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Hey...what about Volume?

  • #41
  • Dec 19, 2017 10:00am Dec 19, 2017 10:00am
Finally we come down the idea of Absorption...but I will have to leave that for another day...I have some responsibilities to attend to now and will try and comment more tomorrow. I hope you find value in what I am trying to communicate here. Please feel free to ask questions, and understand that I too am still developing these ideas so nothing is set in stone quite yet (not for me at least).

I think that by using daily tick volume on NY close of market, that there is sufficient information to enter and exit trades that can move one to provide at least 3xR, and keep stops sufficiently out of the way of broker's meddling. But that's just MY opinion...please don't hesitate to offer yours.
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  • #42
  • Dec 19, 2017 10:58am Dec 19, 2017 10:58am
Quoting DonPato
Exhaustion: That state where price continues to move in the direction usually preempted by the previous climax. But on consistently lower or less volume. Many technicians call this "momentum". I strongly disagree. While price continues to move in the direction of the "trend" (at last as far as they have defined it)...the volume moving that price is lower and lower. Even on lower volume, price continues moving...this is mostly because there is really not opposing order flow to challenge it. Thus since the dominance is established, most new entries...
Hi,

How do do you define "dominant Order flow" ?

Thanks
  • #43
  • Dec 19, 2017 11:09am Dec 19, 2017 11:09am
Quoting Mingary
{quote} Hi, How do do you define "dominant Order flow" ? Thanks
Excellent question...

On my futures trading I define it as the side of the market that produces the most volume in its direction that results in price moving that intended direction. Example: Climax volume = 3x the otherside's volume. (if buying volume is 100, and selling volume is 300 - or more), sellers are dominating the market and therefore producing a bearish price bar.

Of course anomalies occur, especially on very small time frames. I have observed on time frames of 150 ticks or less, that there are often bars where the selling is greater than 3x the buying, yet, a bullish bar or a doji will form. These are usually extremely small ranges of 2-4 ticks. These observations got me into investigating the concept of absorption. I will need to be at the computer for me to adequately explain this further. I currently am not.

Thus if selling > buying AND close < open AND close < 50% of range...selling is dominant.
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  • #44
  • Dec 19, 2017 2:01pm Dec 19, 2017 2:01pm
Quoting DonPato
{quote} These are usually extremely small ranges of 2-4 ticks. These observations got me into investigating the concept of absorption. I will need to be at the computer for me to adequately explain this further. I currently am not. Thus if selling > buying AND close < open AND close < 50% of range...selling is dominant.
I use absorption and mini-absorption as the final trigger in my trading . . . very high % of trades will reach BE, many trades will earn high RR profits, and few trades will hit initial SL.

Busy with holiday, family, travel, but should you want to explore further we can discuss.

The following signals were programmed into sierra chart using very similar logic to what you described.

Best,
N

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  • #45
  • Dec 19, 2017 5:29pm Dec 19, 2017 5:29pm
DonPato,

Posting the same chart with signals as above, as well as zoomed view of each signal with and internal view of the BID vs ASK/OFFER bars at each level. Hopefully this will help illustrate the point i am trying to make. At the bottom of the chart you will see Delta and Total Volume for each bar.

There are obviously additional considerations to be made before trading each signal, but i think these charts are in the same spirit as your post regarding absorption, bid/offer divergence with candle close.

All the best,
N.



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  • #46
  • Dec 19, 2017 5:36pm Dec 19, 2017 5:36pm
Hey there Nik-Nyc...you beat me to the punch line...but you are spot on. I have coded something very similar into my trading but do not have the (as I am not really a programmer) that shows it out by each price level...Good for you! You have done what I have tried to do on a much larger scale. If you are using a 4 tick range bar, I am using tick charts that are substantially bigger by comparison but the concept is the same. OK..I guess I have a little time so I will get into this final phase now...

