Spot on Grob -- I don't think you're going to get anywhere here.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Is Vol. Really Important ?
- Thread starter Babak
- Start date
Spot on Grob -- I don't think you're going to get anywhere here.
The only 'way' I want 'it' done is for people to express themselves clearly and provide arguments and evidence to back up what they are saying. If you think this is unreasonable or somehow wrong, I don't know what to tell you. I guess we have different approaches. I try to write coherently and make sense and you write stuff like this:
8. The prior step is where the first derivative of volume goes from 0 or a persistant low constant to an accelerated value. That is, the volume velocity is seen to be increasing from a constant prior very low value caused by just a variety of market orders hitting.
I've tried very hard to understand what you are trying to say. I've given you a lot of my time and attention. I've read and re-read what you've written. I've thought about it and attempted to come up with possible things you could be trying to say. In the end what you write is either gobbledigook (what I don't understand) or it is incorrect (what I do understand). In the latter case I've provided a few examples above.
Finally you say that I want 'conventional wisdom' verified. In fact, if you had been paying any attention, you would clearly see that I'm trying to challenge conventional wisdom (when it comes to giving volume so much consideration).
[sigh]
If you want to be constructive, I suggest you look over what I've written in response to your posts (prior pages in this thread) and give me feedback. If not, you can just continue to post strings of words handcuffed together.
8. The prior step is where the first derivative of volume goes from 0 or a persistant low constant to an accelerated value. That is, the volume velocity is seen to be increasing from a constant prior very low value caused by just a variety of market orders hitting.
I've tried very hard to understand what you are trying to say. I've given you a lot of my time and attention. I've read and re-read what you've written. I've thought about it and attempted to come up with possible things you could be trying to say. In the end what you write is either gobbledigook (what I don't understand) or it is incorrect (what I do understand). In the latter case I've provided a few examples above.
Finally you say that I want 'conventional wisdom' verified. In fact, if you had been paying any attention, you would clearly see that I'm trying to challenge conventional wisdom (when it comes to giving volume so much consideration).
[sigh]
If you want to be constructive, I suggest you look over what I've written in response to your posts (prior pages in this thread) and give me feedback. If not, you can just continue to post strings of words handcuffed together.
Quote from Grob109:
This is your thread and you want it done your way and not in a manner that is otherwise. Conventional Wisdom is what you want verified in a manner that makes the verification work for your perceived needs.
Quote from Grob109:
Sorry I am plaguing you by my comments.
CW means conventional wisdom.
You are focused on high levels of trading volume where there is much agreement on price. I do not comment on "value" I am speaking only of price. You draw conventional conclusions about what is going on and it largely is a focus on recent history.
By focusing on what stops trading it is possible to get to the place of understanding how and when trading again resumes.
The cycle of making money involves volume at all times.
A specific sequence is:
1. Volume declines and price reaches a steady state value where there is no change or just a very slow drift downwardin price. There is no market action.
2. At this time and condition there is a disagreement on price between current holders and potential buyers. One group is smalller than the other. The smaller group is in control and the larger group has no control.
3. As time passes the current owners and the potential buyers who are most likely to transact go through reevaluation of their price consideration.
4. Market orders prevail in the small volume that is extant. These are coming from either side of the market.
5. Any new "informing" data can affect the dissagreement among the owners and potential buyers. Theories abound on how all market information is absorbed by the market. One can always see the size of the groups near to the trading price.
6. At this time when new information arrives, it is observable as the how the information affects the size of the nearby groups. No one need track the new information per se. What is important to do is observe the size of the groups near the trading price.
7. Long before the trading price changes it is very apparent that there is nothing that can stop the pending change coming up for the very reason that the smallest nearest group is dissolving to no size at all.
8. The prior step is where the first derivative of volume goes from 0 or a persistant low constant to an accelerated value. That is, the volume velocity is seen to be increasing from a constant prior very low value caused by just a variety of market orders hitting.
8. Once one such group has dissolved other same sided nearby groups will follow suit. Those left standing on the opposite side of the trade will "react" in some manner. The usual manner is known as "chasing price".
9. Those who follow lagging indicators of price will soon begin to observe the increased volume that is being recorded over time.
10. Static price dissagreement has come to an end and continuing reassessment by the groups of owners and potential buyers nearest to price becomes very dynamic. This is observable.
