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volume increase mrk reverse
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volume increase mrk reverse

  #1 (permalink)
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volume increase mrk reverse

This is 30-second chart , I can't seem to figure out why a market would not continue with increase in volume. Every time I say there is an increase in volume one direction the market reverses or retraces back before continuing. First I thought it was just a profit taking back but this are big candle with big volume then normal.
what I'm missing?
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Hi are you expecting the market continue its trend because it was either a down or up bar in comparison to earlier bars. If that is the case not sure if there is any logic there. Also 30sec timeframe or even a larger time frame cannot be predictive of future direction because of volume at price.

Maybe you are wanting to check volume in context to some other indicator.

Per my understanding of volume it has no meaning..unless it is read in context to something since a down market may happen with actually volume up exhaustion where you may or may not see a large up candle unless you reading order flow or vice versa for a up move with sell exhaustion.

Am hoping you get some answers to what you searching from others since volume is a big subject and I may not have quite understood the context of the question.

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volume increase mrk reverse

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lexxmd View Post
This is 30-second chart , I can't seem to figure out why a market would not continue with increase in volume. Every time I say there is an increase in volume one direction the market reverses or retraces back before continuing. First I thought it was just a profit taking back but this are big candle with big volume then normal.

what I'm missing?

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I have to agree with @paps regarding the 30 sec chart. I feel its way to short to be able to extract any meaning whatever. Therein lies your problem. 6E has good volume but not great. I feel if you want to find turning points where the trend has some room to continue view a daily chart, at least first and find areas it has turned in the past. Study these areas. Then come down to a time frame within the daily, and study where the market changed direction. Perhaps place horizontal lines at these prices/places and then view the hard right edge to confirm for yourself what happens at these prices.



Another huge consideration regards the volume itself. I don't feel you have enough information about the volume or training to understand what it is doing. Traders place limit orders as a more passive trade so to speak. Not always passive but in general can be considered such. These limit orders stack up and create the "book". Above the current price are the offers or ask price and below the current price reside the bids. The best bid and offer are right at the market... meaning the current price. This is called "mark-to-market". The ONLY way the market moves at all... period....is when traders hit the market order button and these market orders pair up with the limit orders. Limits can ONLY pair with market orders and market orders can ONLY pair with limit orders. Buy market orders ONLY pair with sell limit orders and sell market orders ONLY pair with buy limit orders. Market orders in general are considered more aggressive because you are not just placing them waiting for a fill, your turn in line. You are saying, "I'm confident about this trade and I want to get involved right now." The concept of absorption can come into play a lot as these limit and market orders pair. This is when the limit orders "absorb" all the market orders...so in this situation the limits can be understood as aggressive. They keep get replenished at a certain price or small group of prices and pair with all the market orders and soon the market orders dry up and the market seeks out another price level. Of course the market orders can overwhelm the limits where the limits do not keep getting replenished and move the market this way too. This happens on both sides of the market with the bids and with the offers at the same time so market context is a VERY important concept to understand. IMHO these are the forces, and others, to be on the lookout for at your areas to conduct business in created ahead of time from your chart study as describe above. You will need tools to do this. The market is always looking for liquidity. People, traders willing to place orders of some kind. These forces and others drive the market not merely volume alone as seen on the per bar volume histogram with up or down bars.



This is the concept, more or less, of order flow combined with trade location. There are MANY other ways to trade that might fit someone better. Everything from lunar cycles to your SMA and everything in between. There is much more that goes into trading other than just this. Defining risk. How do/will you do this? How comfortable are you with trade time? Are you able to stay in a trade for days or minutes? Do you/can you think in terms of probabilities? Not right or wrong. In a job/career/school yes think in terms of right and wrong but not in the market. It is all probability.



