Volume tells all

ljyoung said:
A general question for VSA-volk.
Can anyone say from either personal experience or on the basis of something they've read or been taught what the volume relationship is (if indeed one exists) between the "stopping volume" bar and the "bottom" bar it is associated with? My preliminary impression is that the volume at the bottom is less than the stopping volume with the corollary being that if the putative bottom does not have a lesser volume then it is not the bottom but rather a new stopping volume bar.
TIA.
lj
Click to expand...

Since no one has answered your question . . .

If by "stopping volume" bar you mean the selling or buying climax, then, yes, the volume at the eventual price bottom will be less. However, the selling climax and the bottom may coincide. If you'll look in the Tops 'n Bottoms chapter in the book you bought from me, you'll note that the selling climax and bottom bar were the same in the '98 correction bottom. However, the selling climax and bottom "bar" were separated by 10 weeks in '02. (I'm sure there are other examples in the Practicum chapter, but I don't have time to look through it right now; use Find and "climax".)

In other words, the selling climax serves to slam on the brakes and may also be the first sign of accumulation, depending on the instrument. But the road may be slick, and slamming on the brakes doesn't mean stopping on a dime, much less turning on one. Sometimes the brakes are tapped, as in '01 and '02. But volume -- or trading activity -- does not alone tell the story; it is necessary to evaluate price and volume together.

Db
 
It has been (and will continue to be) my experience that when one has a "new" idea it is good to:
(i) Immediately start collecting data with the fervent hope of destroying that idea and if the idea stands up then perhaps it has validity (but only perhaps).
(ii) Ask if there are others who have witnessed the phenomenon.

Which is to say that most frequently, as in this case, the idea was not new and that being the case one then has the opportunity to draw upon the experience of others and expand the original unoriginal notion. That was the objective behind the second part of the question.

As you correctly point out, one looks at price and volume together when one looks at price and volume. It is equally important to consider the bar period but that is another story for another time.

Thank you for taking the time to respond.

lj

As soon as you think you are zen, you are not zen. Anon
Everything zen? I don't think so. Gavin Rossdale
Rock on. Humble Pie
 
ljyoung said:
A general question for VSA-volk.
Can anyone say from either personal experience or on the basis of something they've read or been taught what the volume relationship is (if indeed one exists) between the "stopping volume" bar and the "bottom" bar it is associated with? My preliminary impression is that the volume at the bottom is less than the stopping volume with the corollary being that if the putative bottom does not have a lesser volume then it is not the bottom but rather a new stopping volume bar.
TIA.
lj
Click to expand...

Sorry don't belong to the "VSA-volk" but I hope you don't mind me reply anyway. I did study VSA when I first wanted to start trading, but focused too much on single bars instead of the relationship between price and volume, and the relative volume I should have been looking at. Now I am trying to incorporate again into my trading strategy, in order to improve to probability of a successful trade.

Now in my (limited) experience, I have found that on most occasions price will drop further than what first looks like a potential selling climax. Sometimes it will test the SC, but on other occassions it can travel lower. When a second drop begins and ends with a high volume bar, which is lower then the potential SC, I've often found that price will stall there. It doesn't imply the downmove has finished completely, but I would certainly not be looking to short anymore.

I've attached two charts: one of DAX today where on the third red bar it was my impression selling was completely exhausted. It didn't spark an upmove, and price only drifted towards the end of the day.

On the second chart of November 14, I've marked a blue dot. This is where I would say it "feels" like a marble is being pushed down a very long stairs from the highest floor. The marble keeps tumbling down, with increasing velocity. It finally comes to a halt on the second floor (it came off from 7th) where it hits the wall (the 7500 volume bar). But then, all of a sudden a small breeze pushes the marble over the top of the last couple of steps down and it falls on the ground (sorry, couldn't come up with a better analogy), where it keeps laying still (the second red indicated bar). On this particular chart I found it interesting to note that the two bars that spike down to 6385 after the potential SC, refuse to let price travel any further down, they both close at or above 6390.
 

