This notion of comparing volume against an average on the basis of time-of-day is interesting and I can see the value in it. I often glance at a 60min chart during the day and examine relative volume level for the current bar versus the same bar over the last several days.
However, the problem with raw volume is that is only tells how much participation there is in the market during that period - it tells you nothing about the nature of the trades that took place. MD's Volume Breakdown solves that problem by distinguishing between buying and selling volume. I'm much more interested in the (im)balance between buyers and sellers in a particular bar as opposed to the absolute volume number. This net volume (or delta) if you like provides a much better read on how much buying/selling pressure there was, and what impact it had on price direction and momentum. In essence this is a means for assessing trade facilitation - a core MP concept - initiating versus resposive behaviour etc.
For example, if a net+1500 lots moved the ES +1.50 points on a particular bar and a net +1000 lots on the next bar move it +3.50 points then clearly the market facilitation on the long side is improving - arguing for a continuation of the up move.
Now the sharp witted among you have just clicked that "hey we can measure market facilitation" with MD - divide the net price change by the delta (net volume). Well I've been researching this idea and have concluded that the best approach is to measure trade facilitation from the long and short sides independently - which adds a layer of complexity but I think I've got it figured out. I'll e-mail Chad my idea sometime soon.
later,
bolter
However, the problem with raw volume is that is only tells how much participation there is in the market during that period - it tells you nothing about the nature of the trades that took place. MD's Volume Breakdown solves that problem by distinguishing between buying and selling volume. I'm much more interested in the (im)balance between buyers and sellers in a particular bar as opposed to the absolute volume number. This net volume (or delta) if you like provides a much better read on how much buying/selling pressure there was, and what impact it had on price direction and momentum. In essence this is a means for assessing trade facilitation - a core MP concept - initiating versus resposive behaviour etc.
For example, if a net+1500 lots moved the ES +1.50 points on a particular bar and a net +1000 lots on the next bar move it +3.50 points then clearly the market facilitation on the long side is improving - arguing for a continuation of the up move.
Now the sharp witted among you have just clicked that "hey we can measure market facilitation" with MD - divide the net price change by the delta (net volume). Well I've been researching this idea and have concluded that the best approach is to measure trade facilitation from the long and short sides independently - which adds a layer of complexity but I think I've got it figured out. I'll e-mail Chad my idea sometime soon.
later,
bolter
