Which Indicator uses Volume as a variable
- Thread starter Mut1ey
- Start date
Believe it or not, John Bollinger's book Bollinger on Bollinger Bands, which I've just finished reading, provides an excellent survey, complete formulas, and reasonably good explanations of indicators which are based on volume and price (other than normalized volume and average volume, which Bollinger explains, there are no indicators that I know of that are based on volume alone, except of course for raw volume). For what is meant to be more in depth coverage of indicators based on volume and price, Bollinger also offers a video and monograph called Volume Indicators which you can learn more about at http://www.bollingerbands.com/products/volumevideo.php. I have not seen the video or read the monograph so I can't offer a personal opinion.
If you're looking for more detail on a few important indicators based on volume and price, and on using volume generally in making trading decisions, you may want to read Donald Cassidy's book Trading on Volume, although his writing style is so pedantic that it's tough wading through it to extract what's really useful to know.
Hope you find this helpful and if you come up with any more resources, do let us know.
Adios,
cwb1014
If you're looking for more detail on a few important indicators based on volume and price, and on using volume generally in making trading decisions, you may want to read Donald Cassidy's book Trading on Volume, although his writing style is so pedantic that it's tough wading through it to extract what's really useful to know.
Hope you find this helpful and if you come up with any more resources, do let us know.
Adios,
cwb1014
I appreciate all the responses so far.
I have found these indicators (includes ones above) which fall into all categories identified by Grub109 and also within volume only and volume/price combined. Obviously some groups of these are varaitions of a theme.
1) Accumulation/ Distribution
2) Advancing/ Declining, Unchanged Volume
3) ARMS Index
4) Chaikins Oscillator
5) Cummulative Volume Index
6) Demand Index
7) Ease of Movement
8) Equivolume
9) MoneyFlow Index
10) Negative Volume Index
11) On Balance Volume
12) Open-10 TRIN
13) Positive Volume Index
14) Price and Volume Trend
15) STIX
16) Trade Volume Index
17) Volume Oscillator
18) Volume Rate-of-Change
Now, my question is, which of these make sense being used for Intra-day Futures indices trading - ie. applicable to minutes rather than days/ months. Using a 15 minute chart or 5 min chart.
CWB1014, another book on volume is The Undeclared Secrets that Drive the Stock Market by Tom Williams. I haven't read it myself yet, but have had it recommended.
I have found these indicators (includes ones above) which fall into all categories identified by Grub109 and also within volume only and volume/price combined. Obviously some groups of these are varaitions of a theme.
1) Accumulation/ Distribution
2) Advancing/ Declining, Unchanged Volume
3) ARMS Index
4) Chaikins Oscillator
5) Cummulative Volume Index
6) Demand Index
7) Ease of Movement
8) Equivolume
9) MoneyFlow Index
10) Negative Volume Index
11) On Balance Volume
12) Open-10 TRIN
13) Positive Volume Index
14) Price and Volume Trend
15) STIX
16) Trade Volume Index
17) Volume Oscillator
18) Volume Rate-of-Change
Now, my question is, which of these make sense being used for Intra-day Futures indices trading - ie. applicable to minutes rather than days/ months. Using a 15 minute chart or 5 min chart.
CWB1014, another book on volume is The Undeclared Secrets that Drive the Stock Market by Tom Williams. I haven't read it myself yet, but have had it recommended.
There is an indicator called 'fve" or finite volume elements that I was checking out a few months ago. It is coded for eSignal already. Here is an excerp from the article (and the link)
http://store.yahoo.com/traderscom/v212debrbyma.html
"The finite volume elements (FVE) indicator is yet another money flow indicator â but it takes into account both intra- and interday price action.
Most technical analysts underestimate volume indicators in favor of pricebased indicators or price pattern recognition. Volume often leads price, and volume indicators can predict this price change by observing the delicate balance of supply and demand in the never-ending battle between buyers and sellers, bulls and bears. To help analyze crowd psychology and profit from subsequent price moves, I created the finite volume elements (FVE) indicator.
