Jules - I've been trying to get my head around these vol charts but it just makes my brain ache too much when I try to think about what the differences will/should be compared to time. Have you got any thoughts/references etc?
UF (I'm assuming what you're asking is why the switch from time to volume charts and I'm responding accordingly...let me know if I got it all wrong....),
MY THOUGHTS
I hadn't given this much thought before you asked, and was just exploring volume-charts after having been exposed to footprint charts (I knew about footprint charts a few months back but just couldn't get pass that stage of understanding how they work - it's a tad like reading those 2000-page TWS instructional manual) in a chatroom that a friend had invited me to join for free for a few days.
I still wasn't sold after that few days, but began thinking about volume again. The fact that I rely so much on market depth tells me that I DO appreciate the significance of volume, and that the footprint chart is probably many times more informative than market depth. But there's just too much processing of info that's needed when using footprint.
I always believe that when it comes to trading, you only need an edge to lay a bet, whatever form that edge comes in. My edge is not in processing multiple sources of data before making a decision. A footprint chart is just too cluttered and requires too much pondering on the "structure" aspect of the market and comes with too many "numbers" for my liking.
Now I could always use a time-based chart and add a volume indicator to it. Doing that however, would require the analyzing of the volume indicator, and that's TOO MUCH thinking to do for me (i did say I can only process one piece of info at a time).
So in a spark of genius (I do get this once in a blue moon), I pulled out Sierra's volume charts and started experimenting with the volume size. I must have put in at least 10 different numbers before I settled for one that shows a chart that I can see very unambiguous supports and resistances, and candles that are not too ridiculous in size (something similar to 5-min was very appealing as it means I won't have to take on more risk for a "less noisy" chart).
With range and tick charts - I just simply cannot understand their workings, and I can't use anything until I can understand them. So I'll be doing more studies.
With volume charts, I understand them but I'm not able to explain in a coherent way why and how they work FOR ME. That's why my plan going forward is to explain by "showing" how I trade using these charts.
To put it even more simply, I have gone over the selected volume-charts - a few weeks of data - and I can "see" certain patterns and I can understand how the candles' opening and closing and the size of the candles relate to one another. So I decided to give volume charts a shot. I trust my understanding enough to start using them live. As I mentioned, I would explain to the best of my ability how they work as I go along. For now, I can only show that they work.
I still wasn't sold after that few days, but began thinking about volume again. The fact that I rely so much on market depth tells me that I DO appreciate the significance of volume, and that the footprint chart is probably many times more informative than market depth. But there's just too much processing of info that's needed when using footprint.
I always believe that when it comes to trading, you only need an edge to lay a bet, whatever form that edge comes in. My edge is not in processing multiple sources of data before making a decision. A footprint chart is just too cluttered and requires too much pondering on the "structure" aspect of the market and comes with too many "numbers" for my liking.
Now I could always use a time-based chart and add a volume indicator to it. Doing that however, would require the analyzing of the volume indicator, and that's TOO MUCH thinking to do for me (i did say I can only process one piece of info at a time).
So in a spark of genius (I do get this once in a blue moon), I pulled out Sierra's volume charts and started experimenting with the volume size. I must have put in at least 10 different numbers before I settled for one that shows a chart that I can see very unambiguous supports and resistances, and candles that are not too ridiculous in size (something similar to 5-min was very appealing as it means I won't have to take on more risk for a "less noisy" chart).
With range and tick charts - I just simply cannot understand their workings, and I can't use anything until I can understand them. So I'll be doing more studies.
With volume charts, I understand them but I'm not able to explain in a coherent way why and how they work FOR ME. That's why my plan going forward is to explain by "showing" how I trade using these charts.
To put it even more simply, I have gone over the selected volume-charts - a few weeks of data - and I can "see" certain patterns and I can understand how the candles' opening and closing and the size of the candles relate to one another. So I decided to give volume charts a shot. I trust my understanding enough to start using them live. As I mentioned, I would explain to the best of my ability how they work as I go along. For now, I can only show that they work.
REFERENCES
I managed to find a few (click here, here, here, and Daytrader 233's Blog) and I have to say, reading them (with the exception of Daytrader's) gives me a BAD headache. I am only doing this for you ;-) ...I knew they were out there, I just didn't bother to read up coz to me, the theory per se isn't quite as important as the application and the BOTTOM LINE. Anything that helps me to make money consistently is good enough for me. :-)Hope I haven't given you more headache...
