Trading - can we discuss the use of volume?

Saltynuts said:
On a very fine thread posted by maybe the funniest guy around here, a discussion of volume came up.

One poster, also a very fine lad, posted a picture of a chart, and claimed, based on both price and volume metrics, you could tell essentially where a bottom was and the uptrend started.

Another poster, himself quite a fine lad, posted another picture of a chart, but this time with trend lines drawn on it. He maintained that the volume was essentially irrelevant - at the very least the price action itself was much, much more important. Volume might provide some insight sometimes, but other times it gives the wrong signal.

So what does everyone think? When I was a kid studying this stuff I always read that going up or down on high volume was a sign of great strength/weakness, since it meant lots of people were buying/selling, thus the market had "breadth". This never made much sense to me - sure, a stock going up on great volume means there are a lots of buyers, but for every share or unit bought, doesn't there have to be a share of unit sold? You can say "a stock going up on high volume means lots of people are interested in it." But can't you turn right back around and say "a stock going up on low volume means there are lots of people not willing to sell at that price and think they can get more!!!"

Thoughts?

Thanks.
More...
Volume analysis is essentially "too much information" and is to be discarded.
 
Saltynuts said:
On a very fine thread posted by maybe the funniest guy around here, a discussion of volume came up.

One poster, also a very fine lad, posted a picture of a chart, and claimed, based on both price and volume metrics, you could tell essentially where a bottom was and the uptrend started.

Another poster, himself quite a fine lad, posted another picture of a chart, but this time with trend lines drawn on it. He maintained that the volume was essentially irrelevant - at the very least the price action itself was much, much more important. Volume might provide some insight sometimes, but other times it gives the wrong signal.

So what does everyone think? When I was a kid studying this stuff I always read that going up or down on high volume was a sign of great strength/weakness, since it meant lots of people were buying/selling, thus the market had "breadth". This never made much sense to me - sure, a stock going up on great volume means there are a lots of buyers, but for every share or unit bought, doesn't there have to be a share of unit sold? You can say "a stock going up on high volume means lots of people are interested in it." But can't you turn right back around and say "a stock going up on low volume means there are lots of people not willing to sell at that price and think they can get more!!!"

Thoughts?

Thanks.
More...

never use it
 
Volume is everything. I don't really know how to explain the way I look at volume, but I can say categorically that index, forex, and ETF charts are absolutely meaningless to me. I sometimes pick up systemic moves but I see the forest through the trees in individual stocks (look for the moss...it faces north...lol). I should say that I miss index and ETF moves because the volume of the moves is a drop in the bucket compared with the aggregate volume of the components. I want to explain it as, charts without volume are like reading a language without consonants...you can figure out the cadence and syllables, but meaning is elusive. Volume is the context in which price moves occur, and what gives those moves meaning.
 
Volume is often called the 'godly' indicator. Price can't move without it - hence volume leads price.

Volume can help a great deal to validate if a break out is likely to be the real deal or a fake out.
Openings with much higher volume than the average often are often the big trend days.
Volume starts & stops the big turns.

Haters of volume just haven't unlocked it's real value yet. It took me a long time before I made any sense of it. Most trading books do a piss poor job on explaining volume.

If you want to avoid bear & bull traps than do keep an eye on the volume.
 
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Scataphagos said:
What do you do when price turns and the "volume is a whimper" instead of presumedly climactic?
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I call these 'void signals'. Signals that should be there, but aren't. And they're a hell of a lot more telling than 'strong' signals on volume.

Scataphagos said:
Years ago, about 90% of the volume was retail. (Volume may have been more useful then.... and still may be on individual issues. But what about "the market"... stock indices?)

Then it shifted to be about 80% "institutional".

Today we hear that up to 70% of trade volume is "algorithmic... executed by bots".

How does your "analysis" of volume take that into consideration?
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Retail traders make decisions to trade. Institutional makes decisions to buy or sell. Algorithms faithfully execute a previous decision to trade. I don't care about the methodology that underlays the decision, I care about modeling that decision in real time. And so we arrive at volume.

In it's simplest form, you could look at a fast food restaurant. Based solely on the number of people leaving and the number of bags they're carrying, you could surmise time of day.
 
Provided price can't move without it, how does that mean it leads price?

A good example of this is at bottoms it takes very large buying volume to push equity prices up out of congestion & start the markup stage.
 
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I am new to this sport, but not a novice in the world. My first post! I am on this site to learn, as that is the phase I'm in. I thought that volume is what moved all markets; of course news and other catalysts influence the volume. Isn't volume the buyers and sellers? If so, isn't it the imbalance of buying and selling that drives the market up or down?
 
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