Could also be... that there was more in the time charts to see that you didn't or didn't understand its significance... and that's the actual differential. Not saying it "is", just that it might.
Why does Volume matter? Isn't non-involvement from institutional buyers itself a signal?
- Thread starter CyJackX
- Start date
Could also be... that there was more in the time charts to see that you didn't or didn't understand its significance... and that's the actual differential. Not saying it "is", just that it might.
Some of this is true but most of it is a straw-man argument. To begin with, volume is not an indicator according to the commonly-accepted definition of the term "indicator". Volume is a record of activity, not an indicator. It tells you how many shares, contracts, etc have been traded. That much is true. And while it is true that it is often used as a "confirmation indicator", that doesn't mean that it should be. And while it is true as stated that none of the above assumptions are true, and while it is true as stated that volume cannot be used to consistently and accurately confirm or disprove trends, none of this supports the conclusion reached that volume should not be used for trading. To the contrary, it is important to know how much activity is related to a price point, much less a price move. If there is very little activity related to a price point or move, then those who are trading size -- such as institutions -- are either not interested -- perhaps because the interval is so small that major players don't even see it -- or they have already bought, sold, or gone short. This is the chief reason why there is so much volume at important reversals: the big players see value and slow, halt, and reverse the decline (if buying). This requires a lot of activity. And this activity is reflected in volume. Does this guarantee that price will rise? Depends on the level of buying interest. Price may well segue into a range. But the major buyers have bought; therefore one cannot expect the level of volume/activity at the reversal to continue.
So, no, volume is neither bullish nor bearish nor does it have any predictive value. However, heavy volume does tell the trader where major players see value (which provides the basis for "support" points and/or levels and/or zones) and where major players see overextension and retreat from continuing to pay the ask (which provides the basis for "resistance" points and/or levels and/or zones). It also tells the trader, if "light", where major players are not interested, either because they're already in or because the price point or level does not represent value to them and hence provides no reason to act. Of course, if the trader has no interest in what institutions, etc, are doing or not doing, then there's no reason to include it in one's decision-making. That does not mean, however, that it has no value in the absolute.
For sure - different interpretations are always possible (otherwise we wouldn't still be discussing it?).
As is inevitably the case, with so many of these subjects about which discussions in trading forums continue unabated, there's "information" both for and against: how we choose to classify, interpret and be influenced by that "information", and whether and how we choose to verify it independently (not to mention whether we actually manage to do so objectively and validly), are of course matters we each decide and control for ourselves.
Important highs and lows are made on high volume or low volume... neither definitive about future price movement and therefore irrelevant.
The is one "volume correlation" that seems to hold up.
For an individual issue, there tends to be a HUGE volume spike when the price is down ~90% from its high. That's apparently when the last hold-outs "toss in the towel".
Lol ... it's the "therefore" that I slightly take issue with, here <putting pedantic hat on, now> ... the fact that things are less than "definitive" doesn't necessarily make them "irrelevant".
I run my race, at my pace, in the lane of my choosing.
If that makes me a devotee to me, OK. I'm good with that.
Sounds like you're an evangelist for you're way of racing, versus the race.
BTW. There isn't really a race. It's a metaphor.
Hey, it's America. You're entitled to believe anything you want. (Well, used to be.)
Years ago I "considered volume". Then one day it dawned upon me that there no longer was (and perhaps never was) a correlation to price. And if that was the case, then I was harming my results and wasting my time considering volume. Just passing that (market heresy?) along. Heed it or not.
Of all the market technicians, Pete Steidelmeyer (Market Profile) left the most indelible impression on me. The concept of time, control areas, and the market's acceptance or rejection of a new price valuation was (and still is) a very powerful influence on the way I analyze market behavior.
The more time a market spends at a price point or trading range, naturally the more volume gets traded there. It requires aggressive takers of volume bid or offered to change valuation, and then to sustain that new valuation the balance of the market has to accept the new valuation and in fact exchange volume at that new valuation. In other words, price valuation changes are either accepted or rejected by the marketplace.
The big deal about rejection of a new valuation is that it happens rather quickly. New valuation acceptance builds over time.
The more time a market spends at a price point or trading range, naturally the more volume gets traded there. It requires aggressive takers of volume bid or offered to change valuation, and then to sustain that new valuation the balance of the market has to accept the new valuation and in fact exchange volume at that new valuation. In other words, price valuation changes are either accepted or rejected by the marketplace.
The big deal about rejection of a new valuation is that it happens rather quickly. New valuation acceptance builds over time.
I sometimes wonder with all these "talks" during market hours, if anyone on ET really trade at all.
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