Volume tells all

[ljyoung]

ljyoung

Many thanks for your reply especially after losing your first effort (its a pain when that happens).

My question was refering to the deliberate delay that a broker/mm is allowed before recording a trade. I thought that I had read that a delay of several hours was permitted between the trade and recording it for the market to see. If I am correct can the trade be shown on the next days volume.

What is T&S and B/A?

Regards

bracke

bracke,

T&S = Time and Sales; B/A = Bid/Ask

I believe you are quite correct that MM's can delay the reporting of a trade when "certain circumstances" apply (one of which is very large volume but there are probably others like the fabled 'lost ticket'"). The time frame for reporting differs from exchange to exchange and I'm pretty sure it is 90 seconds for the NASDAQ. The exchanges monitor this sort of thing and if a MM has a lot of these delayed events there can be consequences of some sort (a nasty tongue-lashing or worse, some sort of 'comfy chair' brutality).

However in Tom William's book it does state that his TradeGuider software can detect and ignore the late trades which I interpret to mean that because the MM has to report the late trade in sequence, then what the software will pick up is a jump in volume of a previously recorded trade and if said jump fulfils some sort of absolute or relative volume criterion, it is ignored.

What I said in my lost long version is that I had NOT gone back and assiduously checked all the volume bars for fidelity, but in day to day use had not noticed anything repetitively obvious with respect to changes in the magnitude of the volume bars (this in stark contrast to my observations when using IB, Prophet or Ameritrade as my data provider and employing the "refresh routine" as a way to try and get accurate data). I have checked price very closely though and find it exceedingly rare that there is a readjustment and when there has been one it is $0.01-0.02 for an equity like GOOG.

So it may well be that close scrutiny of volume bars will on occasion show a large change in magnitude but I don't think anything can be done about it. There may well be more than a bit of "nod and wink" activity going on between MM's when this sort of thing happens but the average small (or even large) retail trader isn't going to know about it and so in some sense that group of players will still be playing on the same field (the muddy, pothole-ridden quagmire).

We are left then to the not so tender mercies of ze exchange police who must keep some sort of limit on this type of thing but what that limit is and how rigorously it is enforced, I don't know. Again however we have the experience of other players and Mr. William's book to suggest that the MM's aren't doing this very frequently.

If there are any other questions please fire away and thank you for your interest.

Sincerely,

lj

 

[Splitlink]

I do not use this indicator myself but have used a 5 minute candle-based NYSE $TRIN as a very rough measure of what price is doing vs what the people who are moving price are doing. So if price and $TRIN are both going up it suggests that things may not be what they are being presented to be.
$TRIN has been most useful when the aforementioned divergence (or its converse) is present but again only in a very general sense. This is not an original idea but rather was co-opted from an article I read some time ago by Alan Farley.

lj

Thanks. I trade LSE stocks and accumulation/distribution seems to be the only one available to me. Sometimes it helps and sometimes it doesn't!

Split

 

[bracke]

bracke,

T&S = Time and Sales; B/A = Bid/Ask

I believe you are quite correct that MM's can delay the reporting of a trade when "certain circumstances" apply (one of which is very large volume but there are probably others like the fabled 'lost ticket'"). The time frame for reporting differs from exchange to exchange and I'm pretty sure it is 90 seconds for the NASDAQ. The exchanges monitor this sort of thing and if a MM has a lot of these delayed events there can be consequences of some sort (a nasty tongue-lashing or worse, some sort of 'comfy chair' brutality).

However in Tom William's book it does state that his TradeGuider software can detect and ignore the late trades which I interpret to mean that because the MM has to report the late trade in sequence, then what the software will pick up is a jump in volume of a previously recorded trade and if said jump fulfils some sort of absolute or relative volume criterion, it is ignored.

