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A different way of interpreting volume


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A different way of interpreting volume

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  #1 (permalink)
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Yesterday I was watching the DOM as CL reached the 48 mark and noticed heavy absorption as Bids tried to break the level. This came after a relatively strong up move after a day of indecision.

@silver99 saw the same thing but from a completely different perspective. He entered a trade based on similar analysis so I asked him what he had seen to take a particular trade and his response was:


Quoting 
I wanted a volume spike into 48.07 area which didn't occur. I had a resting short @ 48.15 and when I saw the volume spike @ 11:48 top out at .00 and die, I dropped in the limit @ .99 and was filled on 3 short.

silver uses the volume indicator which paints a bar indicating the volume of trades per candle as in the following image:




I decided to load that indicator and compare it to what I was seeing on the DOM (same time and place approx 17:47 06 June 2017):



The disadvantage on the chart (as I see it) is that you would have to wait for bar close to make a determination whereas the DOM allowed a much more proactive opportunity. Unfortunately I didnít save the DOM window but it was classic absorption.

The advantage of chart volume is that it is a lot easier to simply compare the volume with candle movement and decide on a course of action. Its a black and white approach Ė bids smashing into offers, price not moving at significant level, scalp a short.

Its interesting to note how others interpret data. Im not a fan of lagging indicators but that doesn't mean they cannot provide valuable information provided they are used properly.

Im interested to hear how you use volume.

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Grantx View Post
The disadvantage on the chart (as I see it) is that you would have to wait for bar close to make a determination whereas the DOM allowed a much more proactive opportunity. Unfortunately I didnít save the DOM window but it was classic absorption.

Hey Grantx

Could you elaborate on the above?

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xplorer View Post
Hey Grantx

Could you elaborate on the above?

Id be glad to xplorer.

In the 1 minute chart below, there was a 3000 volume bar right on the candle that hit the 48 mark (marked A).
Everything there would put me off shorting that level for the following reasons:
1. Strong preceding uptrend coming into this level
2. 3x positive candle bars with a corresponding positive volume bar below. This would make me extremely hesitant to short. (if you disregard that this is a roundnumber level and normally can expect some sort of counter move)

So the candle hits but does not break 48 and closes on high volume. Its only when I see the very next candle (marked B) and volume bar that I know there has been absorption. It took those 2 candles to determine that the level was holding.

I was watching the ladder and absorption leading into that level was clearly evident. This would have alerted me to the fact a lot earlier and would have allowed an aggressive short entry. The confirmation being that the level was soaking up huge orders. On the chart you cannot tell until after the fact.


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Grantx View Post
Id be glad to xplorer.

In the 1 minute chart below, there was a 3000 volume bar right on the candle that hit the 48 mark (marked A).
Everything there would put me off shorting that level for the following reasons:
1. Strong preceding uptrend coming into this level
2. 3x positive candle bars with a corresponding positive volume bar below. This would make me extremely hesitant to short. (if you disregard that this is a roundnumber level and normally can expect some sort of counter move)

So the candle hits but does not break 48 and closes on high volume. Its only when I see the very next candle (marked B) and volume bar that I know there has been absorption. It took those 2 candles to determine that the level was holding.

I was watching the ladder and absorption leading into that level was clearly evident. This would have alerted me to the fact a lot earlier and would have allowed an aggressive short entry. The confirmation being that the level was soaking up huge orders. On the chart you cannot tell until after the fact.


Thanks, I now see what you mean.

As for your observations (Strong preceding uptrend, 3x positive candles, high volume) I understand why you'd be hesitant. I suppose the question is: how much conviction do the bulls have to break that level, and who is playing at that time?

I know you look at the DOM. My take is, as you said, certain things can be seen more clearly with one system over th other. I think absorption is easier seen on the DOM.

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June 7, 2017


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