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firewalker99 said:
Sorry don't belong to the "VSA-volk" but I hope you don't mind me reply anyway. I did study VSA when I first wanted to start trading, but focused too much on single bars instead of the relationship between price and volume, and the relative volume I should have been looking at. Now I am trying to incorporate again into my trading strategy, in order to improve to probability of a successful trade.

Now in my (limited) experience, I have found that on most occasions price will drop further than what first looks like a potential selling climax. Sometimes it will test the SC, but on other occassions it can travel lower. When a second drop begins and ends with a high volume bar, which is lower then the potential SC, I've often found that price will stall there. It doesn't imply the downmove has finished completely, but I would certainly not be looking to short anymore.

I've attached two charts: one of DAX today where on the third red bar it was my impression selling was completely exhausted. It didn't spark an upmove, and price only drifted towards the end of the day.

On the second chart of November 14, I've marked a blue dot. This is where I would say it "feels" like a marble is being pushed down a very long stairs from the highest floor. The marble keeps tumbling down, with increasing velocity. It finally comes to a halt on the second floor (it came off from 7th) where it hits the wall (the 7500 volume bar). But then, all of a sudden a small breeze pushes the marble over the top of the last couple of steps down and it falls on the ground (sorry, couldn't come up with a better analogy), where it keeps laying still (the second red indicated bar). On this particular chart I found it interesting to note that the two bars that spike down to 6385 after the potential SC, refuse to let price travel any further down, they both close at or above 6390.
Click to expand...
:) So what happens next ?
 
SOCRATES said:
:) So what happens next ?
Click to expand...

Well, for the second chart of November 14, we can all look what happened next.
For the chart of today, we'll have to wait and see till Wednesday next week, because Eurex will be closed for xmas. But I do know what is going to happen right now, I'm going to sleep :)

If anybody wants to do a forecast for the DAX for 2007, by all means!

PS: In other words, to answer your question, I honestly have no idea but I'm not afraid to admit it.
PSS: But I don't need to ;) [know what will happen next]
 
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Hi Firewalker,
Like you did after post 325, so I did after the earlier post but only when I'd finished reading what you had to say. So now there are several people who have cursorily (speaking only for myself) observed a similar phenomenon. What's more your second thumbnail shows very nicely why it's wise to wait a bit for confirmation of the "bottom", which was the second part of my question and which I also have observed with the GOOG's.

So where does one go from here?
One thing would be to go ahead and go long with a nice tight mental stop at the "real bottom" which would have worked rather splendidly for the second chart. As to why the price action was halted at 6385, I don't know but of course it's possible for me to come with an "obvious" post facto explanation, which I won't do.
With the more recent DAX chart one would have got stopped out but that's OK. Small loss. As for what next week will bring I don't know and will not take up your challenge.

What I do know is that as a trader I expect to be wrong rather frequently and really don't care about that. There is I believe a natural extension of this philosophy to discussions about trading, if in fact I really am a trader (and I am), and so as I said very early on, please iterate my ramblings with abandon.

Thank you for your interest and Joyeux Noel.

lj
 
firewalker99 great post

informative as allways. what I like about your posts is that you can actually learn from them. you are doing a great job, thank u very much.

what I wanted to ask was this:

you said that on the third red bar you felt that selling was over, could you please elaborate why you felt that? what was the reason?
 
thebull27 said:
informative as allways. what I like about your posts is that you can actually learn from them. you are doing a great job, thank u very much.

what I wanted to ask was this:

you said that on the third red bar you felt that selling was over, could you please elaborate why you felt that? what was the reason?
Click to expand...

Thank you thebull27. I've posted other charts also in the S/R and the Dax threads of the European indices forum.

Now about this chart, on each down bar that I marked red, there is buying pressure coming in. You can see this from the close of the bar, but more importantly you can notice it "live" when the market is forming the bar. That's when I felt more strongly that selling was coming to an end. In particular on the last bar, as price dipped below 6545 again, it was immediately rejected and you could see from the sudden and strong ask sizes coming in that this was a price where the smart money wanted to buy.

