Price and Volume

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. . . the experience of the past few years has emphasized the value of disregarding all considerations except those which relate to price movement, volume and time. If one is endeavoring to realize profits from the principal swings in prices of stocks, it is my opinion that he should disregard fundamental as well as corporate statistics relating to the stocks in which he is trading, stick closely to a study of the action of the market and become deaf and blind to everything else.

-- Richard D. Wyckoff
 
In this business, you never stop learning. Let me put it another way. If you stop learning, you're on your way to going out of business. Wall Street is a tough teacher but also a good teacher. If you have any weakness -- arrogance, laziness, stinginess, cowardice, procrastination -- the market will zero in on that weakness and make you pay dearly.

-- Richard Russell
 
DB,

When rolling along in real time, what is it that
distinguishes a potential buying climax (or
selling climax) from an actual one? Is it by
seeing what the next bar or two does?

thanks,
jd
 
A "climax" has to be preceded by something out of the ordinary. The trend will rotate sharply, the bars will be marubozus or close to, and at some point, the volume will expand. If price hits S/R at this point, you've probably got climactic trading going on. If not, it's probably just preliminary.

On the other hand, S/R isn't always in the expected place (if it were, this would be a lot easier). Sometimes price just decides to reverse, and it's difficult to determine the climactic part of the move while you're in it. But this gets into strategy and how to play reversals.
 
Quote from Uni:

do you step aside in the afternoon zzz zone because you can't confirm price action as easily due to tepid volume, or do you do creep too?
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Trading S/R with tepid volume is not impossible. But whether one trades it or not depends on what he wants out of it. After the morning's trading, tepid volume is far more likely to lead to unproductive drift, at least in the futures, though if one were scalping, this might not matter.

With this approach, entries tend to be more successful at those points or levels at which one can expect participation. These include the PDH, PDL and PDC, as well as trend breaks and reversals, in addition to tests of the opening highs and lows, i.e., anyplace where traders can expect to find some action. Once in, considerations such as tepid volume or creep are seconday, or even immaterial, unless one's exit tactics somehow depend on volume cues.
 
In order for the trend in being to change direction there has to be a change in the influences that caused the trend in the first place. Those who can detect this change before it occurs and becomes generally evident are gifted with powers of analysis and foresight of the very highest order.

For most of us detecting the change after it has occurred but before it has proceeded too far is still a very profitable and to many an attainable goal. I think on the average it is better for most of us to be late and sure than to be early and doubtful. Many, who thought that various levels on the way down after 1929 to 1932 were buying or turning points [Note: ditto the Great Rally Fakeout of 2000], lost the most. The late buyer who came in after 1933 and up quite a bit from the bottom did quite all right.

-- Gerald Loeb
 
Quote from El Cazador:

I have one question: Why do you feel volume is not reliable on a one minute basis? There would seem to be some tactical advantage in looking for a sharp volume increase on a short term basis. Especially after a big red Bozo. Comments?
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With any given bar interval, part of the volume will belong to the previous bar and part to the subsequent bar. With longer bar intervals, this peculiarity is inconsequential. However, when you get down to 1m bars, it can make bar by bar analysis generally pointless.

I watch the bars form in real time, so the exact placement of the volume with relation to chart time is unimportant. What I see is the flow back and forth between buyers and sellers, and that's what's important to me. Even an hourly bar will convey that information as it rises and falls.

Unfortunately, you have to be there to see it. When reviewing charts, or when backtesting ideas for entry, exit, whatever, all that volume information is locked into the chart. It doesn't move. Therefore, it's impossible to know whether a given spike belongs to a given bar, or whether part of it belongs to adjacent bars. That's one reason why bar by bar analysis is not necessarily productive if done out of context (ditto with "candle pattern" analysis). It's also why I don't provide interpretations of charts here that I haven't seem form in real time.
 
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