Trading - can we discuss the use of volume?

[mbondy]

^ on the contrary, volume is neither mass nor velocity as it pertains to momentum.
Price is mass. The speed at which it moves is velocity. Volume is something altogether different.

 

[Jeffro72]

^agree, to a slight degree, hence the "in a way" modifier. But a move on big volume will have more "weight" than a move on small volume. Just giving ideas to visualize what's going on.

 

[comagnum]

Your thinking is flawed...
Price can change without volume. Price will not print/execute without volume.

Well if you want to split hairs on this than sure - price can gap with no trade activity - however the gaps are caused by a supply/demand imbalances, which is the aggregate volume of buy & sell orders in the auction. Like I said, volume leads price - including the bid/ask orders in the auction before the next trade prints.

You assumed I was referring only to prints - that's not what I said. Looks your thinking is flawed - not mine.

 

[mbondy]

^agree, to a slight degree, hence the "in a way" modifier. But a move on big volume will have more "weight" than a move on small volume. Just giving ideas to visualize what's going on.

You're substantiating my point. If volume is the catalyst that propels price to move more quickly, as in your example, then volume cannot be both the mass and the propellant.

Anyway, I'm just being semantic so I'll leave it at that.

 

[beerntrading]

^ on the contrary, volume is neither mass nor velocity as it pertains to momentum.

Momentum is literally mass multiplied by velocity.

 

[Jeffro72]

Momentum is literally mass multiplied by velocity.

So mass(volume) multiplied by velocity(change rate of price) = momentum...price itself being current "location". One way of looking at it.

 

[lawrence-lugar]

So mass(volume) multiplied by velocity(change rate of price) = momentum...price itself being current "location".

One way of looking at it.

You just kind of described Level 2 quotes, in relation to watching a chart's real-time movement and trading.

But trading is part art, part science...it pays to view things from a collective, dynamic picture from multiple angles.
If all you know is Level 2, for example, and are basically blind with other facets of trading observation...you're bound to experience an inevitable lethal or damaging hit.

Trading is kind of like being the creator/manufacturer of a chess board and pieces, as well as the player, as well as the event organizer, and etc etc expanding and contracting roles.
Trading is like a moving camera zooming in and out at various speeds and heights of a sporting event or political assassination.
You have to see and sense everything in real-time...the past, present and future.

Initial convictions, but with malleable patience. -- You can't go hunting for deer, if all you have seen, and known, in your life is horses.
You have to reasonably know what to look for and expect for. Otherwise you're just a blind man without a cane. ,

All of this just looks like random words and theory to the uninitiated. -- But you'd be surprised with what kind of returns this fluff generates, if truly digested right and applied right.

 

[easymon1]

I have already mentioned some things you can look at however, if you have a mind to look into tape reading then the trend line break is a reaction (pb) so in tape reading you are going to watch the volume on that reaction. Generally:

1) Decreasing volume on reactions (pd’s) favor a resumption of the previous trend (i.e. resumption of the previous bull trend)

2) Decreasing volume on rallies (pb) favor resumption of the decline (i.e. resumption of the previous bear trend)

What you want to watch for is “dullness” on reactions in bull trends and “dullness” on rallies in bear trends.

1b) Said another way. When the volume increases on the advancement of the bull trend but decreases (light volume) on the PB’s then odds favor a resumption of the bull trend.

2b) Said another way. When volume increases on the advancement of the bear trend but is light on the pauses or PB’s then this sort of action favors a resumption of the bear trend.

On charts tape reading is an interpretation of volume correlated with price movement as seen graphically on a chart. This type of tape reading IS NOT time and sales. The action of the volume renders hints about supply/demand. Price simply shows the monetary “value” of the volume. Volume shows the amount of dollars in play at price levels.

If you don’t mind holding through drawdowns this type of tape reading can render nice profits. However, if a wrong interpretation is made it can result in devastating losses.

I am a scalper of 1 to 8 points over and over in ES, MES, so I rarely look at volume. It just adds another consideration to making decisions that I find not necessary to scalping 1 to 8 points.

The old timers used to say:

“In a bull trend never sell a dull market”

The same applies in a bear trend.

 

[easymon1]

https://www.elitetrader.com/et/thre...-analysis-concepts.363271/page-6#post-5500559

If price is going down and volume is getting less then it will likely go back up, or in a sideways in a TR to get more volume. If it were to keep going down volume would likely get less. If it is going down on less volume then it is going in the wrong direction. If it is going up on less volume then it is going in the wrong direction. Price probing is basically an auction where bullish and bearish pressures are probing to find areas of more transactions or trades. It is a probing of the interest to see at what price point more traders are willing to place more trades and execute more transactions. Markets are designed to facilitate more traders and to facilitate more trades taking place. Brokers want more traders, not less. In terms of real estate if nobody lists their house on the real estate market then there will be no real estate market.


