Volume Trading

Edit time: 2012-11-04
Edit reason: Gathering together all information about eVOLution to keep it simple and understandable for people


A brief history about me and trading eVOLution – this all started in 2008, that time was quite popular trading method using volumes and I started to search volume by price data for free. All existing resources were providing them for some fees, so I decided to investigate a way how to get such data for free. I examined CME Group site a lot and found a lot of interesting information. The eVOLution live 4 long years and keep working and improving more and more. This thread on ForexFactory is the main one I was using during all time it lives, you may check posts here and trace down the history. Thanks FF!

I want to say thanks for all of you who were helping me during this time, with your comments, suggestions and even criticism.


I am not selling anything and will not do this in the future. All data that exists on a site is totally free with no commitment from your side, however definitely I would appreciate your comments and suggestions.



Why eVOLution is useful? The evo-* indicators are not based on a price, they use live data from Chicago mercantile exchange site ( http://cmegroup.com/ ) .


The eVOLution is not a program in standard understanding – it is quite complex system that do:
- Gather some data from cme-group.com site
Process it and load into own database
- Show the data on site via flash applet in browser, so you do not need to download/run anything
- Provide few indicators that can work with downloadable data from a site, to help you drawing lines and levels



Some basic information about volumes, so new people can get it faster:

There are 3 types of volumes on the market:

Volumes by tick - shows dynamic of price changing for selected period
Volumes by amount - shows number of performed operations (buy/sell) for selected period
Volume per price - shows number of contracts/lots bought/sold for selected period on a specified price

The last one is more interesting for us, as only it show us fixed marked interest regarding some prices or price ranges. This means that price movements are absolutely related to amount of lots/contracts that was moved inside market. Or to make it easyer: volume ---> price.

An example – 1500 lots has been sold on a market on 1.3400 price during yesterday trading session, it on other levels volume was much less, like 1200 on 1.3401 etc. The top volume level for yesterday will be 1.3400 price, and it will be interesting for us, as someone spent a lot of money on that level, maybe he is interesting do not allow price move below it. More examples with some screenshots you may find in this thread.


I can present 4 indicators based on data from CME Group site, they are:

eVOLution-levels – the indicator that show 3 maximum levels of volume per price (use volume by price report from http://www.cmegroup.com/tools-inform...=priceByVolume )

eVOLution-histogram – draw vertical histogram of volumes per price (similar to market profile, use same source as above)

eVOLution-dvoid – show you real daily volumes and open interest for forex pairs (futures for them) and a lot of other products. It draw daily volume and open interest charts in standard way (use http://www.cmegroup.com/market-data/...ge-volume.html )

eVOLution-options – draw a sectors trying to predict the levels of support/resistance based on options data (use options daily settlement data, example for EURUSD http://www.cmegroup.com/trading/fx/g...s_options.html )



I have uploaded two screenshots on the end of this post, watch them and you will better understand what are this 4 indicators.


Where to get this indicators and data for them?
On my website, I will not post it directly in this thread, but you may find it on my profile page .


If you are looking for more description for indicators you may visit my site, it is all there. But I will write some comprehensive posts in this thread later.


How to use the data from indicators? How to trade with them?

First I wanna say that I do not use them, and I do not trade at all. I tried from beginning, but it was quite hard to combine offline job with trading, so my trading time is not started yet. I can’t teach you how to trade successfully, but some ideas are following

eVOLution-levels and eVOLution-histogram are designed for short time trades, mostly intraday, the keys are:
- Watch how price is acting near volume levels (perfectly will be combining it with ‘time and sales’ from thinkorswim platform)
- If price is hitting the level second or third time during short period – that level is strong and should be taken as support if price is moving from above, or resistance if price is moving from below. Act as needed, and place stop loss short after the level
- Large volume zones (from histogram) are zones of interests – where big money lived previously and we hope they will stay such today, we may suspect price will move to them so may treat them as targets


eVOLution-dvoid is designed for long time trades as it provide you with daily volume and open interest data. The main keys were posted by lumesh , so just copying them here

Why is open interest important (to put it shortly i have gathered important factors how volume and OI affect the market):


first the general picture (this should be a table):


Price Volume OI Interpretation
Rising Rising Rising Market is Strong
Rising Falling Falling Market is Weakening
Falling Rising Rising Market is Weak
Falling Falling Falling Market is Strengthening



and now more detail:


Some rules of thumb for interpreting changes in volume and open interest in futures market are as follows:

 

1. A rising volume and a rising open interest are confirmation of a trend.
2. A rising volume and a falling open interest suggest position liquidation.
3. A falling volume and a rising open interest point to a period of slow accumulation.
4. A falling volume and a falling open interest depict a congestionphase.

