Do you use volume in your work? NYSE volume was over 20 to 1 up over down
today. This high of a ratio is usually very, very bullish. I was wondering if
you had an opinion about this or if it might have any impact on your analysis?
I have a couple of useful Volume based buy/sell indicators.
But I do NOT analyse volume in the sense many so i.e. I don't worry about how much volume exists on rallies and such.
As for high volume ratio days being bullish?
I believe this idea came has taken hold from the award winning Lowry study by Paul Desmond, which looked at 90% down days followed by 90% up days marking important lows....its online somewhere if you google and well worth a read if you haven't read it.
But great as that study is, all indicators fail at times. The main reason for that can be simplified to 'what everyone knows isn't worth knowing.' So, when I see everyone on message boards, and newsletters talking about breadth and Volume, then I tend to ignore it. Whereas, I pay attension to what most people are ignoring - its sort of contrarian I suppose, but especially the last 2-3 years, just about every methodology has failed, I have stated I believe this is due to Internet and sudden availability of information - that's a whole topic.
If I were to describe my method its roughly as follows -
1. I use buy/sell indicators I've developed based on volatility, trin, tick, volume & price, primarily aimed at few hours to few days swing moves typical example is to look at few indicators I posted earlier on thread which update showing buy/sell lines). - I also have a real-time system I developed on Quotetracker that is pure short term momentum.
2. I will occasional IGNORE those indicators, based on sentiment, which I have alot of data for, I subscribe to Sentimentrader for some of it, I also guage sentiment from various message boards.
3. I use price patterns, and Elliot wave with my own fractal extensions, to look for entry points, find stops, and exit points - I NEVER enter trades based off these alone, only once the signals are on buy or sell - I used to a few years ago, and quickly discover its impossible to trade off them alone, and I've never seen anyone do it successfully, hence why Ewave gets such a bad rap....it has to be interpreted in CONTEXT i.e. within the technical & sentiment setup. I also use at support/resistance to look for entry/exists - I'm still trying to figure this part out, its constant learning...I think this is the hardest part....defining entry/exits/stops/money management.
4. I have a swing system based on dailies, IYB (don) generously shared a system, I used some of that and a few similar I have added..but I don't trade swing currently, but shorter term.....but its useful for context again.
* I suppose I should say what I don't use - well, mainly, I totally ignore anyone elses opinions, not because I think they are wrong, but because I've found you either trust your own system or you don't. If you don't trust it, well, your down the creek without a paddle, and if you do trust it, its a waste of time reading what others think , and will tend to make me doubt my own system because most traders are smart and convincing. But I do read alot of people's opinions, because I want to know how they're thinking to guage sentiment, or to pick up trading ideas.
Edited by entropy, 30 August 2007 - 01:08 PM.