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

  #621 (permalink)
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You're welcome.

I suggest you read the whole thread, but take a look at the following post:
https://futures.io/traders-hideout/634-how-use-volume-your-trading-52.html#post112615

Since you're interested and after digesting this one, jump to this next one:
https://futures.io/elite-group-trading-methods/3631-cot-commitment-traders-cumulative-delta-buysellvolume.html

There's a lot of information here that you can benefit from if you're willing to do the work.

B


Malvolio View Post
Why you are looking to move CVD against the price and not with it? Should CVD not go with the price?

Thank you for sharing your trading style!

Best regards,

Malvolio


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  #622 (permalink)
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Braulio View Post
You're welcome.

I suggest you read the whole thread, but take a look at the following post:
https://futures.io/traders-hideout/634-how-use-volume-your-trading-52.html#post112615

Since you're interested and after digesting this one, jump to this next one:
https://futures.io/elite-group-trading-methods/3631-cot-commitment-traders-cumulative-delta-buysellvolume.html

There's a lot of information here that you can benefit from if you're willing to do the work.

B

Thanks Braulio

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  #623 (permalink)
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josh View Post
I would recommend instead FatTails indicator, "anaBetterVolume" (available in elite). It's free and much simpler IMO. Or, if you understand what the indicator is trying to say with its color codings (what's the criteria and purpose of climax, churn, etc.) you could learn to read what the volume means and not have to worry with the color coding, but that's something you have to decide
.


Thank you for the reply and suggestion. As I understand, Barry Pro-Am is the delta between volume at the bid versus volume at the ask along with the bar range to assess whether the volume was printed by professionals or by amatuers. I want to "test drive" the indicator and needed to know if I purchase the indicator can I use it with free version of Ninja Trader 7.

The other indicator I've seen that provides this volume at bid Vs. Volume at ask is a NT code by Gomi. I'll take a look at the anaBetterVolume, what logic does it use?

What I've been really looking for is a indicator that incorporates following variables 1. Cummulative volume on bid Vs ask for each bar 2. Average trade size on bid vs ask for each bar 3. Average #ticks per minute bar on bid vs ask 4. Open-Close price delta as ratio of bar range for each bar. And a daily cummulative volume at bid printed in red and cumulative volume at ask printed in green on same line on right side of chart for each 1 handle price move of the ES. I tried to code this in Amibroker but all I've been getting is a ton of grief. So now decided to change to another platform . Barrys pro-am appears to incorporate some of the market logic I require, hence the question if it will work on free ninja trader version ( test the pro-am logic before I make the decision to spend time and the money learning C# and NT)

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  #624 (permalink)
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Malvolio View Post
Why you are looking to move CVD against the price and not with it? Should CVD not go with the price?

Thank you for sharing your trading style!

Best regards,

Malvolio

When there is heavy volume in an area, then it doesn't matter who initiated the trade (the market buyers/sellers). The fact is that if the range is narrow and volume is heavy, then when price moves, one side will find themselves trapped, and have their stops triggered, and fuel the move. See this post:

https://futures.io/elite-circle/11179-cumulative-delta-volume-trading-13.html#post130096

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  #625 (permalink)
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olevkat View Post
What I've been really looking for is a indicator that incorporates following variables 1. Cummulative volume on bid Vs ask for each bar

Gomi's indicator is really the main one for this.


olevkat View Post
2. Average trade size on bid vs ask for each bar

I think Barry's indicator does this, but my feeling is that it's useless. Numerous discussions here and elsewhere as to the usefulness of trying to determine intent via trade size--orders are split so easily and cleverly that you will never know who's buying and selling. Forget the rubbish about "smart money" and "professionals" and "institutional" ... look at volume, a contract is a contract, regardless of who traded it.


olevkat View Post
3. Average #ticks per minute bar on bid vs ask

Not sure why tick count would be more helpful than volume itself, but I understand why you are doing it over time, to determine the "speed" of transactions.


olevkat View Post
4. Open-Close price delta as ratio of bar range for each bar.

anaBetterVolume and Barry's both do this, labelled as "churn" bars.

You have some great ideas as to what you want to see, I say go for it and good luck.

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  #626 (permalink)
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josh View Post
Gomi's indicator is really the main one for this.



I think Barry's indicator does this, but my feeling is that it's useless. Numerous discussions here and elsewhere as to the usefulness of trying to determine intent via trade size--orders are split so easily and cleverly that you will never know who's buying and selling. Forget the rubbish about "smart money" and "professionals" and "institutional" ... look at volume, a contract is a contract, regardless of who traded it.



