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Hey...what about Volume?

  • #101
  • Dec 26, 2017 5:32pm Dec 26, 2017 5:32pm
Quoting Whikka
.... My question is, have you gone through a structured process to validate the behaviors you describe? ...
I have on the futures side...long story made short...order flow preceded volume change and volume change precedes price change. That is how I came up with my "theory" on the different phases of exhaustion. They are basically those phases in terms of market structure.

My issue on forex is how to accomplish the same thing using available tools. Even though the FX market is decentralized it still functions the same way. So I have a few ideas on rule sets to test and then gather the statistics you are asking about.

Bottom line (I can't remember the exact number) but it is upwards of 88 % probability that when all three phases are complete a swing point has either been made or is being made on the open candle.

I have yet to find a way to correlate that same pattern using just tick volume...thus this discussion...
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  • #102
  • Dec 27, 2017 1:13am Dec 27, 2017 1:13am
Quoting DonPato
A quick update on USD/CAD short. {image} Price continues to move my direction (however slowly) in the low volume post christmas market. I have left my stop where it is and will check again in a day or so.
well done.
NO MATTER THE SITUATION,NEVER LET YOUR EMOTIONS OVERPOWER YOUR INTELLIGENCE
  • #103
  • Dec 27, 2017 10:01am Dec 27, 2017 10:01am
Quoting Trader-Waldo
well done.
Thank you Waldo...
Update on USD/CAD...I was limited out on this short for a little over 200 pips with an original stop of roughly 50 pips, that's 4xR profit on this trade.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 96 KB

The way things look at this point, it might be shaping up for another run at the top, but I won't know until close of day today.
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  • #104
  • Dec 27, 2017 1:46pm Dec 27, 2017 1:46pm
Quoting DonPato
{quote} Come on friends...anyone out there want to contribute?
Hi DonP,

Nice live trade on UC . . . 4:1 trades go a long way in keeping the equity curve pointed in the right direction.

Unfortunately, my trading focus has moved to the futures market, so my contributions towards the decentralized forex market using tick data are very limited. From a theoretical point of view, i do agree that an edge can be found, but there will certainly be nuances from your futures analysis, and this will take some investigating and testing which you have commenced.

Will keep an eye on the discussion here, thanks for sharing.

N

PS Not to distract from your discussion here, but am curious which chart type (tick, range, volume, time, P&F) you use for you futures analysis? Trading Chart?
  • #105
  • Dec 27, 2017 3:35pm Dec 27, 2017 3:35pm
Friend, I advise you to learn Locked-in Range Analysis (LRA).

This is better then using of volume...
Don't be a Lucky-trader! Just make cause-and-effect trades!
  • #106
  • Dec 27, 2017 6:26pm Dec 27, 2017 6:26pm
Quoting Nik-Nyc
... Not to distract from your discussion here, but am curious which chart type (tick, range, volume, time, P&F) you use for you futures analysis? Trading Chart?
I do multiple time frame analysis on the futures (perhaps to an extreme) but I find these points of view give me a very good idea of the market every time I open the trade station without having to fish through news reports, and various screens. Keep in mind that my trade station has three monitors so I literally have a panoramic view of the market when I'm up and running.

On the left:
Volume charts: (for the larger point of view)
15,000 contracts and 4,500 contracts

In the middle: (trade management window)
1,350 ticks and 1,350 contracts.

On the right: (trigger entries and exits)
525 ticks and 150 ticks.

Yes all this for just 30 pips (net) per day. I know it might be a little excessive, but for me it gives me a "top to bottom" approach and tells me when and where to not only join in a trend, but also when to counter trend...
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 416 KB

Enjoy...
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  • #107
  • Dec 27, 2017 6:35pm Dec 27, 2017 6:35pm
Quoting t8936
Friend, I advise you to learn Locked-in Range Analysis (LRA). This is better then using of volume...
I have not heard of this before, but I have downloaded and am reading a small PDF (http://lratrading.com/file/get-uploa...RA_EN&fileid=5) I am pouring through it all ready. If you've read any of my other threads, I think you'll find I am already trading in a fashion very similar to this already. Although I didn't know it had a name. I call it common sense trading.