If you are a skilled carpenter/craftsmen and someone comes to you and says, "I want to make a table. Please teach/help me." First we must find out if he has the tools for the job and the skills. Does he know how to hold a saw? Can he make a miter joint that's reinforced and make it look good? Does he know about wood? About sanding? About stains, varnishes and painting wood? etc, etc....



I wish you the best.....Good luck!!!!!

Ron

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The steed of this Valley is pain; and if there be no pain this journey will never end.
Buy Low And Sell High (read left to right or right to left....lol)

Last edited by Blash; January 7th, 2016 at 11:22 AM. Reason: grammer
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  #5 (permalink)
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I used 30sec chart to make it easier to illustrate my question by pinpointing the location.
My understanding till this point was that once market trends in one direction , any spike in volume would help it to move along not reverse it's course.

Thank you Blash and Paps for your reply.

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lexxmd View Post
I used 30sec chart to make it easier to illustrate my question by pinpointing the location.
My understanding till this point was that once market trends in one direction , any spike in volume would help it to move along not reverse it's course.

Thank you Blash and Paps for your reply.

30 second behaves diff to 5 min. at 30 you are just picking up orders coming in and out, which is pure noise at this level.

Volume spikes happen at the start and end of trends, not the middle. The spike is caused by people getting in at the start and the late people getting in at the end (and the early people selling to them).

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lexxmd View Post
I used 30sec chart to make it easier to illustrate my question by pinpointing the location.
My understanding till this point was that once market trends in one direction , any spike in volume would help it to move along not reverse it's course.

Thank you Blash and Paps for your reply.


It's flawed logic to assume that an increase in volume leads to a continuation of price movement in that same direction. There's so many instances where that isn't going to apply.

For example: Price could be moving down on steady volume, because someone or some type of sell program is trying to liquidate a large position.The large volume spike you see could be them unloading the last of their position. What now happens to the market now that program stops? Who's there to keep applying the selling pressure? Potentially no one... Hence why you could see a reversal.

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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Remember that for every buy order there is a matching sell order to go with it (and vise versa). So when we see a spike in volume there is the same amount of buying going on that there was selling.

So how does price move up if there are equal buy and sell orders going on? Like what was mentioned earlier, its about liquidity and how much volume is available at each price. Prices move up because the amount of buy orders entering the market overwhelm the sell orders at each price, forcing buyers to look higher to get orders filled. Which is why trends tend to have less volume; its the low liquidity that creates the price move. (look at the volatility of thick liquid markets like the 10yr vs thinner markets like Crude Oil or the DOW)

Volume i believe is a very important piece of the puzzle to be analyzing but looking at it as Volume by Time is probably the least efficient as it gives us very little information as to how price is being traded. If you want to study volume further i would recommend using things like the Profile (which is essentially Volume by Price) or Cumulative Delta which tracks market orders.

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Quite the contrary. You may see UP volume before a sell or down volume before a buy.

Cheers


lexxmd View Post
I used 30sec chart to make it easier to illustrate my question by pinpointing the location.
My understanding till this point was that once market trends in one direction , any spike in volume would help it to move along not reverse it's course.

Thank you Blash and Paps for your reply.


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It's actually fairly common to have a spike in volume just at the point where price is reversing -- in other words, the opposite of your expectation.

The explanation would be that a lot of people want to come in at a level they regard as significant ("support"/"resistance"), then there is a short-term struggle back and forth, and then either buyers or sellers are exhausted and price turns around.

Unfortunately, this also doesn't always work.

The meaning of individual bar volume readings can be hard to figure, and as others have said here, context and the broader picture matter.

You could use the Search function for "VSA" (volume spread analysis) for some of the things that people have done to try to nail down this question. Unfortunately, I am not at all sure that it is really worth the effort. I have found it a little iffy, and a bit complicated, although it may sometimes help.

Being aware that a volume spike might mean that something significant is going on may realistically be the best way to use an individual bar's volume. Probably you should not place too much importance on just that one event, but have a larger context/big picture in mind.

Bob.

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