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

[FanOfFridays]

Quote from black diamond:
That doesn't mean there are not ways to look at volume that change the odds.

It might be easier to understand the OP's statements in this and other threads of you remember the fact that he is almost certainly an academic, and someone who doesn't actually trade. He's into the theory of trading. As with most academics, the real world doesn't intrude into their world of theory.

Please recall that this same member has said that

1. Daytrading is pointless

2. You should pick one side (long or short) and trade from that side exclusively

3. Unrealized profit in a position is 'house money'.

4. Scaling out and scaling in represent 'inferior behaviour'.

This latest thread should be understood with these comments in mind.

 

[UgoCerletti]

This is quite an unusual website.

I wouldn't have believed that this much mis-information (not to mention plain ignorance) existed in one place until I saw it with my own eyes.

My vantage point is from the other side of the pond. I trade in London. What I can say is that many if not all the professionals I know, use the analysis of volume in making decisions.

This should be obvious to people but if not let me state the obvious for all to hear. The financial industry is geared to volume. On the buy and sell side, those of us who transact size know that price moves toward volume. Also if one looks carefully at volume (using volume at price for example) you can see that resting inventory exists at specific price points and on an intraday basis price moves to test these points.

The way the game is played these days is simple. One looks for price to test specific areas (concentrations of volume) and when price approaches these areas we look for initiative buying or selling. If this type of buying or selling comes into the market in enough size to overwhelm the resting inventory, then it is likely that price will "take out" that price point. That is called a breakout. If the initiative buying or selling is not sufficient to overwhelm the resting inventory then price will test and fail, retracing into the previous trading range and that is called "resistance". This is as simple as one can make it.

Well this was certainly entertaining. I hope some few of you figure it out, and move on rather than continuing these pointless arguments.

Good luck to all
Ugo

 

[FanOfFridays]

Quote from UgoCerletti:
This is quite an unusual website.
I wouldn't have believed that this much mis-information (not to mention plain ignorance) existed in one place until I saw it with my own eyes.

Ugo, as someone who has been around for a while, I just wanted to let you know that although the quality of posting has gone down a lot over the years, there still is some valuable information here, you just have to know whose posts to read.

Buy1Sell2 isn't a trader - he's most probably someone who's interested in trading and comes from an academic background. He started another thread in which he claimed that anyone who scales in or out of trades is a loser, that intraday traders are all losers, that those who trade from both the long and the short side are losers, in addition to some other obviously ridiculous claims.

When information which tends to disprove his wild assertion is offered, he usually reposts the same statement with a smiley.

I hope you find some better content here. Buy1Sell2's posts serve to increase traffic, and not much else.

 

[Thunderdog]

The arguments supporting the use of volume all sound compelling and logical. And as I had noted here and elsewhere, I bought into the premise wholeheartedly in the past. However, I would ask that proponents of the use of volume consider putting their views to the test. Presumably, you guys more or less get your cues from price but seek confirmation from volume.

Here is my request for those of you who trade using an objective, systematic method. As you trade using price and volume (I won't refer to the use of indicators of one form or another because I don't use them and because they are beyond the scope of this thread), keep a parallel journal of hypothetical trades for the same period based solely on the price portion of your method, completely ignoring the volume component. Then, after a length of time and a sufficient sample of trades, both real using volume and hypothetical trades disregarding volume, compare the two. If the reliability and/or profitability is meaningfully higher with the use of voume, then it would certainly appear that you are deriving benefit from the information provided by volume. If not, however, then maybe it is time for you to revisit your assumptions.

In my own case, I had to revisit my assumptions. The argument can be made that I did not regard volume correctly, and that is certainly a possibility. But I don't think so. I considered volume in a number of different ways and configurations and, on balance, it added no meaningful value to me.

 

[ARealGannTrader]

There is no such animal as too much information. Volume can b a useful filter for other technical patterns.

Prof has a very good method in normalizing volume which boils everything down to the technical patterns.

Jack and Spyder state that when one goes into dry-up only two things can happen, volume can increase in the way of a breakout into a new trend, or volume can increase in the way of continuing the present trend.

What is all the debate about?

The above two concepts are immutable.

They must occur.

For those of u who do not use volume directly, volume is doing it's thing beneath ur nose, whether u c it or not.

 

[Thunderdog]

Quote from ARealGannTrader:

There is no such animal as too much information...

The use of cloud formations in ES scalping?

 

[Thunderdog]

Quote from ARealGannTrader:

...Jack and Spyder state that when one goes into dry-up only two things can happen, volume can increase in the way of a breakout into a new trend, or volume can increase in the way of continuing the present trend...

Essentially, what you wrote is that one of two things can happen: price can go up or it can go down.

 

[ARealGannTrader]

Quote from Thunderdog:

Essentially, what you wrote is that one of two things can happen: price can go up or it can go down.

If that's the level that u percieve ur information then okay.

What volume does is give u a heads up to traders that follow it. They will get in on a prorata reading, and will get out by the time u figure out the direction

 

[ARealGannTrader]

Quote from Thunderdog:

The use of cloud formations in ES scalping?

There are only certain groups of indicators.

Relative, absolute, volume, direction, and momo.

Most people cannot read the info that they put up, as a result they get confused.

Doesn't mean too much info, it means they need to get better at reading.

 

[Thunderdog]

Quote from ARealGannTrader:

There are only certain groups of indicators.

Relative, absolute, volume, direction, and momo.

Most people cannot read the info that they put up, as a result they get confused.

Doesn't mean too much info, it means they need to get better at reading.

That's all well and good. However, the litmus test is to run a parallel journal without the clutter, as I had noted in a prior post to this thread, and then to compare the performance numbers.

And while you maintain that one needs to get better at reading these other variables, I can make an equally valid argument that one needs to get better at reading the nuances of price rather than rely on wobbly crutches.

Round and round we go.