Volume analysis is to be discarded as it is "too much information"

Volume analysis of any use?

  • I believe in using volume analysis

    Votes: 162 58.5%

  • I discard volume analysis in my trading

    Votes: 71 25.6%

  • I really don't know

    Votes: 43 15.5%
  • Total voters
    277
Quote from Buy1Sell2:

Price can move up with little or no volume. Price can move down with little or no volume. Price can move up with a lot of volume. Price can move down with a lot of volume. Price can move up with average volume. Price can move down with average volume. Price can move up with a little above average volume. Price can move down with a little above average volume. Price can move up with a little below average volume. Price can move down with a little below average volume. Price can move up with a little less than a lot of volume. Price can move down with a little less than a lot of volume. Price can remain unchanged with little or no volume. Price can remain unchanged with a lot of volume. Price can remain unchanged with average volume. Price can remain unchanged with a little above average volume. Price can remain unchanged with a little below average volume. Price can remain unchanged with a little less than a lot of volume. Price can -----
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That is a near perfect description of what someone observes when on the cusp of discovery. It is at this point that you either walk away in confused frustration or push through and discover the equations that makes sense of what appears as contradictions. I am talking about how to read smart money and dumb money.

You have given lots of RELATIVE measurements of volume. By relative I mean relating to the current move and also a prior move. It is actually these anomalies that provide the evidence of what is about to unfold (lead PA).

A simple example: Price rises with volume but then turns and a move down follows. Next time PA approaches this high, instead of volume increasing it is decreasing although the candles look bullish.

When the resistance level is reached volume tells you there is non participation before PA has signaled a reversal. This was a compound signal where the volume in this move looked like interest was waning and compared with volume at this level last time showed a lack of interest.

Read Livermore and see how he tested the power of a move to continue by using volume. You have described the problem without seeing that a problem cannot be solved until it is well described. You describe it well and solutions are available.

As I said before, to learn this will take about 2 years and I'm not saying it's an absolute essential, but it is of great value a lot of the time. Because you can read volume before the next candle forms and the read the volume in that candle is extremely simple to do when you have learned the art.

But that is how I like to use volume. I have used heatmaps and been disappointed, Market Profile and found it to be too general, OBV and found it useless where others find them helpful.

Price doesn't move on zero volume on big volume issues, but it can rocket on very low volume for the simple reason that supply is low and anything with low supply can soon inflate in price.

There are a myriad of signals that make sense of what you observed and make for compelling opportunities.
 
Quote from black diamond:

...Just out of curiousity, what kind of analysis did you do? Did you observe stuff real time and get a sense of things or look at stats over a lot of trades? Did you normalize volume in a few of the likely ways?
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I reviewed a fair amount of historical data in the context of my setup method and then traded it in real time. However, I suppose I had a tendency to selectively observe and give added weight to those instances where volume appeared to add some value. Actual trading disabused me of this bias. I should point out, however, that I only looked at volume as a means of confirming my existing setup method in one way or another. I did not seek to accommodate volume analysis with an overhaul of my basic setup structure. Regardless, in my own experience, I found volume to be far more impressive when looking at historical charts than in real time.
 
Quote from Xspurt:

That is a near perfect description of what someone observes when on the cusp of discovery. It is at this point that you either walk away in confused frustration or push through and discover the equations that makes sense of what appears as contradictions. I am talking about how to read smart money and dumb money.

You have given lots of RELATIVE measurements of volume. By relative I mean relating to the current move and also a prior move. It is actually these anomalies that provide the evidence of what is about to unfold (lead PA).

A simple example: Price rises with volume but then turns and a move down follows. Next time PA approaches this high, instead of volume increasing it is decreasing although the candles look bullish.

When the resistance level is reached volume tells you there is non participation before PA has signaled a reversal. This was a compound signal where the volume in this move looked like interest was waning and compared with volume at this level last time showed a lack of interest.

Read Livermore and see how he tested the power of a move to continue by using volume. You have described the problem without seeing that a problem cannot be solved until it is well described. You describe it well and solutions are available.

As I said before, to learn this will take about 2 years and I'm not saying it's an absolute essential, but it is of great value a lot of the time. Because you can read volume before the next candle forms and the read the volume in that candle is extremely simple to do when you have learned the art.

But that is how I like to use volume. I have used heatmaps and been disappointed, Market Profile and found it to be too general, OBV and found it useless where others find them helpful.

Price doesn't move on zero volume on big volume issues, but it can rocket on very low volume for the simple reason that supply is low and anything with low supply can soon inflate in price.

There are a myriad of signals that make sense of what you observed and make for compelling opportunities.
More...




Excellent post!


Dackster.
 


Here you go Jack. Independent auditing:

Collective2.com

Striker Securities (you have to open an account)

Robbins/World Cup Trading contest

TimerTrac.com

StrategyRunner.com

Theta Research

TimerDigest

Futurestruth not really work, because it basically tests black box systems, as I recall.

pick any of them for several hundred trades and prove the volume based only trading mechanism. These are independent sites, who will clearly show whether this is true or false. C2 has value-add in that they also show a lot of system stats, which exposes the hold&pray crowd...

