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Volume and MFI


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Volume and MFI

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  #1 (permalink)
Jonkoping, Sweden
 
Experience: Intermediate
Platform: ninjatrader
Trading: tf
 
Posts: 9 since Nov 2010
Thanks: 8 given, 11 received

Hi y'all.
I'm trying to make a study on volume and price movement at the pivot areas. The idea is from the book Chaos by B. Williams.
I like to compare the Volume and MFI between individual bars in order to get in with as tight stop as possible at the pivots. I'm using smaller timeframes when I get close to an area to enter the trade so it is pretty fast and sometimes hard to keep up.
I started to do this study with the volume and the Mfi indicator set on 1 period. I then succeeded to get a dot painted above the bar with the strategy wizard. Now I'm trying to make an indicator painting the bars on NT 7 with little success. Has anyone done this study earlier or made an indicator like this.

Let say 5 colors:
Strong bar ((High[0] - Low[0])/Volume[0]) >((High[1] - Low[1])/Volume[1]) && Volume[0] > Volume [1]
Squat bar ((High[0] - Low[0])/Volume[0]) <((High[1] - Low[1])/Volume[1]) && Volume[0] > Volume [1]
Fake bar ((High[0] - Low[0])/Volume[0]) >((High[1] - Low[1])/Volume[1]) && Volume[0] < Volume [1]
Fade bar ((High[0] - Low[0])/Volume[0]) <((High[1] - Low[1])/Volume[1]) && Volume[0] < Volume [1]
Else a neutral bar

The theory say that even a small difference in volume can change the balance, therefor I'm looking for a combination of how effective Volume moves the market (MFI) and the Volume itself.


// Swedein

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  #3 (permalink)
Market Wizard
Berlin, Europe
 
Experience: Advanced
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swedein View Post
Hi y'all.
I'm trying to make a study on volume and price movement at the pivot areas. The idea is from the book Chaos by B. Williams.
I like to compare the Volume and MFI between individual bars in order to get in with as tight stop as possible at the pivots. I'm using smaller timeframes when I get close to an area to enter the trade so it is pretty fast and sometimes hard to keep up.
I started to do this study with the volume and the Mfi indicator set on 1 period. I then succeeded to get a dot painted above the bar with the strategy wizard. Now I'm trying to make an indicator painting the bars on NT 7 with little success. Has anyone done this study earlier or made an indicator like this.

Let say 5 colors:
Strong bar ((High[0] - Low[0])/Volume[0]) >((High[1] - Low[1])/Volume[1]) && Volume[0] > Volume [1]
Squat bar ((High[0] - Low[0])/Volume[0]) <((High[1] - Low[1])/Volume[1]) && Volume[0] > Volume [1]
Fake bar ((High[0] - Low[0])/Volume[0]) >((High[1] - Low[1])/Volume[1]) && Volume[0] < Volume [1]
Fade bar ((High[0] - Low[0])/Volume[0]) <((High[1] - Low[1])/Volume[1]) && Volume[0] < Volume [1]
Else a neutral bar

The theory say that even a small difference in volume can change the balance, therefor I'm looking for a combination of how effective Volume moves the market (MFI) and the Volume itself.


// Swedein

This is pretty easy to code, but I do not think that it is a valid concept for trading. Let me explain why.

I have had a look at Bill William's book "Trading Chaos", and although most of the stuff sounds convincing, I would be careful. Your strong bar, which he calls green bar, just means that range per volume is higher than range per volume of the prior bar. Now this does not mean anything. There are lots of random movements, in particular for smaller timeframes, so I would not think that it has any meaning. It is just a waste of time.

If you want to look at anything, look at bars that stand out, let us say

the highest range/volume of the last 20 bars
the lowest volume of the last 20 bars
the highest range * volume of the last 20 bars

If you identify peak volume, it really shows that there was feedback, which means that the market was non-random. So rather than following the concept of MFI, I would have a look at the Better Volume indicator or its successor. @cunparis has presented these indicators in his volume thread.

This is just my opinion, of course there are other valid opinions.

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  #4 (permalink)
Jonkoping, Sweden
 
Experience: Intermediate
Platform: ninjatrader
Trading: tf
 
Posts: 9 since Nov 2010
Thanks: 8 given, 11 received

Thank you Fat Tails.

