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How to use volume in your trading
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How to use volume in your trading

  #11 (permalink)
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cunparis View Post
What I meant was that we could make our own volume indicator and have the source code. Then we could add to it, like patterns from the Master the Markets book. The part of the Better Volume that prevented me from porting it to NT turns out to be the part that I don't use frequently.

Sorry, I thought you were discussing the BetterVolumeBeta indicator already on the NT platform.

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  #12 (permalink)
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Cunparis,

Attached are a couple of screen shots will you give me some feedback on these.

1. On my template, are my indicator settings correct? The BV video is made on TS and our NT version setting descriptions are different.
2. On the screen capture shot of Better Volume, would you make some comments to my questions?
If it's easier just list comments to points 1 2 3 and 4.

Thank you for your time,

G

Attached Thumbnails
How to use volume in your trading-es-09-09-08_28_2009-699-tick-better-volume-questions.jpg   How to use volume in your trading-better-volume-indicator-settings.bmp  

Last edited by GarryM; August 30th, 2009 at 08:10 PM.
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  #13 (permalink)
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cunparis View Post
It took me a long time before I learned to use volume (and I'm still learning). But once you learn the basics about volume you won't be able to trade without it. Before I'd look at price only. Now I give at least as much attention to volume as I do price, and most often even more attention.

I don't want to come across as an expert in volume, I'm definitely not! I'm still learning myself. I just want to get some discussion going so we can all learn together.

To get started, this page is required reading:

- The Better Volume Indicator … My Secret to Analyzing Volume

You'll learn a lot just from reading this page. You don't have to use his indicator (although if you use Tradestation I highly recommend it), just try to grasp the concepts. His indicator doesn't pick up everything up so it's good to understand how it works so that you can do it yourself just by glancing at the volume charts.

I also highly recommend this book, which goes into much more detail:

- "Master the Markets" by Tom Williams. Amazon.com: Master the Markets: Tom Williams: Books

I found a PDF online, it's not available from amazon. He's pushing his software but don't let that put you off. The book is excellent, in my opinion the best book on volume there is. I do not have his software, but I have coded up some of the signals he has with Tradestation. For example he has a "no demand" pattern. On my charts my indicator prints it automatically.

Once you've read the Better Volume page above, I invite you to post a chart (any market, any timeframe) and we'll see if we can apply what we've learned. Specifically we'll be looking for:

- deciding if volume is buying volume or selling volume. Which reminds me, a year or so ago I demo'd an indicator which labeled volume as buying or selling. I didn't understand it so I asked about it in another forum. I was told there was no such thing, that for every buyer there is a seller, etc. So I stopped playing with the indicator. Big mistake. They were wrong. And now I'm writing my own volume indicators.

- identifying amateur traders by their low volume. It's usually best to fade these guys.

- identify the pros by their high volume. They can stop an advance and turn price in their direction. Think of them as the big bully who rules the playground. It's better to be alongside them rather than getting kicked around.

So let's go! Read the Better Volume page (and if you have time, the book), post a chart, and let's see what we can find.

cunparis,

The NT version is not built to spec. as shown on this website.

If this indicator is not available as shown, anywhere for the NT platform, I will consider porting it over.

If anybody knows if its been done, please post its location here.

Thanks,

RJay

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  #14 (permalink)
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RJay View Post
Sorry, I thought you were discussing the BetterVolumeBeta indicator already on the NT platform.

That indicator doesn't work at all.

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  #15 (permalink)
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GarryM View Post
Cunparis,

Attached are a couple of screen shots will you give me some feedback on these.

1. On my template, are my indicator settings correct? The BV video is made on TS and our NT version setting descriptions are different.
2. On the screen capture shot of Better Volume, would you make some comments to my questions?
If it's easier just list comments to points 1 2 3 and 4.

Thank you for your time,

G

Great questions Gary. For the setup, I don't know what vbar is, I don't have that one. I turn off volume climax churn because on trade station if you turn it off then it gets painted blue which is HVC. If this is the case it's not useful to know if the churn was climax or not, we're just looking for churn. If turning it off doesn't paint the climax churn bars blue then you may want it on.

