Volume--- how to use it and WHY
- Thread starter marketsurfer
- Start date
Level headed and honest answer. Took me a few years on different approaches. Eventually I had charts specially designed for me so I could see the signals.
I based half of it on this but I didn't like the software although some of the ideas were valid. I had to figure out how to delete the false signals and actually their book is better at that than their software.
http://www.youtube.com/watch?v=KeoqJs8L70Y&feature=related
I never cease to be amazed on ET at the persistence of Aristotelianism in a Cartesian age. The usefulness of volume is for ET's Aristotelians a matter of dogma they will not abandon even with the clearest counter proofs. The most casual observation of a one-second chart distinguishing volume at the bid from volume at the ask disproves their cherished belief. Price leads volume around by the nose like a pimp leads his hooker. Volume clearly is price's bitch. And what do the Aristotelians do when price moves with no relation to volume whatsoever, or when there is no discernible volume? No doubt they stand aside complaining of faulty data.
Price and volume (and the order book) are the only pieces of information given by the market. Why would you choose to ignore information when you're given so little? Sure, analysis paralysis is very real. However if looking at volume gives you analysis paralysis, then you didn't prepare properly. Most likely, you're trying to trade without any preparation and you can't handle the amount of information coming at you.
Academics once considered price action to be random... that nobody could beat the market. Many millionaires later, people finally accepted that price action was more than just random. Do you really want to be on the side that says the same thing about volume? I doubt you'll ever find a 100% accurate signal from volume, but I doubt you've found it in price action either.
As far as time is concerned, for the purposes of a market, time is a constant. I would highly question ignoring time as ProfLogic suggests, but I wouldn't consider it the be-all end-all either. People operate on time. They wake up at approximately the same time each day and trade during approximately the same time frame each weekday. Markets open and close based on time. Company reports are typically made quarterly. Large hedge funds often have quarterly or yearly requirements. The weather has relatively predictable changes based on the time of the year. Any one of these factors can create cycles in the price of a product based on time.
Academics once considered price action to be random... that nobody could beat the market. Many millionaires later, people finally accepted that price action was more than just random. Do you really want to be on the side that says the same thing about volume? I doubt you'll ever find a 100% accurate signal from volume, but I doubt you've found it in price action either.
As far as time is concerned, for the purposes of a market, time is a constant. I would highly question ignoring time as ProfLogic suggests, but I wouldn't consider it the be-all end-all either. People operate on time. They wake up at approximately the same time each day and trade during approximately the same time frame each weekday. Markets open and close based on time. Company reports are typically made quarterly. Large hedge funds often have quarterly or yearly requirements. The weather has relatively predictable changes based on the time of the year. Any one of these factors can create cycles in the price of a product based on time.
Cartesian, you say? I use charts, sir, thereby rendering me a chartesian. Should you by chance find yourself in the company of Dr. Deco, do be sure to kindly give him my regards.