What I said in my lost long version is that I had NOT gone back and assiduously checked all the volume bars for fidelity, but in day to day use had not noticed anything repetitively obvious with respect to changes in the magnitude of the volume bars (this in stark contrast to my observations when using IB, Prophet or Ameritrade as my data provider and employing the "refresh routine" as a way to try and get accurate data). I have checked price very closely though and find it exceedingly rare that there is a readjustment and when there has been one it is $0.01-0.02 for an equity like GOOG.

So it may well be that close scrutiny of volume bars will on occasion show a large change in magnitude but I don't think anything can be done about it. There may well be more than a bit of "nod and wink" activity going on between MM's when this sort of thing happens but the average small (or even large) retail trader isn't going to know about it and so in some sense that group of players will still be playing on the same field (the muddy, pothole-ridden quagmire).

We are left then to the not so tender mercies of ze exchange police who must keep some sort of limit on this type of thing but what that limit is and how rigorously it is enforced, I don't know. Again however we have the experience of other players and Mr. William's book to suggest that the MM's aren't doing this very frequently.

If there are any other questions please fire away and thank you for your interest.

Sincerely,

lj

ljyoung

Thank you for your reply

I suspect that the rules relating to delaying trade information are different in the UK from the USA. and that in the UK a number of hours are allowed.

Regards

bracke

 

[Grey1]

downtrends wont be end because of decreasing or increasing spikes in volume.

RIMM CASE

Ok you guys have said so much about Volume and still IMHO don’t understand how business is conducted in the market. Let me explain what I mean .

First of all , the volume information on Level II screen has tiny and limited value. Most large orders are PLO ( pegged limit order ) and only fraction of it is shown on the L2 Screen . In another word if I was a MM or was acting as one and wanted to SHORT 5000 RIMM I would use PLO to only display fraction of the 5000 shares .( For example I would show only 400 shares on L2 screen . This will throw a L2 player’s analysis right out of the window lol

On the Historical volume . the pegged order can be a vwap order executed @ different intervals which again would take the spike out of the trade resulting in warped volume analysis

Secondly ,When program trades hit a certain sector , all stocks with in that sector are affected. If program trades hit the market based on TECHNICAL merit ( OB /OS ) then your volume analysis is kind of reliable but if they hit the sector based on NEWS the reaction becomes very random and no volume analysis is of any value. Your job as a trader should always be to know what is the driving force behind a move in

a) market
b) sector
c) Stock

and as a result to follow the moves parallel to above 3.. It is no good to see T&S and draw all kind of technical conclusions .. specially if you are watching volume.... VOLUME IS MOST DECEIVING TOOL to fool traders with few years of experience ( Newbie’s don’t understand the market any way , they just click on buy or sell button )

Now lets go to the RIMM Trade

RIMM is not a shortable stock for most traders ( unless you are either trading in small size100 _300 ish or you have asked your broker to allocate you few ).. So how does this would affect the stock’s trend / ? well ,, most institutional trader use a VWAP engine to execute the trade which will disguise their volume activity or other traders executing a PLO order to short the stock ,, again hiding the true nature of supply and demand… As a result it would be difficult by using any kind of VOLUME ANALYSIS to detect the future trend of the stocks . If I was to trade the RIMM I would not even bother to look at the volume and only would short the stock based on NASDAQ market direction at any given time . If RIMM showed divergence when NAS fell or did not move with the market then I would close the trade and walk away ..

THE TOP DOWN ( Market first , Sector second , Stock third ) APPROACH IS VITAL IN ANY KIND OF TRADING AND ALL TRADERS MUST USE THIS METHODLOGY IF THEY ARE TO BE TAKEN AS A SERIOUS TRADERS …


Grey1

 

[fibonelli]

A volume oscillator gives interesting signals when compared to price.

 

[SOCRATES]

A volume oscillator gives interesting signals when compared to price.

Yes, perhaps, but invalid in a scenario involving vomumetric filtering.You have to do much more than take a volume oscillator indication for granted.

