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Hey...what about Volume?

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  • First Post: Dec 17, 2017 4:08pm Dec 17, 2017 4:08pm
Hello again all...its been quite awhile since I've posted. Many personal and health issues have prevented me from being able to post as often as I like...but I have NOT stopped trading or watching the markets. In my ongoing effort to translate the lessons I learn from my experience in the futures market I have to ask you all here (the more experienced the better)...how come very few people use the volume data included in their brokers?

I must admit I have gone on record here as saying the volume information on the forex market is "practically useless". I now repent those words. I have been using the volume info from my forex broker (oanda) and have discovered that I CAN translate some of the lessons of my futures trading into the forex market...perhaps not in exactly the same way, but back testing and observation are proving to me the great potential in using the volume information that we all have available to us.

I have not studied much about VSA (Volume/Spread Analysis), but I don't thing one needs to get so complicated with it. As you all may recall from previous posts, I am trading Forex, as a way to grow my savings account...I do NOT look at this market for daily income like I do the forex market however, the same principles I trade there, also work in this market...those of order flow.

A big part of order flow trading is volume. Specifically those volume metrics that are separated by where people are transacting...the bid or the ask. Thus the futures market divides the volume as follows: buying volume = those transacting on the ask (or the "bid" in the futures market), and selling volume = those transacting on the bid (or the "offer" in the futures market). Thus it is easy to find "anomalies" in the futures market using this information provided in each candle.

However, this information does not exist in the forex market. BUT there is a way to use the tick volume data on the forex market in combination with price's reaction to that volume and come up with nearly the same thing.

How about you? Do you use the available tick volume data in your trading? Why? or why not?
Do more of that which succeeds and less of that which does not - Dennis Gar
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 48 KB

Lets look at this monthly screen shot...note where I have placed arrows on the chart (some hand drawn)...along with their corresponding volume data. Anyone here see the pattern. Just about every time there is an uptick in data with an accompanying price response, it signals a swing point has been formed and price moves the other way.

Also note the drop off in volume just prior to the swing point formation (and uptick in volume)...this is-to me-confirming an old theory of trading that I have never been able to quantify previously. Each swing goes through three phases. Climax, exhaustion, absorption. Using just price and the volume info I can find these points...do you see them? Any thoughts?
Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting DonPato
Hello again all...its been quite awhile since I've posted. Many personal and health issues have prevented me from being able to post as often as I like...but I have NOT stopped trading or watching the markets. In my ongoing effort to translate the lessons I learn from my experience in the futures market I have to ask you all here (the more experienced the better)...how come very few people use the volume data included in their brokers? I must admit I have gone on record here as saying the volume information on the forex market is "practically useless"....
DonPato,

Hope you recover fully well...

interesting thread,Subscribed

Thanks
Footprint ... something was there (;

Attached Image
After price, volume is the second most important thing in my trading. I also use only these two, price and volume. Volume helps me anticipating the coming moves, and also helps with the timing of the entries.

Forget tick volume though. Unreliable and harder to read, it is a joke compared to real volume. Even for forex, use currency futures data for trading.
Price and volume reveals everything. The market moves on supply and demand.
Quoting DonPato
Hello again all...its been quite awhile since I've posted. Many personal and health issues have prevented me from being able to post as often as I like...but I have NOT stopped trading or watching the markets. In my ongoing effort to translate the lessons I learn from my experience in the futures market I have to ask you all here (the more experienced the better)...how come very few people use the volume data included in their brokers? I must admit I have gone on record here as saying the volume information on the forex market is "practically useless"....

Hi there,

Volume in fx is not really available to majority of participants in the fx market and I would go on to say it is also not really available in the stocks market. In fx market the larger traders would trade with the few primary market makers(Top fx banks) to avoid from moving the market. So, even if you have access to ebs, reuters, fxall, hotspot etc you would still only have access to transactions that occur in the lit market. In the stocks market there are dark pools that large traders would use when transacting large orders.

