Price/Volume Relationship
- Thread starter bluedemon77
- Start date
Quote from dandxg:
KP- I appreciate the education, really.
"Wake Up". Cut me a little slack would you, I just started reading about this 2 weeks ago.
I have been checking out the webinars on tradeguider, although the one Gavin did about a week didn't impress me. He says he doesn't day trade, but conducts a demo on day trading the e-mini S an P, huh?
While he kept saying not to buy I pulled 4 points on the move down. :eek: That was not luck but a method of reading price action that I have been studying for the last few weeks.
I posted this elsewhere, so pardon if it's redundant. A fellow trader I know that has been trading about 20 years, and has spend over 100k on seminars and software said that now he only watches price and volume. That says alot to me.
I read KP's post and then I was glad I read yours before I posted a response. I couldn't have stated it better if your friend had been my friend.
I get a real kick when individuals use the term "Smart Money". reminds me of the term "Government Intelligence". Just because groups have a lot of money doesn't make what they do with it "Smart".
Time is important to me but not in the context of constant time interval bars. I use volume bars as others here suggest but use time to frame my market.
Break the market down into its time components and see what is happening and why during the various intervals.
For instance pre-market:
Overnight, Dax, Bond market
RTH:
1 minute, 5 minute, and 30 minutes
10 am econ reports
10:15am - lunch
blah ,blah, blah
If price moves toward a key reference area at a key time guess what institutional traders will be trading. Watch what they are doing!!!
Break the market down into its time components and see what is happening and why during the various intervals.
For instance pre-market:
Overnight, Dax, Bond market
RTH:
1 minute, 5 minute, and 30 minutes
10 am econ reports
10:15am - lunch
blah ,blah, blah
If price moves toward a key reference area at a key time guess what institutional traders will be trading. Watch what they are doing!!!
I have used minute chart as well as volume bar chart, so I can speak for both camps.
below I have the 6E chart for today. On the left is the very familiar 5 min chart, on the right is the 100 contracts volume bar chart. (i.e. each bar represents 100 contracts traded. At the 101th contract, the charting software will start a new bar.)
I have marked 2 time positions. Approximately from 7:25 to 8:10.
Here are my observations:
1. For the indicated time period, I can see the CVB takes up a lot more horizontal space than the minute chart. i.e. the CVB is giving more information than the 5 minute chart. You can see the back-and-forth tug of war between the buyers and sellers, while the 5 minute chart gives you less revealing overlapping bars.
During overnight periods, when the transactions are few, you will see the CVB takes up less horizontal space than a constant 5 min chart.
2. On the 5 min chart, the towering volume bars are very persuasive. The message is easy to understand, and the comparison to lower volume period is very graphic. On the CVB chart, it will take a bit training to read the price/volume velocity. Not that the message is not there, to the traditional chartist, this is a new language to master.
Which is better? Which is more useful?
The one that makes you the most money is the one you should use.
below I have the 6E chart for today. On the left is the very familiar 5 min chart, on the right is the 100 contracts volume bar chart. (i.e. each bar represents 100 contracts traded. At the 101th contract, the charting software will start a new bar.)
I have marked 2 time positions. Approximately from 7:25 to 8:10.
Here are my observations:
1. For the indicated time period, I can see the CVB takes up a lot more horizontal space than the minute chart. i.e. the CVB is giving more information than the 5 minute chart. You can see the back-and-forth tug of war between the buyers and sellers, while the 5 minute chart gives you less revealing overlapping bars.
During overnight periods, when the transactions are few, you will see the CVB takes up less horizontal space than a constant 5 min chart.
2. On the 5 min chart, the towering volume bars are very persuasive. The message is easy to understand, and the comparison to lower volume period is very graphic. On the CVB chart, it will take a bit training to read the price/volume velocity. Not that the message is not there, to the traditional chartist, this is a new language to master.
Which is better? Which is more useful?
The one that makes you the most money is the one you should use.
Out of curiousity, why did you select the 5min chart for comparison to the CVB chart?
Why not compare a 1min chart to the CVB chart?
My point, you may as well as picked the 60min chart for comparison to the CVB chart.
I agree with what you said...test the method on both types of charts to determine which is more profitable.
It's as simple as that.
Mark
KPC
I take it from the tone of your post, that you are correct and we are all dumb and should WAKE UP.
This is an extremely unfortunate attitude to have when you are trying to learn.
This post is for others who are following this thread and have become mislead, and for you it will come by way of default.
Your statement that CVB cannot show activity is incorrect as does not take into account the accumulated bid/ask spread.
This can be expressed as a ratio or in total contracts and it clearly highlights the exhaustion bars that you write so "informatively" about.
For those of you who do not understand me, then search for "market delta"
It is not the holy grail any more than MP or anything else for that matter, but it can help in your trading.
I might add KPC that if you ever care to read T&S clearly you will notice the so called "smart money" professionals trading the big lots appear to be no smarter than the small lot traders.
Now there is something to ponder upon over the weekend.
The markets may be chaos by nature but they are not random.
Therefore there is reason behind every event.
Whether you can see it or not is another matter.
Why did I choose 5 min for comparison? The same reason why I did not choose a 50 contract CVB to make the comparison.
most people who track both chart formats would compare them the following way:
5 min with 50 CVB
30 min with 400 CVB
You can match them any way you like. The Prof would use 49 CVB and 343 CVB. The key is, use whatever that makes you money.
The above example is a bit dramatic. The CVB chart is stretched way more than the 5 min chart. That is because of the dramatic increase in volume during the sample time. In a regular hohum trading session, you would want to tweak the resolutions to take up approximately the same space.
To read the CVB chart, you have to orient yourself away from the horizontal constant time scale.
edit: please note correct on 30min vs CVB resolution.
I've used both types of charts and my backtesting results, actual trading results are more profitable via the minute time charts.
However, that was a few years ago and I'm much more advanced in my price action only methodology now in comparison to the past.
Maybe as time permits I'll revisit the CVB chart or similar like charts.
Mark