VOLUME-BASED INDICATORS
Money flow, accumulation/distribution, and balance of power are all terms synonymous with volumebased indicators. I have been using volume indicators for some time as my prime tools in making trading decisions, and Iâve found that divergences between volume and price are often the only clues to important reversals. Volume indicators use intraday (the relation of the close to the midpoint of the day) or interday (todayâs price relative to yesterdayâs) price action to calculate whether money is flowing in or out of a security. The best-known intraday money flow indicators include Marc Chaikinâs money flow index (CMF), David Bostianâs intraday intensity, and Williamsâ accumulation/ distribution. These all ignore the stockâs price change relative to the past, but calculate accumulation or distribution according to the relation between the closing price and the midpoint (Chaikin and Bostian) or the open (Williams) of the day.
On the other hand, the best-known money flow indicators that use interday price changes are onbalance volume (OBV), David Marksteinâs volumeprice trend, and the money flow index (MFI), which is a volume-weighted relative strength index (RSI)."
http://store.yahoo.com/traderscom/v212debrbyma.html
"The finite volume elements (FVE) indicator is yet another money flow indicator â but it takes into account both intra- and interday price action.
Most technical analysts underestimate volume indicators in favor of pricebased indicators or price pattern recognition. Volume often leads price, and volume indicators can predict this price change by observing the delicate balance of supply and demand in the never-ending battle between buyers and sellers, bulls and bears. To help analyze crowd psychology and profit from subsequent price moves, I created the finite volume elements (FVE) indicator.
VOLUME-BASED INDICATORS
Money flow, accumulation/distribution, and balance of power are all terms synonymous with volumebased indicators. I have been using volume indicators for some time as my prime tools in making trading decisions, and Iâve found that divergences between volume and price are often the only clues to important reversals. Volume indicators use intraday (the relation of the close to the midpoint of the day) or interday (todayâs price relative to yesterdayâs) price action to calculate whether money is flowing in or out of a security. The best-known intraday money flow indicators include Marc Chaikinâs money flow index (CMF), David Bostianâs intraday intensity, and Williamsâ accumulation/ distribution. These all ignore the stockâs price change relative to the past, but calculate accumulation or distribution according to the relation between the closing price and the midpoint (Chaikin and Bostian) or the open (Williams) of the day.
On the other hand, the best-known money flow indicators that use interday price changes are onbalance volume (OBV), David Marksteinâs volumeprice trend, and the money flow index (MFI), which is a volume-weighted relative strength index (RSI)."
Thank you Nut and one for your contributions.
Volume is the single most important variable for optimizing making money.
How to use this resource is not complicated.
I recommend using raw volume primarily for several purposes:
1. to determine if the market is tradeable vis a vis liquidity. This minimizes risk caused by disruption.
For ES on the 5 min, the volume factors are: 4500 to 6000 is minumum slow trend volume required. Below that risk is very high. 10k to 12k will support any trend. Beginner fast paced trends are well supported at 20k and a little less. The best leading indicator of a near term future break out is volume less than 2500 for one bar.
2. to trade a trend use pro rata volume assessments on 5 min bars. Conditions of 1. can be anticipated in this manner. This gives you entries, holds, reversals and exits.
NB: Volume is the single best reinforcer of other indicators. Their signals must be reinforced by volume. The corresponding focal point for price bars is only one place; that is the end of the bar that is actionable. (it is the end opposite the trend direction end).
3. The very dry up (VDU) signal (less than 2500 on ES) which calls off all prior signals, patterns, and intrachannel actions. This is a reset signal to traders. It signals dissagreemnet amoung potential traders and from this state anything can happen depending upon who changes their viewpoint first.
4. continually dropping volume which precipitates congestion, convergence and centering of price. The volume breakout (pro rata) will precede price BO (use brackets after centering). On ES it is a process of one to three bars.
5. Failure to BO of price is best measured using volume as the leading indicator. This ensures two profit portions should this occur. When volume is not sustained (pro rata) you will have a price break out failure and you can reverse on the point of failure (pro rata).
