Volume tells all

[mroalan]

FW,just so that your not talking to yourselve! what you,ve posted is common sense,for me its candles/vol/pivots.and a 15 min.chart,to much going on in the 5 min.for me.as for the first chart at the outset the long wicks would have put me on alert,do you use supp/res.?

 

[new_trader]

This post continues from the previous post.

4: high volume bar, but on news

Firewalker,

IMO: Volume makes much more sense if you remember 2 important points I picked up from a very good book.

1) The public is attracted to price.
2) The public is always wrong.

I will almost guarantee the pro's were selling on the release of Non-Farm payrolls and ISM index. It explains the run-up in price the night before.

 

[firewalker99]

FW,just so that your not talking to yourselve! what you,ve posted is common sense,for me its candles/vol/pivots.and a 15 min.chart,to much going on in the 5 min.for me.as for the first chart at the outset the long wicks would have put me on alert,do you use supp/res.?

hi mroalan, thank you for your reply.

The principles I've illustrated obviously are the same on any timeframe. I've found 5-min timeframes very effective when trading intraday YM.

Yes I incorporate support & resistance in my approach. In the first chart for instance you can see tell by the volume that there is a great deal of trading activity going on. When price finally reverses and fails to go higher, it has been building a potential resistance area. This is later confirmed by the weak attempt to go higher (number 1 on the first chart) that comes 5 points shy of the earlier high, but about exactly at the price level where all the bodies of the candles close.

PS: Which markets do you trade?

 

[firewalker99]

Firewalker,

IMO: Volume makes much more sense if you remember 2 important points I picked up from a very good book.

1) The public is attracted to price.
2) The public is always wrong.

I will almost guarantee the pro's were selling on the release of Non-Farm payrolls and ISM index. It explains the run-up in price the night before.

New_trader, thanks for your comment.

Indeed, the public is always wrong and it pays to be contrary.
However when analyzing volume and price I am leaving out the news bars. The only reason I annotated it on the chart was because of the very high volume on that specific bar. You are obviously right in your statement about the pro's selling. As you probably will have observed, it's not the market's initial reaction to the news, but the reaction to that reaction that is worth following.

 

[dbphoenix]

Indeed, the public is always wrong and it pays to be contrary.

This is a popular misconception. The public is always right. Except at turning points. Which is why taking a contrary position will most likely be a losing proposition (depending on stops, targets, etc) except at those points.

Db

 

[Splitlink]

This is a popular misconception. The public is always right. Except at turning points. Which is why taking a contrary position will most likely be a losing proposition (depending on stops, targets, etc) except at those points.

Db

And turning points are only spotted with hindsight, which suggests that waiting and entering on a new trend is the better move. Which is what the public, normally, does.

Split

 

[dbphoenix]

And turning points are only spotted with hindsight, which suggests that waiting and entering on a new trend is the better move. Which is what the public, normally, does.

Split

If by "only spotted with hindsight" you mean the exact tick at which the trend reverses, perhaps. But if one interprets the interaction between price and trading activity correctly (one of the subjects of this and other threads in this forum), spotting the turning point in real time is not especially difficult.

As for the public entering on a new trend, one could argue that they tend to hold onto the old trend for far too long, past the turning point, which makes the ultimate capitulation as profitable as it is.

Db

 

[firewalker99]

This is a popular misconception. The public is always right. Except at turning points. Which is why taking a contrary position will most likely be a losing proposition (depending on stops, targets, etc) except at those points.

Db

I stand corrected. However, I didn't mean to imply that doing the opposite of what the public is doing would pay off. Being contrary also leaves open the option of not choosing any position, and staying flat.

 

[TheBramble]

The public is always right. Except at turning points.

The turning point is normally just a little while after the excitation phase where The Public get interested as if a single entity and jump onboard. Just too late to see the smart money lowering themselves down into the lifeboats. It is precisely this public herding mentality which facilitates professional and informed unloading into a frenzied 'pay anything' milieu.

 

[new_trader]

This is a popular misconception. The public is always right. Except at turning points. Which is why taking a contrary position will most likely be a losing proposition (depending on stops, targets, etc) except at those points.