I am not trying to tell you what to do but my advise is, forget about volume, focus on price.
Focus in volume, you will be rewarded.
Know yourself before fight with the market.
Quoting Supertrader9
{quote} I am not trying to tell you what to do but my advise is, forget about volume, focus on price.
Just by looking at the H4 candle structure and follow through you can pretty much tell if it's high or low vol.
Quoting Mingary
Footprint ... something was there (; {image}
Is it order flow indicator for MT4?
NO MATTER THE SITUATION,NEVER LET YOUR EMOTIONS OVERPOWER YOUR INTELLIGENCE
Recently I have started studying volume. My realization is like why people don't talk much about it. It's amazing. It is the volume that helps predict the market more accurately. Yes it will take time to master on volume based trading. I use volume with Candlestick.
Quoting aaven
{quote} DonPato, Hope you recover fully well... interesting thread,Subscribed Thanks
Thank you Aaven...its actually not my health but my parents...I am with them in California to help out for as long as it takes. The beauty of this kind of work is that it is flexible and allows me to be anywhere in the world there is an internet connection
Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting Supertrader9
{quote} Hi there, Volume in fx is not really available to majority of participants in the fx market and I would go on to say it is also not really available in the stocks market. In fx market the larger traders would trade with the few primary market makers(Top fx banks) to avoid from moving the market. So, even if you have access to ebs, reuters, fxall, hotspot etc you would still only have access to transactions that occur in the lit market. In the stocks market there are dark pools that large traders would use when transacting large orders. I...
I agree with that many do no use or even discuss volume...but disagree completely that volume is useless. Again, I used to believe the same way until I cleared the crap out of my eyes and really took a close hard look. It seems a simple thing to understand that price is the result of order flow and volume. Thus if price is moving one way and the order flow is moving against it...price will eventually succeed to the volume. And by paying attention to the effect that the order flow (and its accompanying volume) you can get a "heads up" just as, or even before a swing point forms. I find that to be a distinct advantage.
Do more of that which succeeds and less of that which does not - Dennis Gar
Does your volume analysis differ then VSA?
NO MATTER THE SITUATION,NEVER LET YOUR EMOTIONS OVERPOWER YOUR INTELLIGENCE
As I said at the beginning...I am trying to "translate" what I learned in trading futures to the forex market. I trade very short time frames, and have found that just because price does something, (up or down) does not necessarily mean that is what the volume (and by extrapolation order flow) is doing. Case in point...Imagine a range. Got it? OK...

Imagine this range breaks to the down side. A big long red candle occurs. From experience I think most of us would say, "the sellers have overcome the buyers, and have now dominated the market." But is this really true? Would it make sense to you if I told you those sell orders were really just stops from the long positions getting hit? What happens when all those stops are hit and there is no one else left who wants to enter new short positions? So if a range breaks but with no accompanying volume...or simply the volume from the stops what will happen to price? If there are no new shorts willing to transact and send price lower...price will rise toward the range looking for new sellers...
Attached Image (click to enlarge)
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Note how the sell off had no where near the volume of the previous sell off...anyone selling this break would've been hosed.
Do more of that which succeeds and less of that which does not - Dennis Gar
Same Story here...note how volume drops off after the break...signaling the end of the trend
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 33 KB


This drop off in volume...even though price continues to move in the direction of the "trend"...is what I call "exhaustion"
Do more of that which succeeds and less of that which does not - Dennis Gar
Final Thoughts for today:
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot2.png Size: 59 KB

Note the bearish engulfing bar in the area where we might expect a turn around...also note the rise in volume.

Of even further note is the very next bar was bullish on even more volume...but couldn't make a higher high. Short anyone?
Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting Trader-Waldo
Does your volume analysis differ then VSA?
Hello Waldo (may I call you "Waldo"?)

I'm not really familiar with VSA, but understand the basic premis. Ranges correspond to volume (or at least they should) and when anomalies occur that might provide a clue to order flow. I have not really studied this method, but I imagine there are similarities. Except this...I don't think anyone else has put these three concept together...

  1. Climax
  2. Exhaustion
  3. Absorption

When these three phases are present, a swing point is forming or is about to form. How powerful would this be when you are wondering WHEN to enter on that retracement to rejoin the trend...or WHEN to take profit on your trade?

Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting DonPato
....I don't think anyone else has put these three concept together... Climax Exhaustion Absorption When these three phases are present, a swing point is forming or is about to form. ...
OK. so can you show on chart those phases(Climax Exhaustion Absorption)?
NO MATTER THE SITUATION,NEVER LET YOUR EMOTIONS OVERPOWER YOUR INTELLIGENCE
Quoting Trader-Waldo
{quote} Is it order flow indicator for MT4?
Yes it works in MT4
Quoting DonPato
{quote} Hello Waldo (may I call you "Waldo"?) I'm not really familiar with VSA, but understand the basic premis. Ranges correspond to volume (or at least they should) and when anomalies occur that might provide a clue to order flow. I have not really studied this method, but I imagine there are similarities. Except this...I don't think anyone else has put these three concept together... Climax Exhaustion Absorption When these three phases are present, a swing point is forming or is about to form. How powerful would this be when you are wondering...
your understanding on the 3 stages is spot on. however your analysis is flawed. mt4 volume is a tick counter which means it is localized to that specific broker.
eg: broker A has relations to 25 LPs. the tick count, will be greater as compared to broker B whom only has relations to 10 LPs. simply because MT4/ECN are tuned to quote best bid/ask. having more LPs to vett thru will cause more changes.

only if you are trading futures which requires a centralized exchange, then volume of a specific instrument will be more or less true
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