Price, (Volume), Support, Resistance, Demand, Supply . . .

[TheBramble]

Since there is no volume component of forex data, I was wondering if volume could be implied by these differing patterns of price action?

JO - as has been described in another thread - yes, you can. The volatility of the price action in any given time period can be used as a proxy volume.

Which also makes me think of a parallel with Market Profile approach.

 

[barjon]

ok you guys. Just about to take a break for a few days, but before I go perhaps you could say whether the volume surge on the down leg is significant and what we might make of the recent fast rise from a price/volume perspective.

Won't pick up answers 'til the week-end so will have begun to see how any views pan out.

Good trading all

jon

 

[TheBramble]

The volume in both the down and the up phases looks consistent, not parabolic. Sure the volume is consistently higher in the down phase than the up, but in each phase, it's pretty level. Does this indicate very little retail involvement which is normally characterised by parabolic or spiking volume? Am I missing a nuance or two?

The other thing that jumps out at me and I'd appreciate views on this is the appearance that the price is being played between those two round numbers 4300-4500.

 

[JumpOff]

examples please!

Fudgestain wrote:
For anyone who is interested, you need to gain experience using live charts of one or more of tick, volume and/or range bars. You can experiment with the number of ticks per bar, the size of volume per bar and number of points per range bar. You'll find it illuminating .. a big step forward.

Well I am interested, but I still don't really understand what you are talking about! What kind of trading or analysis platform do you use that has these kinds of charts included in it?

JO

 

[sulong]

barjon,
It's my thought that you'er looking at an incomplete picture. I drew some circles and such on your chart, to illustrate how price and volume are reacting at previous price levels.

For one, the volume shows sellers losing interest on each test of support, (they'er just plain looking tired)
You see where I drew circles around price? And how price is always hesitating in that area? It's almost a straight line, across that level.
So for me the question would be, "will that area be important again?"

ok you guys. Just about to take a break for a few days, but before I go perhaps you could say whether the volume surge on the down leg is significant and what we might make of the recent fast rise from a price/volume perspective.

Won't pick up answers 'til the week-end so will have begun to see how any views pan out.

Good trading all

jon

 

[fudgestain]

Yes Fudgestain. Could you please explain in more detail.

OK, do you want me to further illustrate how tick, volume and range bars work? Just a quick response for now but if so I will come back and explain.

 

[dbphoenix]

So many people didn't trade today, at least on this side of the water, because the volume was "so low". And yet the buying and selling pressures were still there, the setups were still there, the NQ and ES still reached their daily averages.

Just something to think about . . .

 

[TheBramble]

So, what does it mean? When the majority believe the vouime is low, what does that mean? And who are the majority - retailers or the big guns?

And if NQ and ES reached their daily averages without much volume - what does THAT mean?

 

[dbphoenix]

So, what does it mean? When the majority believe the vouime is low, what does that mean? And who are the majority - retailers or the big guns?

And if NQ and ES reached their daily averages without much volume - what does THAT mean?

Maybe that volume isn't as important as buying/selling pressures?

 

[sulong]

I thought I'd give my take on this buying/selling pressure issue.

Volume alone means nothing. But volume ( regardless of how much of it) with price movement, means "pressure".

If there are trades taking place, and the price is moving up, then there is pressure to the upside, and also the reverse is true, trades+ down price = downward pressure.

For me, the volume picture is of the most help at seeing potential exhaustion, or, a confirmation of continuation. Other than that, price action is foremost on my decision tree.

 

[TheBramble]

So pressure is related to the amount of price movement per unit of volume? Is this a roughly constant relationship or variable? And if variable, is it derivable empirically or just through experience and 'feel'?

 

[sulong]

1. So pressure is related to the amount of price movement per unit of volume?
2.Is this a roughly constant relationship or variable?
3.And if variable, is it derivable empirically or just through experience and 'feel'?

1. Yes, this is the way I see it.
2. Again, yes, as long as we remember that the amount of pressure is always changing.
3. I'm not sure how to answer this one, but I [think] that "empirically" and "experience, are the same thing. no?

 

[TheBramble]

I'm not sure how to answer this one, but I [think] that "empirically" and "experience, are the same thing. no?

