Attached you will find a small table I have built regarding pace settings. As usual I will go through my thought processes. In PV, once I jump on the right side of the market, I am then specifically looking for volume to carry the current B/A pair away from my entry pair. It is my strong belief that alot of people get screwed right off the bat because they do not give any consideration to volume whatsoever. Just as with STR.SQU, some of you may be seeing volume as a leading indicator for the first time. The PRV tool a few pages back is showing you the projected 5M volume that we are expecting by the end of the 5M bar. For me, this pace setting is fairly critical for a number of reasons. I regard it as a profit projection. 
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So how is it that so many can get screwed? If you take a look at the attached chart, you will see a table of data generated from 5M volume bars that occur between 9:45 AM EST and 3:45 PM EST. I plot each bars VOLATILITY (H-L) against it's VOLUME. The reason this works is because of the correlation between Price and Volume. As a result of this correlated relations, we can run projections of Volume that can be mapped to an expected Volatility. It is not necessary to get into specifics here, it is just enough to know that because of PV and specifically the correlation between P and V, we can PRV and sneak a peak into the segments anticipated volatility and the amount of skill that is required to realize the bar's potential.
After plotting each bar's volatility against it's volume, I arrived at the following table which I believe pretty much sums up why alot of people can get screwed when they get into a trade. As usual, not knowing where you are or what's happening can be very problematic for us as traders. The following chart is divided into VOLUME DECILE vs VOLATILITY. When you look at the bottom VOLUME DECILE (bottom 10% of volume bars), you find 161 bars who's volume ranged between 369 contracts and 2401 contracts. LOLLLLLLLL. That 2401 number look familiar, it is nearly dead on with the 2500 number Grob posts for the random drift arena. Of course, we all know this to be the VDU zone. It is a killer zone to trade in because as you can see, 73 of the 161 bars are in the loss arena; in other words there are no pairs of entries and exits that will yield a profit within the 5M that the bar ensues.
At the other EXTREME ( ), we find 161 bars with volume in the 18K+ zone. Most of the FOMC bars are in that zone. Every FOMC day, I read countless posts saying stay out of the market on these days. You can circle every single FOMC day and just pick them apples with little to no risk. An IF1 and IF2 easily get the job done on these type of bars. You see that the volatility distribution of these bars ranges from about 1 to 6 pts. The total sum of just these bars alone are roughly 300pts. The data is from the last month or so of trading... I designate the extreme zone as easy money since directionality does not fluctuate as much. I understand that Grob used indicators as a starting point to get oriented with most ETer's. I view this PV chart as an additional way to get folks to understand the relation between Price and Volume.
The attachment is a sort of pure PV layout. As you move down the PACE spectrum from EXTREME to VDU, the amount of skill required increases. So at the top, it takes very little skill to pull out what is available. As you move down the PACE spectrum, it takes more and more skill and sharper pictures to be able to handle the reduction in volume and conversely, the increase in risk (ie. frequent adjustments to keep on the right side of the market). Eventually, you wind up in the VDU zone where it is nearly 50/50 that you are in a losing opportunity from the get go...
As far as a big picture, you can view the attachment kind of like an apple tree. The EXTREME apples are the easiest to collect. Working your way up the tree so to speak requires additional tools (ie. a ladder, balance, etc...). By just picking the EXTREME apples, you stay in great shape bounty wise. All the other levels are just icing on the cake...
Kind Regards,
MAK
!So how is it that so many can get screwed? If you take a look at the attached chart, you will see a table of data generated from 5M volume bars that occur between 9:45 AM EST and 3:45 PM EST. I plot each bars VOLATILITY (H-L) against it's VOLUME. The reason this works is because of the correlation between Price and Volume. As a result of this correlated relations, we can run projections of Volume that can be mapped to an expected Volatility. It is not necessary to get into specifics here, it is just enough to know that because of PV and specifically the correlation between P and V, we can PRV and sneak a peak into the segments anticipated volatility and the amount of skill that is required to realize the bar's potential.
After plotting each bar's volatility against it's volume, I arrived at the following table which I believe pretty much sums up why alot of people can get screwed when they get into a trade. As usual, not knowing where you are or what's happening can be very problematic for us as traders. The following chart is divided into VOLUME DECILE vs VOLATILITY. When you look at the bottom VOLUME DECILE (bottom 10% of volume bars), you find 161 bars who's volume ranged between 369 contracts and 2401 contracts. LOLLLLLLLL. That 2401 number look familiar, it is nearly dead on with the 2500 number Grob posts for the random drift arena. Of course, we all know this to be the VDU zone. It is a killer zone to trade in because as you can see, 73 of the 161 bars are in the loss arena; in other words there are no pairs of entries and exits that will yield a profit within the 5M that the bar ensues.
At the other EXTREME (
), we find 161 bars with volume in the 18K+ zone. Most of the FOMC bars are in that zone. Every FOMC day, I read countless posts saying stay out of the market on these days. You can circle every single FOMC day and just pick them apples with little to no risk. An IF1 and IF2 easily get the job done on these type of bars. You see that the volatility distribution of these bars ranges from about 1 to 6 pts. The total sum of just these bars alone are roughly 300pts. The data is from the last month or so of trading... I designate the extreme zone as easy money since directionality does not fluctuate as much. I understand that Grob used indicators as a starting point to get oriented with most ETer's. I view this PV chart as an additional way to get folks to understand the relation between Price and Volume.The attachment is a sort of pure PV layout. As you move down the PACE spectrum from EXTREME to VDU, the amount of skill required increases. So at the top, it takes very little skill to pull out what is available. As you move down the PACE spectrum, it takes more and more skill and sharper pictures to be able to handle the reduction in volume and conversely, the increase in risk (ie. frequent adjustments to keep on the right side of the market). Eventually, you wind up in the VDU zone where it is nearly 50/50 that you are in a losing opportunity from the get go...
As far as a big picture, you can view the attachment kind of like an apple tree. The EXTREME apples are the easiest to collect. Working your way up the tree so to speak requires additional tools (ie. a ladder, balance, etc...). By just picking the EXTREME apples, you stay in great shape bounty wise. All the other levels are just icing on the cake...
Kind Regards,
MAK