Volume analysis – The Key to the Truth

Petar Jacimovic

Active member
195 1
we'll just have to agree to disagree. i've been trading for years, and have studied thousands of chart patterns at this point.

too often the expanding volume does not come until after the breakout.

aside from some trend analysis, just give me price and a breadth indicator, particularly when daytrading, since you simply don't have time for lengthy analysis.

the last thing i want to do is overanalyze, and miss trades. i'd just soon get a few wrong, and let my winners make up for it.

on the longer term charts, i spend a little more time looking at the underlying components, ie apple, msft, sox, etc.,to find confirmation.

notice the two W bottoms below and corresponding volume at breakout. you'd have missed the boat on both.

cheers

Hello there,
You didn't read post 12 where i said >
Patterns are fine on stock market but without volume they are useless, because you must watch fora breakout of critical points and observe volume in a creation of pattern to avoid invalid patterns.

Its not just about breakouts, we observe a whole pattern and volume creation there. Anyway, will post new analysis with explanations next week, now i enjoy weekend. :)

Petar
 

Petar Jacimovic

Active member
195 1
big difference between your chart and his...his are lovely examples of where it works. I look at the FTSE100 stocks and volume is completely irrelevant. Had I traded with volume, I wouldn't have traded at all
but then I'm sure he'll tell me how little I understand.
I'll say he doesn't understand the real world
Hello malaguti and walcome to thread.

Volume analysis is a big field and usually when i see that ppl. speak about volume in negative context I know that they lack proper knowledge about volume analysis.

Anyway, as I said i will post analysis with explanations in future and together we can create good discussion. For now, have a great weekend.

Best Regards,
Petar
 

jjames69

Member
52 4
Hello malaguti and walcome to thread.

Volume analysis is a big field and usually when i see that ppl. speak about volume in negative context I know that they lack proper knowledge about volume analysis.

Anyway, as I said i will post analysis with explanations in future and together we can create good discussion. For now, have a great weekend.

Best Regards,
Petar
ok, always looking to expand my universe. i trade the nasdaq not forex, so i hope i'm not trying to compare apples to oranges.

cheers
 

wallstreetwarrior87

Senior member
2,066 388
ok, always looking to expand my universe. i trade the nasdaq not forex, so i hope i'm not trying to compare apples to oranges.

cheers
Actually from a volume analysis POV - NQ, YM, and ES are the best to observe, as they are the most transparent in terms of real time reported activity.

I know where the OP is coming from, but yes as others have said, we can trade without volume also, but sometimes you just miss a tiny bit of information (warning sign) as to why a set up may not work. If you want to make it all part of probability, and accept it just did not work out, then that's fine, but with a bit of added information (volume) you may not take the trade even though the set up "looks" good. So it can add to your probability if you know what to look for, but it is not the only critical factor to trading.
 
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jjames69

Member
52 4
Actually from a volume analysis POV - NQ, YM, and ES are the best to observe, as they are the most transparent in terms of real time reported activity.

I know where the OP is coming from, but yes as others have said, we can trade without volume also, but sometimes you just miss a tiny bit of information (warning sign) as to why a set up may not work. If you want to make it all part of probability, and accept it just did not work out, then that's fine, but with a bit of added information (volume) you may not take the trade even though the set up "looks" good. So it can add to your probability if you know what to look for, but it is not the only critical factor to trading.
a. if you are trading right the capital made from one winner should offset 2-3 losers. so one must be careful not to over analyze trades and miss the boat.

b. as a daytrader, there is just not a lot of time to do in depth analysis. i try to make analysis as mechanical and steamlined as possible.

c. i have found the use of volume subjective.
 

Petar Jacimovic

Active member
195 1
Hello traders,
Let's speak about the Volume spread analysis.
Simply stated, spread analysis pays attention to the spread of the bar (range of the bar), volume and where the bar closed. These three things are very important.

Lets observe today example on GBP/USD FX and Futures market (1M timeframe). I marked letters on chart and will post explanation here >

a - Buying climax (volume spike). Bullish wide spread bar but with closing well of the high. Market don't like wide spread bars in an ultra high volume. The specialist will look to short in these situations. Anyway, we need more clues for positions.

b - Very next bar was a bearish bar in a high volume. So, if there is real buying power how the very next bar can be a bearish ? Of course, the smart money sold into public buying. Supply came in...

c - Classic no demand bar in a very low volume. Final confirmation that there is no professional money on the buying side, which means that can be only sellers.

Volume spread analysis or just spread analysis is all about smart observation and gathering clues to build the smart view.

Petar
 

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Petar Jacimovic

Active member
195 1
Another example on EUR/NZD 30M timeframe >

a - Reversal up - thrust bar (demand overcame supply) - sign of strength

b - Strength came in (a bearish wide spread bar but closed near the top). This must be that buyers overcame demand. Notice the high volume on this bar.

c - healthy demand bar just after strength came in. This is confirmation that buyers are in control and that we may expect a higher price.