But I welcome any comments on how one uses this on the right hand edge of the chart and if you have used it and, of course, if it has helped you be more consistently profitable in your trading.
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  • #108
  • Dec 27, 2017 9:01pm Dec 27, 2017 9:01pm
Quoting DonPato
{quote} I have on the futures side...long story made short...order flow preceded volume change and volume change precedes price change. That is how I came up with my "theory" on the different phases of exhaustion. They are basically those phases in terms of market structure. My issue on forex is how to accomplish the same thing using available tools. Even though the FX market is decentralized it still functions the same way. So I have a few ideas on rule sets to test and then gather the statistics you are asking about. Bottom line (I can't remember...
My issue with using volume has always been false signals or the fact that it is very subjective. The way I’ve used volume in the past for trading futures,was simply looking for double tops/bottoms with a volume divergence to show exhaustion. In key areas, these were good spots for reversals - sometimes.

Your trade was excellent, but I’d like to see more examples or maybe some losing trades and ways you’d differentiate between valid signals and knowing when to stay out.

Either way, good luck with your research!
  • #109
  • Edited Dec 28, 2017 12:06am Dec 27, 2017 11:13pm | Edited Dec 28, 2017 12:06am
Quoting DonPato
{quote} I do multiple time frame analysis on the futures (perhaps to an extreme) .. Enjoy...
what is meaning of gold cross symbol on your chart...and pink/blue dots?
NO MATTER THE SITUATION,NEVER LET YOUR EMOTIONS OVERPOWER YOUR INTELLIGENCE
  • #110
  • Dec 28, 2017 5:35am Dec 28, 2017 5:35am
Volume is a very useful tool to analyse the market however it does lead to false signals otherwise everyone would just trade purely off it.

Volume used in conjunction with Delta is far more powerful.

Volume used in conjunction with delta and a value model is about as good as you can get in the retail space.

Here is an example of how volume by itself can lead to the incorrect trade decision.

GC was making higher highs in a strong uptrend this morning. Volume increasing on the up bars but dropping off on the down bars. Everyone thinks the market is going to continue higher.
This however is the incorrect. Value (the coloured lines on the GC chart) are dropping off rapidly. The increase in volume on the upbars coming into 9am is selling volume as indicated by the negative deltas. Selling into the resistance (at the green arrow) is the perfect trade as GC is left all on its own with all its value lines either pointing down or there is a significant divergence offering a premium selling price on GC.

Attached Image (click to enlarge)
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Boxing clever since 76.
  • #111
  • Dec 28, 2017 5:46am Dec 28, 2017 5:46am
Quoting DonPato
{quote} I have not heard of this before, but I have downloaded and am reading a small PDF (http://lratrading.com/file/get-uploa...RA_EN&fileid=5) I am pouring through it all ready. If you've read any of my other threads, I think you'll find I am already trading in a fashion very similar to this already. Although I didn't know it had a name. I call it common sense trading. But I welcome any comments on how one uses this on the right hand edge of the chart and if you have used it and, of course, if it has helped you be more consistently...
Yeah this is a very logic method. I think everebody need to use it. Maybe you can start New Thread for "Locked-in Range Analysis" and we try to talk about it ?
Don't be a Lucky-trader! Just make cause-and-effect trades!
  • #112
  • Dec 28, 2017 7:57am Dec 28, 2017 7:57am
Quoting t8936
{quote} Yeah this is a very logic method. I think everebody need to use it. Maybe you can start New Thread for "Locked-in Range Analysis" and we try to talk about it ?
Hi again from the other threat can you open private messages so i can sent you or open a threat so we dont hijack others people threats?
  • #113
  • Dec 28, 2017 9:16am Dec 28, 2017 9:16am
Quoting t8936
... Maybe you can start New Thread for "Locked-in Range Analysis" and we try to talk about it ?
I will let you take care of that...I would very much like to continue the discussion here.
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  • #114
  • Dec 28, 2017 9:21am Dec 28, 2017 9:21am
Quoting Trader-Waldo
what is meaning of gold cross symbol on your chart...and pink/blue dots?
The "+" sign on the futures charts are those candles that exhibit absorption. As well the pink and blue dots show something very similar but with a slightly different code. But they both signify the same thing...increasing volume yet despite that, price reaction is anomalous.
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  • #115
  • Dec 28, 2017 9:32am Dec 28, 2017 9:32am
Quoting jack411
My issue with using volume has always been false signals or the fact that it is very subjective. ...
I run into this quite often the concept of "false signal". After studying it extensively I have to wonder what you mean by that...the idea here is that something signals but does not have the anticipated response. I think that is what you are trying to indicate here...