Not sure why tick count would be more helpful than volume itself, but I understand why you are doing it over time, to determine the "speed" of transactions.



anaBetterVolume and Barry's both do this, labelled as "churn" bars.

You have some great ideas as to what you want to see, I say go for it and good luck.



I agree these days large traders can easily hide their trades by using iceberg type orders, but looking at the size on bid/ask is important imho because size on the bid or ask is transmitting hugely important data on the "intent" of the large trader. Sure there is lots of market making activity that "muddies the waters", I can sit on the bid as a buyer, then get filled and then flip out on the ask on a reversal but we can all agree that anyone printing 700 contracts on ES tape is no small fish. So I will disagree on a contract being same as any other contract. No 2 contracts are alike because the intentions of the people behind each contract is different.

Is that 1000 print on the bid a buy or a sale? we can look at the price bar and we'll know soon enough. Let's look at some scenarios:

1. A 1000 contract trade prints at the ask sweeping 2 levels up on the price ladder. Clearly a large "desperate" buyer. If at the bottom of a move, very high probability this is beginning of short covering and a sharp "V" reversal up. If at top of a over bought trend, very high probability large smart buyer desperately wants in "before impending news". Large smart buyer "wants in now" and does not care if he moves the market adding slippage to his order.

2. A 1000 contract trade prints at the ask, but price level stays same, with numerous singles and doubles on the bid mopping up the 1000 print on ask, then a 300 contract print at the bid and price is now 1 tick lower. If this signature is at the bottom of a price move, this can mean "whale iceberg" and price may go lower if the "whale" continues to iceberg. We see this usually during bear flag patterns.

3. After a 1000 contract prints at the ask, then a series of singles and doubles on the bid and the bar closes lower. If this occurs at overbought levels, clearly signals a impending reversal lower. For confirmation we look for higher than average tick count / price bar for the next bars that print. If this occurs on a small bounce from the bottom oversold levels and tape does not speed up, means a sucker rally and double bottom retest ahead.

Other volume scenarios,

4. cumulative 1000 contract / bar, with greater than average size on ask = greater than average size on bid with small average price range close usually means impending reversal. Cumulative 1000 contract/bar with average ask size > average bid size and bar close near high of bar with large range means trend continuation.


There are many more such scenarios that are good to look for. This volume analysis can provide info such as when a Reversal is a false bottom making a "bear flag" to continue lower, or when a bottom is a real bottom before tend change, trend exhaustion at overbought, etc

5 years ago or so, it was much easier to "read" this information from the DOM because the levels and transactions could be "seen". However in the past couple years, at least for me, it has become impossible to analyze the DOM information. The DOM flickers so fast and there is so much activity it has become impossible for me to "see" the important activity. So now I am back to square one in the "learning to trade process", but this time it's choosing the correct platform, then learning to code, test, debug.

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  #627 (permalink)
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olevkat, nice ideas and it's clear you've thought out what you are looking for quite well. Good luck with your trading!

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  #628 (permalink)
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An example of using volume in trading today. Took this trade, exited early unfortunately but clear target was upper channel line (.35 was initial target).

So, pretty simple premise. Connect the two highs (11:28 and 12:35). Draw the parallel and connect it to the only low point (12:22). The next touch of the lower line is the area of interest. The trigger was the high volume, low range bar closing on the highs. Simple Wyckoffian effort vs. result. Longed .01, stop at .88. It was a grind, but it made it to .35 and beyond. The fun part was waiting for price to come to me because of the predictive channel line, then pulling the trigger. Now, my management was another story... wish I had that part down.

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  #629 (permalink)
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josh View Post
I think Barry's indicator does this, but my feeling is that it's useless. Numerous discussions here and elsewhere as to the usefulness of trying to determine intent via trade size--orders are split so easily and cleverly that you will never know who's buying and selling. Forget the rubbish about "smart money" and "professionals" and "institutional" ... look at volume, a contract is a contract, regardless of who traded it.

Hey Josh, I have read a bunch of your posts and I really like the logical way you approach trading. With the above quotation, I am a little curious as to why you subscribe to volume's predictive value yet are against the idea of institutional/professional traders/smart traders.

What is classified as a professional trader by tape reading semantics could very well be a retail trader wielding a big stick but he is referred to is institutional because of size. To me, it is not that the larger traders are smarter or more professional than retail traders, but that they have more capital than most retailers and the power to move markets so it makes sense to gauge their actions and attempt to time a purchase with them.

