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Price/Volume Relationship
- Thread starter bluedemon77
- Start date
bluedemon77
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Quote from ProfLogic:
As long as you view any market using minute charts you will never "SEE" a relationship.
Prof, I've looked at various time frames and securities and I've never been able to observe a consistent CAUSAL relationship where changes in volume result in price changes, which some people are arguing exists. Obviously there is a relationship and that goes without saying. All of this discussion has been interesting, but I guess so far the response to my question is no, people have not investigated this on a scientific basis, relying on anecdotal observations on which to base their conclusions. I'm not saying anybody's wrong, just that I'm not satisfied with that for my own strategy.
If somebody will give me a security and time frame where you think this relationship is especially pronounced, I'll do a correlation at several time lags and see what it produces. Then I'll post the results. I just don't want to re-invent the wheel if somebody already did this kind of analysis.
Quote from bluedemon77:
Prof, I've looked at various time frames and securities and I've never been able to observe a consistent CAUSAL relationship where changes in volume result in price changes, which some people are arguing exists. Obviously there is a relationship and that goes without saying. All of this discussion has been interesting, but I guess so far the response to my question is no, people have not investigated this on a scientific basis, relying on anecdotal observations on which to base their conclusions. I'm not saying anybody's wrong, just that I'm not satisfied with that for my own strategy.
If somebody will give me a security and time frame where you think this relationship is especially pronounced, I'll do a correlation at several time lags and see what it produces. Then I'll post the results. I just don't want to re-invent the wheel if somebody already did this kind of analysis.
It isn't that price changes as a result of volume, in it of itself, is important, it is the clarity of how price creates oscillations at Resistance and Support.
The easiest way to explain is visually. Pick something; EMini S&P, DOW, Russell, eGrain, Hogs, Euro FX and then give me a time frame, either; intraday, swing position or long term and I will post a chart you can then compare visually the same symbol to your time increment.
I think at extremes volume does lead price. Volume means extinguishing of demand or supply and price is ready for the next move. Especially when volume now is higher than previous period and price makes a dramatic move, the momentum has higher probability of continuing that move (distribution/accumulation days). I follow such an approach whenever possible in my trading http://lauristonletter.blogspot.com/
Quote from ProfLogic:
It isn't that price changes as a result of volume, in it of itself, is important, it is the clarity of how price creates oscillations at Resistance and Support.
The easiest way to explain is visually. Pick something; EMini S&P, DOW, Russell, eGrain, Hogs, Euro FX and then give me a time frame, either; intraday, swing position or long term and I will post a chart you can then compare visually the same symbol to your time increment.
Could you post a picture of todays 3 min ES chart and explain exactly what you mean? particularly today from 11:45-12:45 as well as 13:15 - 14:00
I was trying to recognize lower volume bars, along with lower lows looking for reversals.
Thanks
Quote from jack411:
Could you post a picture of todays 3 min ES chart and explain exactly what you mean? particularly today from 11:45-12:45 as well as 13:15 - 14:00
I was trying to recognize lower volume bars, along with lower lows looking for reversals.
Thanks
There is no such thing as a specific minute chart for volume bars. Each bar is a specific number of contracts traded. In the case of the posted chart, it is a 343 Volume Bar Chart. The times are marked and the time line is at the bottom for comparison of time.
I don't use minute charts because the markets aren't traded based on time they are based on price and read in volume.
Hope this helps.
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Quote from ProfLogic:
There is no such thing as a specific minute chart for volume bars. Each bar is a specific number of contracts traded. In the case of the posted chart, it is a 343 Volume Bar Chart. The times are marked and the time line is at the bottom for comparison of time.
I don't use minute charts because the markets aren't traded based on time they are based on price and read in volume.
Hope this helps.
I meant something like the 3 min bar chart for the ES, along with a simple volume study at the bottom. I thought we were talking about how volume correlates to price movement?? Such as declining volume with lower lows being made in price, means a reversal of price going back up is soon to come.
Thanks anyways for the post though. Maybe I misunderstood the thread's topic.
bluedemon77
Guest
Quote from ProfLogic:
There is no such thing as a specific minute chart for volume bars. Each bar is a specific number of contracts traded. In the case of the posted chart, it is a 343 Volume Bar Chart. The times are marked and the time line is at the bottom for comparison of time.
I don't use minute charts because the markets aren't traded based on time they are based on price and read in volume.
Hope this helps.
This is probably a stupid question, but if each bar represents 343 contracts, how do you interpret the graph? I mean how do you make decisions with it and what advantage does it give you versus a standard graph with a uniform time scale? What is the indicator at the bottom?
Quote from bluedemon77:
This is probably a stupid question, but if each bar represents 343 contracts, how do you interpret the graph? I mean how do you make decisions with it and what advantage does it give you versus a standard graph with a uniform time scale? What is the indicator at the bottom?
Time is a variable that doesn't exist on a Volume Bar Chart (VBC). A VBC is a perfect view of price movement uncorrupted by any and all variables in the market. Since it is so clean the oscillations are smooth, methodical and easy to read. The advantage is you are looking at pure price movement. The markets aren't traded in specific time increments (those are major variables). The markets are traded in share or contract increments and those are represented in the markets as price instruments.
A detailed description on how to read and use VCB's is in this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=80582&highlight=Odd+Tick
The chart I posted is simply an entry and exit version of the Trend Chart for the eMini S&P. I'm posting the Trend chart for today. All of the labels; price, oscillation outcomes, trend lines and trend designation are all created in real-time by my computer program. The written labels are added by me showing the trade set-ups and execution points that were created today from this chart.
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Quote from jack411:
I meant something like the 3 min bar chart for the ES, along with a simple volume study at the bottom. I thought we were talking about how volume correlates to price movement?? Such as declining volume with lower lows being made in price, means a reversal of price going back up is soon to come.
Thanks anyways for the post though. Maybe I misunderstood the thread's topic.
Prof is offering you an understanding that purely links P and V.
Go to where he is for a moment and allow yourself to consider understanding P and V and their relationship.