Why do people use Volume, Range and Tic charts?
- Thread starter fearless9
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The willingness of buyers to pay higher prices need not have anything to do with the number of transactions. If you feel that's absurd, so be it. But I base what I know on twenty years' experience, not on a course I took or what I read somewhere.
And there is no such thing as "noise".
LC
Thanks for the entertaining discussion gentlemen, and you have conducted yourselves as gentlemen while having it.
While there may be (and often are) cases where you will see increased directional volume which follows price action on an intra-day basis, there actually is not a direct correlation between the two, and furthermore, high volume most definitely is not necessary to achieve an extreme price movement in one direction.
Lamont C is 100% correct in the following statement:
"The willingness of buyers to pay higher prices need not have anything to do with the number of transactions."
Notice how I have made the "need not" in the statement bold to emphasize its use.
Some of the best information on the board is in this thread, it's up to you to determine how you use it.
Good trading,
Jimmy Jam
P.S. This is some of the most well-thought out and intelligent conversation I've seen regarding how price action itself can be studied and used to make productive, effective, intelligent, well thought out and consistently profitable trading decisions. I actually had to figure-out a lot of these things on my own, so it's a great resource to have it around for some of the traders who are not nearly as manic as I am (and have other obligations) in their approach to trading.
While there may be (and often are) cases where you will see increased directional volume which follows price action on an intra-day basis, there actually is not a direct correlation between the two, and furthermore, high volume most definitely is not necessary to achieve an extreme price movement in one direction.
Lamont C is 100% correct in the following statement:
"The willingness of buyers to pay higher prices need not have anything to do with the number of transactions."
Notice how I have made the "need not" in the statement bold to emphasize its use.
Some of the best information on the board is in this thread, it's up to you to determine how you use it.
Good trading,
Jimmy Jam
P.S. This is some of the most well-thought out and intelligent conversation I've seen regarding how price action itself can be studied and used to make productive, effective, intelligent, well thought out and consistently profitable trading decisions. I actually had to figure-out a lot of these things on my own, so it's a great resource to have it around for some of the traders who are not nearly as manic as I am (and have other obligations) in their approach to trading.
"High volume", in fact, is generally a danger signal, suggesting as it can a blow-off.
Increasing volume is a plus up to a point, but continuously escalating volume into increasing price has to prompt the trader to ask who is doing all this selling and why. If he understands the dynamics of the auction market, he'll at least determine where the exits are.
LC
Well said, and precisely on target.
st
The only manner in which I can talk of "high volume" or "increasing volume" is if I know which side it is on.
Please let me explain.
If you are watching time bars as most people do, then a bar containing 'n' *better than average volume is deemed to be a high vol bar.
This is only half the information that you really need.
You need to know what quantity or ratio of that vol is on the bid or ask.
ie. If the price is breaking to the longside and massive action on the bid fails to pull it down, then the price has chewed it's way through the defensive stops and cleaned them out.
It will now probably run long to the next level of limit stops.
Bear in mind that these comments are only derived from ES trading (which is all I know) and I might add that I do not use time bars, but the comments that I make are relevant because in the begining god made price and volume,or at least somebody did.
How you assemble the information and therefore your comments, always comes after this fact.
So many ETer's allow their opinions to preceed the market and become the cause of confusion not only to the readers of ET but also themselves.
You're making a distinction between "volume" of bid and ask and the number of transactions. Some people use the "volume" of the B/A to make trading decisions, particularly if they're scalping. But they don't "need" to. One can just as easily determine "where" the volume -- or buying/selling pressure -- is by price action, e.g., if volume rises and so does price, then buyers are in control. If volume continues to rise and price pulls back, buyers are being beaten back. And so on.
I personally prefer line charts rather than bars. What matters is whether or not whatever one is doing makes money for him. There is no other criterion for determining whether or not what one is doing is "right" or "wrong".
LC
"I found that when I experimented with the volume charts that I was handicapped by not having this information."
The information is there you just have to translate it.
In the chart example you gave you showed about 4 bars pulling back on lower volume. The approximate equivalent of that lower volume would show up on a volume chart as 1 longer bar, taking up the space of the 4 shorter bars shown.
If each of the 4 bars had 500 contracts of volume in them on your time chart, and you had your setting on your volume chart at 2000 contracts per bar, then 1 bar pulling back to the same price would equal the same lower volume pullback.
On the other hand if the volume chart showed a pullback with 4 short bars pulling back to the same price that would be on higher volume. 8000 contracts.
It all becomes very visual after a while, length of bars mostly
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