Quote from illiquid:
Changes in volume evoke the same rear-view after-the-fact reasoning as changes in price; when all is said and done, it's last price which ultimately determines what "evidence" changes in volume actually "yield" (a blow-off top, a paradigm shift, a sudden acquistion rumor -- what differentiates price/volume action amongst these?).
But usually by the time a conclusion can be reached, you either have already made your profit by anticipating the volume/price change before it happens, or have missed the moved altogether. In either case, like with most technical indicators, the conclusion drawn will have very little to do with profits extracted from the given move. Accumulation, distribution, exhaustion, etc -- these will be 'obvious' volume clues confirmed only following price action. So for eod/swing trading where one is not considering pace or velocity at all but just cumulative numbers, past volume is equally important/(non)predicitve as past price.
Fwiw, I trade currency and index futures where the significance of volume is much more opaque than in the realm of individual equities.
You introduce in this thread another layer of consideration for volume in swing and position trading.
Swing and position trading is done either with just EOD data or by people who actuallt monitor the market during the day. The difference in yield of profits is significant.
Most data retreaval for both methods revolves around EOD data as you suggest. Determining the universe to trade can best be done this way. About 5 seconds a day is required and the cost is about 10 bucks a month. Daily updates on the universe dictate the the entries and exits the following am after open.
If a person position or swing trades and also monitored during the day (As would any intraday trader who had to lay off intraday profits into position trading portfolios (see Gary Smith, for example)) then the monitoring is very useful for exacting more profits.
In three groups below I list 9 leading indicators of price movement that allow a person to get ready to do a profit cycle. The EOD only ones are in group X. the monitoring ones are found in groups Y and Z.
X Advance warnings (1 to 2 days)
1. CANSLIM sort
2. TC2000 maths (the seven equations)
3. Stochasitcs (modified defaults)
4. RSI (dip) with volume MACD
Y first intraday advanced warnings (30 minutes plus)
1. FRV pro rata just after open
2. Formation analysis
Z Last chance before the initial price movement (7 to 15 min ahead of move)
1. MACD related signals around X overs (proper defaults required)
2. Trend analysis
3. DU xover
So for intraday volume considerations the signal sequence is X-4, Y-1 and Z-3.
For evening analysis types who do EOD only the same signals are seen the evening of the intraday monitoring entry.
Before web stuff my SEC citations were based upon real time pro rata analysis of live real time data feeds. It gives the appearance of insider trading since entries are just before price moves and are based upon volume assessments relative to a calibrated standard. (See a couple of posts here relative to calibrating the prior market volume as a guide to determining whether the impending BO from the trough is a viable BO and after BO whether or not the BO is sustainable) as well.
Illiquid advocates that all surmizes about the milieu of momitoring signals relative to trading actions and particularly profit taking are related to rear view vision.
I addressed entries only. Three of the list have different names for exits and they are there too.
Illiquid is looking at differing flags than I am and his set is a lagging set instead of a leading set.
That is one of the points of Babak's inquiry. And it is also the point of my prior posts in here. What a person is monitoring and what the person's belief system is regarding the truths that he has come to know, is a major determinent in how well position and swing trading goes.
To do these trades it does not require monitoring but if you do monitor you can have the pleasure of being "pushed" by the herdwith good entries. similarly you can determine,effectively when the forces driving price are exhausted in advance of reaching that point by using leading indicators of price.
Again there is no I'm right and you are wrong stuff in the space.
anyone can add sets of additional signals to the list above. I use a lot of differing approaches, comparably speaking. Here volume is on the table and it is a powerful and different variable than price.