 

[Nastrader]

RIMM CASE

Ok you guys have said so much about Volume and still IMHO don’t understand how business is conducted in the market. Let me explain what I mean .
First of all , the volume information on Level II screen has tiny and limited value. Most large orders are PLO ( pegged limit order ) and only fraction of it is shown on the L2 Screen . In another word if I was a MM or was acting as one and wanted to SHORT 5000 RIMM I would use PLO to only display fraction of the 5000 shares .( For example I would show only 400 shares on L2 screen . This will throw a L2 player’s analysis right out of the window lol

THE TOP DOWN ( Market first , Sector second , Stock third ) APPROACH IS VITAL IN ANY KIND OF TRADING AND ALL TRADERS MUST USE THIS METHODLOGY IF THEY ARE TO BE TAKEN AS A SERIOUS TRADERS …
Grey1

Hi Grey1

I totally agree with your description on the limited value of LVII today. Once upon a time the LVII was a valuable tool to traders, but not any more - that was years ago. Today, the Market Makers (MM) & Specialist's can and do hide their true intentions on how many shares they have to sell or buy. In addition, today many if not most of the MM's/Special's are using ECN's instead of their own routing, this allows them to also hide the "best" MM trading the security (where the Best function is also useless on LVII in today's trading). These are just a couple examples on how the LVII can't be trusted any more. It's only value is the T&S listing the actual latest sales prices, and the spread, but not volume (you'll see mostly 100 shs running after another continuously). Even the spread has limited value if the spread is large, since MM's and pro Platforms can hide their orders 100%.

As a matter of fact, on many occasions I've seen the LVII with large orders on the Bid side at the 2nd Tier position, while on the Ask side there was only 100 shs shown. During this time, both the T&S and chart volume looked average/normal. Next the large Bid Size disappeared, and moved to the Ask side showing a large order and pushed the stock down sharply. It's true that as soon as other MM's and traders noticed this (although some did get burned), and those who were not caught just cancelled their orders, this allowed the stock fall like a rock.

Many if not most of us who have a professional trading platform have the same option to hide our true share size for longs or shorts. Also, in today's trading environment, many of us also have the option to place trades off of our Charts (any time frame), or Watch Lists (or table). The MM's utilize algorithms, VWAP, and many other tools to increase their profitability over other traders today.
Regards,
NasTrader

 

[nickerson334]

Hi osho67;

The principle of volume and it's relationship to price is the most significant to any experienced trader. I have read in Shares mag that then they interviewed some traders in the city, they were surprised to see that they only look at level 2, and that only shows you current quoted prices and volume. They can see where the large blocks of volume are at which price level, so they know where they can push prices for a profit before they hit those large orders. The same is done on the CBOT and CME, and also the NYSE as the specialist has a unique view of the market. He is the market maker and can see both sides, also knowing where the stop losses are, large orders to buy or sell stock.
Why don't you ring up the NYSE and ask then if they use anything else but price and volume. you might be surprised by the answer.

I ONLY use volume and price, with trend-lines. That's it!

Regards VSATrader

Yep, the only thing I've figured out in trading is

1: Insider Knowledge & Buying (yes folks , they know............don't get me started!)
2: Trend shifts due to insider buying. The smart ones get in quick
3: Uninformed buying pushing prices very high.
4: Insiders getting out.
5: Trend Traders getting out quick at a profit.
6: Uniformed traders losing.

I'm not 100% sure you need volume analysis to spot that, however I'm always open to finding out something new.

 

[Splitlink]

Yep, the only thing I've figured out in trading is

1: Insider Knowledge & Buying (yes folks , they know............don't get me started!)
2: Trend shifts due to insider buying. The smart ones get in quick
3: Uninformed buying pushing prices very high.
4: Insiders getting out.
5: Trend Traders getting out quick at a profit.
6: Uniformed traders losing.

I'm not 100% sure you need volume analysis to spot that, however I'm always open to finding out something new.

