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Volume Price Level Trading

  • #21
  • Jan 2, 2013 3:46pm Jan 2, 2013 3:46pm
I only trade and make the decisions after the candle closes. I never make or base a technical decision on an open candle. If I want an earlier peak or entry, I use a lower time frame like M5 and trade on the M5 closed candles. I'm big on multi-time frame technical analysis and trading. Did I say never...ok I cheat once in a while..and usually pay the price.

Yes, there can/will be second waves, which is why our stop ratio is always lower than our earnings ratio. It is unlikely (not impossible), we will ever encounter a succession of second waves. In other words, we are trading, expecting to lose a few, but always gain overall.

Quoting Davit
I like volume and I have it on my charts always however my trading decisions are not based on them.Challenging part is volume increase is simultaneous with pa and by the time you "see" volume increase move is done.
Furthermore just because volume peaked and temporarily decreased does not mean there is no second wave coming in same direction of original spike.
Anyway I am always open to learn.
Regards
  • #22
  • Jan 2, 2013 4:33pm Jan 2, 2013 4:33pm
Hi Spudfyre

Interesting thread, looking forward to reading more.

I have just sketched this out on MT4 to help me understand some of the sequence, thought others may find it useful, hope you don't mind me posting it.


Marshy
Attached Image (click to enlarge)
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“A setback is a setup for a comeback.”
  • #23
  • Jan 3, 2013 7:34am Jan 3, 2013 7:34am
Many Thanks for teaching us to interpret the volume indicator. I'm subscribed and look forward to learning from you.

jesse





Quoting Spudfyre
I promise I will summarize the rules and guidelines after I introduce the topic. Volumes and Price Levels are powerful when used together and consider the introduction the safety course. I want people to trade successfully and know why they are making their decisions.

If I'm unclear and you would like a better explanation in anything I write please let me know what and I will definitely look to rewrite and make it easier to understand. It's just the beginning and a new and difficult topic to write about, so I am no doubt going to have some...
  • #24
  • Jan 3, 2013 8:21am Jan 3, 2013 8:21am
Hi Spud!

Great to see you back!

Current situation on EU. A long set up. Entry would be at 1.3100. Exit 1.3130... applying the 00/05 rule.

Attached Image (click to enlarge)
Click to Enlarge Name: eu volume trigger 15min_2.jpg Size: 92 KB


1.3095 seems to hold judging from the high volume on the down bars which are unable to move price lower. The close is well off the candle lows which reflects buying activity.
  • #25
  • Jan 3, 2013 12:13pm Jan 3, 2013 12:13pm
Quoting Spudfyre
I promise I will summarize the rules and guidelines after I introduce the topic. Volumes and Price Levels are powerful when used together and consider the introduction the safety course. I want people to trade successfully and know why they are making their decisions.

If I'm unclear and you would like a better explanation in anything I write please let me know what and I will definitely look to rewrite and make it easier to understand. It's just the beginning and a new and difficult topic to write about, so I am no doubt going to have some...

i tried your last multi-stochastic multi timeframe system some time ago. didnt work out, as altough all time frame stochs lined up, market still moves in opposite direction resulting in stopouts....too many of them.

are you still using that system ?
  • #26
  • Jan 3, 2013 6:01pm Jan 3, 2013 6:01pm
How do you interpret volume when you have more than one volume bar?



Quoting jtpada
Hi Spud!

Great to see you back!

Current situation on EU. A long set up. Entry would be at 1.3100. Exit 1.3130... applying the 00/05 rule.

Attachment

1.3095 seems to hold judging from the high volume on the down bars which are unable to move price lower. The close is well off the candle lows which reflects buying activity.
  • #27
  • Jan 3, 2013 7:55pm Jan 3, 2013 7:55pm
Let's go through what we see everyday in volume and price levels.

First, let's forget the word volume as it is a technical term. Instead we will use the word INTEREST. Peaking volume means their is INTEREST and low volume means their is no INTEREST. INTEREST in what? Price level.

IMPORTANT:
Volume and price levels is not about predicting or forecasting where the price is moving too.
Instead it is about knowing where the price levels are to enter a trade when a price level is reached, and exiting a trade when a price level is reached.
We order and enter a trade when price hits a price level, in the direction of interest, and set an exit where interest will fade.

I will now show you.
  • #28
  • Jan 3, 2013 8:01pm Jan 3, 2013 8:01pm
Let me explain INTEREST.

VOLUME = INTEREST

The chart below on the left side seems pretty simple. Volume is rising and price is rising, which means buyers are bidding up to sellers in order to purchase (demand). Interest is high and somewhere along here we have crossed an important price level. I've set it at line "A" on the chart (1.3200).

