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

  #571 (permalink)
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Thanks Mike--I second that IRT is a great piece of software though I don't use it anymore due to cost and lack of integrated DOM or chart trading.

Looking very forward to the webinar on Wyckoff!

Please repost this in the IRT thread above so they see your feedback

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  #572 (permalink)
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Hi;
Very very nice thread on volume lots of info
Regards

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  #573 (permalink)
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Keeping It Simple


Greetings everyone! I hope this post finds you well. I've been trading just price for about a year now, and I have been using volume for about 4 months. I've found a really simple setup using a combination of trendlines on volume and price. It's pretty straightforward, and only has a few nuances that I have picked up just from staring over time. I use the NYSE TICK for a little confirmation, but it is absolutely not necessary. It works well on the CL as well, although I don't trade that instrument live yet because my stats aren't up to a level that I am comfortable with. Price worked well, but volume was the missing piece for me.

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How to use volume in your trading-2011-04-29-tos_charts.png   How to use volume in your trading-2011-04-29-tos_charts_cl.png  
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  #574 (permalink)
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pinkieman View Post
Greetings everyone! I hope this post finds you well. I've been trading just price for about a year now, and I have been using volume for about 4 months. I've found a really simple setup using a combination of trendlines on volume and price. It's pretty straightforward, and only has a few nuances that I have picked up just from staring over time. I use the NYSE TICK for a little confirmation, but it is absolutely not necessary. It works well on the CL as well, although I don't trade that instrument live yet because my stats aren't up to a level that I am comfortable with. Price worked well, but volume was the missing piece for me.

Thanks pinkieman for posting this! It seems that you are basically using the strength of volume over a range of prices to determine strength or weakness. So if a move up is on progressively weak volume, then you can deduce that generally the move up will not be sustained. Or, in a move up, a low volume pullback will continue to show bullish strength. Am I correct?

Because your trendlines in price and volume don't match in their time range, I can't tell what you're looking for? The time range for your trend lines on price does not match the time range for your trend lines on volume. See the chart I posted, I drew lines down vertically to show that they don't match. Maybe you could explain in a little more detail how you read the chart you posted, perhaps I have misunderstood your method.

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  #575 (permalink)
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josh View Post
Thanks pinkieman for posting this! It seems that you are basically using the strength of volume over a range of prices to determine strength or weakness. So if a move up is on progressively weak volume, then you can deduce that generally the move up will not be sustained. Or, in a move up, a low volume pullback will continue to show bullish strength. Am I correct?

Because your trendlines in price and volume don't match in their time range, I can't tell what you're looking for? The time range for your trend lines on price does not match the time range for your trend lines on volume. See the chart I posted, I drew lines down vertically to show that they don't match. Maybe you could explain in a little more detail how you read the chart you posted, perhaps I have misunderstood your method.

Josh, you are totally right. To clear things up a bit:

I trade based on the assumption that volume will gradually decrease as a move starts to lose steam. A break of the current volume trend means that someone is intervening with what is happening at the moment. I know that it is a total assumption, but I tend to visualize that the volume increases at the end of moves symbolize the amount of passive buying / selling it takes to absorb the "active" community and change the trend. Additionally, if I see volume INCREASING as a trend ensues (where each "spike" is higher and higher), I have confidence that this is the dominant trend at the moment and I should be looking for a continuation trade as opposed to a reversal. My method only has a few steps....
1. Try to establish a meaningful trendline on the 512 tick chart
2. Take a look at volume to see if it is increasing or decreasing
3. If it's decreasing, I draw up a trendline on volume as well.
4. When that trendline breaks, I wait for the trendline on price to break.
5. Lastly, I look to see if the NYSE TICK agrees with my trade direction. Levels about +500 tend to be bullish and levels below -500 tend to be bearish.
6. If it all lines up, I'm in.

All in all, I pretty much only have one setup. Luckily it happens between 1-4 times a day, and through backtesting and stats tracking I have been able to lock my setups down to a minimum expected profit target. All the pieces have to line up or I sit out. If a volume trendline breaks, but I don't get the TICK confirmation, I will sometimes "test" with 1 contract just see if it pans out, but 9 times out of 10 it's a loser. It's funny how when I am out of the market, I can be unsure at times if the setup has promise or not, but as soon as I am in the market it because clear pretty quickly

EDIT: Also, I understand that the volume trendlines aren't always crystal clear, but the nuances come from the time I've spent looking at the ES in this way. I've stuck to the same chart for almost 2 years now, and I studied just the NYSE tick for about 8 months by itself, so by now I have a decent feel for what I should ignore and what I should take. Please let me know if you have any other questions, thanks!

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  #576 (permalink)
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Thanks pinkieman!

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  #577 (permalink)
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Same setup again today

Volume comes in at the high (bearish)
Draw up trendline on price
See if TL break coincides with bearish TICK readings
Sell.
Minimum expected profit target reached.

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  #578 (permalink)
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And again...

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  #579 (permalink)
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pinkieman View Post
And again...

hi pinkieman,

I see you're using TOS for your $TICK. and I can also see you got the advance decline ratio on that chart.

just in case you're interested. attached is an indicator that plots a box, and you can choose the advance decline ratio or the actual number or both.

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Register to download File Type: ts AdvanceDeclineBoxSTUDY.ts (582 Bytes, 23 views)
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  #580 (permalink)
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Thanks so much for that! I often forget to look at that, even though I have it up. I think it's because it's always colored red no matter what. The color changing might actually make this useful for me

Here's another snapshot of later on today. Volume decreased on the way up between 8 and 9 (even though there was an OK setup in there for my minimum profit target). Volume comes in at the high, and begins increasing on the way down. The TICK throws the bearish signal, and the bullish TL breaks on price, and now I've got a setup. Notice that volume again increases all the way down, until we start chopping down near the low. Near the low we get volume decreasing and some bullish TICK readings, but I wait for all 3 conditions to be met before considering a trade. Last trade of the day was another minimum PT hit.

EDIT I just realized while reviewing these posts that the short in this pic was setting up, right as I snapped the previous picture. Interesting timing!

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