Describing a feeling is often difficult, but I also noticed on the previous bars that - although we were still dropping lower - the strength of the move was nearing and end (you can also notice the volume drying out there). By the way, the next day saw us climbing from the low of the previous day to 6685... quite an amazing upmove considering the downtrend on this chart.

I hope this helps clear things up a bit... Never hesitate to ask...
 
bonox said:
i generally don't find volume to be useful. price action for me is sufficient.
Click to expand...

One of the common reasons for traders not finding volume to be useful (which is not to say that for some price action cannot be sufficient) is that the volume data they are using to base their volume/price correlations on, is of less than acceptable quality. There are tiers of data which are supplied to market participants and if you are being handed anything but tier one data by your provider, you have a major strike against you.

Something to think about, for as many of those who frequent this thread will attest, volume can be very useful in formulating a general strategy and specific tactics to effectively trade in the financial markets.

lj
 
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analyzing volume as standalone indicator is useless, i.e. RIMM

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

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analyzing volume as standalone indicator is useless, i.e. RIMM

If by this you mean that volume is useless unless it is correlated with itself and with price, then I would most certainly agree with you.

lj
 
ljyoung said:
analyzing volume as standalone indicator is useless, i.e. RIMM

If by this you mean that volume is useless unless it is correlated with itself and with price, then I would most certainly agree with you.

lj
Click to expand...

Would you recommend the distribution/accumulation line?

Split
 
Firewalker,

I’ve only just found this thread, and only quickly read the last few posts so forgive any (temporary) shortcomings.

Being a recent, potential adherent to the significance of volume, I’d like to add my own limited observations. Note: observations, not statements.

I would make a tentative suggestion that the price/volume relationship is based on supply and demand (how perceptive). To elaborate, as the second charts shows the bigger moves (approx 11:30, 13:00, 14:30, 16:15-16:30) are preceded by increasing volume.

Between 14:30 and 15:30 volume decreases, and price drifts sideways. It then picks up and we see the price drop. If we can just assume an average 2,500 volume for each these moves, it would be reasonable to assume big volume = big price move. So where is the volume after 16:30 for a 45-point move?

For the big moves we had willing (or reluctant depending on which side they were on) buyers and sellers, ie supply and demand. For every 2,500 sellers, we had 2,500 buyer at the bid/ask. Following 16:30 volume appears relatively insignificant. Hypothetically, we had 10 buyers for every 10 sellers – at a guess, I would say the shorts were looking to close/take profits, new longs were looking to enter. But doesn’t this undermine any notion of the significance of volume: 2,500 = 5-10 point move, odd lots = 50-point move?

I’m still trying to find my way, here but it seems any supply and demand will move prices, not the size of supply and demand. For example, 1,000 each side at 4000 –01. Theoretically, the price will move +/- 1 point when 1,000 of one side have traded. 10 each at 4000-01, the price will move +/- 1 point when 10 lots have moved.

We can see rising/falling volume and presume there will be a follow through on the price. But this can’t be said for odd-lots. This is my point: we can’t see supply and demand. Can it determined?

I’ve made a note to read this thread in its entirety.

Grant.
 
grantx said:
Firewalker,

I’ve only just found this thread, and only quickly read the last few posts so forgive any (temporary) shortcomings.

Being a recent, potential adherent to the significance of volume, I’d like to add my own limited observations. Note: observations, not statements.

I would make a tentative suggestion that the price/volume relationship is based on supply and demand (how perceptive). To elaborate, as the second charts shows the bigger moves (approx 11:30, 13:00, 14:30, 16:15-16:30) are preceded by increasing volume.

Between 14:30 and 15:30 volume decreases, and price drifts sideways. It then picks up and we see the price drop. If we can just assume an average 2,500 volume for each these moves, it would be reasonable to assume big volume = big price move. So where is the volume after 16:30 for a 45-point move?