11. At some point a continuing rather fixed level of unbalance will be maintained. Like sand flowing through an hour glass. One side of the market continues to dissolve through trades and the other side is increasingly left standing rooted to the spot where the market moves away from them.
12. The rather fixed level of unbalance most often does have a periodic ebb and flow associated with it. This transient is continually reverting to the rather fixed level of unbalance for a relatively long time (many ebbs and flows). The market is said to be trending in a channel by this point.
It is unfortunate that most trading platforms and associated software only present one side of the story. With any price change a new never seen before of data drops into the picture having whatever size that appears. Watching the new size data appear is an important event. There is also the dynamic of size changes caused by arriving participants on both sides of the then traded market price.
Maybe if you look at the market and detect the items noted above by looking at what you are watching, you will no longer just see what you say you see. Maybe you will see something else instead or something just along side of your observations.
When I mentioned the opposite, I meant the opposite of volume building that you see. This opposite, on the other hand, is the dissolving of one side of the market and how it, precisely at that moment, causes price to shift when the smallest group on one side goes to zero.
What causes price to change is the advent of the absence of one side of the market auction. Lookiing at the volume of that dissolution is where the action is.
At some point, dissolution fails to go to completion and that is what signals the beginning of the end effects of trends. As a trend continues the smaller group size increases from group to group. This means that for market pace to continue steadily it takes more volume velocity to sustain a given trend pace. At some point the sustainable volume is not met and the pace and trend begin to arrive at the beginning of the end of the trend.
Since it is apparent that trends overlap, determining what represents endings and what represents beginnings is important to know. It is especially so with respect to lateral trends when and if they appear.
So I amplified on one of my points that you responded to. I'm sure my amplification is more muddling from a muddled mind, as you quickly learned to discern in your trading career.
I wasn't trying to explain to you that you are wrong. I simply stated that you are on the wrong track.
This is your thread and you want it done your way and not in a manner that is otherwise. Conventional Wisdom is what you want verified in a manner that makes the verification work for your perceived needs.
Ok, I know a lot of people complain about your language use, but I tried to get through all of this despite the fact that it read like an econ theory paper. No maths, no proof, just abstract concepts.
That said, I would greatly appreciate it if you could answer some questions on this post:
a) the first derivative of volume = volume velocity(transaction speed)?
b) "At this time when new information arrives, it is observable as the how the information affects the size of the nearby groups. No one need track the new information per se. What is important to do is observe the size of the groups near the trading price. Long before the trading price changes it is very apparent that there is nothing that can stop the pending change coming up for the very reason that the smallest nearest group is dissolving to no size at all."
- Is this in regards to only an EOD/swing perspective, or also short-term? So, let's say an uptrend is forming. When you say the smallest nearest group(assuming the current owners
- I know this cannot be known until after we see which group - bids or offers size is dissolving) is dissolving to no size at all, you mean that they are pulling their offers back(cancelling, amending to a new, more favorable price), right? So then, any suggestions how to filter for this type of activity on the ES, YM? At the same time(step 8), more and more traders start getting anxious, lifting whatever the nearest offers are(chasing price), and hence the volume velocity picks up? I think Nononsense or Nitro coined this the avalanche effect in another thread?
I use volume... yeah, usually breakouts that occur on low volume retrace right back to their prior range, but if you look at sharp climatic moves, you will miss out on $$ if you are waiting for volume to confirm the retrace move. One of my fav psychological plays is to go long on a stock that has fallen a great amount in a few days...each day worse than the prior with increasing volume. I go long if the last down day is huge with several times the ave volume. Now....this stock will move up easily with very little volume....simply because there is an imbalance in buyers/sellers....in other words it wont take much to move the stock up (path of least resistance). These plays have made me good $$$ in the past. 1 or 2 pt moves with little volume. On most other plays...i do not wait for volume to confirm....if you wait,......... well you know.
Quote from Babak:
This is for swing/position trading:
Like others, I've read in TA books how volume is an important indicator of 'fuel' for moves up or breakouts out of ranges. Some books even go as far as saying that if a rally doesn't have volume, it is suspect and should be avoided, if not shorted.
But over the years, I've seen so many examples of stocks levitating with a placid volume line underneath that I'm really beginning to wonder if volume is all that important. For brevity's sake I offer only two examples here:
GMP (Cdn - TSX)
TRID (NASDAQ)
I've sidestepped many stocks like these because they 'just don't have volume'. Are they the exception rather than the rule? Or am I onto something here?