It's up to you if you want to keep the up/down colors on your chart. I have mine turned off so that the yellow & blue stand out better. I do look at the open and close to see if a bar closed up or down (i use OHLC).

Now for your questions:

#1 - Barry calls this pattern a "low volume test". It's funny you say "what I think I know about volume", I believe you will find out that a lot of the things we believe turn out to be false. In my opinion, it doesn't take a huge volume or huge money to get a long range bar. What makes price go up? More buyers than sellers. It's not really more volume that makes it go up, but we tend to think that. Cause if price goes up and there is higher volume we think it's the volume pushing it up. But if we dig deeper, the higher volume is a result of more buyers than sellers.

Image there are only two 1 lot traders trading the ES at a certain time. I want to buy 100 and you're the only guy selling them. But you only want to sell one. So I buy it and then you raise the price cause you know I'm buying. So I raise my bid and buy it. You keep doing that and we could drive up the price as far as I want - I say "I" cause I can stop buying when I want. Now I know in ES this would never happen, but you get the idea?

Professionals don't trade 1 contract. So when they're buying or selling you see high volume. On the bars you highlighted the price went up from 1035.50 to 1038.75 on low volume. so we know the professionals weren't buying it up. Now there were 4000 contracts traded on those bars, so we don't know if that was 4000 1 lot traders or 40 100 lot traders. But what we do know is that a lot of professionals weren't trading it. I have a volume splitter that I want to talk about in the future and it would tell us who was trading but I don't use it because the truth is it doesn't matter.

So why were the professionals out for those three bars? I'm attaching my chart. I believe this: They sold the rally premarket and that made the first top. Then some professionals bought the dip. Remember they don't all trade on the same side! This is really important. We want to see when they're active at turning points and then trade with the side that wins. If there is HVC then there is an usually high transfer of shares. If someone is buying something that is declining, they must have a reason. What we want to see is can they stop the decline?

So back to the scenario, they bought the dip. But then no more buyers came in, that gave us the 3 low volume up bars. Low volume leading up to a major high is a "Low Volume Test" and in this case a double top (which we could only know afterwards). This is important, cause a low volume test we can know at the present, but the double top we can only know later on. That's very important. It's easy to mark up a chart and mark double top, but that's in hindsight. Low volume test is not. it's the "now". And can be a good shorting opportunity. I'm surprised we didn't see more volume after those 3 yellow bars. If there was HVC after the 3 low volume bars then it'd be a good short candidate for me.

A - low volume pullback. you want to fade these two but you want it to prove itself so you need some kind of confirmation cause sometimes these amateurs are right.

B - this one is tricky. Low volume is a warning but you have to see what happens around it. I had two blue bars before it (see my chart) but they weren't together so it's more likely profit taking than accumulation. In this case it looked like it was going to reverse but then sellers came in.

C & D - after the low volume we get pullbacks. This shows the rally is running out of buyers and a few latecomers are still active.

#3 - Be careful with that. First HVC & Climax HVC are different in the settings but for us we can treat them the same. Second, if they reliably marked turning points (I prefer turning points over "tops and bottoms", then I'd be rich! It shows professional accumulation & distribution which often happens around turning points. We need confirmation, we can't trade on this alone. My way of trading involves finding several different setups with different data sources/indicators and waiting until several are in agreement and price confirms. Often these turning points are temporary and sometimes it's just profit taking and they don't turn at all.

#4 - Profit taking. If there are enough buyers to overcome the selling profit taking, then price continues. This is why we need clues. On higher timeframes the blue bar often marks the high or low.

Barry hinted that the NT version isn't as reliable as the TS version. We'll have to study the differences. Also note that tick charts are different for different data providers so that's one reason our bars look different. It's possible for me to have a low volume bar and for you not, depending on how the bar was split.

Great questions Gary, thank you for posting your chart. It made me late for work but it was well worth it.

