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

  #601 (permalink)
Elite Member
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josh's Avatar
 
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I had to annotate this chart and post it, as here is a picture perfect example of how volume can be useful, and why the context is so important. This is just my analysis so take it for what you paid for it.

The first super high volume area shows price stalling with a heavy increase in volume. This could be interpreted by some as exhaustive, and sign of an immediate reversal. However, in this case price rises right after. Why? Because the high must be tested. There is an immediate target. It doesn't matter that buyers have been "exhausted," because momentum is pushing up, and buyers will test the high. Thus, a few remaining buyers push it up and test the high, where then it falls because NOW buyers are exhausted. There simply isn't as much interest in pushing it higher, so it falls rather on its own.

The second high volume area is different. Why don't prices rise after this area of high volume? Because we are AT the high. Target reached. No more interest in buying at this point--THIS is exhaustive volume. There is not as much momentum here because this is the third attempt and buyers are all absorbed, at least at this point. Could price have risen higher? Of course. But with such unusually high volume for this time of day (300-500 contracts per minute at 11:30PM ET), there simply aren't that many people or computers willing to buy.

This is my take on why context is so important when we talk about volume and whether the volume indicates "healthy participation," or whether it indicates absorption and a reversal. If you have another interpretation I would love to hear feedback from others!

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  #602 (permalink)
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Not an expert, but here's my 2 cents.

Yah, I like your analysis.

High volume in the middle of a range vs. high volume on extremes have different logic.

High volume on extremes is a bit more comprehensible. Taking of profits, initiating new positions, lot getting in and out...etc.

High volume in the middle of a range..... higher highs and higher lows.... price rises as sellers are waiting for the re-test. There isn't enough selling because it's waiting higher up.

"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
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  #603 (permalink)
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My good friend Jay wrote this interesting article on Volume that I wanted to share with the community.

http://thelonelytraderv2.wordpress.com/2011/06/04/volume-analysis-is-becoming-more-difficult/

Wolfie (the werewolf) Wolf

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  #604 (permalink)
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Video


Michael.H View Post
Thats why i think most people fail. They treat everything with rigid rules, like if they see alot of trades at the bid, then someone is selling real hard, so you must go short. If a hammer forms, you need to take a long. If you get a green bar at a MA, you go long.

You will never make money doing that. You need to see what happens, and then react.

If you see huge orders being traded at the bid, and it stalls there for 5 min, and fails to go lower( meaning all it can muster is 1-2 ticks more to the downside), and starts trading back up, then thats bullish. Now if you see orders picking up at the ask a few ticks higher after this, then you have a reason to go long with a reasonably small stops. Its exactly what cunparis said, someone is absorbing the selling, or its a limit buyer. You don't know until the market tips its hand.

People treat their indicators like a buy and sell switch. Thats why you constantly hear people on these forums talking about how its impossible to make money.

I kind of wish i could show you guys a video ( I record all my live trades), but the files are huge, and my DOM is on there, with my account number.

If enough people are interested, i could try to do one using the ladder and record without my dom( with chart trader on) so you guys can see the trade. Ill put a separate dom up on sim so you can see the level II

After @Michael.H and I talked about making some videos to show order flow and what we see on the market, I decided to go ahead and post one. I'm sorry I don't have a microphone.
This was done today in marketreplay on the 6E when I saw buyers entering the market. The image is kinda vertical and the windows look stretched up...need to work on that on the next one

MARKET REPLAY
Market replay doesn't show exactly what I see in real time while trading. It's more clear when I saw it trading than when I made the video.
This is the second trade I made today. Also tried to make a video from the first one at 07:46 (GMT-1) where I also went long but it was even less obvious in market replay and no, I don't know why this happens.

TOOLS
. ZondorTimLadderDec11th
. GOMCD (CumulativeChart updowntick)
. GOMCD (CumulativeChart bidask) = CVD

TRIGGER
1. I try to identify buyers/sellers coming in with the ladder + CVD.
I basicly try to see the cumulative volume delta (or comulative delta volume, call it what you like) going down while price stalls or moves up. The more selling volume i see coming in without price moving accordingly on the same direction, the more confident i'll be going into the trade.
This is not easy to see as it sometimes happens in a blink of an eye (yes, very fast) and it doesn't happen very often. To help me gauge the pressure of price vs volume I use GOMCD with updowntick.
This is like a microscope, very fine detail.
2. After having identified the dominant player, I look for a break of previous support/resistance and place a stop (see the vid). I use the 6range chart for context but I usually identify support and resistance with a 4range chart because the move can be quite fast.

