Volume Analysis
- Thread starter melteye
- Start date
That's where the effect on price comes in. If there's huge volume, and price goes nowhere, then there obviously wasn't enough demand to not only absorb the supply but also to push price higher. If buyers can't marshal their forces, a reversal is as likely as a continuation.
A transaction is more than an exchange at a given price. If that's all there was to it, prices would never change. But prices rise because buyers are willing - sometimes even eager - to pay a premium in order to get their hands on some shares (we sometimes call this "chasing"). Prices fall because sellers want out and are willing to take whatever they can get (and, yes, this is oversimplified in order to make the point). Before the exchanges imposed a variety of rules, this environment could be pretty chaotic.
The shorter the bar interval, the more problematic the volume analysis. Noise is as much a factor in volume as it is in price. However, you can still reach some general conclusions. What is it that is not reliable?
And nothing personal, but you have a lot of stuff on your chart. If you got rid of it, perhaps in a separate chart, and expanded the volume window so that the bars weren't so scrunched, the relationships would be easier to see.
I scruntched up the chart so more of the data would fit in the snapshot I took. I was just trying to show the vol. indicator (blue line) with price moves.
Yes, the volume relationship does look different with various time frames. If the TF is intra day and gets too large, though, the early morning and late afternoon volume surges sqew the indicators.
As far as what isn't reliable about it, here is an observation. As expected, the voume (indicator too) surges as price moves in the direction of trend and declines on minor retracements. However, just as often in the ES, the retracement (with volume decline) turns into a reversal of sorts.
You will notice on the previous chart that there are some places where the retracement on lower volume continues to retrace as volume starts to pick up in the new direction. Also, some larger volume spikes indicate market reversals while others do not. I could elaborate more but you get the drift.
Yes, the volume relationship does look different with various time frames. If the TF is intra day and gets too large, though, the early morning and late afternoon volume surges sqew the indicators.
As far as what isn't reliable about it, here is an observation. As expected, the voume (indicator too) surges as price moves in the direction of trend and declines on minor retracements. However, just as often in the ES, the retracement (with volume decline) turns into a reversal of sorts.
You will notice on the previous chart that there are some places where the retracement on lower volume continues to retrace as volume starts to pick up in the new direction. Also, some larger volume spikes indicate market reversals while others do not. I could elaborate more but you get the drift.
Why use a volume indicator when you've got the volume right there? Volume analysis has to do with the relationship of volume to price, not the relationship of an indicator to price.
As for your comment regarding reliability, I still don't see what you're going for. Demand is not constant, nor is it infinite. That's where an undestanding of support and resistance comes in.
If you'll take all that stuff off and present a simple price and volume chart, we can go over the relationships. Or not, whichever you prefer.
Incidentally, when I said "scrunched up", I was referring to the vertical, not the horizontal. It's difficult to see the volume bars at all, much less their relationships to each other.
As for your comment regarding reliability, I still don't see what you're going for. Demand is not constant, nor is it infinite. That's where an undestanding of support and resistance comes in.
If you'll take all that stuff off and present a simple price and volume chart, we can go over the relationships. Or not, whichever you prefer.
Incidentally, when I said "scrunched up", I was referring to the vertical, not the horizontal. It's difficult to see the volume bars at all, much less their relationships to each other.
Thanks for the offer DB. I just find the indicator gives me a better heads-up of what is going on. I do look at the individual volume bars but only when it is at a relevant trading point.
I was just making the point that volume is not the cure all. It has to be used in conjunction with other analysis.
I would be interested in seeing a post/tread from you about how you combine your volume analysis with s/r to make entry/exit decisions on the ES or other markets. I'm sure others would get a lot out of that also.
I was just making the point that volume is not the cure all. It has to be used in conjunction with other analysis.
I would be interested in seeing a post/tread from you about how you combine your volume analysis with s/r to make entry/exit decisions on the ES or other markets. I'm sure others would get a lot out of that also.
I don't want to be argumentative, but how can you make judgements about the value of volume when you're using an indicator instead? Volume analysis has nothing to do with volume indicators.
As for your request, I've asked for a revised chart from you. Without a place to begin, there's not much that can be analyzed.
As for your request, I've asked for a revised chart from you. Without a place to begin, there's not much that can be analyzed.