Volume tells all

[wwatson1]

Volume needed here

Good afternoon to you all

Successful speculators learn to follow price action and not try futilely to predict turning points in advance. They seek to trade in tune with the large participants who move the markets.futures contract--fundamental, political, psychological or otherwise--is actually reflected in the price of that commodity. It follows, therefore, that a study of price action is all that is required.let the market tell you which way it is most likely wants to go.

You know there are reasons why markets go up and down.I just dont believe that knowing what those reasons are is necessary.I been trading a long time.I did not have the tools as you guys have today, to study volume,I just trade on price action. But I am not saying volume dont work. I dont feel its necessary..to make a few $$$ Good luck

joe

I agree, But I find volume makes up the full picture and feel trader's should learn to use it to there advantage.

If I took volume of my price chart's I would be lost!!

 

[Splitlink]

Good afternoon to you all

You know there are reasons why markets go up and down.I just dont believe that knowing what those reasons are is necessary.I been trading a long time.I did not have the tools as you guys have today, to study volume,I just trade on price action. But I am not saying volume dont work. I dont feel its necessary..to make a few $$$ Good luck

joe

Hi Joe

I'm not making fortunes- I wish I was- but manage to make trading a useful activity.. I'm glad that you confirm my own ideas about volume. I can't believe that something, such as volume, that is so difficult to understand can be of much use in trading. I find it like politics, get two people together and you will find three opinions .

Nevertheless, it is a great timewaster because it seems logical that it should be related to price and, therefore, worth investigation.

No one has convinced me yet.

Split

 

[dbphoenix]

Not everything that one finds difficult to understand is a waste of time. But those who insist on defining "volume" as some sort of bar will very likely find it difficult to understand and a waste of their time as well.

--Db

 

[VSATrader]

Reon't use volume

I think that all my posts designed to enlighten you all has failed completely, so I will now stop posting any more. I think that an intelligent person would keep an open mind about anything, not just dismiss as most seem to do. If you don't have the knowledge yet, determination will get you there. Afterall, mankind had to experiment to build the things we now take for granted: satellite:the Space Shuttle etc, So did they dismiss it all and say 'well we never built that before, so it cannot work?' No they designed and redesigned until they got it right.

Please enjoy the last four charts. I know most of you won't understand them, but with a little study, you never know.

Regards VSAtader

 

[Trader333]

I think that all my posts designed to enlighten you all has failed completely

I wouldnt let this put you off as those who wish to make use of volume will continue to benefit.


Paul

 

[JonnyT]

I just cannot see that volume predicts / shows anything.

Others may disagree.

The one thing that you cannot argue with is price.

JonnyT

 

[Jcob]

Oh man

What is better than a vendor posting hindsight analysis. Too bad we are so stupid that we do not understand to buy the product.

Btw. Is there something on those charts that is difficult to understand? I have not found it yet. And yes I do make use of volume in my trading.

 

[Splitlink]

I don't want to upset people by saying that the study of volume is waste of time for them. It is for me, though, and I have said it to db before and I am sure he does not want to hear all that again!

You guys go ahead and talk about it and leave me to drown in my ignorance.

Good trading

Split

 

[purplekiwi]

jlo_bidlo

You can buy Tom's book here (without the software)

www.vsatrader.com

purplekiwi

 

[neil]

check it first

jlo_bidlo

You can buy Tom's book here (without the software)

www.vsatrader.com

purplekiwi

Check that it is not the edition that contains all the typos

 

[pttrader]

Volume tells "how" price was made. Volume is the "gasoline" to whatever price did. All good tape readers always correlate volume with price because the volume tells the manner in which the price was made. For instance, a fairly wide up bar on low volume closing on the low shows weakness. Especially, if the previous few bars (preceeding context) show weakness. Why? The movement up was made on just a little gasoline and it closed weak indicating lack of demand. Like a car going uphill needs power to keep going up, likewise, price movement that is heading up needs volume to continue the drive up. Of course, this isn't always the case but the odds favor weakness in such a senario.

On the other hand, a wide range up bar that closes on the high or near the high with high volume indicates strenght.

The market can fall on its own. Just a lack of demand can cause the market to go down. However, it takes alot of demand to drive the market up. It is harder for prices to go up than down. Maybe that is why Livermore was a plunger to the short side.

IMO VSA knows his stuff. It would be wise to think thru the charts he has posted.

 

[fudgestain]

Volume tells "how" price was made. Volume is the "gasoline" to whatever price did. All good tape readers always correlate volume with price because the volume tells the manner in which the price was made. For instance, a fairly wide up bar on low volume closing on the low shows weakness. Especially, if the previous few bars (preceeding context) show weakness. Why? The movement up was made on just a little gasoline and it closed weak indicating lack of demand. Like a car going uphill needs power to keep going up, likewise, price movement that is heading up needs volume to continue the drive up. Of course, this isn't always the case but the odds favor weakness in such a senario.

