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Importance of Volume

  #16 (permalink)

London, UK
 
Trading Experience: Master
Platform: sierra chart, Jigsaw Trading, Bookmap
Favorite Futures: 6E futures, Cable
 
Posts: 93 since Aug 2012

Importance of Volume


dariuszszyc View Post
For most people it is hard to understand volume. I am one of them. That's it.

How much time would it take you to understand moving average? Or MACD ? Or RSI? We all learned how to use new indicators in matter of hours, however volume is not something as obvious.

It's not that people don't want to learn it. It is just so much harder to learn it than any other technical indicator.



What is needed is a short description about meaning of volume (not 1000 page books) and tons of examples how volume should affect our decision



just like @SoftSoap presented on previous page .


Unlike RSI or MACD, volume is not an indicator. You want to buy at 1.27 and I want to sell so we do a deal and we exchange a contract. This creates a volume of 1. Someone else then wants to buy at 1.2701 and someone else is willing to sell and another deal happens so this creates another volume of 1. If there was limit orders of 1 at each level then the price will move up accordingly.

This is order Flow, what makes the market move up or down, nothing to do with an indicator, and all of that can be seen on a DOM. The whole thing can take a while indeed to learn, but understand that volume is simply exchanging contracts and the only thing that makes the price move (or I should just say the only thing that makes the price very simply), is key.

This is not like using an indicator whose use is debatable, but just the mechanism of the market. I have not decided it is the case and this is not coming from me, it is simple a fact and how the market moves.

Everyone uses and looks at volume simply by looking at the price, even if unknowingly. It is the underlying of the price. Volume precedes the price.


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