By empirically I meant observable, measurable and definable. Such as "whenever the volume is double the previous volume bar and the price hasn't moved - da di da di dah".

As opposed to "experience" which completely defines any possibility of defining accurately or even verbalising if its very deeply experiential. Such as "I've been trading for over 100 years and I know when this happens - then this happens - but don't ask me how I know. I just do".

 

[dbphoenix]

What do you mean by "unit of volume"?

 

[TheBramble]

What do you mean by "unit of volume"?

I assume you're asking me?

What I think I meant was in relation to your phrase 'selling/buying pressure' we could establish the extent of the pressure by examining the relationship of volume to price.

If (say) 10,000 volume moves the price UP 1c in one period and 1.000 volume moves it up 1c in the next, buying pressure (=desire to buy) is increasing.

The 'unit' is very much defined relative to recent performance.

Make sense?

 

[dbphoenix]

I assume you're asking me?

What I think I meant was in relation to your phrase 'selling/buying pressure' we could establish the extent of the pressure by examining the relationship of volume to price.

If (say) 10,000 volume moves the price UP 1c in one period and 1.000 volume moves it up 1c in the next, buying pressure (=desire to buy) is increasing.

The 'unit' is very much defined relative to recent performance.

Make sense?

It's not so complicated.

If price is moving up, buying pressure is greater than selling pressure. If it weren't, price wouldn't move. That's really all there is to it.

Of course, if one wants to make an indicator out of all this, which is the common impulse, that's an entirely different subject.

 

[TheBramble]

It's not so complicated.

If price is moving up, buying pressure is greater than selling pressure. If it weren't, price wouldn't move. That's really all there is to it.

Well, even better then.

So how do we use this information?

Knowing that price is moving up indicates buying pressure - at that moment or timeslice only. We can take a position that the market has a higher probability of doing what it's currently doing in the next bar than anything else. But where does the sophistication come in? What additional knowledge can be applied to the current situation? Support & Resistance are obvious considerations. Supply/Demand partially exposed by Buying/Selling pressure. IS volume action the key indicator then?

What other factors to we use to determine if this will continue, slow, stop, or even reverse?

 

[dbphoenix]

Well, even better then.

So how do we use this information?

Knowing that price is moving up indicates buying pressure - at that moment or timeslice only. We can take a position that the market has a higher probability of doing what it's currently doing in the next bar than anything else. But where does the sophistication come in? What additional knowledge can be applied to the current situation? Support & Resistance are obvious considerations. Supply/Demand partially exposed by Buying/Selling pressure. IS volume action the key indicator then?

What other factors to we use to determine if this will continue, slow, stop, or even reverse?

If by "sophistication" you mean where do you set price targets, stops, etc, that comes from developing a thorough familiarity with the territory rather than coming up with increasingly elaborate maps. If, for example, sellers can't find a trade in one direction, they'll look for it in the opposite direction. And they'll continue to fish until they catch something. If they catch something, and the catch attracts attention, it's up to you to determine the criteria for entering the move, as well as the criteria for exiting the move if it turns out to be short-lived.

You have no way of knowing whether a given move will continue or not, nor do you have any control over same. But you can determine the criteria for deciding when to scale out or exit. You always have absolute control over that.

 

[JumpOff]

We can take a position that the market has a higher probability of doing what it's currently doing in the next bar than anything else.

This makes sense to me, and I said so on another thread. I think I can predict the weather in for the next 10 minutes with a much higher degree of certainty than I can for the next 2 weeks. You would think that this would give the shortest term traders (scalpers) a big advantage. Trader333 pointed out that it's not really true. He says that studies about this kind of thing indicate that position traders are more likely to correctly identify the current direction (or perhaps he said predict what's coming). I think it's because a long term trader does not have to predict what the temperature will be at 3pm on December 15, that trader only has to predict the average low temperature for the coming December.

I still expect that all other things being equal, scalpers would have an advantage. The reason they don't is because things are not equal. Scalpers have to ante up a bigger percentage of their potential profit on each trade.

JO

 

[dbphoenix]

On the other hand, one must accept the fact that the outcome of any given trade is unknowable, which is generally at odds with what most traders mean by "prediction".