We can see where INTEREST is lost in the price. Somewhere above line "B". We don't know exactly where but we have a reference point, I used 1.3275 as the price level since we have a drop in volume above this price level after a volume peak.

So entry for a short would be at 1.3275. In reality this is a bit of a gamble, because we only know from what we see that buyers loved the price at 1.3200 and lost INTEREST above 1.3275. But our risk reward ratio is quite high. Our stop would fall around 1.3300, our entry at 1.3275, and our exit at 1.3225...that's 2x earnings vs a stop loss risk.

At this point we have hit a volume peak 5 candles from the left of the chart (our TRIGGER). For 2 candles after the peak we saw volume drop and price climb. So INTEREST in this price higher level has faded.

At this point we are pretending we have no previous price and volume history except what is on this chart, so our trade entry here is the typical "I think price is going that-a-way". We have discovered 2 price levels from INTEREST, but that is far from really knowing anything concrete yet.
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  • #29
  • Jan 3, 2013 8:04pm Jan 3, 2013 8:04pm
As we progress we can see where the vertical lines are drawn on the chart that volume is rising and we see the largest price movements are down. The first price movement simply reinforces that INTEREST in price level is still not above our horizontal line B. The price movement and higher volume means that INTEREST is in price going down. Buyers are purchasing as price drops.

Between vertical line "2" and vertical line "3" price drops and volume falls and as volume continues to fall, price starts to rise. Again no INTEREST in a higher price and lines 3 & 4 almost peg our upper price level. The high volume (INTEREST) here is anticipation and buying that because price is moving to cross the upper price level (or has crossed, since we don't know exactly where it is) that price may jump. This just further reinforces that our "B" price level line is close to where it should be.
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  • #30
  • Jan 3, 2013 8:06pm Jan 3, 2013 8:06pm
Lines 5,6 and 7 are all peaks of volume (INTEREST) and where does the interest lay? Not in price going up, there is INTEREST in selling at this price level.

And now things will get interesting.
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  • #31
  • Jan 3, 2013 8:11pm Jan 3, 2013 8:11pm
Now, notice how the INTEREST changes at lines 8 and 9. Higher volumes and price going up. This is a market change and sets a brand new price level at horizontal line C which is 1.3250.

This price level is crystal clear if you take a look back at where price stopped falling between lines 2 and 3, as well as after line 6. This price level is not random. Look back further to the 4th candle from the left side of the chart....remember there was interest in price passing a price level and now we found it.

The market has changed, so either their will be INTEREST in the price going higher, or the price going lower. We simply have no clue at his point in time. The safe play here is exit our trade, but it is still sound to stay in our short trade for now as we are far away from our stop.
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  • #32
  • Jan 3, 2013 8:14pm Jan 3, 2013 8:14pm
The INTEREST simply remains at this price level one candle after vertical line 9 and then as price rises past our new price level again their is no INTEREST at this price level.

Our "B" price level is once again verified as a no INTEREST price and buyers don't want to be buying at this price.

Now, we have our trade. This is the real deal, and simply a ride from 1.3250 to 1.3200. Why?

We know that there is absolutely no INTEREST from buyers at either the 1.3250 or 1.3275 price levels.
We know that the market changed and our original "B" price level at 1.3275 has dropped to 1.3250 at the "C" price level.
Since there is no INTEREST in buying at these levels, there will be an INTEREST (volume) peak coming and like peaks 2, 6 and 7 it will be sell because our price level still exists at 1.3200.
Vertical line 12 is not a surprise, it is fully anticipated because that is where the INTEREST is.
Attached Image (click to enlarge)
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  • #33
  • Jan 3, 2013 8:29pm Jan 3, 2013 8:29pm
So what exactly are the rules, look for high volume, wait for low volume to come in, see if price will continue to move higher with low volume and then look to short? vice versa for a sell?


So from your pic and depiction, your looking for low volume to determine where you are gonna put your stop? I understand what your saying but I wanna make sure Im understanding thethought process in analyzing volume, cause like other guys on here, using it and making sense of it has always eluded me. I would love to get my head around interpreting it.
  • #34
  • Jan 3, 2013 11:56pm Jan 3, 2013 11:56pm
Quoting dappa
So what exactly are the rules, look for high volume, wait for low volume to come in, see if price will continue to move higher with low volume and then look to short? vice versa for a sell?


