Question regarding PA

[Sprout]

This one is still eluding me, weakness could be a climactic volume before moving back into the range, or just an upwave with less volume after a climactic move. Or it could be that volume rose before or at the break, but then stalled before the reversal.

For example, I took this chart from the Trading the NQ forum:

We come from a strong uptrend after the break of the lower range, there is an upside break where demand dried up earlier in the morning, but then comes the very clear reversal in hindsight. If I was looking at this in real time I would have been thinking that the most probable scenario would be a breakout and that the lower volume bar was the retracement (test) before the confirmation. So here is where I think I am missing the volume analysis bigtime.

View attachment 181060

Something to consider is using the terms demand and supply. They can refer to being long or short in price. However, when you consider that any initiated short position is a stop away from being long as well as any initiated long position is a stop away from being a seller, demand and supply is more accurately describing liquidity. The offering of trading options to other traders when one places open limit orders (supply) and the role of market orders when traders are time sensitive on liquidity (demand).

When observing volume, demand (for time sensitive trading) is the volume of transactions where there is agreement to do business. When there is no-agreement to do business at the current price levels, the supply of open limit orders might fluctuate but it's the market orders entering the market that initiates a move contra to the Dominant trend.

DU (Dry up) volume is the shortest volume bar on one's display in the timeframe one is observing. Long and short volume had a behavior prior to this moment and will exhibit a different behavior post this moment.

 

[murray t turtle]

Something to consider is using the terms demand and supply. They can refer to being long or short in price. However, when you consider that any initiated short position is a stop away from being long as well as any initiated long position is a stop away from being a seller, demand and supply is more accurately describing liquidity. The offering of trading options to other traders when one places open limit orders (supply) and the role of market orders when traders are time sensitive on liquidity (demand).

When observing volume, demand (for time sensitive trading) is the volume of transactions where there is agreement to do business. When there is no-agreement to do business at the current price levels, the supply of open limit orders might fluctuate but it's the market orders entering the market that initiates a move contra to the Dominant trend.

DU (Dry up) volume is the shortest volume bar on one's display in the timeframe one is observing. Long and short volume had a behavior prior to this moment and will exhibit a different behavior post this moment.

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Good points, an elite market maker questioned my use of ''sell volume,red + buy green buy volume ''; noting there is always always buy + sell volume, to make a trade/investment. I noted him ======i see your points, but if it closes down @ end of day[close price] i call that sell volume, vice versa for buy volume He wasnt questioning my colors.......LOL

 

[lcranston]

Two nice examples of reversals this morning in the NQ, one of which illustrates withdrawal of demand and the other withdrawal of supply.

 

[PAAddict]

Two nice examples of reversals this morning in the NQ, one of which illustrates withdrawal of demand and the other withdrawal of supply.

View attachment 181317

Thanks, I understand the logic of the Climax+Test in the second one where I can see after strong volume to the downside, prices bounce on what is still strong volume (compared to any volume bar during the downmove) to the upside and then comes the test on lower volume before prices form a small congestion and then rise.

But in the first one, I can´t see the same logic. I see here that after a strong rise around 10, the rise was slower, with deeper retracements and each upwave had less volume and less magnitude. Then came a test to the downside, that from my reading found demand (volume bar marked with the little circle on top) and then, on the next attempt to find buyers above the last swing high, demand withdraws, as prices fall rapidly without volume and then comes the break of the last swing low on stronger volume before the bar that you marked as test.

 

[lcranston]

Thanks, I understand the logic of the Climax+Test in the second one where I can see after strong volume to the downside, prices bounce on what is still strong volume (compared to any volume bar during the downmove) to the upside and then comes the test on lower volume before prices form a small congestion and then rise.

But in the first one, I can´t see the same logic. I see here that after a strong rise around 10, the rise was slower, with deeper retracements and each upwave had less volume and less magnitude. Then came a test to the downside, that from my reading found demand (volume bar marked with the little circle on top) and then, on the next attempt to find buyers above the last swing high, demand withdraws, as prices fall rapidly without volume and then comes the break of the last swing low on stronger volume before the bar that you marked as test.

If you understand on a practical level the continuity of price and if you are accustomed to watching price move live (or via replay), you will see the "slower rise" and the deeper retracements as indications of lessening of demand. IOW, buyers are losing interest. Price then makes a double top, which brackets the circle you drew. In the very next bar, there is a pitiful attempt to boost price (or perhaps it's short-covering, or some other contributing factor, but none of that matters: it fails immediately, bigtime).

If you've read the Trading Price thread, you know that these bars represent "waves" (not Elliott Waves but rather buying and selling waves). If you spend sufficient time watching price move, you are more likely to reach a point where you can see these moves in a static chart (though the chart will have to be close to a tick chart; otherwise you'll have no idea what's going on inside those bars, and if you don't observe the struggles between buyers and sellers to arrive at a posted price, you'll be trading in the dark, with a flashlight).

Watching the NQ on a day like today ought to hammer home a few lessons about price movement. For one thing, it's so slow that you can not only see the ticks -- i.e., the individual price prints -- and the gaps between the ticks but also how the "bars" often serve no function other than to connect the ticks. Whether or not there is enough demand to move price in any worthwhile direction remains to be seen. But 15-20 minutes of this little exercise ought to be enough for the point to be made.