extent of dissagreement.
How do you measure the size of this power? How can you affect it? How can anyone affect it? The algorithm thread is now waking up to the basis of how mechanical trading systems also misjudge the opportunity.
Imagine for a moment if I were to go to Vegas and run a desk at a Prop trading operation for 2 weeks. Of course I can't because you have to turn pro to do it...lol.... I cannot afford to be a pro.
By knowing how to detect the dissagreement coming to an end, you are able to always have the market "push" your entry for a swing trade. How you measure all this stuff has been put on an excel sheet in the MSN site.
The first step is to know down cold how the volume of an entity works as measured historically. Obviously you don't look at every possiblilty. You just simply select a universe that meets the "know down cold" specified criteria for volume.
So volume is the principal criteria for selecting a universe of tradable stocks.
People who do not know anything about volume cannot make high velocity money. I have always suggested that when you open a book go to the index and see if there are a lot of citations on volume. if not do not buy the book.
Obviously the 1000 pages of so of my past comments on volume are helpful in view of nothing in books so far.
One of my stock trading limitations is 100,000 shares of a stcok from those in my universe which is based upon vo9lume. My exits and entries on such a limitaions average 20 blocks in and 30 blocks out, all are determined by volume in the context of a volume criteria of not trading more than 10% of the cummulative trading on the day of entry or exit.
I will post in this thread occassionally. My posts are all based upon personal operating experience over nearly fifty years of trading. What you read in books you will notice were written relatively recently. Obviously, my money velocity shows that in 50 years I have come to own the world except for one thing. I lsot track of how many times I took my initial investment (300 bucks plus three years of 50% of salary) out of the market.
Get it straight as soon as possible that volume drives most of the big decisions you make for swing and position trading when you get to the point of learning how to make money with a high velocity. If your reasoning about things is like Babak, davelansing and sundance you will be prevented from learning about how the market works for you to make money.
I have made two posts here. Begin to start to compare thoughts on volume, if you do not get it straight you are not going to make money. It has nothing to do with competition it only has to do wih knowledge, skills and experience.
All of this is directly transferable to any trading fractal in any market.
Great post Dave. In fact when I see low volume in an uptrend it's a short I want to stay away from. Why? With the plethora of hedge funds, options writers, pair traders, and just run of the mill short sellers, I see a low volume rally as often indicative that nothings for sale. Prices the MUST auction higher in order to attract longer time frame sellers.
Isn't the adage "never sell a quiet market" contrary to what we commonly hear about volume? In fact often the volume spike is the END of the move.
I have never found any relationship between volume and price, nor between liquidity and volatility. For prices to move it only takes ONE displaced buyer or seller to cause a market to auction higher or lower than pre-conceived value.
Isn't the adage "never sell a quiet market" contrary to what we commonly hear about volume? In fact often the volume spike is the END of the move.
I have never found any relationship between volume and price, nor between liquidity and volatility. For prices to move it only takes ONE displaced buyer or seller to cause a market to auction higher or lower than pre-conceived value.
Quote from davelansing2004:
Which is why I think this sort of thing is nonsense:
"The only fundamental factor that really counts in the stock market is The Law of Supply and Demand" - Richard D. Wyckoff
I agree with you Babak... doesn't volume represent the buying AND selling of the stock? How can that be a bullish or bearish signal? If price rises, even on LOW volume, doesn't that mean that the demand for the stock, at the current price level, was high enough to continue to push the bid and ask up? And if price falls, even on LOW volume, doesn't that mean that the demand for the stock at the current price level was so poor that the sellers had to continue to lower the ask in order to attract buyers? But an either case price can simply reverse itself on the next bar regardless of the "strength" or "weakness" of the volume underlying the current price bar.
Plus how do we know the reasons behind who is buying and who is selling?A buyer can be anyone wanting to enter the market long, or someone wanting to cover a short position. Likewise, a seller can be someone who wants to exit their long position, for whatever reason that may not be even related to the stock's current price movement, or someone who wants to enter with a short position.
Maybe I don't know what I don't know, but for every thread or article I've read about volume being sooo important for price movement, I can look at any given EOD chart and point out instances where price rose on low volume (and continued to rise without a significant change in it average volume), price rose on high volume (and continued to rise even on a lower average volume), price retraced on low volume (then resumed its upward trend), and price retraced on high volume (then resumed its upward trend).
does Ed Seykota, Marty Schwartz, Richard Dennis or any of the other "Market Wizards" use volume as an analytical tool to base their buy/sell decisions? I even have Livermore's book "How to trade in stocks" that he wrote shortly before his death in the 1940's and volume is not even mentioned except for the sake of buying/selling stocks with high liquidity.
Anyways, great thread!
Quote from MacroEvent:
volume is important as the ratio between the buy and sell side deviates from 50/50. it is the inequality of volume that i pay attention to.
Please enlighten me... how can the ratio of the buy and sell side deviate from 50/50? Are you talking about the absolute difference in the number of buyers vs. sellers? and if so, where can you get this information? Also, how do you differentiate between a transaction (=volume) when: (1) a "new" buyer buys 1000 shares from a seller who was long and now wants to exit for reason unrelated to the price of the stock, versus (2) the "new" buyer who buys his stock from a short seller?