Studying Volume

D

dvst8

Hi ET

I've been studying the relationship between volume and price for a month and have come up with the following.

1. High volume with no price movement is an indication of buyers/sellers closing there positions.

1. High volume with price movement is an indication of new buyers/sellers

3. Low volume with no price movement just simply means no interest

4. Low volume with price movement.....would anyone know what this would mean?

Can anyone confirm that my findings are on the right track? also try to answer my 4th question?

cheers
J
 
J,

Read 'Master The Markets' by Tom Williams. Google it... you'll find it out there for free.

It does a good job of explaining the relationship between price and volume.

~Mike
 
Hi dvst8 and Percy: Google: Richard D Wyckoff and read his books. They are old but still valid even if you don't like the older style of writing or market terms. the forum: traders laboratory has a Topic on his method.. ag
 
Simple statements about price and volume relationships are almost always wrong. The relationships are not 1 to 1; a low-volume decline may mean something completely different from one week to the next, depending on the context.

One of the most common misconceptions about price and volume is that low-volume moves are somehow not valid. I laughed a couple of weeks ago when I saw an internet news blurb-- something like "market drops... but silver lining... low volume".

There are many cases where the context is the price is inflated and lots of traders are standing around holding the bag. If you want to sell there aren't many bids out there around the market because there is not a lot of interest at these high prices. As traders sell those bids disappear and the price drops. If the price is still generally seen as too high, the new lower prices don't uncover many more bids. The price will continue to drop on low volume. This is like doom and I love it when it happens while i'm short, because I know the move still has a way to go.

On the other hand a drop on low volume, that follows a previous drop to around the same level on high volume, (classic double bottom) may mean the dumping is over at least temporarily. If the price is seen as a bargain price, there are traders who got in at the previous low who are holding on. They are asking or hoping for prices above the market before they sell. Prior longs got out during the previous low and now have nothing to sell. Prior shorts already closed and those who shorted the previous low are sweatin' bullets. Basically the move is exhausted and things are primed to move up.

So there are two examples where a low volume price drop means two entirely different things depending on the context.
 
Quote from PetaDollar:

Simple statements about price and volume relationships are almost always wrong. The relationships are not 1 to 1; a low-volume decline may mean something completely different from one week to the next, depending on the context.

One of the most common misconceptions about price and volume is that low-volume moves are somehow not valid. I laughed a couple of weeks ago when I saw an internet news blurb-- something like "market drops... but silver lining... low volume".

There are many cases where the context is the price is inflated and lots of traders are standing around holding the bag. If you want to sell there aren't many bids out there around the market because there is not a lot of interest at these high prices. As traders sell those bids disappear and the price drops. If the price is still generally seen as too high, the new lower prices don't uncover many more bids. The price will continue to drop on low volume. This is like doom and I love it when it happens while i'm short, because I know the move still has a way to go.

On the other hand a drop on low volume, that follows a previous drop to around the same level on high volume, (classic double bottom) may mean the dumping is over at least temporarily. If the price is seen as a bargain price, there are traders who got in at the previous low who are holding on. They are asking or hoping for prices above the market before they sell. Prior longs got out during the previous low and now have nothing to sell. Prior shorts already closed and those who shorted the previous low are sweatin' bullets. Basically the move is exhausted and things are primed to move up.

So there are two examples where a low volume price drop means two entirely different things depending on the context.
More...

Spot on..perfect.
 
Quote from dvst8:

Hi ET

I've been studying the relationship between volume and price for a month and have come up with the following.

1. High volume with no price movement is an indication of buyers/sellers closing there positions.

1. High volume with price movement is an indication of new buyers/sellers

3. Low volume with no price movement just simply means no interest

4. Low volume with price movement.....would anyone know what this would mean?

Can anyone confirm that my findings are on the right track? also try to answer my 4th question?

cheers
J
More...
===================
DV8;
Plenty true,/confirmed,
and also more to it.[3] Also means some interest, but most just left for lunch. Not that all lunches are low volume.........................

[4]Low volume with price movement can mean more than several things;
[4a] Great trend in real estate, all needed for 2 house sale is one[1] buyer, for each house.

[4b]Deleveraging-see 12 month chart,SPY.......

[4c]Good downtrends can happen on low volume, not many buyers;
good uptrends can happen on low volume, not many sellers.

4e]Could write more, but banker Dad said dont tell everything you know.

:cool:
 
Thanks for the input guys, Very good points.

I've started to read Master the markets. So far so good. Will update this post with my new findings. :cool:
 
Why MOST do NOT understand volume flow.......

I can have a very LOW volume rally of 10 points in the ES with the "delta" very positive (buyers had more conviction than sellers and the NET affect of the buying is statistically greater than those selling into the move). On the other hand, I can have a HUGE volume period where price stays stuck in a 4 point range and the "delta" is mostly neutral (buyers and sellers conviction was about equal and the NET affect of the HUGE volume flow gave no statistical advantage to either side).

The IMPORTANT aspect of volume flow is.....who is IN CONTROL??? When the NET affect of the volume flow "shows" a statistical advantage to one side over the other, you WILL THEN GET price movement! :)

Remember....."he who is MOST COMMITTED to their position in life WINS!" :D
 
Quote from PetaDollar:

Simple statements about price and volume relationships are almost always wrong. The relationships are not 1 to 1; a low-volume decline may mean something completely different from one week to the next, depending on the context.

One of the most common misconceptions about price and volume is that low-volume moves are somehow not valid. I laughed a couple of weeks ago when I saw an internet news blurb-- something like "market drops... but silver lining... low volume".

There are many cases where the context is the price is inflated and lots of traders are standing around holding the bag. If you want to sell there aren't many bids out there around the market because there is not a lot of interest at these high prices. As traders sell those bids disappear and the price drops. If the price is still generally seen as too high, the new lower prices don't uncover many more bids. The price will continue to drop on low volume. This is like doom and I love it when it happens while i'm short, because I know the move still has a way to go.

On the other hand a drop on low volume, that follows a previous drop to around the same level on high volume, (classic double bottom) may mean the dumping is over at least temporarily. If the price is seen as a bargain price, there are traders who got in at the previous low who are holding on. They are asking or hoping for prices above the market before they sell. Prior longs got out during the previous low and now have nothing to sell. Prior shorts already closed and those who shorted the previous low are sweatin' bullets. Basically the move is exhausted and things are primed to move up.

So there are two examples where a low volume price drop means two entirely different things depending on the context.
More...

what time frame are you talking about that this applies?

and do you use it to make trading decisions?
 
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