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

  #521 (permalink)
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Braulio View Post
Fat Tails,

That makes sense but how about a 24h market like the 6E?
The product/ration of volume and range oscillates all the time. Sure it has an European, US and Asian session but it's not linear. In the European session, for example, I can see the market stop for 2/3 hours after RTH and start again when the forex markets open (before US RTH).

This means I have to count another blind spot after I see the market start again, because it's low pressure volume, right?

If you look at the chart below, you will notice that there are two blind spots, where the indicator will trigger lots of signals, irrespective of market conditions

- after the London Open
- after the New York Open

These signals are meaningless. They just indicate that the market is now open.

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  #522 (permalink)
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I now understand what you mean.

Do you take trades based on these signals from a 5min chart? Or is this something you just look at through t the day and take your setups on a different chart?

Do you have more reference charts where you see what you're looking for? Like a manual? That would be helpful for starters.

I use range bars so I'll have to add another window to my workspace, and since you now got me interested I'll be spending some time back-testing this.

Thank you.


Fat Tails View Post
If you look at the chart below, you will notice that there are two blind spots, where the indicator will trigger lots of signals, irrespective of market conditions

- after the London Open
- after the New York Open

These signals are meaningless. They just indicate that the market is now open.


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  #523 (permalink)
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Braulio View Post
I now understand what you mean.

Do you take trades based on these signals from a 5min chart? Or is this something you just look at through t the day and take your setups on a different chart?

Do you have more reference charts where you see what you're looking for? Like a manual? That would be helpful for starters.

I use range bars so I'll have to add another window to my workspace, and since you now got me interested I'll be spending some time back-testing this.

Thank you.

I do not take trades directly from those signals. But I am attentive to churn bars. They are often decision points. After a churn bar, half of the traders is unhappy because they exited too early or were trapped. At least some of the trapped ones will add fuel to the move. This is why a narrow range churn bar can be a good signal to enter a trade. It needs a trend filter though. If the breakout that follows is a trend continuation it can be taken faster, while a trend reversal will typically need a confirmation other than the churn bar.

For range bars you can not use VSA volume spread analysis, but what you could do is to analyze

- the number of ticks or the volume per range bar
- the duration of the range bar

High volume per range is not exactly churning, but will have a similar impact as part of the traders who were responsible of that high volume will quickly be unhappy. So you can use the volume per bar as well.

The range analysis basically detects bars with a high momentum. The same would be true for range bars with a short duration. I think, if you replace the range of the Better Volume Indicator with something like 1/Sqrt(1+ bar duration), that should do the trick. Let me try, whether it is feasible.

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  #524 (permalink)
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I guess the perfect thing would be to have a tick chart with the close of the candle based on the close of the range chart! Now that would be something!

Didn't quite understand what you meant with "replacing the range of the Better Volume Indicator" though...


Fat Tails View Post
I do not take trades directly from those signals. But I am attentive to churn bars. They are often decision points. After a churn bar, half of the traders is unhappy because they exited too early or were trapped. At least some of the trapped ones will add fuel to the move. This is why a narrow range churn bar can be a good signal to enter a trade. It needs a trend filter though. If the breakout that follows is a trend continuation it can be taken faster, while a trend reversal will typically need a confirmation other than the churn bar.

For range bars you can not use VSA volume spread analysis, but what you could do is to analyze

- the number of ticks or the volume per range bar
- the duration of the range bar

High volume per range is not exactly churning, but will have a similar impact as part of the traders who were responsible of that high volume will quickly be unhappy. So you can use the volume per bar as well.

The range analysis basically detects bars with a high momentum. The same would be true for range bars with a short duration. I think, if you replace the range of the Better Volume Indicator with something like 1/Sqrt(1+ bar duration), that should do the trick. Let me try, whether it is feasible.


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  #525 (permalink)
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Braulio View Post
I guess the perfect thing would be to have a tick chart with the close of the candle based on the close of the range chart! Now that would be something!

Didn't quite understand what you meant with "replacing the range of the Better Volume Indicator" though...

The Better Volume indicator detects the range of each bar to perform calculations. This is not useful on a range chart, as the range will always be the same.

What is the range used for? A large range on a fixed period chart indicates a high momentum, as price moves far. To detect high momentum on range bars, you cannot measure the range of that bar, because it is always the same, but the speed, with which it is completed. This can be measured as the duration of the bar in seconds. A short duration would indicate high momentum. You would therefore use the reciprocal value of the bar duration. which is 1/duration to measure momentum. To avoid division by zero, and for scaling and model reasons, I would not use 1/duration but calculate 1/SQRT(1+duration). Will post that indie, can be quickly created from the other one.


Last edited by Fat Tails; April 13th, 2011 at 08:20 AM.
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  #526 (permalink)
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You're hired!! Always wanted a mentor!

In the meantime I have put up a 5min chart showing the bettervolume to match the signals with my charts. Good ones so far!

Thank you

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  #527 (permalink)
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BetterVolume for Range, Tick and Volume Charts


Braulio View Post
You're hired!! Always wanted a mentor!

In the meantime I have put up a 5min chart showing the bettervolume to match the signals with my charts. Good ones so far!

Thank you

I have played a little, and here is a first version called anaBetterVolumeX, which can be used on

- range charts
- volume charts
- tick charts
- and maybe other charts

The X stands for experimental, it is not yet a final version.

This is what I did

- volume was replaced with volume per bar time (this indicates the pressure)
- range was replaced with range per bar time (this indicates the intra-bar momentum)

The low volume alert sound will only play on minute charts. For other bar types this will be added, once I have modified the bar timer, which is used by the indicator.

WANTED: A fearless trader to test it.

Indicator file is attached.

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Big Mike View Post
For those of us without Ninja, can someone post a screen shot?

Mike

Here you go!

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  #530 (permalink)
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Big Mike View Post
For those of us without Ninja, can someone post a screen shot?

Mike


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