But congrats Nik-Nyc...this is exactly the concept I am trying to put across...as you put it to "trigger" trading.
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  • #47
  • Dec 19, 2017 5:52pm Dec 19, 2017 5:52pm
Absorption: This concept is often more difficult for people to grasp because we are taught the the more participants or volume in one direction, the more price will move in that direction. However this is not always true...We all understand that for every buyer there must be a seller. It is a basic tenant of the market. In fact there IS NO market unless you have at least two parties willing to transact from opposite sides. One buyer, one seller. But what happens if the guy who wants to buy as so much money that he can "absorb" any and all sell orders at a certain price until there is no one left to sell?

This will register as an anomaly. Higher selling volume but price does not follow suit, or in fact goes UP. This is absorption. When an order's volume (how many lots he/she is willing to transact) is so big it can absorb all the available volume from the opposing side and not permit price to move any further...someone or something is coming in with large volume and once the sellers are all sold out, price will rise, because this order's volume hasn't yet been filled completely. So with more buying volume left to transact, price starts ticking higher.

It can be seen (again in futures markets) or markets with any central exchange, when one side of the order flow cannot move price any further, even though it is transacting more volume than the other side of the order flow. Example. A bearish bar that has more selling than buying but finishes (closes) at least 50% of the bar's range off the lows.

Here are some examples from an earlier screen shot.
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There are two different types of code at work on these bars...both are registering basically the same thing, one on delta volume, and one on total volume. it is this total volume concept that I believe will work in the forex market.
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  • #48
  • Dec 19, 2017 6:03pm Dec 19, 2017 6:03pm
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USD/CAD - short...I just entered this trade and it is the perfect example of what I THINK we can interpret as absorption. Keeping in mind that we are using total tick volume for 24 hrs, this candle shows rising volume and finished bullish after breaking to new highs. However, it close below 50% of the total range for this day. I have been exploring this for just a short while now on the FX side, and am interested in what others with this kind of experience think. I have found it to be quite consistent, and would require a rule set...one which I am working on now.

We should follow this trade and see how it works out.
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  • #49
  • Dec 19, 2017 6:15pm Dec 19, 2017 6:15pm
Summing things up...
Before, or just as, a swing point is forming, there are three inevitable phases the order flow will pass through that will provide a signal in the market as to WHEN you should either, take profit on your current trade, enter a new position in the other direction, or both (stop and reverse). This concept is based on fundamental and well proven order flow concepts and work in the market every day. They are:

  1. Climax - that point which ALL the participants in a particular direction are in. EVERYONE...fundamentalists, Technical analysts, impulse traders, EVERYONE. The volume will be quite obvious and easy to see.
  2. Exhaustion - Often called "momentum". Price continues moving in the direction of the climax volume (or grinding) on successively lower volume. Even on this lower volume price continues to move, due to lack of interest in counter party transaction
  3. Absorption - The condition where even with higher volumes in the direction of the dominant order flow, price does NOT continue, or even moves contrary to the order flow.

All three must be present for a "valid" swing point to form. "Valid" in my mind as to whether or not I will consider taking action.

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  • #50
  • Dec 19, 2017 6:22pm Dec 19, 2017 6:22pm
Final thoughts...
All three must be present, but they don't always occur in the same order. As well, often time you can have them occur on different time frames, and across multiple different views of the market...these are only confirming.
Attached Image (click to enlarge)
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OK...that's my 2 cents worth. Do you think this has any value? Is it worth pursuing? Should we continue this conversation and try to refine it?
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  • #51
  • Dec 19, 2017 11:34pm Dec 19, 2017 11:34pm
Quoting Mingary
{quote} Yes it works in MT4
Quoting Nik-Nyc
......The following signals were programmed into sierra chart using very similar logic to what you described. Best, N {image}

Quoting DonPato
....I have coded something very similar into my trading ......