On the other hand, a wide range up bar that closes on the high or near the high with high volume indicates strenght.

The market can fall on its own. Just a lack of demand can cause the market to go down. However, it takes alot of demand to drive the market up. It is harder for prices to go up than down. Maybe that is why Livermore was a plunger to the short side.

IMO VSA knows his stuff. It would be wise to think thru the charts he has posted.

This is simplistic and can misguide.

I don't need to use volume. Nevertheless I have said that volume can give a small clue if volume is the only thing or main thing a 'would be' trader uses.

I was a floor trader for a time and contrary to standard mythology selling moves the price upwards. When sellers retreat price moves up; when they take fright suddenly thats when price can shoot up. Vice versa for buying moving the price down.

As well you can have big volume going head to head without a big price move either way.

Happy detecting volume hunters.

 

[frugi]

I was a floor trader for a time and contrary to standard mythology selling moves the price upwards. When sellers retreat price moves up; when they take fright suddenly thats when price can shoot up. Vice versa for buying moving the price down.

You seem to be contradicting yourself fudgestain.

When sellers retreat, i.e. become less aggressive, it allows buyers to more easily move the price upwards as there is less resistance; when previous sellers take fright suddenly and cover, that's when the price can shoot up.

So it's not selling that moves the price up, it's the lack of it, coupled with a willingness from buyers to step up in light of this attenuated aggression; subsequent covering of old sells will add more fuel. I suppose in this respect the fact that old sellers cover does mean selling is indirectly responsible for the rise, but only becuase they are now buying.

That said, the price can move up even when the bid volume outweighs the ask volume; perhaps this is what you mean?

e.g
100 bid at 50 / 10 offered at 51
Someone sells 80 at market
20 bid at 50 / 10 offered at 51
Someone buys 10 at market
20 bid at 50 / 20 offered at 52
Someone bids higher
10 bid at 51/ 20 offered at 52

Price moves from 50/51 to 51/52 despite bid volume being 8 x ask volume.

I always value the opinion of one who "only backs certainties" successfully.

Cheers.

 

[mroalan]

well lets give it a try,been trading for over twenty years,which proofs very little other than i,m a survivior,in olden times we would make our choices out of a newspaper,so from there to today the computor has a lot to answer for,best thing since sliced bread!this opened a brand new bag off tricks,cfd,s /shorting,we used to dream about shorting,and then ta.came into being for us well behind the curve,bought my first computor in 94,so say eleven years have tried lots of things re ta. but have to say i am fully wired to volume at reversal points,also like to see it gap in my direction for confirmation,would like a program that had the ability to search for key reversals and enter the trade late in the day,i scroll the ft 350 at eod. to pick shares which fit,don,t get to many but enough to keep me busy and it makes money.

 

[fudgestain]

You seem to be contradicting yourself fudgestain.

When sellers retreat, i.e. become less aggressive, it allows buyers to more easily move the price upwards as there is less resistance; when previous sellers take fright suddenly and cover, that's when the price can shoot up.

So it's not selling that moves the price up, it's the lack of it, coupled with a willingness from buyers to step up in light of this attenuated aggression; subsequent covering of old sells will add more fuel. I suppose in this respect the fact that old sellers cover does mean selling is indirectly responsible for the rise, but only becuase they are now buying.

That said, the price can move up even when the bid volume outweighs the ask volume; perhaps this is what you mean?

e.g
100 bid at 50 / 10 offered at 51
Someone sells 80 at market
20 bid at 50 / 10 offered at 51
Someone buys 10 at market
20 bid at 50 / 20 offered at 52
Someone bids higher
10 bid at 51/ 20 offered at 52

Price moves from 50/51 to 51/52 despite bid volume being 8 x ask volume.

I always value the opinion of one who "only backs certainties" successfully.

Cheers.

No contradiction, Frugi. I told you what happens in actuality. Selling is the act of selling whether you imagine there is lack of it or not.

But you are free to rationalise whatever misconception keeps you comfortable. Bid volume does not outweigh; nor vice versa. Sales equal purchases; vice versa. Sellers retreat; price advances. This behaviour of selling moves price up.

And incidentally, by all means, back uncertainties if that is what you do or want to do.

 

[pttrader]

No contradiction, Frugi. I told you what happens in actuality. Selling is the act of selling whether you imagine there is lack of it or not.