I also marked that all these actions happened near the support cluster.

Petar
 

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Petar Jacimovic

Active member
195 1
Previous charts are just examples of analysis but I usually trade after the big events (news). I like to read large liquidity and I avoid to trade low liquidity markets. Why ? Because low liquidity means easier manipulation by markets makers. Also, low liquidity means no professional money involved into the market. So, I avoid trading when there are no big events on the schedule.

Anyway, I will post examples and explanation to explain you logic of thinking. ;)

Petar
 

Petar Jacimovic

Active member
195 1
Another example on EUR/NZD 30M timeframe >

a - Reversal up - thrust bar (demand overcame supply) - sign of strength

b - Strength came in (a bearish wide spread bar but closed near the top). This must be that buyers overcame demand. Notice the high volume on this bar.

c - healthy demand bar just after strength came in. This is confirmation that buyers are in control and that we may expect a higher price.

I also marked that all these actions happened near the support cluster.

Petar
And this is what happened :)
 

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Petar Jacimovic

Active member
195 1
Interesting combine those two analysis together, I would love to know more about it.
Volume analysis in combination with the chart patterns is very powerful. I will show you USD/JPY setup I posted on another forum before I registered here and so far is working very good and is still active. The point is to use volume spread analysis like the filter for patterns, to avoid fake patterns.

I am posting you 2 charts (FX chart and Futures market chart same instrument).
Futures markets got an inverse quotation, so Head and Shoulders formation on Futures market are inverted HSS on Forex.

Notice decreasing volume in an upward leg on the futures market. Decreasing volume on upward movement represents a lack of smart money involved in that movement and potential reverse soon or later. Once I spotted clear HSS formation I marked neckline and watched creation and breakout. I saw few UP - thrust bars in creation, which is the sign that pattern is valid and we need breakout but even more important (testing of neckline). Once I saw a successful test in a low volume of the neckline and narrow spread of the bar on that, I knew it will be beauty setup.

Setup is still active and potential target is set at 111.80

As you can see, patterns with volume analysis are very powerful.

Will post more examples :)

Best Regards
 

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Petar Jacimovic

Active member
195 1
Today evening we got news, which can bring us strong liquidity >

RBNZ Financial Stability Report
RBNZ Gov Wheeler Speaks

I will watch speak since it can bring us potential liquidity, If not then I am waiting tomorrow Manufacturing Production m/m

Best Regards,
Petar
 

Petar Jacimovic

Active member
195 1
interesting thread petar------ just curious as an example would your method be short 5min gpb/usd yet ???
Hello there and welcome to the thread :)

On the GBP/USD, we got very choppy market today and low liquidity. Probably smart money awaiting Manufacturing Production m/m. This news can bring us liquidity so I will carefully watch price action tomorrow. Again, when i daytrade i trade after the high impact news and observe price action and volume. If I do trade regular market there must be some chart pattern together with volume.

Best Regards,
Petar
 

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Petar Jacimovic

Active member
195 1
Hello traders,
Nothing important happened on RBNZ Gov Wheeler Speaks and Manufacturing Production m/m, very low liquidity on this news so I am waiting today Crude Oil Inventories for potential action.

Anyway, while I am waiting for news,I found a very solid pattern and I like volume action in the creation of the pattern.

I found inverted head and shoulders formation according to the 15M time frame. I am posting you SpotFX gold chart and Futures market chart. Notice the volume on the right shoulder of the pattern (diminishing volume). This is a good sign for me that this is a valid pattern and that is worth buying position (0.5% risk). Another good confirmation of pattern is a successful breakout of the neckline and successful test of that same. I will try to take 1:3 RRR. TP around the price of $1,287.00.

If you like my analysis don't be afraid to comment :)

Petar
 

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Petar Jacimovic

Active member
195 1
Hello traders,
Nothing important happened on RBNZ Gov Wheeler Speaks and Manufacturing Production m/m, very low liquidity on this news so I am waiting today Crude Oil Inventories for potential action.

Anyway, while I am waiting for news,I found a very solid pattern and I like volume action in the creation of the pattern.

I found inverted head and shoulders formation according to the 15M time frame. I am posting you SpotFX gold chart and Futures market chart. Notice the volume on the right shoulder of the pattern (diminishing volume). This is a good sign for me that this is a valid pattern and that is worth buying position (0.5% risk). Another good confirmation of pattern is a successful breakout of the neckline and successful test of that same. I will try to take 1:3 RRR. TP around the price of $1,287.00.

If you like my analysis don't be afraid to comment :)

Petar

Hello traders,
I took the lose 0.5% on the gold. Anyway, I am awaiting news for GBP today for potential setup >

BOE Inflation Report
GBPMPC Official Bank Rate Votes
GBPMonetary Policy Summary
GBPOfficial Bank Rate
BOE Gov Carney Speaks

In the next 2 hours, I am expecting large volatility on GBP pairs. Hope I will find good setup :)

Best Regards,
Petar
 
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