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Hey, Newbie got some questions 12 replies

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Attachments: Hey...what about Volume?
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Hey...what about Volume?

Quoting Fred-IV
{quote} The indicator is at the bottom of the chart (histogram with arrows - I put there three yellow arrows to point at the indi's signals). On first sight might be useful when paired with a couple of MAS or Hull Averages to show trend, green ones are false signals in a downtrend so should be filtered. The arrows on the main screen (white, yellow and red) come from my volume indicator, I am trying to make it better (I aim to have an indi showing me the end of a correction with good reliability and precision, and then to build a scanner showing...
I will once again raise this caution...using tick volume on intraday time frames is (IMHO) unrealizable at best due the pulsative nature of tick volume during the different trading session over the course of a 24 hr day. It means nothing that volume drops off between the Asian and London session...and just as important, that volume signal at the start of the US session is not significant simply because the start of each session sees a spike in volume, just as the end of each session sees a drop off in volume.

Thus placing meaning on these intraday volume pulses can have some disastrous effects on your account balance. I reiterate my caution here again...if you want to trade intraday on small time frames do it on a market with centralized and transparent data. Then YES, by all means use volume to help you find your perfect entry/exit points.

I cannot stress this enough, yet no one here seems to comment on it or heed this advise...and we are always seeing this theory applied to small time frames in FX trading...I dare say it is dangerous especially when using retail brokers that also provide you the data...and are the counter party to your trades...please be careful with this...
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Quoting DonPato
{quote} I will once again raise this caution... (((1))) using tick volume on intraday time frames is (IMHO) unrealizable at best due the pulsative nature of tick volume during the different trading session over the course of a 24 hr day. It means nothing that volume drops off between the Asian and London session...and just as important, that volume signal at the start of the US session is not significant simply because the start of each session sees a spike in volume, just as the end of each session sees a drop off in volume. Thus placing meaning...
Generally yes, however in futures data we also have intraday high-low periods volatility, I see that you attributing similar meaning to the volume in futures and in Forex, I would politely disagree - tick volume is not volume at all, it is only a number of transactions/signals at the platform during the period - so it is something completely different than true=real volume. It is number of transactions as I understand. And in spite of that we can have reliable signals, I know that is far from classic volume analysis but at the same time look at my indicator. If something works it works, if signal occur and it is good then.. good.

And regarding your second part of the comment - volume intraday analyzed through volume analysis was initially something ... misleading, because original VSA was created to analyze Daily/Weekly data (I believe in the thirties or forties in the USA). And then with evolution - autorof the VSA and his followers tried to analyze also intraday data. I see that some did that with success because the analysis itself also evolved and was tested through many years of practice.
Quoting Fred-IV
{quote} Generally yes, however in futures data we also have intraday high-low periods volatility, I see that you attributing similar meaning to the volume in futures and in Forex, I would politely disagree - tick volume is not volume at all, it is only a number of transactions/signals at the platform during the period - so it is something completely different than true=real volume. It is number of transactions as I understand. And in spite of that we can have reliable signals, I know that is far from classic volume analysis but at the same time...
I completely agree with everything. I was using the VSA colored candles on my larger charts to reproduce colored candles that I use in futures trading...

When using futures volume I can easily program a candle to change color when the buying volume is x% greater than selling volume or vise versa...(again real volume). As this information is unavailable in FX I have substituted VSA candles...The jury is still out (IMO) about its usefulness, but I am seeing some good results as a viable substitute...using large candles.
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Quoting DonPato
{quote} I completely agree with everything. I was using the VSA colored candles on my larger charts to reproduce colored candles that I use in futures trading... When using futures volume I can easily program a candle to change color when the buying volume is x% greater than selling volume or vise versa...(again real volume). As this information is unavailable in FX I have substituted VSA candles...The jury is still out (IMO) about its usefulness, but I am seeing some good results as a viable substitute...using large candles.
As I understand part of your signal is when (real) buying volume exceeds sell volume for a certain %?

Interesting approach.

I would analyze for example daily down trend and after some amount of time - when buying vol exceeds selling vol I would wait for a corrective move down and then go to the H1 and try to do the same, wait for the same signal. It would be an attempt to trade exit from the first reversal move or to trade second part of the correction. Interesting....
Quoting Fred-IV
{quote} As I understand part of your signal is when (real) buying volume exceeds sell volume for a certain %? Interesting approach. I would analyze for example daily down trend and after some amount of time - when buying vol exceeds selling vol I would wait for a corrective move down and then go to the H1 and try to do the same, wait for the same signal. It would be an attempt to trade exit from the first reversal move or to trade second part of the correction. Interesting....
Yeah...Been there done that...In my experience it just doesn't work that way...but that is very similar in how I actually find signals...as in the case of a buy signal.