Grey1 and Nastrader confirm a suspicion that I have held for years. Non-professional traders are misguided in their beliefs that buying the best data service will give them, truly, accurate volume figures, especially with LSE shares.

Nevertheless, like you, I am open to something new. What about EOD totals--any hope?

Split

 

[nickerson334]

Grey1 and Nastrader confirm a suspicion that I have held for years. Non-professional traders are misguided in their beliefs that buying the best data service will give them, truly, accurate volume figures, especially with LSE shares.

Nevertheless, like you, I am open to something new. What about EOD totals--any hope?

Split

Hi ,

I trade forex.

If 10 banks do 80% of the trading
then 10-20 chief strategists are running 80% of the forex markets. I guess if you're in that position you're going to know what tomorrows news announcements will be.

As regards stocks. Company CEO's do the same. They buy up their own stock prior to
releasing good news or they'll do things like running PR campaigns in the Telegraph 'analysis' section, getting brokers to promote it etc.

All amounts to the same thing. Fleece the suckers.

The skill is to get in and out after the insiders and before the suckers.

I've done ok daytrading and TA'ing forex although I find that quite exhausing. I find the above theory is easier to trade.

I figure it takes them at least a week to accumulate prior to initiating a sucker buying frenzy.

I might be completly wrong but since I've started viewing the markets like that trading has become easier.

 

[ljyoung]

Originally Posted by Splitlink
Grey1 and Nastrader confirm a suspicion that I have held for years. Non-professional traders are misguided in their beliefs that buying the best data service will give them, truly, accurate volume figures, especially with LSE shares.

Nevertheless, like you, I am open to something new. What about EOD totals--any hope?

Split

I think you are talking about apples and oranges when you say what you said in the above noted post. With no doubt at all Level II volumes are a joke. Nasdaq has recently come out with Total View which is supposed to give traders access to info about "deeper pools of liquidity" but it is still the same shell game.

What is not a shell game are the posted volumes for trades which have occurred. Clearly if one sums the volumes on a trade-filtered T&S readout for a period of let's say one minute, then that sum should equal what your data provider has posted as being the volume for that one minute. If it doesn't reasonably approximate the posted volume then get yourself another data provider. There are "special circumstances" which have been discussed previously but these are in the main, rare. The exchanges monitor this stuff and if some scum-sucking scamster pulls off a crooked trade periodically he may get away with it but not on a routine basis.

VWAP is but one of many types of algo trading, but the purpose which most if not all of them share is to get their not infrequently large volume transaction effected with a minimal perturbation of price. It is not naive to think that all of the pros do not share the same opinion all of the time and there may be "discussions" about which way price should be going at any given point in time. Eventually they must show their hand and they do that with volume.

It may well be that there are those who can successfully trade the markets without any consideration of volume. More power to them but to say that traders like me who find volume to be of utility are being deceived and don't even know it, is rather presumptuous.

As Mr. Lennon once said "Whatever gets you through the night, is all right, is all right". It is non-trivial to learn how to correlate price and volume but it can be done and for me (and many others I perceive) it helps in selecting entry and exit points or as Mr. Jack Hershey says facilitates the decision of whether to "hold or reverse".

lj

PS: Socrates. I know what "filtered" means and what "volumetric" means but do not know what you mean when you refer to a "scenario with volumetric filtering". What do you mean?

 

[Splitlink]

Originally Posted by Splitlink
Grey1 and Nastrader confirm a suspicion that I have held for years. Non-professional traders are misguided in their beliefs that buying the best data service will give them, truly, accurate volume figures, especially with LSE shares.

Nevertheless, like you, I am open to something new. What about EOD totals--any hope?

Split

It may well be that there are those who can successfully trade the markets without any consideration of volume. More power to them but to say that traders like me who find volume to be of utility are being deceived and don't even know it, is rather presumptuous.