But you are free to rationalise whatever misconception keeps you comfortable. Bid volume does not outweigh; nor vice versa. Sales equal purchases; vice versa. Sellers retreat; price advances. This behaviour of selling moves price up.

And incidentally, by all means, back uncertainties if that is what you do or want to do.

Sales = purchases is true. However, each transaction has meaning to it depending on the size of it and whether or not it hit the bid or the ask. If more and larger block (more volume) transactions are taking place on the offer then that means more demand. Buyers are stepping up to the plate and buying whatever is offered and sellers are backing off. If more and bigger transactions are taking place on the bid then sellers are hitting the bid to sell their stocks and this indicates weakness as the buyers are backing off and sellers are stepping up to the plate.

So sells=purchases is NOT exactly equal in this sense even though every buy is a sell and every sell is a buy. The size of the transaction and whatever was hit when the transaction went down does indicate demand/supply. I trade alot just watching transaction size and where it went down. I also use bid size and offer size to give me a view of demand/supply apart from watching the transactions as they go down.

 

[Spcboe]

Fudgestain, Viola! that makes so much sense. you have clarified what I often see but I've not een able to explain. thanks. I'll have to check out some of your previous posts. Onve again, a big thanks.

 

[frugi]

Fudgestain,

I'm not sure we disagree.

Selling is the act of selling whether you imagine there is lack of it or not.

Yes, of course. Imagination not required as we have T&S. Every transaction involves a sale. So you could say that selling makes the price go up, and indeed down, or indeed that buying does. It becomes meaningless, reduced to "transactions cause price changes". What is interesting is who is selling, where and why.

But you are free to rationalise whatever misconception keeps you comfortable.

I prefer rationalising comforts that ensure temporary misconception, but I admire your drift, hence the new sig.

Bid volume does not outweigh; nor vice versa.

Bid volume can certainly outweigh. 800 transactions at the bid and 200 at the offer: 1000 buys and 1000 sells, with more volume transacted at the bid.

Sales equal purchases and vice versa. Sellers retreat; price advances. This behaviour of selling moves price up.

Behaviour as in retreat, reduction, no longer willing to accept current price? I think we agree.

And incidentally, by all means, back uncertainties if that is what you do or want to do.

Trouble is, I'm just not sure.

Despite this silly reply, I'm here to learn, fudgestain, not trying to plump my feathers. They're not especially glossy anyway. Please keep posting brain food.

 

[JumpOff]

What does a buyer want?

I have often thought that the terms buyer and seller are inadequate when discussing price action. This is because a buyer who currently has no position has a different motivation than a buyer who entered the fray 10 minutes ago. The latter trader is now an owner-Long. She bought 10 minutes ago because she believed the price wasn't going to get any lower (or not much lower anyway), - that it was her best chance to get in at a price that was good. What does the owner want? Now she wants the price to go up. By her act of buying, she has essentially become a seller - for that is what her next transaction will be. (let's leave aside multilple lot trading and scaling in-out for the time being). If she and the other owners are inactive for a long enough period of time, as a group, they can make the buyers come to them. Sellers lift the price by not selling, because they want the highest price they can get.

The buyer who is currently standing aside is waiting because she wants the price to come down some more- that's where the bargains are. She believes the price will not rise immediately and may dip a little lower. By inactivity (witholding support), she brings the price down to her desired area, if other buyers act as she does. If time passes and the price does not come down to her, -indeed if it starts to rise a little bit, - this will change her belief. Now she may be driven to action by those who have become owners during the last few moments. Her fear may cause her to pay more for than she would have just a while ago, for she see the bargain slipping away. But she is not happy to pay the higher price, for the buyer always wants the lowest possible price.

(just reverse all this for sellers and owners-short)
JO

 

[fudgestain]

Sales = purchases is true. However, each transaction has meaning to it depending on the size of it and whether or not it hit the bid or the ask. If more and larger block (more volume) transactions are taking place on the offer then that means more demand. Buyers are stepping up to the plate and buying whatever is offered and sellers are backing off. If more and bigger transactions are taking place on the bid then sellers are hitting the bid to sell their stocks and this indicates weakness as the buyers are backing off and sellers are stepping up to the plate.

So sells=purchases is NOT exactly equal in this sense even though every buy is a sell and every sell is a buy. The size of the transaction and whatever was hit when the transaction went down does indicate demand/supply. I trade alot just watching transaction size and where it went down. I also use bid size and offer size to give me a view of demand/supply apart from watching the transactions as they go down.

There is a lot of theorizing and often just plain unjustified imagination as to what volume means. However I note your point of tracking whether transactions are taking place at bid or offer and what size is going through. The only occasional time I look is to check liquidity .. bigger size confirming better liquidity.