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

  #191 (permalink)
Trade with the flow
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Saroj View Post
I thought this was a stellar example of using volume to at least exit a trade and then to enter the reversal... an aggressive trader could do an SAR at the xS marker. Chart (yes, I remembered to attach it this time)... is annotated for entries/exits.

This chart also shows how to trade trendlines.. in this case a falling wedge.

Interesting chart. I'm curious what my volume patterns would have shown for the same time.

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  #192 (permalink)
Trade with the flow
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There was a question in the thread about using HVC on range bars. I had originally replied that I had never tried it. I originally started using these volume patterns on tick charts trading ES. I later moved to 5min charts just to standardize a single timeframe for all markets and avoid some of the noise of tick charts. I got less volume patterns but the ones I got were still very valid.

Recently Jeff from the All You Need thread convinced me to try range charts for CL. So I did. I kept my volume patterns paintbar on my chart even though I didn't plan on using it.

I was a bit suspicious of using the patterns on range charts because HVC is defined to be the bar with the highest ratio of volume to range. Specifically we look for a high volume low range bar. Now it could be really high volume medium range, explosive volume with high range, or below avg volume with tiny range. If we use a range bar then the range is constant and we end up just comparing the volume. So I didn't think it would be useful.

So tonight while making Perfect Trading charts over the past 2 weeks for CL to test out some new setups, I observed something. The volume patterns were picking turning points! Very well in fact. I was very surprsied. As it is now I do not have anything in my trading rules to use these patterns.

For those who aren't aware, at the beginning of September I removed everything from my chart and started trading "naked", that is without indicators. Well call it see-through-bikini trading cause I left my volume patterns indicator on my chart even though I wasn't using it.

So now I'm going over my rules and seeing where it makes sense to use the volume patterns. I previously used HVC to pick turning points in the market cycles, which were excellent low-risk entries. In my naked trading i'm mainly looking for low-risk entries into an existing trend. HVC could warn me of an impending reversal and allow me to tighten stops, exit, or not jump in. I'm going to work on that.

I'm attaching my CL chart so you can see. I didn't cherry pick this date or timeframe, this is exactly where I was working on my perfect trading. So for everyone trading range charts, these are useful.

Finally, there hasn't been much activity. If you have any special requests let me know. I proved to myself in my naked trading that one can trade without volume. Now I want to see if I can prove to myself that volume can reduce risk and increase wins.

Attached Thumbnails
How to use volume in your trading-20090922-cl-range-volume-patterns.png  
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  #193 (permalink)
Trade with the flow
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Another HVC example on a range chart


Notice the pullback started by HVC. This makes a breakout of the pullback less likely. In this case it failed, at least for a few bars.

Also note the HVC at the bottom left which started the move up. the HVC in the middle of the run up could be profit taking.

I'm still experimenting with HVC on range bars so if you have examples feel free to post them.

If you made it this far then you are all big boys & girls right? I don't have to mark HVC on my charts any more right?


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  #194 (permalink)
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Does anyone know of a volume indicator that will overlay on the bottom of the price panel instead of in a separate panel and have variable transparency for the volume bars.


Thanks

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  #195 (permalink)
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DavidHP View Post
Does anyone know of a volume indicator that will overlay on the bottom of the price panel instead of in a separate panel and have variable transparency for the volume bars.


Thanks

That's an interesting idea.

I think my next mod will be to make a version that doesn't display the volume bars at all. All I need is the paintbar and the volume bars take up valuable space. I'll try to do that in the next few days.

I'm still experimenting between range bars and minute bars. I hope to share some more once I get things figured out.

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  #196 (permalink)
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cunparis View Post
That's an interesting idea.

I think my next mod will be to make a version that doesn't display the volume bars at all. All I need is the paintbar and the volume bars take up valuable space. I'll try to do that in the next few days.

I'm still experimenting between range bars and minute bars. I hope to share some more once I get things figured out.

set panel =1 and auto scale = false.

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  #197 (permalink)
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I´m a volume addict myself. I just trade with a 5 min chart with volume and for reference I use natural range (different high/low/close/open) and volume profile. I tried a lot of indicators but they all confuse me. And also they are only the derivates of price action. When they give a signal it is often to late.

I read everything I can find that covers the relationship between price, volume and pace (tapereading). Tom Williams books are great but Wyckoff and Livermore also help understand this relationship. The most practical book I read is "Techniques of Tape Reading" by Vadym Greifer. This is really the best trading book out there. No fuss, no indicators, no advanced techniques, just volume, 2-3 setups and orderflow. Vadym covers the climax, churn, low volume but I think his way of teaching is better then Barry Taylors. Since Vadym has been around longer I bet Barry found his inspiration i Vadyms book. Also I find that using time instead of ticks much better captures the majorities moves. Just becouse someone trades 500-lots doesen´t mean they are the minority that profits from the rest.

Ok, now to my question. I´m pretty novice when it comes to NT. Is there a way of writing an indicator that sounds an alarm based on the volyme action (like a climax bar or churn bar)?

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  #198 (permalink)
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fiki View Post
Ok, now to my question. I´m pretty novice when it comes to NT. Is there a way of writing an indicator that sounds an alarm based on the volyme action (like a climax bar or churn bar)?

Glad to meet you fiki. I'd love to see some of your trades showing how you use volume.

I read the book you recommended during my summer vacation. I didn't remember it being that good. The rags to riches story was ok and then the last part of the book was the patterns. I guess I was a bit disappointed because I thought it was going to be about tape reading and it seemed the book was not about tape reading but about price patterns. I'm going to read it again (though I'll skip the Cinderella story) based on your recommendation.

To answer your question, I will add an alert for HVC to my volume patterns indicator. This is an excellent idea. I cannot do volume climax because of limitations with Ninjatrader. Although I'm probably going to purchase Barry's Better Volume for Ninjatrader if he confirms that he has a workaround for this.

I'm curious how you use the climax volume? I don't normally use it, just HVC & LV.

Welcome to the forums, I look forward to seeing some of your trades if you wish to share.

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  #199 (permalink)
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fiki View Post
Just becouse someone trades 500-lots doesen´t mean they are the minority that profits from the rest.

I forgot to clarify this point: A tick chart has x trades, independent of the number of contracts. So a 1 lot trader & 500 lot trader count the same. This is why I use the HVC & LV patterns to see what the pros are doing and what the amateurs are doing. Works the same on tick & minute charts.

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  #200 (permalink)
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Nice to meet you to cunparis.

Well I agree about the "Cinderella story". To be honest I skipped that part. I started out trading 2 years ago in the middle of one of the worst bears ever educated by the Swedish equilant of CNBC so I have my own scars and stories to tell... But I think Vadym captures the battle between the minority and majority and his trade examples have a lot of information.

I used Barry´s indicator with the tick-chart, but what I meant is that all 500-lots are not “smart money”. But I guess the time based chart works best with the climax pattern. There we are looking for the majority to join a move. To see that in a tick chart one would have to use some form of bar counter… Because if you see heavy volume on a tick period and wide price movement that would mean the pros are selling/buying and nobody is interested in taking the opposite side of the trade. Nothing you would fade..

The way I iuse climax is just looking for a wide range with heavy volume selling or buying into a reference point (support/resistance) and liquidating any position I have and starting to look for a reversal – maybe a high volume churn or a low volume. If I´m very aggressive I just fade the close of the climax period. I usually rely on the DOM to se if momentum is reversing. That and the tick and 8/16 nyad to gauge the trend is all I use. I can post a trade later on if I make a nice one. Usually they are not so clean. I average and use discretionary stops so sometimes my trades are all over

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