For the big moves we had willing (or reluctant depending on which side they were on) buyers and sellers, ie supply and demand. For every 2,500 sellers, we had 2,500 buyer at the bid/ask. Following 16:30 volume appears relatively insignificant. Hypothetically, we had 10 buyers for every 10 sellers – at a guess, I would say the shorts were looking to close/take profits, new longs were looking to enter. But doesn’t this undermine any notion of the significance of volume: 2,500 = 5-10 point move, odd lots = 50-point move?

I’m still trying to find my way, here but it seems any supply and demand will move prices, not the size of supply and demand. For example, 1,000 each side at 4000 –01. Theoretically, the price will move +/- 1 point when 1,000 of one side have traded. 10 each at 4000-01, the price will move +/- 1 point when 10 lots have moved.

We can see rising/falling volume and presume there will be a follow through on the price. But this can’t be said for odd-lots. This is my point: we can’t see supply and demand. Can it determined?

I’ve made a note to read this thread in its entirety.

Grant.
Click to expand...
Because the relationship that exists between them is elastic and not rigid and this serves to confuse from a purely observational point of view against a perceptual point of view, and that is the difficulty.
 
Splitlink said:
Would you recommend the distribution/accumulation line?

Split
Click to expand...

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
 
What is the maximum time that information about a trade , and therefore volume, can be delayed?
And must all trades be recorded on the day they occured?

Regards

bracke
 
bracke said:
What is the maximum time that information about a trade , and therefore volume, can be delayed?
And must all trades be recorded on the day they occurred?

Regards

bracke
Click to expand...

I had a long response all typed out and then lost the damn thing so here is a short version.

Basically T&S provides the record of an equity transaction defined as one in which the total volume changed (it provides a record of all B/A data but here we're only interested in the actual trades). This info is recorded essentially coincident with the trade and is available for a price.

Direct data providers link their customers to a data feed which comes directly from whichever exchange the customer is dealing with. Second and third tier data providers buy their data from a "direct" provider and here's where the problem arises. Examples of the lower tier providers would be chart software outfits or your friendly online broker - they make their money other ways.

Check the "Day Trade and Scalping" board for the "Yoiks!!" thread and you will see what happens after the data leaves the dedicated provider. To make a long story short, the time delay totally messes with the raw data, which can be somewhat corrected by doing refreshes on your chart but if you're trading on a 1 minute bar that's 405 refreshes day!!

For a number of reasons (which I can elaborate on if asked) I believe that the data I get from DTN, which is my data provider, is kosher. So if you're losing money one of the reasons (I believe I have found most of the other ones) is that your data is the pits. I have a charting program (QuoteTracker) which is interfaced with DTN but which is NOT the data provider.

I hope this answers your question but if further clarification is needed just let me know.

Regards,

lj
 
ljyoung said:
I had a long response all typed out and then lost the damn thing so here is a short version.

Basically T&S provides the record of an equity transaction defined as one in which the total volume changed (it provides a record of all B/A data but here we're only interested in the actual trades). This info is recorded essentially coincident with the trade and is available for a price.

Direct data providers link their customers to a data feed which comes directly from whichever exchange the customer is dealing with. Second and third tier data providers buy their data from a "direct" provider and here's where the problem arises. Examples of the lower tier providers would be chart software outfits or your friendly online broker - they make their money other ways.

Check the "Day Trade and Scalping" board for the "Yoiks!!" thread and you will see what happens after the data leaves the dedicated provider. To make a long story short, the time delay totally messes with the raw data, which can be somewhat corrected by doing refreshes on your chart but if you're trading on a 1 minute bar that's 405 refreshes day!!

For a number of reasons (which I can elaborate on if asked) I believe that the data I get from DTN, which is my data provider, is kosher. So if you're losing money one of the reasons (I believe I have found most of the other ones) is that your data is the pits. I have a charting program (QuoteTracker) which is interfaced with DTN but which is NOT the data provider.

I hope this answers your question but if further clarification is needed just let me know.

Regards,

lj
Click to expand...


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
 
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