Trading analogy re price / volume

[chump]

It's mooted that price in tandem with volume bars might have some 'secret' to tell us how to trade...I remained unconvinced that past the basics of reading price / volume that volume bars can add much more to our trading decisions other than on random chance basis and I'll use an anology to explain that statement.

Cutting through the 'mystery' of volume I think any corner shopkeeper can explain it simply....morning paper headlines state "Drought expected"...then he knows what to expect..he emptys half his shelf stock of water into the store room and waits. Now what happens to the price of his water depends on how many people are queuing up in his shop to buy and how much stock he's really got to sell..but the point is only he knows the whole story..no one out in the shop knows and likewise past the obvious when we look at volume bars on a chart we can only see that part of the supply / demand story that the shopkeeper wants us to see..which brings us to....on level 2 don't we get at least part of the extra information that the shopkeeper is trying to conceal...that is don't we get to see more about who is trying to sell and at what price and does this not tell us something more within a fixed time span about what this shopkeeper is going to do next and what he might be holding in his store room?

 

[Mr. Charts]

Level 2 is indeed a very valuable tool for seeing into depth and obtaining more clues as to where true support and resistance actually are and what major market participants are doing.
Sometimes you can see things that are going to happen before they do - and that means before they appear on volume bars or charts.
The value of that is worth thinking about!
I use level 2 in specifically my own way integrated with price action, patterns, TA and reading the tape, in other words the whole picture.
I'll leave any further comments to the man who is, imho, the best level 2 player - Naz ;-)
Richard

 

[Noodles]

To me the value of price/volume/rate (or tape reading to give it the traditional name), is in what it exposes of the masses market psychology. There are too many examples to be seen where the many are frantically buying into moves and the footprint of this is borne out in pronounced volume spikes or dips. Of course it's not an exact science and the average bloke would be hard pushed to use it solely for exit's & entries. However, I feel anyone who uses a robust setup (one which they stick to and really try to learn) and who uses uncluttered indicators backed up with Level2 would be arguably denying the themselves the strongest positive indicator there is in watching price/volume/rate.

Noodles