This assumes several things that I have not stated. A signal...which I have not defined in anyway. That fact that it didn't work as anticipated...that happens only when you don't understand the structure of why the signal generates in the first place. I try not to trade on "signals" but rather to interpret and understand what I think the order flow is doing at any given point in time. Thus I do not trade by x,y,z, = a,b,c signals. I try to say to myself, "what is the order flow doing right now?" "What does it looks like it might do in the next bar or two?" "Does it look like the order flow will change?" and finally, "How is price responding to the current and anticipated order flow?"

To my mind these are far better questions to ask than, does this candle (or volume bar) complete, x,y,z, criteria, and if so, then does that mean there is x% probability that price will move a,b,c. As much as most people try to convince you otherwise, the price just doesn't do that...thus a "false" signal is generated.

I think we need to learn and understand the underlying market structure...order flow --> Volume --> Price reaction. Then at any time or point on the chart you can make intelligent decisions (enter, hold, exit, stand down) based on what you are "reading" at that moment. And by so doing you don't leave your trading to "chance" or probability. You simply "read" the market and understand that it is changing every second. So what you see from one candle to the next may change...thus the nature of the market.
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  • #116
  • Dec 28, 2017 10:03am Dec 28, 2017 10:03am
Quoting copi88
Volume is a very useful tool to analyse the market however it does lead to false signals otherwise everyone would just trade purely off it....
Please see this post here...
Quoting copi88
...Volume used in conjunction with Delta is far more powerful. Volume used in conjunction with delta and a value model is about as good as you can get in the retail space...
I have gone over this ad nauseum. I understand we are using tick volume...Delta is unavailable in the spot forex market. I you or anyone else needs or wants to use these tools you will NOT find them in the spot market. You may find companies who have found algorithms to extrapolate this data...fine but it is not the same and IF you feel you need this...knock yourself out.

Quoting copi88
...Here is an example of how volume by itself can lead to the incorrect trade decision....
I will engage you on this point only because it does serve to show the point I've been trying to make through out this thread. That is before or as a swing point is being made, a series of phases will occur that will clue you into a swing point that may represent a change in price direction.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 148 KB

On your first screen shot with just volume, I have noted the phases, of climax, exhaustion, and absorption that occurred as the swing point was made and while difficult to see, I have drawn lines down to their corresponding volume bars. I will address them one by one...

  1. Climax - highest buying volume since the major swing point (indicated by the red dot). represents all the shorts stopping out (or taking profit) and confirms the new higher low...thus setting up the idea of trend continuation
  2. Exhaustion - price continues rising but on significantly lower volume and this is the big clue...if price is going to continue rising, why isn't there more volume? Interpretation - the buying was only short positions stopping out...no new buys (of any significant volume) are entering.
  3. Absorption - Again a significant rise in volume and price moves even higher, BUT cannot close there. Close is (at least it looks from here) 50% of the range off the lows...on rising volume. Again here it looks like price SHOULD continue higher but doesn't...this is the anomalous price reaction I am talking about.

Again, ALL three phases are present and when complete, a swing point has formed and price moved lower stopping out all the remaining longs and driving price even lower.

Now lets look at the order flow...thank you for providing it by the way.

Attached Image (click to enlarge)
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You can see the two arrows you were pointing out where the delta on that candle was negative. Even as the candle closed bullish. This is how I also learned about absorption. But absorption is only the final phase. It must also be in union with the two other phases or absorption alone will generate a "false" signal.