Db

I disagree. I have gained a much better understanding of the motives and tactics of the professionals and as a result it is clear (to me at least) why 95% of traders fail. I am not saying that I will be successful, but now I understand why I have been failing so miserably in the past. If you think like the public you will lose almost every time.

 

[new_trader]

And turning points are only spotted with hindsight, which suggests that waiting and entering on a new trend is the better move. Which is what the public, normally, does.

Split

No, incorrect. Turning points can be identified with near surgical precision. It requires discipline and practice to act upon them.

I'm quite pleased with my call on todays market action. Compare my analysis to what the ESM 7 has done so far (up to 19:30 UK).

http://www.trade2win.com/boards/showthread.php?t=25134&page=3

 

[dbphoenix]

I disagree. I have gained a much better understanding of the motives and tactics of the professionals and as a result it is clear (to me at least) why 95% of traders fail. I am not saying that I will be successful, but now I understand why I have been failing so miserably in the past. If you think like the public you will lose almost every time.

You're disagreeing with something you misunderstood. Understanding how the public thinks and acts does not preclude understanding how "professionals" think and act. And neither the "public" nor the "professionals" are monolithic.

In any case, none of this is a question of either/or. Eventually you will discover that much of what you thought was true now or at some point in the past turned out not to be true at all, or at best only partly true.

Db

 

[new_trader]

You're disagreeing with something you misunderstood. Understanding how the public thinks and acts does not preclude understanding how "professionals" think and act. And neither the "public" nor the "professionals" are monolithic.

In any case, none of this is a question of either/or. Eventually you will discover that much of what you thought was true now or at some point in the past turned out not to be true at all, or at best only partly true.

Db

I view the market as a cattle drive. The public are the cattle.

 

[dbphoenix]

I view the market as a cattle drive. The public are the cattle.

Don't linger in front of a stampede.

Db

 

[firewalker99]

I view the market as a cattle drive. The public are the cattle.

But when the cattle crosses the road, you'll have to wait like anybody else

 

[free4440273]

{playing devil's advocate}

...unless you don't value your life, nor anybody else's...

 

[new_trader]

But when the cattle crosses the road, you'll have to wait like anybody else

Yes, but maybe I was just talking a load of Bull.

 

[kesh kash]

FX Market

is this system working with forex market?

 

[firewalker99]

is this system working with forex market?

Not sure what you are refering too, but none of the charts and examples posted are part of a system. They are just "as is". See what you get... you can build something around it perhaps, but it's far from what you need. I don't know a whole lot about forex, but I do know you have no volume readings as in trading futures .

 

[lurkerlurker]

A false dichotomy

I disagree. I have gained a much better understanding of the motives and tactics of the professionals and as a result it is clear (to me at least) why 95% of traders fail. I am not saying that I will be successful, but now I understand why I have been failing so miserably in the past. If you think like the public you will lose almost every time.

Yes, the professionals frequently make money at the expense of the public. Yes, the professionals generally do not make the same basic mistakes as the public. Yes, the professionals generally have far superior discipline.

However, I think you are presenting a false dichotomy here. The public can be "right" also - think of every bull run - when the public become interested in stocks again and buy them, this is during the period that the price is going up. At the exhaustion phase of every bull move, most of the public are buying from the professionals who are unwinding their positions. However, that is not to say that the public who bought on early bull tips and held for a few years (and sold well before the top) can't profit.

I suppose what I am trying to say here, and not doing it particularly elegantly, is that professionals can be wrong and the public can be right. I'm sure it is a given that the public are "wrong" on balance, and the professionals are "right" on balance. However, trading against the public isn't a system in itself - in fact, trading against the public can get quite dangerous.

I think it is important to study the mistakes of the unsuccessful traders, and to learn to use as many of the professionals advantages as you reasonably can without actually being an institutional trader. The ultimate weakness of the professionals is a large line, which can't be bought without putting up the price on themselves or sold quickly without destroying the value of their position. The "cattle" have the advantage of being nimble.

Just some ponderings ... sorry, I'm waffling now.