Price/Volume Relationship

Quote from ProfLogic:

Today I'm WARM and relaxing for a change. Does that count?
More...

We are scheduled to go to 80 here today. I put the pool on solar yesterday to start to get it up to temp this week.

The weather map looks kinda cool up north and east.

Only plants that grew through here was the bok choi.
 
And now for something completely different...

"There is bidirectional causality between volume and prices. The price-volume relationship is asymmetric, in the sense that negative price and volume changes have stronger effects (on each other) than positive changes."

Reference: Moosa, Imad A.(2003) , et al, TESTING FOR TEMPORAL ASYMMETRY
IN THE PRICE-VOLUME RELATIONSHIP, Bulletin of Economic Research 55:4, 2003, 0307–3378

"Trading volume tends to adjust to price in the long run and price tends to lead trading volume in the short run. Price volatility is a determinant of both trading volume and volatility of trading volume."

Reference: Malliaris, A.G. and Urrutia, Jorge (Feb, 1998) VOLUME AND PRICE RELATIONSHIPS: HYPOTHESES AND TESTING FOR AGRICULTURAL FUTURES. Journal of Futures Markets; Vol. 18 Issue 1, p53-72, 20p, 7 charts

"Lead-lag relationships were found in about 15% of the usable data sets. Price variability leads volume slightly more frequently than volume leads price variability. Hence, a small number of lead-lag relationships do exist between price variability
and volume, and the results are invariant with respect to the price variability measure or volume measure employed. The number of times volume leads price variability and vice-versa are nearly identical. "

Reference: Garcia, Philip, Leuthold, Raymond M. Zapata, Hector. Lead-Lag Relationships between Trading Volume and Price Variability: New Evidence. Journal of Futures Markets; Spring86, Vol. 6 Issue 1, p1-10, 10p, 1 chart
 
Quote from bluedemon77:

A lot of people adamantly feel that there is a strong relationship between price and volume and this hypothesis makes sense. However, I've never observed this, casually looking at charts and I wonder if there has been any empirical evidence presented to support this hypothesis.

For example, in the attached 5 minute chart for ES last week, I highlighted the peaks in average volume and they do not appear to display any pattern that is discernable. The peak shows up when the price is peaking and bottoming, which you would expect, but also when it's moving up or down near points of resistance.

In addition, I analyzed ES quotes for the past 3 months and here is what I found. I divided the data into four quartiles of volume and it produced the following means:

Avg Vol. Avg Close Avg C-O

1816 1426.40 2.9%

5531 1424.65 3.2%

10423 1421.54 2.7%

34908 1419.50 -1.6%

From this it would appear that when the volume is greatest, the price tends to drop on that bar and shows up when the prices are lowest, contrary to some of the opinions expressed on ET.

I realize this is a limited sample, yada, yada, yada. But my question is has anybody presented any data to support the relationship between price and volume, or is this something that just "feels right?"
More...
===============
Right, its limited, however your headline gets it right anyway;
its 1]price 2]secondary volume.

William O Neil proved its helpful;
on stocks ,above average daily volume helps.
However very many emini opportrunities happen on below average volume. Having tested price-volume much, found other things more helpful

Even though i have volume on stock charts;
ES charts, simply click on a daily [all data]ESH7. chart today And while better volume helps in fills in this ES chart case ! As of right now most of the candles are on well below average volume:cool: meaning volume so small it looks like dots, better volume grows into visible bars

Same ESH7 chart, as of now;
most of the trends happen on barely measurable daily volume.

And in liquid markets tops /bottoms are almost always areas;
============================================
not a precise point made by ''smart money'' Certainly not against smart money, its better than dumb money.

Joey Enough wrote the book on dumb money:D
 
no apologies here lamont sanford....db is about as helpful as pinkeye, by the way.......he was then he is now....i never looked for spoon feeding from anyone on the forums....and by the way, 100 % again today NQ. I was interested in stuff back then but let me assure you, db only drew trendlines on the 5 min and touted volume as the perfect answer with it..you are not smart enough to realize he was drawing channels also.... ..Nobody has a more robust, accurate, and simpler mechanical system than porgie, unless there is a higher rate than 100%....no curve fitting and totally robust...........it came from my spoon...not found while slumming on these ignorant forums.db's or anyone else's rhetorical smart aleck answers .... ..i play these forums for grins only...and you 2 are like playing a fiddle...not hard at all.........Mr. Hershey and Mr. Marcus don't belong on these garbage forums...they are both in a unique and fine class of their own........... the rest of us deserve what we get out of it...weak entertainment.......
 
Quote from porge:

no apologies here lamont sanford....db is about as helpful as pinkeye, by the way
More...

Db was voted Most Helpful Member by t2w members in 2005 and Most Valuable Contributor in 2006.

Would you like a little whine with those sour grapes? :)

LC
 
Quote from Lamont_C:

Db was voted Most Helpful Member by t2w members in 2005 and Most Valuable Contributor in 2006.

Would you like a little whine with those sour grapes? :)

LC
More...

Hi Lamont,

There was a mentioning of a very good thread by DB. Would you happen to know which one it was?

Thanks,
redduke
 
Quote from bluedemon77:

And now for something completely different...

"Trading volume tends to adjust to price in the long run and price tends to lead trading volume in the short run. Price volatility is a determinant of both trading volume and volatility of trading volume."

Reference: Malliaris, A.G. and Urrutia, Jorge (Feb, 1998) VOLUME AND PRICE RELATIONSHIPS: HYPOTHESES AND TESTING FOR AGRICULTURAL FUTURES. Journal of Futures Markets; Vol. 18 Issue 1, p53-72, 20p, 7 charts
More...
Volume Spread Analysis user Joel Pozen, formerly of tradeguider.com and now with tradingmentor.net and who studied under both Tom Williams and Richard Ney, echoes this sentiment.

He says, increased buying (volume) does not lead to rising prices. Rather, rising prices lead to increased buying (volume). This is why retail traders end up buying at tops and selling at bottoms. The professional money has marked price up enough to create demand-price leading volume. Once demand is present, they take price down. Which was the direction they ultimately wanted price to move.

Longer term, the supply imbalance created by the Smart Money selling would reflect itself in Price. Selling (Volume) leading to lower prices.

Nice post. It is nice to see two people with different agendas basically saying the same thing. That is, one coming from an academic perspective and one from the real world of trading.
 
You must log in or register to reply here.
Back
Top