T2W Bot

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The power of correct volume analysis cannot be overlooked. Unfortunately the ability to read volume correctly is not readily discussed or freely available. Off-the-cuff remarks such as, “increased volume on advances is bullish and increased volume on declines is bearish” are bantered around but that’s as far as it goes. The correct use and application of volume can make for some quite startling insights into price action, especially when one is swing trading or leaning against support and resistance points or zones of confluence.
I set up my charts with a couple of extra volume measures. I use a normal volume histogram that can be found with almost all software packages. However, if there is a larger volume spike skewing the ability to read the volume properly I will edit the data accordingly. Next, I add a 10-day moving average of the volume. This gives me a guide as to what is below average or above average volume on any given day. Lastly, I add in a 2- standard deviation of the...
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Senior member
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Some very good points, but also some very dangerous assumptions which will lead followers of volume analysis up the wrong garden path.

Remember Wykoff, VSA etc are just someone's opinion on market concepts. But do not assume these are always correct. Yes a lot of the information maybe very accurate, and some correct answers may come by chance, but a lot is incorrect and you can spot this if you work things through for yourself.

The chart in figure 1 is an off the shelf volume chart with default settings from a charting software I presume (dangerous to presume, but im working this out logically). How can the blow off volume ( we have to assume its blow off as we only have a limited amount of data) be correct here? Has this volume been confirmed with the exchange?

The stock volume seems to be a bit better, there for more reliable to read from.

You see if the volume data was indeed incorrect then one would be trying to understand volume from the wrong POV.

Bottom line; make sure all components are correct first. It can be dangerous to begin with the answer book (volume) if you do not know the question that the answer relates too.::-0

Nick Radge

6 1
Thanks for your comments wallstreetwarrior87. I agree fully that skimping on data is fraught with danger. The data provider I use is subscription based, clean and accurate. I have used this provider for the last 12-years for stocks, futures and FX without issue. Its fully adjusted for corporate actions and dividends.
The software here in these examples is TradeStation which I have used since about 1995. I also extensively use Amibroker for my systematic portfolios.
There are no default settings for volume. The overlying averages and deviation lines were coded in as an extra.


1 0
Title : Modification o f the Normal Volume Bar

Hi Nick, THanks for an impressive volume/price analysisd. one question, How do i incoporate the 10 day volume moving avarage and 2 SD deviation 20 day volume moving avarage on to the normal Volume bar chart ?

Best regards

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