I will definitely take a look at the indicators you mentioned.
I'm using the waves as a set up for my trades.
I prefer to trade the third Eliott wave and sometimes the c correction.
I mainly trade the TF on a 233 or 110 tick chart with a Maccd and I use the fibs to calculate setups and targets.
I'm usually out of the trade before i hit target, I don't like to watch the market retrace with my profits. I'm working on that though.
I watched your fib video #1 and I really appreciate your knowledge. It's far greater than mine and I'm trying to keep it simple.
If I loose count of waves I don't trade until I know where I am.
My first rule is: Minimize your cost.
I'm trying to get in at best price possible, that is why I'm shifting to a smaller timeframe to enter my trades. I'm looking for price action, weakness, high- or low close in the direction of my trade, supported by volume and Maccd. I sometimes shift to a 34 tick chart, depending on the volatility. I can save a few ticks in risk getting a confirmation on a lower timeframe. It makes me feel good taking the trade with a 2 to 5 tick stop loss.
The pullback before the second attempt is my favorite entry point, normally it is not supported by Volume or MFI or Maccd. Sometimes you get lucky and hit the very bottom or top with you entry. In the beginning it was scary taking these pullbacks, now it's fun, you are not risking more than a couple of ticks to win a couple of points. If you're wrong at the 50 % pullback you might get another opportunity at 62 %, if I'm wrong at 62% l usually have a reversal order at the stop with a short trail stop.
If I'm using a 110 tick period with an indicator as described I will get an average 110 tick reading for every bar to compare with previous bar. I have the Maccd and 55 EMA for longer timeframe rules and divergence.
I'm in the beginning of using volume for my setups and it looks like it is giving me an understanding I did not have before.
Super interesting.

Thanks
//Swedein

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  #5 (permalink)
Market Wizard
Berlin, Europe
 
Experience: Advanced
Platform: NinjaTrader, MultiCharts
Broker: Interactive Brokers
Trading: Keyboard
 
Fat Tails's Avatar
 
Posts: 9,855 since Mar 2010
Thanks: 4,238 given, 26,728 received


swedein View Post
Thank you Fat Tails.

I will definitely take a look at the indicators you mentioned.
I'm using the waves as a set up for my trades.
I prefer to trade the third Eliott wave and sometimes the c correction.
I mainly trade the TF on a 233 or 110 tick chart with a Maccd and I use the fibs to calculate setups and targets.
I'm usually out of the trade before i hit target, I don't like to watch the market retrace with my profits. I'm working on that though.
I watched your fib video #1 and I really appreciate your knowledge. It's far greater than mine and I'm trying to keep it simple.
If I loose count of waves I don't trade until I know where I am.
My first rule is: Minimize your cost.
I'm trying to get in at best price possible, that is why I'm shifting to a smaller timeframe to enter my trades. I'm looking for price action, weakness, high- or low close in the direction of my trade, supported by volume and Maccd. I sometimes shift to a 34 tick chart, depending on the volatility. I can save a few ticks in risk getting a confirmation on a lower timeframe. It makes me feel good taking the trade with a 2 to 5 tick stop loss.
The pullback before the second attempt is my favorite entry point, normally it is not supported by Volume or MFI or Maccd. Sometimes you get lucky and hit the very bottom or top with you entry. In the beginning it was scary taking these pullbacks, now it's fun, you are not risking more than a couple of ticks to win a couple of points. If you're wrong at the 50 % pullback you might get another opportunity at 62 %, if I'm wrong at 62% l usually have a reversal order at the stop with a short trail stop.
If I'm using a 110 tick period with an indicator as described I will get an average 110 tick reading for every bar to compare with previous bar. I have the Maccd and 55 EMA for longer timeframe rules and divergence.
I'm in the beginning of using volume for my setups and it looks like it is giving me an understanding I did not have before.
Super interesting.

Thanks
//Swedein

Here is the Better Volume 3 indicator for NT 7 from the NT forum (direct link to indicator)

https://www.ninjatrader.com/support/forum/local_links.php?action=jump&catid=4&id=423

Further Information can be found here.

The Better Volume Indicator – My Secret to Analyzing Volume

I have coded a similar indicator, which includes sound alerts (not yet published).

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