This isn't easy to see or explain but hope you can see it on the vid.

P.S. - will try and post some more if I can find trades that are clear enough.

B



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  #605 (permalink)
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Braulio View Post
After @Michael.H and I talked about making some videos to show order flow and what we see on the market, I decided to go ahead and post one. I'm sorry I don't have a microphone.
This was done today in marketreplay on the 6E when I saw buyers entering the market. The image is kinda vertical and the windows look stretched up...need to work on that on the next one

MARKET REPLAY
Market replay doesn't show exactly what I see in real time while trading. It's more clear when I saw it trading than when I made the video.
This is the second trade I made today. Also tried to make a video from the first one at 07:46 (GMT-1) where I also went long but it was even less obvious in market replay and no, I don't know why this happens.

TOOLS
. ZondorTimLadderDec11th
. GOMCD (CumulativeChart updowntick)
. GOMCD (CumulativeChart bidask) = CVD

TRIGGER
1. I try to identify buyers/sellers coming in with the ladder + CVD.
I basicly try to see the cumulative volume delta (or comulative delta volume, call it what you like) going down while price stalls or moves up. The more selling volume i see coming in without price moving accordingly on the same direction, the more confident i'll be going into the trade.
This is not easy to see as it sometimes happens in a blink of an eye (yes, very fast) and it doesn't happen very often. To help me gauge the pressure of price vs volume I use GOMCD with updowntick.
This is like a microscope, very fine detail.
2. After having identified the dominant player, I look for a break of previous support/resistance and place a stop (see the vid). I use the 6range chart for context but I usually identify support and resistance with a 4range chart because the move can be quite fast.

This isn't easy to see or explain but hope you can see it on the vid.

P.S. - will try and post some more if I can find trades that are clear enough.

B



Hi Braulio

Good recording!
I am unable to look into the microscope details with GOMCD package(I am using NinjaTrader with GOMCD).
All the GOMCD indicators are display with usual scale on new panel.
How to get the middle chart display with data on the candlestick chart?

EK

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  #606 (permalink)
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Braulio's Avatar
 
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Volume Ladder

That's the Volume Ladder.

You can find several downloadable versions of it on the following threads:
https://futures.io/elite-circle/2100-volume-ladder-highlight-addition.html
https://futures.io/elite-circle/1342-volume-ladder-ninjatrader.html

If you like journals you can also check the following:
https://futures.io/elite-circle/2243-volume-ladder-ninjatrader-patterns-setups-journal.html
https://futures.io/elite-group-trading-methods/3631-cot-commitment-traders-cumulative-delta-buysellvolume.html

B


EK1288 View Post
Hi Braulio

Good recording!
I am unable to look into the microscope details with GOMCD package(I am using NinjaTrader with GOMCD).
All the GOMCD indicators are display with usual scale on new panel.
How to get the middle chart display with data on the candlestick chart?

EK


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  #607 (permalink)
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Braulio's Avatar
 
Posts: 230 since Aug 2009
Thanks: 404 given, 216 received

Video - Sellers coming in

Today was a very clean day, you could clearly see what was going on the 6E.

Saw sellers coming into the market with some pressure and you can see it more clearly than on the previous video.

Enjoy.

Edit : the image quality is much better if you watch on HD (just press the button and watch it on the vimeo website)



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  #608 (permalink)
Trading Apprentice
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Hello. I am looking for the following indicators:
RJay_Market_Volume_Delta_NT7
RJay_Market_Volume_Total_NT7
Please share those indicators in this thread if you have them. Thank you

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  #609 (permalink)
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Braulio's Avatar
 
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Don't have them. This may sound pretty obvious but have you tried asking RJay?


Arnej View Post
Hello. I am looking for the following indicators:
RJay_Market_Volume_Delta_NT7
RJay_Market_Volume_Total_NT7
Please share those indicators in this thread if you have them. Thank you


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  #610 (permalink)
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Braulio View Post
Don't have them. This may sound pretty obvious but have you tried asking RJay?

Can you also help to identify indicators I need by picture, Thank you.

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