Hi,

Being presumptious is the least of my intentions. If you thought so, I am sorry. There have, always, circulated stories of London dealers being too busy, or for any other reason, to post their volume figures. That was why I asked whether EOD figures could be trusted. If you are convinced that your volume figures are accurate , then what can I say? However, if they are not accurate, then to base market tactics on them is a deception.

Since I do not trust the veracity of intraday volume figures, I would be a fool to use them, but I live in hopes that I am wrong
because accurate volume figures would be better than any other indicator.

The only fiddlers we hear about are the ones that get caught.

Split

 

[ljyoung]

Good AM Split,

Accept my apologies for misperceiving the tone of your post. The only way that I can see for a retail trader to check the posted volumes is by summing the trade-filtered raw data and then comparing the two. However if the LSE is as bad as you recount then I too would find it hard to accept posted volumes simply because at some point in the future they will be changed by the addition of "late trade"data.

To be honest I don't quite know what to say further on the subject. A rant about the inequities of the LSE (or any other exchange for that matter) would not be productive. At the risk of falling victim to the old "too clever by a half" aphorism, could it be that there is a campaign of disinformation about the extent of the problem so as to dissuade traders from using reliable volume data?

lj

 

[ljyoung]

Addendum: I made a mistake in an earlier post (#351) when I said something about trade-filtered T&S data. I meant to say trade-filtered raw data (which should be the same as T&S data).

FWIW: When in the past I have checked my minute by minute T&S data (which will of necessity have the trades from all exchanges which deal with a particular equity) with the volume posted by my data provider on a one minute bar, they are essentially identical.

General Question: Is it not true that Level II or Total View or whatever view is exchange-specific and thus may not (or will not) have comparable data from other exchanges which deal with the same equity?

lj

 

[Nastrader]

Addendum: I made a mistake in an earlier post (#351) when I said something about trade-filtered T&S data. I meant to say trade-filtered raw data (which should be the same as T&S data).

FWIW: When in the past I have checked my minute by minute T&S data (which will of necessity have the trades from all exchanges which deal with a particular equity) with the volume posted by my data provider on a one minute bar, they are essentially identical.

General Question: Is it not true that Level II or Total View or whatever view is exchange-specific and thus may not (or will not) have comparable data from other exchanges which deal with the same equity?
lj

Ljyoung

No - LVII is not exchange specific or at least shouldn't be.

According to my Platform (Realtick) "Quote Sources Configuration" it does provide all Exchanges & Market Centers trades/volume unless I de-select it. I always have this selection chosen for "All." I believe that this option is for traders that do want exchange specific data (when de-selected). I'm not sure about other non-pro platforms. Thus all T&S & chart volume will be the same, or should be. On the other hand all Trades are mandatory to be shown in T&S per SEC.

NasTrader

 

[ljyoung]

Ljyoung

No - LVII is not exchange specific or at least shouldn't be.

According to my Platform (Realtick) "Quote Sources Configuration" it does provide all Exchanges & Market Centers trades/volume unless I de-select it. I always have this selection chosen for "All." I believe that this option is for traders that do want exchange specific data (when de-selected). I'm not sure about other non-pro platforms. Thus all T&S & chart volume will be the same, or should be. On the other hand all Trades are mandatory to be shown in T&S per SEC.

NasTrader

Thank you NasTrader for the clarification. So let me see if I have it correct now:

For any given equity:
T&S = all trades from all exchanges with the volume and price associated with each trade.
Trade-filtered raw data = T&S as defined above.
Level II (Total View or whatever view) data = all "visible" quotes and all trades with associated volumes which can be selected, in a professional platform, to be either exchange-specific or to encompass all exchanges.
Trade-filtered Level II data = all trades with associated volumes which can be selected, in a professional platform, to be either exchange-specific or to encompass all exchanges.

lj

 

[Nastrader]

Thank you NasTrader for the clarification. So let me see if I have it correct now:

For any given equity:
T&S = all trades from all exchanges with the volume and price associated with each trade.
Trade-filtered raw data = T&S as defined above.
Level II (Total View or whatever view) data = all "visible" quotes and all trades with associated volumes which can be selected, in a professional platform, to be either exchange-specific or to encompass all exchanges.
Trade-filtered Level II data = all trades with associated volumes which can be selected, in a professional platform, to be either exchange-specific or to encompass all exchanges.

lj

Ljyoung

I think you have it, but you’re making it too complicated.