I would really like to know what others think about this in general as well as those two examples specifically.
I see volume in the same light as the chicken and the egg. Sometimes price is leading, sometimes volume is leading.
Have not looked at volume in years, my system works fine without it.
Sherlock
Just two thoughts:
"Buy and Sell should always equal so volume increase does not matter"
One must first distiguishe price driven and order driven market;
In price driven market (US markets) Volume is clear an important signal associated to price as Market Makers have no choice but being on the other side of the trades and providing liquidity.
This is what they are paid for.
Second even in order driven Market, Information assymetry will lead some category of buyer to step in when crowd is selling and Volumes increasing (or vice versae).
Last intraday volume information can be totally blurred today by Algorithmic trading tools : These tools objective is to beat some predefined benchmark such as VWAP, for a buy order for example they willl generate sell and buy order during the day that will completely blur Volume and price signals and that will at the end of the day allow them to reach and potentially beat the benchmark. So the old signal may be in some instance totally polluted by these tools.
"Buy and Sell should always equal so volume increase does not matter"
One must first distiguishe price driven and order driven market;
In price driven market (US markets) Volume is clear an important signal associated to price as Market Makers have no choice but being on the other side of the trades and providing liquidity.
This is what they are paid for.
Second even in order driven Market, Information assymetry will lead some category of buyer to step in when crowd is selling and Volumes increasing (or vice versae).
Last intraday volume information can be totally blurred today by Algorithmic trading tools : These tools objective is to beat some predefined benchmark such as VWAP, for a buy order for example they willl generate sell and buy order during the day that will completely blur Volume and price signals and that will at the end of the day allow them to reach and potentially beat the benchmark. So the old signal may be in some instance totally polluted by these tools.
Quote from Babak:
This is for swing/position trading:
Like others, I've read in TA books how volume is an important indicator of 'fuel' for moves up or breakouts out of ranges. Some books even go as far as saying that if a rally doesn't have volume, it is suspect and should be avoided, if not shorted.
But over the years, I've seen so many examples of stocks levitating with a placid volume line underneath that I'm really beginning to wonder if volume is all that important. For brevity's sake I offer only two examples here:
GMP (Cdn - TSX)
TRID (NASDAQ)
I've sidestepped many stocks like these because they 'just don't have volume'. Are they the exception rather than the rule? Or am I onto something here?
I would really like to know what others think about this in general as well as those two examples specifically.
In my opinion, volume is not consistent. Volume varies from provider to provider. In Spyder's journal, for example, there have been instances where FRV was met on one provider, and not another. Volume is also calculated differently from exchange to exchange. Block trades can also distort the picture.
Price is the only consistent and absolute indicator.
Regards
Oddi
Quote from Grob109:
1. Volume declines and price reaches a steady state value where there is no change or just a very slow drift downwardin price.
The slow downward drift is something that has always fascinated me and one of the reasons that I lean heavily to the short side but am not clear on what causes it. I just think of it as gravity.
Quote from oddiduro:
In my opinion, volume is not consistent. Volume varies from provider to provider. In Spyder's journal, for example, there have been instances where FRV was met on one provider, and not another. Volume is also calculated differently from exchange to exchange. Block trades can also distort the picture.
Price is the only consistent and absolute indicator.
Regards
Oddi
Which is more likely to signal a reversal, a low volume hammer, or a high volume hammer? Both are white hammers, and both are reversing off clearly defined support.
Quote from lilduckling:
One of my fav psychological plays is to go long on a stock that has fallen a great amount in a few days...each day worse than the prior with increasing volume. I go long if the last down day is huge with several times the ave volume. Now....this stock will move up easily with very little volume....simply because there is an imbalance in buyers/sellers....in other words it wont take much to move the stock up (path of least resistance). These plays have made me good $$$ in the past.
This seems like a very dangerous play for individual stocks, even for mega-caps like IBM (see April). I'd think you'd need to go for alot more than just a few points rebound to make up for the few times whatever news is coming out has not yet been fully priced by the time you are in.
Setups like these are very susceptible to optical fallacy of cycling through chart histories and saying "I would have bought there (last down day with huge volume)" when often times the days prior to the final drop will visually qualify as a buy signal in terms of price and volume when that actual last day is taken out of the chart.