If we are talking about multiple time frames, I use the weekly and daily together. Assuming the weekly chart is in an up trend...(making higher highs and lows), then at the base of a retrace - on the weekly, I look for the weekly candle to show an acceleration in selling. (Climax). This shows up as a large deviation on the volume delta extrapolation and/or a large VSA candle. But that is only the first phase.

Simultaneous to this occurring on the larger time frame, the smaller (daily) time frame is also showing a climax phase, usually because this phase is being generated on smaller time frames. In futures this phase shows 3x (or more) selling than buying...in other words EVERYONE is buying. Once that phase is complete, price will "drift" down until it runs into an area where sellers start to take profit...or limit out...this is the "exhaustion" phase.

The corrective move on the small time frame you speak of is where the larger sellers are getting out. And simultaneous to this placing buy orders below the market that will eventually absorb the next wave of late sellers when price dips down. These last two phases often aren't as obvious on the larger chart as they are "embedded" in a single candle. But become quite obvious on the smaller time frame (again for me that is the daily chart).

Once I see the absorption phase complete that is my buy signal. Often this phase causes a slow change in order flow and price will range on these smaller time frames. So I will trade the bottom part of that range.

This keeps risk small while I anticipate the break above the range.
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Quoting DonPato
{quote} Yeah...Been there done that...In my experience it just doesn't work that way.
Don, maybe do you have any screen with this described process. I think understand your words anad at the same time find it hard to imagine.
Quoting Fred-IV
Don, maybe do you have any screen with this described process. I think understand your words anad at the same time find it hard to imagine.
The markets I watch have been ranging so much lately that I had to go back a little to find this example...but it is one that I traded.
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Note the weekly chart (on left) next to Daily chart (on right)...This example shows low weekly volume but the concept is the same...
Weekly shows higher volume deviation, while simultaneously the daily chart is producing a climax phase. In fact this climax is what caused the higher deviation on the weekly chart.

Then the corrective phase ensues, as price moves sideways...Inside yellow box on both charts. Once the correction phase is complete (profit taking on shorts is done), late sellers come in to drive price lower, but the volume is weaker both in the tick volume and also on volume delta...this is exhaustion.

The absorption phase then comes in when price reaches the low of the climax phase (in this example) but cannot close below there...even while on rising tick volume. The close of this candle is significantly off the low even on rising SELLING volume delta.

The wick on this absorption candle is the area where all the selling was absorbed by resting buy orders...and once this selling was done, there was nothing left to drive price down any further and price "boomeranged" higher...(I affectionately call this "whoosh").
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Hi all...just wanted to share a screen shot of a "hedge" i have placed on USD/CAD. I have already closed out the majority of my longs on this trade but there remains a remnant position with a target will above the current market.
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This week brought about a buying exhaustion signal and instead of a stop and reverse I decided to try an old technique I haven't used in a great while. I have entered the sell orders and tightened the stops on the long. Both sell orders have now triggered, so I am "hedged". If price moves higher the shorts will stop out and the long will remain and most likely make its higher target of 500 pips. If price moves lower, the long will stop out at approximately 300 pips profit and I will then manage the shorts as the market dictates.

As I trade mostly in the US hedging in this manner was taken away 10 years ago, because our moronic and Marxist congress felt us "evil" speculators caused the great financial collapse. But since this current broker is offshore (for me) I forgot about this effective and profitable technique. So lets see what happens.
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Longs stopped with 300 pip profit on hedge...now only shorts remain.
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Quoting DonPato
{quote} I'm unsure if you understand but just to be safe...Delta Volume = buying volume-selling volume. What ever is left over is "delta"...I don't know why they termed it that way, its just what they call it. Example on a 30 min candle: Buying volume is 100 shares (units) Selling Volume is 120 shares (units) Delta volume is 20 shares net (selling) This is independent of how the candle forms or finished. Hope this helps.
Hi DP:

Hope you do not mind, but if I may clarify your above post as there is a subtle nuance which needs to be mentioned.

Delta Volume (as used in MarketDelta and Sierra charts platform) is the:

"Buy at market volume" minus "Sell at market volume".

ie:
If there is a limit order to sell 50 lots at 1.5600, and some one places a "buy 50 at market"order which hits the 50 lots at 1.5600, the delta would be +50.