Lets just keep it simple:

1) T&S - you can trust.
2) LVII - I would not trust or believe everything shown, since LVII has limited value. Utilize Technical Analysis for scalp or daytrades, not LVII.

NasTrader

 

[firewalker99]

Volume tells all...(2)

This thread apparently has had something of a time-out, but I was hoping to get it back on track.

I will start myself with a chart analysis of last two days. Yes it's in hindsight, but those who have been following the DOW 2007 last month have seen some of my live trading there.

Volume is all around the chart as price is in a continuous flow of buyers and sellers. Volume can be very difficult to interpret, unless you know where to look and what to look for. I have been using volume in my trading, often as confirmation to support price action. What follows is two charts: one of last Thursday and Friday of the YM futures contract. I am not saying my analysis is 100% correct nor that it is the only way one can interpret or see volume action. I picked out some of the clearest signals on a 5-min chart, although there is much more information available in the price/volume than what I've posted below. I am open to constructive suggestions and comments from other members.

 

[firewalker99]

Analysis of 2007/05/31

Ok, so let's get started Analysis of 2007/05/31:

1: Price opened the day with a test of resistance at 13690. Notice however how all the wicks of those bars close below 13685. Moving on, we swing low to 13655, make a swing high to 13675 and then swing low again to 13650. Price moves up again to 13680 and stays there for about 30-minutes. Notice how the volume drops of gradually (1) before resuming the downtrend. When volume suddenly picks up (1a) you could've entered a short, although the move would've already been underway. If you had noticed that price failed to go higher on the lack of buying pressure, you could've shorted from 13680 and got in that move nice and early.

2: This is a potential selling climax. It's noticeably a stopping bar(*). The volume is very high compared to the previous bars, but the bar closes well off it's lows. Then for the next couple of bars price is closing above 13635 on moderate volume. The stop volume bar in itself can lead to a rather agressive long entry.

3: This is a re-test of the low. But the selling pressure is clearly more absent than on then before. Price is able to push higher without much trading activity, which means the sellers have been washed out. Unfortunately this is so close to the end of the day, but for overnight traders this would've been a nice long entry.

(*) A stopping volume bar does not necessarily have to mean the bottom: http://www.trade2win.com/boards/showpost.php?p=297416&postcount=321

 

[firewalker99]

Analysis of 2007/06/01

This post continues from the previous post.

4: high volume bar, but on news

5a: potential selling climax, notice how the bar closes well of it's lows, however on the following bar there is very little reaction compared to the trading activity. The volume is even higher than on the previous bar, but price isn't able to travel higher. So we wait just a little longer for taking that long.

5b: another potential selling climax and a wide spread bar. Now the difference is much more clear. The volume on the next bar is quite low, but nonetheless able to push price higher: absence of selling pressure. Price hangs around 13650-13655 for a couple of minutes. Then notice the very low volume (blue circle) on the selling bar. This is a very clear entry signal for a long. Price immediately bursts higher on the next bar.

6: If you waited for price to move up, again you've been to late. Price is now consolidating into a sideways area and again volume tells the clue. We need to re-test the low at 13640 again.

7: At this point it's important to compare the price/volume action to the previous action at 13640. The volume is now much lower and there's not as much selling going on. When volume drops almost to zero. If you've been quick enough to notice that, you would e in around 13650, for a 40-point rise. Not bad for a Friday night trade