Volume and open interest can be used in a practical sense to guide one's trades as follows:

 

1. Open interest increases during a period of an exhibited trend.
2. During the accumulation phase, volume may decline while open interest builds, but volume occasionally spikes.
3. Rising prices and a declining volume or open interest indicate a pending change of direction.

eVOLution-options – the option levels were requested by many peoples, the basic strategy has been explained in this post: http://www.forexfactory.com/showthre...15#post4697215


Cheers and good luck

How we should know the drown line is line of resistance or support? Hmm, the best way is to watch what price is doing near our line, let's discuss the previous picture.

Price is going up from some lower value, it touched the line, and move several pips higher, but revert back to it, and here we should sell JPY/USD . If the price will not revert back, but moves higher and higher - just ignore it.

The stop loss should be placed not far from our lines - I think 20 pips willbe enough, but it depends from drown lines, if they form the area of support/resistance - SL should be placed 20 pips after the last line.

And that's all about rules.

Now, from where volumes should be taken? First of all - forget about volumes in Meta Trader, they have nothing similar to the real market volume as shows only number of 'jumps' price made for a selected period.

All currency pairs have their appropriate futures contract, so let's check the original source - CME Group site - http://www.cmegroup.com/cmegroup/index.html

Here is the direct link to page where report volume by price can be found:
http://www.cmegroup.com/tools-inform...=priceByVolume

It is quite simple:
select Asset Class: FX
Choose product name: currency pair
Choose Delivery Date: some date (It should be checked prior making report, but you may select month that is closer to us )
Choose Trade Date: some date for which report will be shown.
Choose Venue: Globex

Wait for report generation, and when finished - copy it to excell , and sort by volume.

You should take at least first 5 entries and draw line from yesterday for today.

Here are some new pictures how do it works on GBP/USD (currently this currency pair shows the best results).

Red lines - volumes from previous month
Blue lines - volumes from previous week
Green lines - volumes from previous day

Now I want to describe the program I made, someone can remember the first version. This is second version, all data is stored in mysql database so it's really easy to manage them. The program is named eVOLution , it contains only 2 currency pairs: EUR/USD and GBP/USD , and two indicies: E-Mini S&P500 and E-Mini Nasdaq.

The data can be shown for any day of month, or for predefined (previously conted by me) periods. The screenshot is attached.

But there is no data for previous week , I am in process of improving it and will not need to count data for period manyally. The program is still not finished yet.

Once again, it is free for use, but I will not provide a link for it in the thread - write a PM to me.

Why it is working? Some peoples (marketmakers) wants to move price to some direction and they have enough funds to do it, and this indicates high volume on that level. So the best way here will be to join them.
The other thought is that traders all around the word 'think' the same way, and wants to buy/sell something at the same price .

Why it is not working sometimes? Well, I do not know, maybe they do not move price this time .

I did just several trades on this system, and they were not perfect, but all together I did not lost anything, but gain experience. I am still improving it and try to find some ways to filter entrances.

And the only one recommendation - stop loss should be close to the entrance (20 pips), and we should move it to non-loose level right after we got price move to plus.

I will keep you all posted about the results.

Thanx my friend for Continuse Presenting your attractive Style of trading..

could you kindly show us step by step how you get data of Red lines,Blue lines and Green lines?

Green lines are just a levels of maximum volume from previous day. This is simple.

To find weekly volumes (blue lines): the data for every day is compared and if price for day A equals price for day B - we sum volumes from day A to day B, and go on for the next days in week.

The same for the monthly volume (red lines): we should count it day-by-day .

This is standard way you can find the values yourself with data from cme-group. But if you are using my program - you have just to select a period - the data is already there.

Forgot to say, my 'program' is a Flash Applet, it requires Flash Player v.9 , and the weight is near 100 Kb .

I want to anounce that new version is almost ready, you can view data for any period.

