Importance of Volume | Traders Hideout


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Importance of Volume

  #26 (permalink)

Vancouver Canada
 
Trading Experience: Beginner
Platform: Investor RT & Ninja
Broker/Data: IB & IQ DTN
Favorite Futures: ES
 
Posts: 1,106 since Nov 2014
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Equivolume

I am a fan of volume studies. I am also a strong believer that volume changes often happen BEFORE price changes.

My favourite indicator is Equivolume indicator where the width of the price bar is adjusted according to the volume traded. It gives a better feel for the validity of price moves.

I also use average tick size which helps me to differential small vs big players locations.

Example from Friday. Gap up open but minute bars and tick bars show very narrow bars above 2042 i.e lack of buyers. That would have been a good place to short or take profit if you are long Overnight. I was bullish and hence didn't attempt short though.

1 minute bar
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1000 tick bar
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First area of support at 2135 weekly vWAP- red square area - shows bigger players stepping in but no follow through. Sellers dominance continues with a big volume bar and selling goes on until 2127. Eventually big buyers step in with a retest and then back to vWAP. (Though I went long at 2132 and 2127, I didn't exit at right locations and trade management is another big piece in this puzzle)

I don't mean to complicate the concept of volume. It's just how I see the market and try to understand what's going on. When I apply this intra-day information with overall market internals, I feel like I am in-sync with the market. The only thing that is not happening yet is consistent profitability.

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