Is volume analysis useful in index futures?

[tommcginnis]

Volume is dangerous (as mentioned above) when activity is light: *anyone's* agenda can turn the market.
That said, the story told with volume in the ES today is more plain than I've seen it in a while -- which, with everyone having a non-market (read: Vacation Weekend) agenda -- is almost surprising. Still, the following scenario(s) jump out rather plainly...

The yellow circle appears as a cusp point: will the selling volume (of the last 10-15 minutes) continue the ES slide through the day? Or will the "11:30 Euro-turn" prevail, and with Europeans (down more than U.S.) now out of the U.S. trades, will we (the ES) turn back upwards to end the day flat-or-slightly-up?

Dunno! But what the situation would drive me to do right now is, SIT ON MY HANDS. At a cusp, I don't want to be long *or* short. I want to be out.

Anywho -- in pricing, I tune my candle-"view" to have long tails (wicks) correspond to market turns. When these wicks correspond to volume surges, that shouts loudly of the actors' agendas. It's those agendas I need to watch -- it's about the only tells available, with floor trading closed.

 

[Sprout]

Or what they need to see, to hopefully make sense of a nonsensical situation. So what is logical for the Price Volume trader?

Statement: Price alone is useless without volume, as is volume without price.

Is the above statement logical?

Structure the statement with "IF's", "Then's" will allow one to test the logical operators of True, False, AND, OR.

Via testing, and using the market's granularity one can work out the function of price as a derivative of volume - volume being defined as the quantity and quality of transactions and the ratio of participants to size that supply vs demand liquidity in any given timescale.

 

[Sprout]

Volume is dangerous (as mentioned above) when activity is light: *anyone's* agenda can turn the market.
That said, the story told with volume in the ES today is more plain than I've seen it in a while -- which, with everyone having a non-market (read: Vacation Weekend) agenda -- is almost surprising. Still, the following scenario(s) jump out rather plainly...

View attachment 180566

The yellow circle appears as a cusp point: will the selling volume (of the last 10-15 minutes) continue the ES slide through the day? Or will the "11:30 Euro-turn" prevail, and with Europeans (down more than U.S.) now out of the U.S. trades, will we (the ES) turn back upwards to end the day flat-or-slightly-up?

Dunno! But what the situation would drive me to do right now is, SIT ON MY HANDS. At a cusp, I don't want to be long *or* short. I want to be out.

Anywho -- in pricing, I tune my candle-"view" to have long tails (wicks) correspond to market turns. When these wicks correspond to volume surges, that shouts loudly of the actors' agendas. It's those agendas I need to watch -- it's about the only tells available, with floor trading closed.

Although my interpretations are different, I respect yours and am delighted to consider the close of the European markets nor the participants whom consider such things (which I have not done up until now.)

 

[tortoise]

Am I the only one here who swears by time-based charts? Price and time. Those are the twin pillars on which all else rests.

Setting aside the lofty (empty) rhetoric, my preference for time-based charts stems from the fact that, in this algo-driven market, the one universal denominator is time. That’s the page I want to be on.

 

[Gotcha]

Volume is dangerous (as mentioned above) when activity is light: *anyone's* agenda can turn the market.
That said, the story told with volume in the ES today is more plain than I've seen it in a while -- which, with everyone having a non-market (read: Vacation Weekend) agenda -- is almost surprising. Still, the following scenario(s) jump out rather plainly...

View attachment 180566

The yellow circle appears as a cusp point: will the selling volume (of the last 10-15 minutes) continue the ES slide through the day? Or will the "11:30 Euro-turn" prevail, and with Europeans (down more than U.S.) now out of the U.S. trades, will we (the ES) turn back upwards to end the day flat-or-slightly-up?

Dunno! But what the situation would drive me to do right now is, SIT ON MY HANDS. At a cusp, I don't want to be long *or* short. I want to be out.

Anywho -- in pricing, I tune my candle-"view" to have long tails (wicks) correspond to market turns. When these wicks correspond to volume surges, that shouts loudly of the actors' agendas. It's those agendas I need to watch -- it's about the only tells available, with floor trading closed.

I do agree that the day before the weekend isn't the best way to illustrate something, but I fail to see what you are trying to show. (not too surprising because to be honest, I find it hard to understand what you say sometimes given the way you write)

But what stands out for me is that you don't make any mention of trades. You mention at one point "as soon as the volume stops, so does the price decline". Can we then infer you to mean that you go long? I hardly want to put words in your mouth, but the volume analysis, if it is to be useful, needs to provide a trade. If you want to see when selling stops, this mean that you also need to wait for one more bar to finish, in order to see the volume for that bar in fact is lower than the next bar, and then more often than not, you might have already missed the turn, if in fact there is a turn.

Case in point, your last example. Big down red bar along with very high volume around 11:10. Then the next bar is a green bar, lower volume... do we go long since the selling stopped? At 11:34, which is off your chart, the ES made a lower low since selling wasn't in fact over.

So my point is that your example doesn't really show anything when the name of the game is to put on a trade and make money.

 

[tommcginnis]

I do agree that the day before the weekend isn't the best way to illustrate something, ...

A year ago, when I started to make my 10 year ET membership a habit, you showed yourself to be classless. Haven't seen you since. That's nice. But, 'it's a free country" so, go where you wish. But, for me, simply, F.O.A.D., or, .

(D'ya get that??)

 

[comagnum]

I do find volume an important element of my trading for certain conditions, more so with equities than futures due to the fixed number of shares (float). Looking at the equity charts gives me a better read on an index at times. I know some futures traders that do very well that don't look at volume at all.

Indexes are just averages - you often see changes in the equities before you see it on the index. I consider it an edge to keep up with the more liquid stocks in the indexes. I have caught plenty of big turns and continuations this way when the Index lagged the developing strength or weakness developing under the hood.

The indexes move like the last box car on the train - the box cars up front are the leadership stocks, they always get there first. Volume leads price - at the big reversals and continuations volume is everything - it is the wind in the sail.

 

[zdreg]

Keep It Simple Stupid. It's my philosophy.. "If I can't explain the trade in 10 words or less, I've probably got it wrong." You know, Occam's razor kind of thing...

also winston churchill upon receiving request from his Generals for armaments to win the war, receive a voluminous stack of paper told them to put the requests on one sheet of paper.

 

[algofy]

Trading is just not that simple

Maybe LL has already hit the famous line but if not....drumroll please. Trading is part art and part science.

 

[Jackpot]

Hello. I found this picture off a different trade site during a previous selloff during 11/29. Does this count as volume confirmation? A lot of buyers and sellers would generate a much volume, but without price change. The candle after the green bar, the red doji, had the highest volume not counting the early part of the day, where volume is usually the highest. It was also very close to the day's low.