Take a look on a screenshot how it looks like.

Only one button is working to select period automatically - 'Last trading day', I hope will finish the rest today.

Thank you for this and bringing something new to the table

Is their a way to compare dollar index volume and euro volume
to look for patterns or turning points

No, there is no way to do this. This should be done manually, but I do not think that this is good idea to trade. But if you will approve that this will be working - I can implement this .

I have just uploaded new version with working buttons for automatic period selection. If you allready being there you have to clear browser cache - reload page with Shift+F5 (Shift+R in firefox).

I am a really busy person and have a time only in late evening when it's to late to trade, but next week I will try to find some time to trade and will provide you with real trades to show how it works.

Hi there,

can you include gold as well?

thanks

did you code this all by yourself ? impressive


i didn't start to look for volume related threads by accident...i will try to work something out and let u know...

ok here's my first thought:

is it possible by any chance to make a chart out of daily volumes ? for instance you take the average of each day for everyday and then a program forms a chart....then we have a clear overview of what to expect at any given day...this will help us to either confirm the trend or suggest a reversal.

then this can help us use your first strategy to go with the main trend (if volume chart confirms that)

any thoughts ?

i don't know what would be the best parameters for that...would it be the average daily volume or only the high volumes ? what do you think ?

just to keep this going....is there a place to find open interest as well ? OI is different from volume and if you could put those two in one chart we have a great system

i'll explain later if i get answers to these...thanks a lot.

The people are asking if other products can be included. Actually I will do it, and they will be:
E-Mini Dow Jones
JPY/USD
Corn
Wheet
Soybeans

Most probably they will be added this week.

Will try to add crude oil, but do not know for sure yet.
What about gold - I have not found any source from where I can take data, so as of now - it's not available to include this.

Yes, I did code this myself, but I should say that I am not a professional programmer, just a beginner , all things were made first time.

Hmm, very interesting. I think that we should take not average volume, but total volume of the day. This thing will not be hard to implement as that data is already in database.

I did not found from where OI can be taken, but please explain you idea and maybe I will find something .

yes, of course total volume....i don't know what was i thinking

anyway open interest is there:

http://www.cmegroup.com/market-data/...-interest.html

choose "daily bulletin"

then you choose your parameters (just like when finding volume)

then the website generates reports in pdf files (i don't know if that is good for your database)

remember that it gives you many reports for one day...you should choose "Equity and Index Futures" not "Equity and Index Futures Continued" or "Equity Flex options"

and there you will find mini dow futures and s&p futures and so on...i didn't find forex futures open interest there but i saw that you trade futures and i believe some others as well including me ...if it is possible i'll explain later why DOW is important for forex traders as well.


Now why is open interest important (to put it shortly i have gathered important factors how volume and OI affect the market):


first the general picture (this should be a table):


Price Volume OI Interpretation
Rising Rising Rising Market is Strong
Rising Falling Falling Market is Weakening
Falling Rising Rising Market is Weak
Falling Falling Falling Market is Strengthening



and now more detail:


Some rules of thumb for interpreting changes in volume and open interest in futures market are as follows:

1. A rising volume and a rising open interest are confirmation of a trend.
2. A rising volume and a falling open interest suggest position liquidation.
3. A falling volume and a rising open interest point to a period of slow accumulation.
4. A falling volume and a falling open interest depict a congestion phase.

Volume and open interest can be used in a practical sense to guide one's trades as follows:

1. Open interest increases during a period of an exhibited trend.
2. During the accumulation phase, volume may decline while open interest builds, but volume occasionally spikes.
3. Rising prices and a declining volume or open interest indicate a pending change of direction.

hope this helps.

take care.

Interesting, looks to be great idea. At least this should be tested. Unfortunately PDF is un-usable for me, will try to find something in clear text format, or .csv .

But first of all will add additional products.

Live trade on EUR/USD . Svcreenshot attached.
Blue lines - maximum volumes from previous week.
Orange lines - maximum volumes for this trading month.
Green lines - maximum volumes for last trading day

Actually it should be bought some times ago, right above blue lines range. But I just moved stop loss to non loose level (do not know how to say it in english, can anyone help ? ).
Take profit is right belov green line.

Buy 6B (eurusd) at 1.2545 , Stop loss at 1.2548 , Take Profit at 1.2685.