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

[JumpOff]

You may have noticed that I've stopped using volume on my intraday charts, and I've wondered if perhaps I ought to suggest that beginners also not use it on intraday charts. Perhaps they might understand the dynamics of buying pressure and selling pressure better if they focus on price and the extent and pace of movement and not look at "volume" at all. ...

Do you feel this is true of all instruments (stocks, indexes, futures, and tick volume for the currencies)?
JO

 

[dbphoenix]

If you're referring to the second sentence you quoted, of course. After all, "volume" wasn't even available to those who developed these principles, so they had no choice. And charts were drawn by hand. These men reached a deeper understanding of the dynamics of buying pressure and selling pressure through time and volatility, not from bars posted to a chart by a data feed and software program.

One might argue that this level of understanding is not necessary to trading, any more than one must know how a car works in order to drive one. But when the car stops working, one has no idea how to go about fixing it. Ditto with whatever one is doing in an attempt to extract money from the market if his knowledge of the market is limited to lines and bars plotted on a graph.

--Db

 

[RUDEBOY]

Information flows? Information wise and information distribution has evolved? Evolution of the markets? The markets have never changed for us. We all adapt to our circumstances! RUDEBOY.

 

[dbphoenix]

. . . there is a greater danger (i.e., a higher noise-to-signal ratio) than usual in relying on what the "market says," due to the behavior of its many voters. With 8,000 hedge funds and 8,000 mutual funds (many of which operate as though they were hedge funds), the environment today is more schizophrenic than usual. In his Sept. 6 letter, Justin Mamis -- who's been writing about the markets since the l960s -- said it best:

"For the first time in our experience, we have a gut feeling that this time, the market doesn't know. That it is in the hands of individual active traders/bettors, who are guessing this way and that, or betting that way or this, frequently, if not constantly, changing their minds, convinced and re-convinced by every different thing they hear."

I believe the comment is an accurate portrait of the current landscape. Take the pool of bettors willing to change their minds multiple times a day, take a macro tragedy like Katrina, then mix in a potential Fed easing, an oil price/refined product spike, and all the other disruptions caused by Katrina that I haven't mentioned. What you get is a milieu like we have, where on any given day, any market outcome appears possible.

--Fleckenstein

 

[erierambler]

. . .

I believe the comment is an accurate portrait of the current landscape. Take the pool of bettors willing to change their minds multiple times a day, take a macro tragedy like Katrina, then mix in a potential Fed easing, an oil price/refined product spike, and all the other disruptions caused by Katrina that I haven't mentioned. What you get is a milieu like we have, where on any given day, any market outcome appears possible.

--Fleckenstein

In so far as a potential Fed easing , looking at the chart for the $TYX. Have not the traders here already taken their position? There has been a potential reversal.......double bottom, test, higher high and higher low? Does this not conceivably give an uptrend for interest rates?

erie

 

[commanderco]

This is an interesting thread.
I will jump in if I may, but forgive me for not having read the previous 60 pages in detail.
While I agree that reading the price is everything, I must confess that I give it a little tuneup by comparing stochs on two timeframes 5 & 10 min.

I watch volume only in so far as an indication of activity.
As far as S & R, I am interested in todays H /L and yesterday´s H/L/C
and where the price is relative to these 5 lines.
I am also interested in the previous swing H/L and the time lapse since these occurred.

 

[jezza888]

This is an interesting thread.
I will jump in if I may, but forgive me for not having read the previous 60 pages in detail.
While I agree that reading the price is everything, I must confess that I give it a little tuneup by comparing stochs on two timeframes 5 & 10 min.

I watch volume only in so far as an indication of activity.
As far as S & R, I am interested in todays H /L and yesterday´s H/L/C
and where the price is relative to these 5 lines.
I am also interested in the previous swing H/L and the time lapse since these occurred.

Very similar to you there. I use a 15min and 30 stochastic, not as entry/exit signals but to alert me to possible set ups. Price then takes over.

I use S/R including H/L/C and previous open/closes but as a mere guide but price action does take overall precedence. Trading forex I'm dubious of volume supply so it doesn't really enter into my decision making.

Would recommend reading through the thread if you get a chance. Its a good read and its a shame a few of the contributors are no longer with us.

J

 

[SOCRATES]

Very similar to you there. I use a 15min and 30 stochastic, not as entry/exit signals but to alert me to possible set ups. Price then takes over.

I use S/R including H/L/C and previous open/closes but as a mere guide but price action does take overall precedence. Trading forex I'm dubious of volume supply so it doesn't really enter into my decision making.

Would recommend reading through the thread if you get a chance. Its a good read and its a shame a few of the contributors are no longer with us.

J

Yes, it is a shame a few of the contributors are no longer with you.......wonder why that is...humm......

 

[jezza888]

Why is that then Socrates?

