Why do people use Volume, Range and Tic charts?
- Thread starter fearless9
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If you really believe this then you are missing the difference between Signal and Noise.
You talk of pressure as if the buyers and sellers are lined up opposite each other, pushing in opposite directions. These guys showing their supplies are just the damping in the system. The volume consuming their supply can push them back over themselves to the point where it hurts so much they change direction and become additional volume themselves.
Volume consumes supply, this begets price change, this begets more volume.
Increasing volume => continuation of price. QED (trumps per se).
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Funny how the Fed doing its job causes such mayhem in the US markets. Look at the volume. Look at the price volatility - there seems to be a relationship: more volume = more volatility.
Volume does not consume supply; demand does. Nor does increasing volume lead to continuation of price (I assume you mean continuation up or down). Price can move quite nicely with very little volume at all and often does.
As for increasing volume equalling more volatility, sometimes. Sometimes not. In fact, increasing volume wihout much change in price or volatility generally precedes a reversal.
LC
Another way of looking at demand and supply without having one's judgement skewed by the perception of sellers standing behind a counter with stacks of "supply" and hordes of buyers waving their checkbooks and credit cards demanding service.
The term "selling pressure" enables the observer to include whatever type of selling pressure it may be, whether outright sells, options, shorting, futures, etc. It is whatever is pushing against those who are trying to move price higher. But neither is it a constant, depending on what buyers and sellers consider to be value.
If you know Market Profile, that addresses the same subject, though there's nothing new about auction markets. Knowing how volume relates to value and how traders behave once price becomes "imbalanced" and breaks out above or below the range in which traders are and have been most active becomes important information for the trader who knows how to and wants to take advantage of this.
All assuming that your question was serious.
LC
I am not bright enough to know the answer to this
until after the event, which quite frankly is of no use to me
at all I am sad to report.
I am not clever enough to make sense of the DOM either , since we all preload and then there are some amongst us who fake
as well.
Anyway, I can only watch one thing at a time.
All I know is that from time to time the price flattens after it has chewed up the limits and so it requires MOs to move it on.
If it flattens at a channel that has previous history of similar
events, then it is going to take some serious grunt in order to move on.
The amount of horsepower required will depend on what the underlying tendency is saying and this is the skill in reading the market.
As I see it I like to see the price move up on the accumulating ask
and vica versa. The total volume bears more in common with the day's activity level then with any broad sweeping statements concerning price/vol relationships.
This is a period IMO when your risk of front running is at it's lowest as you can usually pick up some useful tics of profit across the stalled range.
A single transaction is "volume". Depends on the balance between the two forces.
For example, a great deal of buying pressure facing little or no selling pressure (other than filling the demand) can move price far and easily with very little "volume" at all. This is common after an accumulation phase in which much of the available "supply" has already been absorbed.
On the other hand, if strong selling pressure attempts to swamp strong buying pressure, "volume" will be high, but price will make little or no progress.
LC
Are you making a distinction between volume and demand? That is absurd.
As for increasing volume being consistent with continuation of price - well you can deny it all you want, it's there for all to see. Price bobbing around in a thin market has little to do with the main signal and a lot to do with noise.
Have you examined 6 months worth of 5 minute bars to establish the almost linear relationship between volume and expected bar volatility? No, neither have I, but I know a man who did just this and I saw the results for myself.
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