Article Volume Analysis

andryush1a

Newbie
1 0
I think jmreeve is very correct to say : "Trouble is Wyckoff wrote these principles a long long time ago before markets were linked together with derivs, stat arb programs and heavily influenced by algorithmic trading. The price volume picture is not as simple as it used to be."

I agree diana too.

I know v + p is a very important indicator and i use it all the time. Sebstian has not said what evidencve backs these large statements and I listen to him in hotcomm. I hope Sebastian will start to trade in profit before giving lessons. This may take some time .
 

frugi

1
1,827 126
I wonder if there is anything in the fact that both these members registered at the same time, use the same anonymous proxy, have only posted once and have a wee dig at Tom Williams and Sebastian Manby? Probably not :)
 

dbphoenix

Legendary member
6,953 1,256
Fortunately, the laws and principles are independent of Williams and Manby and whoever else writes about them, including me. This means that the interested trader can find out the truth for himself, rather than rely on -- much less demand -- "proof" of the trading prowess of X or Y.

The Law of Supply and Demand couldn't care less whether anyone "believes" in it or not. It's there. And if one is going to trade an auction market, he'd best understand it.
 

ducati998

Experienced member
1,193 68
Note: This message and all subsequent discussion on the "Price, (Volume), Support, Resistance, Demand, Supply . . ." thread have been moved back here for continuity and housekeeping purposes" JO
-----------------------------------------

JumpOff,

You asked the the important question, and never received an answer.

Well all that is a prelude to my real question. Isn't it true that because of the way the markets are linked, and the way that computer arbing programs work, that the most important thing to know about trading is: which instruments (if any) are "the dogs." If you are trading one of the wagged tail derivatives, you would need to watch volume and price on the dog, no?

The answer is quite simply the UNDERLYING.
So in the case of the Dow Jones e-mini, ( YM ) it will be the constituent 30 stocks that form the index from which the futures contract is DERIVED.

Once the NYSE closes for trading, then the YM is free to trade where ever it wishes.
When the NYSE opens, the YM will again resume lockstep.

Therefore, unless you are simply a momentum trader, ie, daytrader, to understand where the futures are going, you must understand where the underlying are going.

To understand where the underlying are going, then VOLUME, is pretty much a complete waste of time. Price is very relevant, but not how DBP advocates, watching bars on charts, is for daytraders, and their success rate is abysmally low.

cheers d998
 
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SOCRATES

Veteren member
4,966 136
What you refer to as a law is not a law at all, it is a flexible abstract concept. It therefore poses three major problems to ordinary people.

1st problem: Because the modus operandum is flexible, it does not lend itself to have "laws" or "rules" imposed upon it.

2nd problem: Because it is abstract, the great majority have huge problems in transposing what is abstract into what is tangible reality.

3rd problem:Because it is a concept , it cannot be verified by a series of ideas, bounded by rigid laws.

There are several more problems involved with this, some of them subtle and others not so subtle.

But these first three are enough to keep you awake at night if you are at all a deep thinker.

And that's for starters.....

And if you are not a deep thinker but just a thinker who thinks he thinks, well, you will fall asleep at night dreaming of all this and snore like a brewery.
 
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dbphoenix

Legendary member
6,953 1,256
ducati998 said:
To understand where the underlying are going, then VOLUME, is pretty much a complete waste of time. Price is very relevant, but not how DBP advocates, watching bars on charts, is for daytraders, and their success rate is abysmally low.

Watching bars on charts is merely a convenience and a choice, not a requirement, and it's no more related to daytrading than trading via monthlies.

And if you're defining "VOLUME" as a bar of some sort, then you're at least partly correct.
 

JumpOff

1
702 14
just checking my facts

Hi Ducati,
Thanks for your interest, and lets stick to the S&P - just to make it easier on my brain OK? There is an S&P index which is calculated (derived) from the value of the stocks included in the index. It is just a published number, not a tradeable instrument. Right?

There are also S&P futures contracts. Traders speculate here about what they think the S&P index will be worth in the future. If the futures contracts gets too far away from the S&P calculated value (say the futures are higher than the calulated index), then the arbing programs go into action. When the futures get "too high" there are programs that sell the S&P futures contracts and/or buy the underlying stock. Right?

The S&P futures contracts come in 2 sizes. (the e-mini is 1/5 the size of the S&P full contract).

My question is about the arbing programs that keep the S&P full size futures and S&P e-mini futures and the underlying stocks all in relative tandem when the markets are open.