anything to share for MT4?
NO MATTER THE SITUATION,NEVER LET YOUR EMOTIONS OVERPOWER YOUR INTELLIGENCE
  • #52
  • Dec 19, 2017 11:58pm Dec 19, 2017 11:58pm
Quoting DonPato
Final thoughts... All three must be present, but they don't always occur in the same order. As well, often time you can have them occur on different time frames, and across multiple different views of the market...these are only confirming. {image} OK...that's my 2 cents worth. Do you think this has any value? Is it worth pursuing? Should we continue this conversation and try to refine it?
Don Pato,

Thanks for the excellent analysis...
  • #53
  • Dec 20, 2017 2:08am Dec 20, 2017 2:08am
Quoting DonPato
Final thoughts... OK...that's my 2 cents worth. Do you think this has any value? Is it worth pursuing? Should we continue this conversation and try to refine it?
Thank you, DonPato.

I think this is high quality information and it worth further refining.
And I like your interaction here.

Cheers
  • #54
  • Dec 20, 2017 5:23am Dec 20, 2017 5:23am
Thanks Don Pato, interesting
You may want to have a look at this (from page 8):
Attached File(s)
File Type: pdf VSAVolumeanalysis.pdf   421 KB | 2,336 downloads
  • #55
  • Dec 20, 2017 7:01am Dec 20, 2017 7:01am
Amazing post so far, I personally think that it should continue.
I personally studied PVSRA before but I like the in-depth volume analysis, can someone please explain this chart?
How is it called, what does it do, how can it be used? Maybe include the Expert Advisor that creates the chart(if you want of course).
Thanks!

P3rri.
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Do Not Predict! React!
  • #56
  • Dec 20, 2017 8:08am Dec 20, 2017 8:08am
Quoting P3rri
Amazing post so far, I personally think that it should continue. I personally studied PVSRA before but I like the in-depth volume analysis, can someone please explain this chart? How is it called, what does it do, how can it be used? Maybe include the Expert Advisor that creates the chart(if you want of course). Thanks! P3rri. {image}
Thanks P3rri... the chart you reference is a futures chart showing bid and offer transactions at each price. In other words...the actual order flow. This information is not available in the FX market because there is no central exchange. Thus the point of this thread. How to interpolate this same information using the tools available.
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  • #57
  • Dec 20, 2017 8:14am Dec 20, 2017 8:14am
Quoting Trader-Waldo
{quote} {quote} {quote} anything to share for MT4?
Waldo..the coding refered to here is in the futures market and cannot be used in FX because the data doesn't exist. That is why I am profering this thread to use the information available to achieve the same mission. The FX market traders are at a distinct disadvantage because of the lack of a central exchange. But again you can use the tick data on the mt4 platform...you might want to call your broker and ask where that data comes from. My understanding of mt4 is that it it confined to just your broker. Be prepared for a lot of blank stares though
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  • #58
  • Dec 20, 2017 8:26am Dec 20, 2017 8:26am
DonPato,

Great posts and analysis. The exploration of volume, and specifically the Bid vs Ask activity is well worth everyone's time. After beginning to study and understand that Price itself is essentially a product (dare i say: an indicator) of Bid/Offer activity i made the switch to Futures and have never looked back. There may be a benefit for spot forex traders, but i have not studied it enough to be sure . . . in the Futures market, there is without a doubt an edge that exists once a trader can understand what is going on.



@trader-waldo: Am not using mt4, but should you explore sierra charts i can help you set them up. Google "numbers bar study sierra charts" to get started.

@P3rri: These charts have a few different names, i am using sierra charts where they are known as "numbers bar study". You can also check out OFA charts, but there is no reason to pay for their software when free alternatives, and indeed even better software exists.
  • #59
  • Dec 20, 2017 8:39am Dec 20, 2017 8:39am
Look what volume does..
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Know yourself before fight with the market.
  • #60
  • Dec 20, 2017 8:52am Dec 20, 2017 8:52am
This is a brilliant thread.
I have heard of a couple of companies that will supply volume data not tick.
It feeds into the MT4
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