Let's play "teach IronFist how to use volume in his trading" (lots of pics)

Is volume histogram useful in your trading?

  • Yes - it is useful to help predict price action

    Votes: 57 60.6%

  • No - it's as useful as random distribution

    Votes: 37 39.4%
  • Total voters
    94
Volume on an intraday chart is a very unreliable metric because it is not possible to determine what the actual volume is. To prove my point open a 1-minute bar chart before the market opens and load a fairly active symbol e.g. SPY. DO NOT touch that chart or change the symbol for the entire trading session (9:30AM to 4:00PM EST). After the market has closed (wait until about 6:30 PM EST) open a new 1-minute bar chart but load it with the same symbol. Now for each chart export the bar price and volume values to Excel. You should have 390 rows in each Excel worksheet. Perform a simple comparison between the two worksheets and you will find that the volume values for each bar can differ by several hundred percent or more. At the end of the day, the cumulative volume for each time chart can often differ by several hundred percent. There are many reasons why this happens but how can one use volume as a reliable measure of anything when the difference between real-time data and the corrected historical data can often be several hundred percent? For a real eye opener load the same chart a couple of days later and compare it to the real-time values that were saved in the Excel worksheets. On some days the values are not that different but on other days they can have extreme variations.

Regards and Good Luck,

Slave2Market
 
Quote from Slave2Market:

Volume on an intraday chart is a very unreliable metric because it is not possible to determine what the actual volume is. To prove my point open a 1-minute bar chart before the market opens and load a fairly active symbol e.g. SPY. DO NOT touch that chart or change the symbol for the entire trading session (9:30AM to 4:00PM EST). After the market has closed (wait until about 6:30 PM EST) open a new 1-minute bar chart but load it with the same symbol. Now for each chart export the bar price and volume values to Excel. You should have 390 rows in each Excel worksheet. Perform a simple comparison between the two worksheets and you will find that the volume values for each bar can differ by several hundred percent or more. At the end of the day, the cumulative volume for each time chart can often differ by several hundred percent. There are many reasons why this happens but how can one use volume as a reliable measure of anything when the difference between real-time data and the corrected historical data can often be several hundred percent? For a real eye opener load the same chart a couple of days later and compare it to the real-time values that were saved in the Excel worksheets. On some days the values are not that different but on other days they can have extreme variations.

Regards and Good Luck,

Slave2Market
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Isn't what you're describing simply a matter of scaling on your charts?

Couldn't you fix what you're describing simply by fixing your chart's axis to a set value that you'd expect to see?
 
Quote from IronFist:

I do not see volume as anything other than a random distribution histogram.
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Without correct Bar Coloration, you can expect to never see what Volume tells you. Start with a 5 minute chart of the ES and color the Price and Volume Bars in such a fashion that areas of change stand out. Forget the software default settings. They don't allow for accuracy.

- Spydertrader
 
Quote from IronFist:

Premise: I do not see volume as anything other than a random distribution histogram.
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The only time I've ever found volume to be helpful is to confirm capitulation or euphoria on daily or weekly charts.

Intraday it is useless when trading indexes.

An intraday volume study may seem to leave tracks in hindsight, but IMO as no predictive value.
 
Quote from forrestang:

Isn't what you're describing simply a matter of scaling on your charts?

Couldn't you fix what you're describing simply by fixing your chart's axis to a set value that you'd expect to see?
More...
No. Please perform the exercise that I outlined and it will become obvious that volume on an intraday time chart is unreliable and almost worthless as an indicator.
 
Quote from Slave2Market:

No. Please perform the exercise that I outlined and it will become obvious that volume on an intraday time chart is unreliable and almost worthless as an indicator.
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:D :D :D :D D
 
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