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How to use volume in your trading-20090828-es-699-better-volume-examples.jpg  
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  #16 (permalink)
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RJay View Post
cunparis,

The NT version is not built to spec. as shown on this website.

If this indicator is not available as shown, anywhere for the NT platform, I will consider porting it over.

If anybody knows if its been done, please post its location here.

Thanks,

RJay

Here is my attempt (first file). The problem is TS has historical upticks & downticks, NT doesn't. upticks = volume on an uptick. I'm not sure it's necessary for HVC and it's not necessary for low volume. Look at the original code and then my version, it should be a starting point. Also Barry said his NT version is coded as a strategy, that must give some extra bid/ask information. I tried to do it by computing the upticks/downticks myself. In the end I just got tradestation!

The second file is another person's attempt. I didn't like that either.
Let me know if you have questions, I'm glad to help. I've been wanting to modify the original one for TS cause it often misses a HVC. Look at my chart, I labeled a "hidden" HVC. I want to be able to catch those.

Thanks

Attached Files
Register to download File Type: cs BetterVolume.cs (13.3 KB, 125 views)
Register to download File Type: cs BetterVolumeNT.cs (18.0 KB, 117 views)
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  #17 (permalink)
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EL's Programmer's Definition


UpTicks (Reserved Word)

Disclaimer
Returns the number of ticks on a bar whose value is higher than the tick immediately preceding it.
Upticks

Remarks
Returns the Up volume of a bar when Trade Volume is used for the chart. See EasyLanguage Reserved Words
Related to Ticks, Volume & Open Interest for more information.


Examples

Upticks
returns 5 if there were 5 ticks on a bar whose value was higher than the tick immediately preceding it.

Upticks


returns 12 if there were 12 ticks on a bar whose value was higher than the tick immediately preceding it.


Additional Example

To check if a bar of data appears to reflect a steady upturn, compare
Upticks to DownTicks:

Value1 = Upticks - DownTicks;

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  #18 (permalink)
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cunparis View Post
That indicator doesn't work at all.

Looks fine from here!!!

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  #19 (permalink)
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RJay View Post
Looks fine from here!!!

Ok, "doesn't work" doesn't mean that it doesn't draw something on chart. "Doesn't work" means I didn't find what it drew useful. I compared identical charts on NT & TS and the NT version wasn't even close. Again, this is the "Better Volume NT Beta" which is not by the author of the Better Volume.

Compare a 699 tick chart with mine posted below.


Last edited by cunparis; August 31st, 2009 at 12:13 PM.
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  #20 (permalink)
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A trade example


I thought I'd post a trade example of using this in a real trade. The important thing is not to just trade volume signals by themselves, you have to incorporate them into your trading system. I like to have confirmation on several timeframes and with several indicators.

On the first trade you will see pro's started buying but were unable to stop the decline. However they absorbed most of the selling. A few bars later we see sellers are out of gas and we get a low volume bar. That marks the bottom.

I got confirmation from my indicators. The sine wave showed support, LBR's 3/10 oscillator has a first cross, and there is bullish momentum on my momentum indicator, and the tick is moving up. I had similar setups on my shorter timeframe (233 tick). This for me was an almost perfect setup. Support on the lower timeframe, HVC on the higher timeframe (but no support from indicators on 2097 tick chart). The trade hit my 2 pt profit target before the HVC churn bar signaled an end to the up cycle. Had my target not been hit I would have exited on a break of the HVC low.

I did another trade shortly after, going short. I put my stop 2 ticks above the top and it almost got stopped out. +1 as I type.

This is just an example of how I use volume in my trading. Let me know if you understand how I used the volume. Don't worry about the other indicators, you can use whatever you're comfortable with.

Volume can alert you to a potential turning point. If you buy breakouts you could think about tightening stops if you see professionals going the other way or if find yourself trading with the amateurs. If you go countertrend as in my example you could think about a new entry setup on the pro's side. In both cases it can keep you from being on the wrong side.

PS: At 9:50 you can see NoS. This means "No Sellers" and it's a pattern from the Master the Markets book. It often alerts me to potential turning points as it did in this example (although i didn't take the trade).

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