But that is always where you go silent, isn't it? Words seem to outweigh proof.
 
Quote from TraderZones:



Here you go Jack. Independent auditing:

Collective2.com

Striker Securities (you have to open an account)

Robbins/World Cup Trading contest

TimerTrac.com

StrategyRunner.com

Theta Research

TimerDigest

Futurestruth not really work, because it basically tests black box systems, as I recall.

pick any of them for several hundred trades and prove the volume based only trading mechanism. These are independent sites, who will clearly show whether this is true or false. C2 has value-add in that they also show a lot of system stats, which exposes the hold&pray crowd...

But that is always where you go silent, isn't it? Words seem to outweigh proof.
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It's never gonna happen.

None of those so-called "volume aficianados" are ever gonna step up to the plate and prove themselves in a definitive fashion as being able to use the techniques to trade profitably.

Whereas the OP not only steps up to the plate everyday trading multiple-instruments, he even has an ES Journal where he continues to demonstrate his trading beliefs (which are not mine, btw) in real-time.

... so there you go. :)

Have a great weekend!
 
Quote from TraderZones:



Here you go Jack. Independent auditing:

Collective2.com

Striker Securities (you have to open an account)

Robbins/World Cup Trading contest

TimerTrac.com

StrategyRunner.com

Theta Research

TimerDigest

Futurestruth not really work, because it basically tests black box systems, as I recall.

pick any of them for several hundred trades and prove the volume based only trading mechanism. These are independent sites, who will clearly show whether this is true or false. C2 has value-add in that they also show a lot of system stats, which exposes the hold&pray crowd...

But that is always where you go silent, isn't it? Words seem to outweigh proof.
More...

We chose another route on this. An interactive one. Here is how it went.

1. We posted the universe daily.

2. To keep the universe complete and up to date we posted adds and deletes.

3. From this universe we posted the daily Hot list.

4. We also noted the calls from the hotlist.

5. We noted the completion coming up for a hold from the hot list.

6. After a year, we noted the annual results from the trades.

7. We answered questions through the time the journal was running.

8. Others posted their results so "transference" could be understood.

If you have any questions or comments on the process that was published here duriong that time, let us know. AS it stands now, anyone can make up the universe. Anyone can make up hotlists. Any anyone can automate or manually follow the rules posted fron the one pager. The one pager in based upon about 1.000 times more data points that you expected to see on the sites you prefer.

What you are requesting has happened in ET. As was seen we worked for years to make it plain and we published a synopsis of a year's posted results so anyone could see what an actual forward application could do.

There are many real time intraday narratives on several sites where trading with large quantities required partial fills on turns. Others will PM you about the specifics if you make your needs known; I won't simply because you do not do the work to become informed.

Apparently you are just late to the party and haven't seen the proofs you and others are asking about.

Many in ET have proven conclusively that they are not capable of using what has been given and used by others. You certainly fit that category. Some people (Nitro, for example) have posted the erroneous work of others. This type of action simply means that they did not have the capability to examine others works and see and understand the mistakes. Most people can do this type of check out since they can figure out what is going on.

Your unawarenss, in general, is your fault, Making rules and using them successfully is very dirrerent than citing rules breakers which is you common activity up to a point. You certainly couldn't figure out that Trader666 screwed up back testing and that nitro can't figure out how Trader666 screwed up. Too bad for you, Trader666 and Nitro.

What makes you think you could figure out how any of the sites you mention are working as claimed? you couldn't tell a set of deductively proven rules from a set of inductively created (unproven) rules. None of the sites you mentioned function from a deductive orientation and you do not know that as yet.

Notice steps 1 through 8 above do not prove anything. they are just an inductive record of the presentation of a set of deductively derivered rules. I presented the deductive basis of the PEP in feedback. PEP is the basis of the one pager.

Requesting inductive proofs of others is not a rational request. TSganngalt may request a proper proof but that does not mean he can make use of it of understand it. Not many people in the financial industry have ever seen or understood anything rational. Read Justin Fox for a wake up call.

I am one of the people who did not go your route. Instead, I chose the svientific, deductive route. It is getting to be very evident that the 60's to present with the quant briefly superimposed from the 80's to mid 2006 was not too swift a way to go. Being a parasite and rational was the way to go.
 
Quote from jack hershey:


A thought on volume. One of volume's greatest handicaps to traders was how the platform vendors tied it to an axis. Intellectually, this was unnecessary and actually needs to be avoided.

You can see that gradually over time the more successful annotators of volume leave the anchoring to an axis behind to the same extent that price is no longer anchored to an axis. As we see some indicators are anchored to an axis and others are not. Does this deny some information content to the representations?
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Could you expand on this please?

Are you saying volume should not be plotted to a time axis?
 
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