 

[SOCRATES]

Because closed loop arguments without end become tiresome in due course after the novelty of the sheer futility in them has worn off, that's why.

 

[jezza888]

I didn't realsie the arguments in this thread where the main reasons for reading. I read through it in order to discover and understand price more, and it has helped alot for me.

 

[SOCRATES]

Good, I am pleased you have found some benefit, at least, goodnight.

 

[dbphoenix]

I didn't realsie the arguments in this thread where the main reasons for reading. I read through it in order to discover and understand price more, and it has helped alot for me.

Good to hear it, jezza. Only a few people post here to argue. Most post here to learn. But nobody's had any questions recently, and the landscape hasn't changed much since my last series of posts, so . . .

As for the stochastics, anyone who uses them is welcome to do so, and there are plenty of threads which embrace them, but, as I said in the first post, this is an indicator-free thread (if it weren't, it would be many times longer). Any help in keeping it that way is appreciated.

--Db

 

[jezza888]

Thought you had gone and left DBP!

No problem, will keep it indicator free. As I say, they are there for alerting me to possible entries as I am still in early days of understanding price alone. Hopefully they will be gone soon!

 

[Chorlton]

Hello Dbphoenix,

I'm fairly new to trading (approx 12mths now) and came across this thread by accident.

A friend of mine initially got me into trading. After purchasing Metastock, he gave me a copy of one of his layouts, which contained various indicators from MA's, MACD, RSI, Oscillators, etc etc, etc. To be honest, not only did I find them all confusing, I couldn't understand how reading something which basically covers past history (previous day and beyond) could actually help to predict the future. I'm sure I'm completely wrong here and I know there any thousands of successful traders who use all these 100's & 100's of different indicators with success but this is my opinion.

Consequenty, I was just about to give up on trading altogether when I came across a book on VSA (volume Spread Analysis). The idea of (with some experience of reading the "signs") someone could "almost" predict the future (albeit short-term ie. 1day - few days) struck me as a vital tool.

I'm not saying that VSA is the holy-grail, far from it, but I do believe the answer to market sentiment can be contained in these 3 elements (Price, Spread AND volume) + maybe some other elements like recent news, etc.

I am now trying to come up with a trading strategy that I can use for trading UK stocks which encompasses VSA. I would be grateful from anyone who may have some advice on creating this

My friend who originally got me into trading finds it hard to believe that I want to trade this way. His argument is that I should use all the tools & indicators currently available to me to help trade.

My return argument is that in the old days (before computers) how did traders make money?? They watched a tape containing nothing more than Price, Spread & Volume. If they could make money then.......................
Sometimes its better to start off and fully understand the basic elements rather than rely to heavily on clever & complicated indicators....................

Sorry for the long (& pretty pointless) ramble but I wanted to just say that I fully agree with your posts.

But as I'm still very new to trading in general, I'd welcome any further advice & help on this subject...............

All the best,

Chorlton

 

[dbphoenix]

Hello Dbphoenix,

. . . Consequenty, I was just about to give up on trading altogether when I came across a book on VSA (volume Spread Analysis). . . .

I'm afraid there's not much more I can offer that isn't already here, and the length of the thread is such that many (most?) don't want to read it.

Therefore, since you are interested in VSA in particular, I suggest you look at the following thread. It's considerably shorter and is much more focused on VSA itself.

http://www.trade2win.com/boards/showthread.php?t=12480

I'll also reiterate what has been suggested elsewhere regarding developing a strategy. Without that, you may as well give all your money to charity (see the second and third links below). At the very least, trading something that requires "constant" attention during periods when you can't provide that attention is going to present hurdles which you will likely find insurmountable.

--Db

 

[dbphoenix]

Those who are interested in the interpretation of price movement, the relationship of price and "volume" (i.e., trading activity, not inventory), and how all of this interacts with support and resistance would have a tough time finding a better example than the movement of the major U.S. indices over the past two-three months, particularly yesterday.

The question now is what the probabilities are from this point of an upmove or a downmove. I hope that those who've read this thread have a handle on this by now. If not, analyzing the movements during this period may help to tie up whatever loose threads there may be.

--Db

 

[contrakt]

The question now is what the probabilities are from this point of an upmove or a downmove.
--Db

probabilities favour moves to the uside, but maybe first a few days sideways

 

[dbphoenix]

probabilities favour moves to the uside, but maybe first a few days sideways

What principles of P/V and S/R lead you to this conclusion?

 

[contrakt]

What principles of P/V and S/R lead you to this conclusion?

Yesterday exhaustion sell of towards earlier S and even after this big volume day price didn't finish at low of the day.
If you look at qqqq's Range between +/- 38.25 and 40 since July/14/05 with S now tested for the third time.
Almost same Range story for IWM and last, but in my case, not least Smh.


But even if these indexes seem to be resting at /testing multi S, at current price levels, continued downside is still credible.