As the market goes down there may be an increase in volume at first but soon that volume will begin to decrease as less and less sellers are willing to sell at such lower prices and price will then have to go up to find more sellers (sellers coming back in) willing to sell. Or it could “in theory” reach a point of no transactions.

Flip this around in bullish moves. When no one is willing to buy as price gets higher and higher price will have to go down to attract buyers.


Putting too much emphasis on volume can cause a trader to miss out on an otherwise good trade. In my post above I showed a bear move and stated that likely volume was increasing. Why? Price previously had some sideways price action and now beginning to go down. However, a BO south can start on low volume. If I am keen on volume I may not take a trade because of low volume. But if I look to the left and see BO bar is a new low below the last 20 bars and the general trend is down then in spite of the low volume the context favors more of a move south so I will short it. However, if I was waiting on volume confirmation I would probably not take a perfectly high probability trade. The low volume would have made me fear taking the trade, tricked me, and I therefore will have missed taking the trade.

Look at some charts. Say for instance, a chart that has a bearish context. You can have a bear BO on low volume that is a high probability trade but because of the low volume you might decide not to take a perfectly logical high probability trade. A little further along the same chart show a strong bullish bar or two so you think price has to go up so you go long, instead it goes sideways, then down. So you get trapped in a long trade. In the former you have a bear BO on low volume but get tricked into not taking the trade and in the latter you get a bull BO on high volume and get tricked into taking the trade and instead price goes against you. The volume was misleading on both trades. In the former it convinced you to NOT take the trade. In the later it convinced you TO TAKE the trade. In these cases it was not a leading indicator but a mis-leading indicator. In the former you missed out on a good trade. In the latter you lost on a bad entry. …ROFL.

Bottom line: looking at volume is probably not going to result in making more money but more likely will result in losing more money by losing out on good trades and being tricked into bad trades. Conclusion: volume is not going to be that much of a help, if any, especially in intraday scalping.

Extra large trend bars that are in a context of much smaller bars are almost always going to have bigger volume. I don’t have to look at volume bars to know this. I just take the trade in the direction of the trend betting there will be at least enough more of an additional move to give me a good scalp. I don’t have to see other indicators such as stochastics…etc I just act and take the trade. I am placing trades based upon Price action ACTION not volume ACTION.


On a BO say south the market will try more than once to get lower as it is probing to where volume gets less. Once it gets so low where there are no sellers then if someone wants to buy they are going to have to bid up and take the offer thus price will rise. No sellers or few sellers then price has to go up. No buyers or few buyers then price has to go down.

I usually don’t look at volume. I usually place my trades on PA action not volume action. Price is going to move where more volume will take place. Look at this chart below. Do I need a look at volume to tell me that a whole bunch of traders just bot on that big bull bar? Of course not. Odds are 70% or more that the market is going to continue up enough additional movement for me to take a profitable scalp. It was a strong BO from previous sideways PA and had FT. There will likely be enough more push up for a decent scalp.

The market is going to price in the news. It doesn’t matter what the news is it matters how price reacts to the news and that will show up on a chart. Price is truth. All institutions have opinions on what the market should do on an upcoming report. Those opinions may differ. What matters is what price does. That will be obvious on a chart. There are about 200 or more larger institutions that control the markets. They cannot know each others opinion about the market. All that matters is what price does in reaction to the news. 50/50 chance it will go up or it will go down.

Nobody knows how many dollars are betting the market will go up and how many are betting it will go down. You only know after the market starts to move and it's movements will show up on a chart. If there is bad news on bullish price you just buy and don’t worry about the news. News is useless. Price is truth. If news is bad but price is good I am buying. I don’t care what the news is. If news is good but price is bad. I am selling. If news is bad and price is bad I am selling. If news is good and price is good I am buying. Price will tell me what I need to do. I don’t care about the news. And generally don’t need to look at volume. At least not for scalping 1 to 8 ES points.

The market can go up or go down on good or bad news. All that matters is how it reacts to the news. I don’t have watch the news nor watch volume.


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[easymon1]

https://www.elitetrader.com/et/thre...-analysis-concepts.363271/page-6#post-5500608

Volume on a short term basis 1min or 5min is hard to glean much from it by comparing it to the previous bar or X number of previous bars - at least in my opinion.

Current volume compared to the same time of day in the past is another story. Friday's ES for instance 5 minute volume bars versus 10 day average volume for each 5 minute timeframe (inside red box, cyan greater than avg, yellow continuing to close - greater than avg by +125% or more) and cross signs above before, during and after RTH open show increasing volume which fueled big drop once support broke - wide range engulfing candle @ 940am EDT signal to go short or all fake long only traders to exit :-
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