If a large trader breaks up his size, he will hide his presence from the Time of Sales but he will still be obviously present on the volume (as highlighted below). I think the main problem with Tape Reading as it is often practiced (read: mere Time of Sales watching) is that people use it as a tactic to predict price action instead of a tool to confirm volume on the chart.

Personally I think watching Time Of Sales before a key area works occasionally when there is a clear surge of smart money (or a clear lack thereof) but for the most part, watching the Time of Sales prior to a key price level being tested is akin to watching the showboating antics and trash talk before a Pacquiao fight: sure it is entertaining, but in the end of the day, it has little predicative value on the results of the battle.

I annotated the chart you posted. Note the increase in volume as contracts are distributed at tops and accumulated at the bottom:

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How to use volume in your trading-cl.bmp  
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  #630 (permalink)
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Bermudan Option View Post
To me, it is not that the larger traders are smarter or more professional than retail traders, but that they have more capital than most retailers and the power to move markets so it makes sense to gauge their actions and attempt to time a purchase with them.

I like this definition, and think there is a lot of logic in this viewpoint.


Bermudan Option View Post
Personally I think watching Time Of Sales before a key area works occasionally when there is a clear surge of smart money (or a clear lack thereof)

The simple fact is that I am not really a tape reader; I have not given it the attention or had the training necessary for practical use or mastery; I am concerned that if I focus too much on the tape that I may lose sight of the bigger picture. At some point I would love to incorporate a more structured use of it into my trading, but right now I use it as a quick glance, and use it to determine if lots of green or red is coming in, and to see if price moves much when that happens... pretty much nothing else to it for me. The lower window on my chart is cumulative delta, which is kind of a nice "historical tape" if you will. It shows bid/ask differential, just as T&S does, but it lets me see it accumulate, and I do pay attention to it on the shorter time frame (over several minutes for example).


Bermudan Option View Post
I annotated the chart you posted. Note the increase in volume as contracts are distributed at tops and accumulated at the bottom:

What you are talking about here is not really about tape reading, though Wyckoff was a tape reader (in a very different time I might add, when prints would come across the wire every 30 seconds or over minutes, compared to today, where they come by in milliseconds). It's a Wyckoffian perspective on volume analysis, and I use this extensively--this was my trigger for entry on the trade I posted. I think that the principles of accumulation and distribution are logical and therefore timeless, so they will always have some validity in the markets. What I do not adhere to is Wyckoff's "smart money" and "internal operators" lingo. It takes my focus too much off of what is happening, and puts it too much on who's doing it. I really don't care who's doing it--the fact is, if price moved up, demand was greater than supply, and vice versa. IMO it complicates the issue at hand by attempting to assign labels to market participants.

I can understand on the longer time frame (daily to weekly) that the labels may be appropriately assigned, as investors enter and exit the market systematically. But I do not see every volume spike on a 5m chart as activity by "smart money." I've seen people using 100 tick charts that span a grand total of 10 minutes talk about "accumulation and distribution," and taking it to that extreme is too much, IMO. But the principles work on any time frame, and that's the key for me--I just don't personally like to presume to understand or know the intent of the trader. I use volume, I use delta to some degree, and moreover I use price--who does it, for what reason, is not important to me.

On your annotations, I do not see the 3rd or 5th boxes as any kind of significant volume activity indicating accumulation or distribution. The context is the important aspect here, and the 4th box (the trade I took) had the important context of being a channel line test. The 12:26 bar (the last high volume bar in your first red box) is the significant bar in that group, as the support held, and then price moved up. It very well could have moved down, and that volume would have represented accumulation by longs, which then likely would have bailed and fueled a further move down.

What I'm saying is that an increase in volume in and of itself doesn't mean much, except that there was greater participation, and only what happens next confirms whether it was truly accumulation or not. For example, all this morning as the high of the day was put in, volume kept dwindling, and looked to be WAY past exhaustion before the high of the day. A climax does not always precede a reversal--sometimes just falling volume does--the 11:10 1m bar looks very climactic, but it keeps going up. So, the context is important. After 95.00 broke, it really didn't matter how the volume looked--we were destined for the daily EMA, prior resistance, etc.: basically, 95.80 was about as clear a target as you can find. The 5m bar that was the high of the day closed in the middle, and had over 10K contracts, certainly looks exhaustive -- but it's the context that really gives it away though, as this was a super key level for oil.

Sorry for droning on, hope this addresses your post.

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