In my work on futures, I used to think that absorption was the signal I should be looking for...and indeed they show up at swing points very consistently. However these areas also show up in other points on the chart that end up failing. It is only when observing the other phases of exhaustion and climax that you will be more accurate in finding where to enter or exit. Even those are not 100%. This is why I advocate "reading" the market bar by bar (or tick by tick if you're a scalper). You must compare the structural elements of order flow and volume to how price reacts and find the inconsistency...THAT is where the edge is.
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  • #117
  • Edited 11:09am Dec 28, 2017 10:51am | Edited 11:09am
I'm thinking that we should perhaps return to the basics of market structure. I'm pretty sure this will stimulate discussion even further. So I will try to put up a series of posts that will hopefully help us all understand the nature of not only the markets but also what I am trying to accomplish by this thread. If this is too elemental for you perhaps you can chime in and help me teach. So we will take this one step at a time.

Market Structure element #1: "It takes two to tango"
Just like the tango, you need TWO participants to create ONE transaction (or tick). One who buys and one who sells. Just like with any other transaction, if there are NOT two participants willing to transact, no transaction will take place. You cannot buy a car if no one is willing to sell one, and you cannot sell a car that no one is willing to buy. Once you have those two parties, (a party and a counter party) all that's left to do is agree on a price.

Each tick in our volume counter represents two participants who agreed transact keep in mind each of these two participants expects to win. So at some point, one or the other will leave the market because he/she is losing too much. So to leave the market one must place another order in favor of the winning participant. ( A seller must now buy, or a buyer must now sell). And...the exiting participant must now (hopefully) find another counter party to complete his/her transaction, and when completed...another tick registers on the volume.

What does this mean to us as traders...it will become more clear later, but it is a quazi representation of order flow. Understanding that each of these ticks represents orders that are filled...buyer and seller...it then becomes a question, as to which side is dominant? And then is that dominance due to more new entries, older losers exiting, or winners taking profit?

So lets recap. Order flow is simply the stream of orders coming into the market and each transaction registers on the tick volume. Thus higher volume = more transactions, and therefore higher order flow. Up next...Dominance...tomorrow.
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  • #118
  • Dec 28, 2017 11:17am Dec 28, 2017 11:17am
Hello all, I would like to share one of the ways I trade.
I look for price to go up and hit Exact Price Levels, (EPL),
and I look at Volume. Its simple and works. I took this
sell trade Monday evening and closed it this morning.
Attached Image (click to enlarge)
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  • #119
  • Dec 28, 2017 11:27am Dec 28, 2017 11:27am
Quoting DonPato
{quote} Please see this post here... {quote} I have gone over this ad nauseum. I understand we are using tick volume...Delta is unavailable in the spot forex market. I you or anyone else needs or wants to use these tools you will NOT find them in the spot market. You may find companies who have found algorithms to extrapolate this data...fine but it is not the same and IF you feel you need this...knock yourself out. {quote} I will engage you on this point only because...
Volume analysis is most probably the only useful thing I have learnt on this forum however this is the last step in the process of placing a trade.
If volume / orderflow analysis was the only piece of the puzzle I would be able to write an algorithm and become a billionaire. That combination of volume and price action pointed out in the post above will occur all over the chart but we have to have a reason for taking the trade and it needs to be in the right area.

This is how institutional traders trade
-Establish a fundamental reason for a trade
-Either wait or manipulate price to create a discount (or a buy trade) or a premium (for a sell trade) on value. The institutions have complicated models that calculate value using AI models.
-Look for areas of liquidity to place their passive orders.
- Execute

We can need to carry out the same process as them and then wait for the orderflow clues that they are creating to appear and then deal. But we first need to have a fundamental reason and know where value is. How can you buy something without knowing what its value is? How do you know if you will be able to sell it again in the future for a profit.
Boxing clever since 76.
  • #120
  • Dec 28, 2017 11:57am Dec 28, 2017 11:57am
Quoting DonPato
{quote} I will let you take care of that...I would very much like to continue the discussion here.
Thanks, but I see there many posts about footprint etc and this is not the correct way to trading. That is why I want only Locked-in Range Analysis thread. I'm sure I can say more about it, because I use LRA since 2006
Don't be a Lucky-trader! Just make cause-and-effect trades!
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