So from your pic and depiction, your looking for low volume to determine where you are gonna put your stop? I understand what your saying but I wanna make sure Im understanding thethought process in analyzing volume, cause like other guys on here, using it and making sense of it has always eluded me. I would love to get my head around interpreting it.
Sorry if you already answered.I could not find it.
You wait 15min candle to close to make your trading decision? Which TF candle is your trigger candle.
Reason I ask it makes huge deference in entering the trade.On your chart 15canndle #12 is roughly 20pips.Had you waited to close that candle you would of missed good chunk of the move.
From Price Action perspective #11 candle should of been a good signal.
Anyway I am more interested how you make your entry decisions.
Thank you
In trading, you have to be defensive and aggressive at the same time
  • #35
  • Jan 4, 2013 6:41am Jan 4, 2013 6:41am
How would interpret these volume bars? see attached pic
Attached Image (click to enlarge)
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  • #36
  • Jan 4, 2013 8:32am Jan 4, 2013 8:32am
What we are establishing are price levels. Then looking for where the interest is in those price levels. It isn't as simple as saying we get a high volume, followed by a low volume and we do.....

Volume and price work together so when price at an interesting level, trades happen. Crossing price levels will trigger trades in the market.

Stops are where there is little/no interest in a price level, not to far from our entry, and our risk/earnings ratio is pro earnings.


Quoting dappa
So what exactly are the rules, look for high volume, wait for low volume to come in, see if price will continue to move higher with low volume and then look to short? vice versa for a sell?


So from your pic and depiction, your looking for low volume to determine where you are gonna put your stop? I understand what your saying but I wanna make sure Im understanding thethought process in analyzing volume, cause like other guys on here, using it and making sense of it has always eluded me. I would love to get my head around interpreting it....
  • #37
  • Jan 4, 2013 8:39am Jan 4, 2013 8:39am
I'll start to spend more time on the practical side of trading and dcisions behind it.

Closed candles or different time frames. Yes, you can miss moves in open candles, but my experience is that I make a lot of bad decisions trading open candles. Closed candles mean more to me, and I have remained constant in that.

The way around open candles is to trade shorter time periods, or look at shorter time periods for an entry. So, if you are using M15, but want to trade part way through an open candle, drop down to M5 and see if it supports your decison. I wrote a lot about multi-time frames in MTF Stochastics and Escalator to Pips in these forums. I use stochastics routinely, but that's just my preference when using an oscillator indicator.


Quoting Davit
Sorry if you already answered.I could not find it.
You wait 15min candle to close to make your trading decision? Which TF candle is your trigger candle.
Reason I ask it makes huge deference in entering the trade.On your chart 15canndle #12 is roughly 20pips.Had you waited to close that candle you would of missed good chunk of the move.
From Price Action perspective #11 candle should of been a good signal.
Anyway I am more interested how you make your entry decisions.
Thank you
  • #38
  • Jan 4, 2013 9:07am Jan 4, 2013 9:07am
Quoting Spudfyre
What we are establishing are price levels. Then looking for where the interest is in those price levels. It isn't as simple as saying we get a high volume, followed by a low volume and we do.....

Volume and price work together so when price at an interesting level, trades happen. Crossing price levels will trigger trades in the market.

Stops are where there is little/no interest in a price level, not to far from our entry, and our risk/earnings ratio is pro earnings.

Could you interpret how one would go about interpretting the volume on the chart that I posted?
  • #39
  • Jan 4, 2013 9:38am Jan 4, 2013 9:38am
The volume peak (in white); prior to that there is a red volume bar that peaks, there is a crossing of a price level there (establishing a new price level on this chart), but the interest is not strong in the price climb. When the price turns down and volume goes up just before the white peak, we cross the price level and there is far more interest in the market with price gong down.
We would be entering a short order at this new/existing highest price level and exiting at the next lower price level.

I've drawn "rough" price levels where the volume (INTEREST) is being supported.

After the big drop 3 price levels are established, follow the volume valleys closely and you should be able to see how the price level interest is being established.

At the end of this chart their are 2 spike volumes with climbing price. At quick glance and looking at price at a whole it looks like interest is less on the final price climb but the green line is actually interest in a higher price. It's may be hard to see and put together, but remember it is where the INTEREST is, and the interest (volume peaks are supporting a climb) and that higher green level.

If that final candle is closed and the volume closed at that level, I'd be putting a long order in where my green arrow is at the middle price level, looking for price to rise back up to the highest price level.

This is a very tough trade and requires really paying attention to details in the volume/price moves.









Quoting dappa
How would interpret these volume bars? see attached pic
Attached Image
  • #40
  • Jan 4, 2013 11:02am Jan 4, 2013 11:02am
As the forex market is decentralized, we can't have exact value of volume. This volume will vary from broker to broker. So, the performance will vary depending on brokers, won't it? How do you define this term? If you please explain then it will be better for understanding.
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