Similarly, if there is a limit order to buy 25 lots at at 1.5600, and some one places a "Sell at market order 10 lots" which hits the 1.5600, delta would be -10.

A bar could have a total volume of ie. 100 but the Delta of the bar could be between -100 and +100 depending on how aggressive the "at market" activity was.

[edit - adding an extra example] From: https://marketdelta.com/what-is-delta/
Example: If the bid price for WTI Crude Oil is 63.50 and the ask price is 63.51 and 25 contracts trade at 63.51, then the delta would be counted as +25. If a second trade occurred but this time the trade occurs at the bid price of 63.50 for 10 contracts the delta for that trade would be -10 and the total bar delta would now be +15.


This has lead to a whole range of studies titled, "delta divergence" ie. if bar is up but delta is down, could shows buying is waning etc.

I can post a chart this evening if anyone is interested?
Quoting Tesmy
{quote} ... This has lead to a whole range of studies titled, "delta divergence" ie. if bar is up but delta is down, could shows buying is waning etc. I can post a chart this evening if anyone is interested?
I'm interested. Go ahead please.
yes please
Quoting Tesmy
{quote} Hi DP: Hope you do not mind, but if I may clarify your above post as there is a subtle nuance which needs to be mentioned. Delta Volume (as used in MarketDelta and Sierra charts platform) is the: "Buy at market volume" minus "Sell at market volume". ie: If there is a limit order to sell 50 lots at 1.5600, and some one places a "buy 50 at market"order which hits the 50 lots at 1.5600, the delta would be +50. Similarly, if there is a limit order to buy 25 lots at at 1.5600, and some one places a "Sell at market order 10 lots" which hits the...
It sounds to me like we have a difference in data and how that is interpreted. what you described in your description above is how actual volume is calculated. (at least that is how it is done on my futures feed). The 50 contracts market order that is matched with a resting order is counted as 50 contracts transacted...buy or sell it is always a positive number.

That same transaction in the FX market would count as 1 tick. Do you see the difference?

In addition, if your 50 contracts buy order AND your 25 contract sell order are both filled the total contracts transacted are 75. Again that would register as 2 ticks. The "delta" is the remaining value between these two transactions...in this case it would be 25 buying contracts. If the selling continues and eventually outweighs the buying then the number would reflect selling contracts but still be a positive number. Thus in my indictor the number is always positive but simply a different color (Magenta or Agua).

When you start doing calculation on top of this simple data (think Delta divergence) or any other variation of this data, you start moving farther and farther away from the actual data and the market. You are now dealing with averages and lags in time, and the resulting oscillator will have negative numbers.

The volume "delta" I use in FX is an indicator of my own design and is "Extrapolated" because this information is not available in the FX market. I use this indicator (as I do in my futures trading) to assist me in determining the order flow and defining exhaustion in this order flow. The exhaustion signal has become my "go-to" signal for anticipating a change in the order flow.

I have not had experience with the other indicators you mention but I am not a huge fan of indicators in general...if it does not pass this test, I don't use it: "how does this indicator assist me in seeing and/or anticipating the order flow?"

Always keep in mind...Order flow/volume is what moves prices...prices do not move of their own accord. It is people/programs placing orders in various sizes and in opposing directions that cause prices to move. If you can "see" the order flow as it is occurring in real time and interpret that you will automatically know which direction to trade and when that flow is changing.

I don't want to get too far off topic here, because volume is the focus of this thread...but the real point of using volume is to show the "strength or weakness" of the order flow and use that to assist you in determining how and when to trade.
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Quoting DonPato
{quote} It sounds to me like we have a difference in data and how that is interpreted. what you described in your description above is how actual volume is calculated. (at least that is how it is done on my futures feed). The 50 contracts market order that is matched with a resting order is counted as 50 contracts transacted...buy or sell it is always a positive number. That same transaction in the FX market would count as 1 tick. Do you see the difference? In addition, if your 50 contracts buy order A.
Hi DP:

Thank you for taking the time to write.

Sounds like we are talking at cross purposes (perhaps using same term to mean different things?)

I am describing Market Delta (the term given by Trevor Harnett - the creator of the MarketDelta platform where the term was first coined). He describes Delta = Aggressive Bid Volume Minus Aggressive Ask Volume. A lot of platforms now use this term to describe what I have described in my post.

The below website will have the example.
https://marketdelta.com/what-is-delta/


Market Delta has nothing to do with tick or tick size.