After raw volume,usually as a leading indicator, comes the A/D type "switches". Because volume leads, you get to see the switch sooner. The relaviatistic indictors lead the absolute indicators. Break your list into two parts so you have the difference noted.
The above five signal groups generally allow you to trade continually.
Volume best reinforces SCT trading where you stay on the right side of the market at all times. ET is not really conversant on system trading where system means continuous rather that an edge based system. The further along in multiples of H/L performance you average on the long term, the more important volume becomes. From 75% of H/L per day it becomes rather significant. Above 200% of H/L, volume is the leading precursor to trend ending flaws.
The Welles Wilder RSI set to the Pring published settings, is the best indicator to place on a volume chart which is in synch with your price set up. Keep all indicators off your price chart. And keep all indicators from creeping in between you price and volume pair of charts.
Volume is the single most important variable for optimizing making money.
How to use this resource is not complicated.
I recommend using raw volume primarily for several purposes:
1. to determine if the market is tradeable vis a vis liquidity. This minimizes risk caused by disruption.
For ES on the 5 min, the volume factors are: 4500 to 6000 is minumum slow trend volume required. Below that risk is very high. 10k to 12k will support any trend. Beginner fast paced trends are well supported at 20k and a little less. The best leading indicator of a near term future break out is volume less than 2500 for one bar.
2. to trade a trend use pro rata volume assessments on 5 min bars. Conditions of 1. can be anticipated in this manner. This gives you entries, holds, reversals and exits.
NB: Volume is the single best reinforcer of other indicators. Their signals must be reinforced by volume. The corresponding focal point for price bars is only one place; that is the end of the bar that is actionable. (it is the end opposite the trend direction end).
3. The very dry up (VDU) signal (less than 2500 on ES) which calls off all prior signals, patterns, and intrachannel actions. This is a reset signal to traders. It signals dissagreemnet amoung potential traders and from this state anything can happen depending upon who changes their viewpoint first.
4. continually dropping volume which precipitates congestion, convergence and centering of price. The volume breakout (pro rata) will precede price BO (use brackets after centering). On ES it is a process of one to three bars.
5. Failure to BO of price is best measured using volume as the leading indicator. This ensures two profit portions should this occur. When volume is not sustained (pro rata) you will have a price break out failure and you can reverse on the point of failure (pro rata).
After raw volume,usually as a leading indicator, comes the A/D type "switches". Because volume leads, you get to see the switch sooner. The relaviatistic indictors lead the absolute indicators. Break your list into two parts so you have the difference noted.
The above five signal groups generally allow you to trade continually.
Volume best reinforces SCT trading where you stay on the right side of the market at all times. ET is not really conversant on system trading where system means continuous rather that an edge based system. The further along in multiples of H/L performance you average on the long term, the more important volume becomes. From 75% of H/L per day it becomes rather significant. Above 200% of H/L, volume is the leading precursor to trend ending flaws.
The Welles Wilder RSI set to the Pring published settings, is the best indicator to place on a volume chart which is in synch with your price set up. Keep all indicators off your price chart. And keep all indicators from creeping in between you price and volume pair of charts.
onewaypockets has picked one of the best IMO! Also, read the recent article from "T/A of S and C" magazine (I think the September or October issue of this year...good FVE information). The Finite Volume Element indicator makes a TON of sense to me for looking at the 15 min/60 min/Daily indications for any potential volume pressure information. I trade the ES and I am incorporating this indicator into my trading for additional assistance in the area of volume pressure. I want to make sure that I am not entering into large trades against the pressure. Also, I see that this can be used to find potential breakouts in a bigger picture sense. Anyway, I will be trying it out for several months to see if this indicator has benefits for my style of trading.
Chris
Chris
The finite volume elements indicator does seem worth following up on, but it looks a little rough without a little data processing as you can see by the .png included here.
Perhaps using a T-3 MA or a Jurik MA function of the indicator itself would reduce false triggers without losing any speed and would make things more clear.
Any screen shots of what you come up with would be appreciated...