Volume--- how to use it and WHY

[Scataphagos]

Quote from ProfLogic:

How many would disagree with the phrase, "Analysis Paralysis"?

One of my favorite quotes.... "Simplify your method as much as possible. Then when you've done that, simplify again".

Way back when, I considered volume. Even had a few of my own self-constructed oscillators. However, the oscillators stopped correlating with market action long ago.

Swing highs and lows can come on either high or low volume... volume spikes can correlate with an acceleration/reversal in price... or be false... or be random....seems all whimsy.

I stopped considering volume in any way at least 10 years ago.

I continue to hold to the belief that "considering volume will cost a trader money". That's because it's an additional variable. (Unreliable one, at that.)

We'd of course, like to have some sort of "confirmation and comfort" before putting money at risk. That comfort for many comes via "volume confirmation" in their eyes.

But....

1. I believe there is no such thing as "confirmation"

2. Looking for "volume confirmation" will cost a trader more opportunities for profit than will save him from losses.

 

[ProfLogic]

Quote from marketsurfer:

from someone who considers time not to be a constant, im not sure how to answer.

Time IS a constant, it's just that the markets aren't traded in time, they are traded in contracts or shares. At least they have been in my world for the last 15 years.

And as I have mentioned to you more times than I have fingers and toes;
IF you can give me a non-varying or constant figure on how many contracts or shares are traded in any given market; per week, per day, per hour, per minute or per second
or
give me the name of a broker that will pay you profit on time moving forward or backward
THEN I will agree with you that trading a time based chart holds ANY advantage over a natural price/volume chart.

 

[Dackster]

See how your thread is filling up with BS rhetoric and egotistical statements? This could be a good thread, but already people are posting what they think instead of fact. I'll start with some fact.


1. Volume is the only entity that moves a market.


There you go.




Dackster.

 

[ProfLogic]

Quote from risktaker:

But how do you incorporate volume into an analysis when much of the volume nowadays is fake garbage to begin with? Just comparing volume today to volume x days ago or similar idea, becomes useless.

Unless you guys have some unique way of analyzing volume others may not.

See my previous post.

Interpretation of volume alone is worthless.
Someone throwing a large block order at a market doesn't mean THEY know anything more than anyone else. You could interpret that volume till you were blue in the face with no concrete or consistent conclusions.

 

[Xspurt]

Quote from risktaker:

But how do you incorporate volume into an analysis when much of the volume nowadays is fake garbage to begin with? Just comparing volume today to volume x days ago or similar idea, becomes useless.

Unless you guys have some unique way of analyzing volume others may not.

Good question. There are 3 ways.

1. Intraday. You don't need to worry about dark pools etc. as the sample in any liquid market proves to be an excellent representation.

2. Daily. Works surprisingly well considering it is usually way off as what is normally posted is really the volume for the day before (i.e. the volume bar is under the wrong day!)

3. Correct daily volume. That requires more effort and explanation than I'd go into here.

 

[Xspurt]

Quote from ProfLogic:

Time IS a constant

Strangely enough time is not a constant. It is a physical property that is subject to change.

That can have an impact on your trading depending on the type of charts you use but that's off the topic.

 

[cashinvestor]

I've been watching tsunami-trader for awhile now. They have some interpretation of price/volume so they can predict/measure price direction.

Watching their videos, it seems to work pretty well. Does anybody have experience with them?

Also what about Hawkeye tools and the volume analysis he does?

 

[risktaker]

Ok, so you're saying your volume-based charting gives you an edge? That sounds good. If so, can you post or point to some charts so we may look at a comparison (if you don't mind).

Thanks!

Quote from ProfLogic:

See my previous post.

Interpretation of volume alone is worthless.
Someone throwing a large block order at a market doesn't mean THEY know anything more than anyone else. You could interpret that volume till you were blue in the face with no concrete or consistent conclusions.

 

[heypa]

Forget the esoteric babble.Volume only lets you interact.
"Let not your action affect price unduly."

 

[Dackster]

Quote from heypa:

Forget the esoteric babble.Volume only lets you interact.
"Let not your action affect price unduly."

Orders are for interacting, you get filled and you become part of the volume. But are you on the right side of the volume that is going to take you to where you want to go?



Dackster.