Market Delta is not an indicator - it shows how the volume was made up - ie. whether it was made up of aggressive buyers or aggressive sellers.

I will post a numbers bar once I get home where it will be much easier to see.
Quoting DonPato
{quote} I don't want to get too far off topic here, because volume is the focus of this thread...but the real point of using volume is to show the "strength or weakness" of the order flow and use that to assist you in determining how and when to trade

If I may, I will post two charts tonight and an explanation? If you think this is not what you'd like to see, I will stop as this is your thread and I do not wish to impose.

However, When you say, "...real point of using volume is to show the "strength or weakness" of the order flow...", I believe Market Delta is ideal for as it allows you to see exactly if the buyers or sellers were aggressive in that volume bar. But I will let you be the judge.
Quoting Tesmy
{quote} Hi DP: Thank you for taking the time to write. Sounds like we are talking at cross purposes (perhaps using same term to mean different things?) I am describing Market Delta (the term given by Trevor Harnett - the creator of the MarketDelta platform where the term was first coined). He describes Delta = Aggressive Bid Volume Minus Aggressive Ask Volume. A lot of platforms now use this term to describe what I have described in my post. The below website will have the example. https://marketdelta.com/what-is-delta/ Market Delta has...
I understand all of what is presented in this web page and agree with it. While I don't use it in quite the same way and my indicators are "self" programed. But there are a few simple facts that remain: To quote the website you listed: Delta is the net difference between the buying and selling at each price (footprint delta), each bar (bar delta), or the the entire day (cumulative delta).

This is exactly what I have done here but with extrapolated data....once again, the buying and selling data IS NOT AVAILAVLE here in FX market. I happen to do it on a daily candle basis to try and reduce error that is naturally occurring when you extrapolate anything. Again, the point of this is to "see" the order flow. If a price is rising on consistently lower and lower BUYING, what does that say?

To me it tells me that buyers are getting fewer and fewer, and that at some point price buyers will stop buying, and that means that price will stop rising. Likewise, if price is moving sideways in a small range, but each time it reaches the top, the buyers just aren't there, this most often indicates, price will drop and most likely break below the range.

These are the real questions...how long will price continue in its current direction? Is this breakout a fakeout? Should I enter/exit now or wait? Using this data is only a way to try to answer these most important questions.

If you use price only, you might not "see" the order flow as well. Because Price is always the RESULT of order flow/volume...not its cause.
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Quoting DonPato
{quote} I understand all of what is presented in this web page and agree with it. While I don't use it in quite the same way and my indicators are "self" programed. But there are a few simple facts that remain: To quote the website you listed: Delta is the net difference between the buying and selling at each price (footprint delta), each bar (bar delta), or the the entire day (cumulative delta). This is exactly what I have done here but with extrapolated data....once again, the buying and selling data IS NOT AVAILAVLE here in FX market. I happen...

Fair enough - I shall refrain from posting the charts.
Quoting Tesmy
{quote} Fair enough - I shall refrain from posting the charts.
Forgive me...I did not say you should refrain...in fact I think it would be good to see them. My only point in all this discussion is that most of the traders here are trading the FX market, and thus many will respond that the data you wish to highlight is unavailable to them, and thus of little value. However, I believe the more voices on this subject the better. what you do with that data is (as it always would be) your decision.

If this thread helps you use it more efficiently or allows you to consider it where you hadn't before, I will rest content.
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Quoting DonPato
{quote} Forgive me...I did not say you should refrain...in fact I think it would be good to see them. My only point in all this discussion is that most of the traders here are trading the FX market, and thus many will respond that the data you wish to highlight is unavailable to them, and thus of little value. However, I believe the more voices on this subject the better. what you do with that data is (as it always would be) your decision. If this thread helps you use it more efficiently or allows you to consider it where you hadn't before, I will...
Hi DP,

Nothing to forgive, I totally understand where you are coming from

We are using the same terminology, "Delta" to mean different things based upon the data we have available to us.

I understand you are using spot forex whereas I am using futures forex so I have a different data set available to me.

And you are right - as the majority of people on this board, and this thread, use MT4, true market delta is not available to them. As such, it would be unfair of me to post anything that they cannot use which could cause confusion in what you are trying to teach. It would be better for me to either start my own thread or post on a more suitable thread.

Please accept my apologies for any inconvenience caused.

All the best - good trading
This one of my favourite indicator before open a position...especially on big news..just waiting until big trader get in to the market and follow them..
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