You say
to understand where the futures are going, you must understand where the underlying are going.
but that seems too simple to me. (and backwards of what I have often heard, though I don't why the futures would always lead the underlying stock either). I'm guessing that it might be more of a push me / pull you kind of action, and that the instrument with the most weight (that is the most liquid volume) wags the other two. - but that's just speculation too.

In any case, if we were to use a computer to graph aggregate price and volume for the underlying stocks, and compare those to the price and volume graphs for the each of the futures contracts, would we learn anything?
---------------------------------------------------------------
The flies generally follow the herd, but if the flies get thick enough, they can actually cause the herd to move too...

JO
 

barjon

Legendary member
10,705 1,809
mmm, if you were charged with switching a large pension fund out of stocks and into bonds I wonder if you might have a dabble in the futures before you start ;)
 

dbphoenix

Legendary member
6,953 1,256
JO, what exactly is it that you're trying to do? Are you interested in the abstract or the hypothetical? Or are you asking a trading question?
 

SOCRATES

Veteren member
4,966 136
JumpOff said:
In any case, if we were to use a computer to graph aggregate price and volume for the underlying stocks, and compare those to the price and volume graphs for the each of the futures contracts, would we learn anything?
---------------------------------------------------------------
The flies generally follow the herd, but if the flies get thick enough, they can actually cause the herd to move too...

JO
She is simply asking a question at an academic level.


Hello Jumpoff, I am going to answer your question for you, otherwise you will only get misdirected.

The answer is no.

The reason is that the underlying is subject to its own supply demand forces.

The derivative is subject to separate supply demand forces.

Although both may be tilted in the same direction, it does not mean that they are tilted in harmony to each other. This means quite simply that they are not yoked in unison to the same supply demand pressures.
 

nine

Senior member
2,038 507
Running a chart of both at the same time would seem to imply an opportunity for additional insights then Socrates. Is that true in your experience?
 

SOCRATES

Veteren member
4,966 136
I used to do it. I don't find it necessary any more nowadays. I occasionally refer to the underlying index more out of curiosity than for any valid reason.
 

JumpOff

1
702 14
dbphoenix said:
JO, what exactly is it that you're trying to do? Are you interested in the abstract or the hypothetical? Or are you asking a trading question?
I'm winnowing. Abstract and Hypothetical questions occasionally lead to practical applications. Just looking to see what can be safely ignored, and which information should command my full attention.
JO
 

JumpOff

1
702 14
SOCRATES said:
The reason is that the underlying is subject to its own supply demand forces.

The derivative is subject to separate supply demand forces.

Although both may be tilted in the same direction, it does not mean that they are tilted in harmony to each other. This means quite simply that they are not yoked in unison to the same supply demand pressures.

So the fact that they appear to move in tandem is a result of similar, but separate forces, and not arbing programs?
JO
 

dbphoenix

Legendary member
6,953 1,256
JumpOff said:
I'm winnowing. Abstract and Hypothetical questions occasionally lead to practical applications. Just looking to see what can be safely ignored, and which information should command my full attention.
JO

Again, that depends on what you're trying to do with it. Books have been written which address your questions, so it would help to narrow your focus.

Everything is of course related in some way, so if you're asking general questions about how various market segments are related to each other, then it is unlikely that you would find the answers that you want here since the question is not related to the thread and the sorts of people who would have something to say are not likely to see it.

On the other hand, if you're asking a trading-related question, then the answer is the same that I've provided before: it doesn't make any difference. If you're trading the ES, trade the ES. If you're trading the S&P, trade the S&P. Trying to calculate the movements and volumes of even the most heavily-weighted components in order to tell you what to do won't help you much unless you're trading off a weekly chart, though you might be able to do it off a daily chart if you're especially aggressive. However, since you're trying to trade for only a few hours in the early morning, this seems not to be a route that is open to you and will not likely help you define your setup.

Nor would it help you if you were trading stocks. If you're daytrading Schlumberger, daytrade Schlumberger, regardless of what Baker-Hughes is doing. If you're trading over a longer timeframe, you'll want to know what the sister stocks and the sector are doing, but for what you're doing, it doesn't matter.

So, again, knowing what you're trying to do will help people make pertinent responses.

[Edit: I should point out, of course, as I have in and out of the group, that if the interrelationships that you're curious about will have an appreciable effect on your trading, you'll be able to find that out through research since they will be true, as opposed to taking somebody else's word for it which may only be opinion.]
 
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