NQJ and Jimmy:
About Top and Bottom Picking:
Depending on the context, I think it's ok to fade a trend. I can't come up with an example off the cuff now besides 2nd entry setups (I'm still feeling very drowsy...), but will show them on more charts to come. On days that are not trending, top and bottom picking is not only ok but actually necessary if you want to be able to get in on a fairly profitable trade. Brooks has some of his methods listed and Chp 15 is a good place to start (this is for Jimmy, I'm not sure if Jaya's reading Brooks).
ok, now I'm going back to sleep.
I know I'm a broken record, please bear with me. If you are reading this, I BEG you to please check out Denarii's blog and help him if it's within your means. Here's a fellow trader who might not have the resources (time, energy, capital, etc) to trade anymore, and that in itself is something that's tearing me apart. If you're a trader, and you understand how that feels, and you feel the same, I really hope you'll extend a helping hand.
ok, now I'm going back to sleep.
I know I'm a broken record, please bear with me. If you are reading this, I BEG you to please check out Denarii's blog and help him if it's within your means. Here's a fellow trader who might not have the resources (time, energy, capital, etc) to trade anymore, and that in itself is something that's tearing me apart. If you're a trader, and you understand how that feels, and you feel the same, I really hope you'll extend a helping hand.
10 comments:
3:30AM here in UK, so for now just a big THANKS for taking the time to respond to my Q. I'll process all the information more fully in the morning
Thanks for the info Jules.
Here is what I wrote about volume charts awhile back when I was using them:
"I use volume charts because I feel it maps out supply and demand the best. Each candle/bar represents a fixed amount of contracts traded, so if a candle length is short, I see indecision, whereas when it is long, I see one side not participating. The quick speed of multiple candles filling up tells me when there is a market mover coming into play, or some major news breaking out. It is important to use an unfiltered data feed like ZenFire as to not miss any traded contracts (most data feeds filter data (contracts) out to save bandwidth when price did not change or they are using some sort of price averaging method per milliseconds). A major advantage with volume charts is that I clearly see the trend and supply/demand of pre-market. A major disadvantage is I loss the vision of the crowd that make decisions on the close of a minute candle/bar."
All good stuff, all inwardly digested.
At the end of the day it is about seeing patterns that you can personally exploit and representing the data in the most opportune way for that. I am kind of breaking my own rules about keeping it criminally simple when I start to think about the underlying mechanisms.
'Spec Ed' makes a good point above about the disadvantage of not having on your screen what the majority have on theirs.
Will watch progress with interest, thanks again Jules.
Jules,
Please don't think I'm trying to dissuade your use of volume candles. I'm pretty sure you could trade using anything! :-)
There is one problem I had with volume candle charts. The time of day I started a volume chart significantly changed the look of the candles, and thus the signals it generated. Due to the nature of how the candles are created, a 24 hour volume chart will give you different candles intra day than a regular trading hours chart. Think about it...if I start a 40k volume candle at 9:30 est it starts at ZERO then builds the first candle to 40k. A 24 hour chart candle may have 20k built in as the 9:30 time hits. Thus 2 different looking candles that will skew the look of the candles all day.
As Ed stated, I wanted to see what everyone else was seeing which is why I returned to minute charts. I bet there's an edge in using both. :-)
Ed and DT,
Thanks for the heads up :-) Yes, I thought about that too - that most are looking at something else. I've done some backward testing (not enough I know) and found that it suits my trading style for now. I'm not dismissing the 5min charts, it's just that I need a chart that has less noise during this period. I tend to look for trades in 5mins - something to do with my recent temperament - and it hasn't served me well. With volume charts, I'm doing things a little differently - I don't look for traps (knowing that most are not trading off v charts) but go for pure support and resistance. For all I know, maybe I'll switch back to 5 min next week LOL!
But thanks so much, I really appreciate your concern :-) I'll keep monitoring and continue to trade very light for now. My favorite is still the 5min and I'm not giving it up. I kind of miss trading traps and such :-)
At the same time, I'm also exploring range plus renko. I just really need to understand the mechanism first.
Tell you what, if Denarii stops bashing any kind of government healthcare proposal, I'll donate $200. Hate to say that, but there it is. We have so many uninsured people in this country. It's rediculous. The "indirect" costs of not insuring...well I don't need to go there. But I have been hearing Denarii bash everything about government-funded healthcare -- the current proposal is not feasible, in light of the money we have spent on the wars in Iraq and Afghanistan and on the Dept of Homeland Security, as well as all the bailouts. But some sort of government-funded healthcare program is necessary for people who otherwise are not in a position to afford private insurance. I want to see Denarii acknowledge this. Then I'll donate. I know that I may sound despicable adn political. But this is precisely my point. It IS political. And he has to choose a side. The right side. For people like his daughter. I stand by my word. I like Denarii. I really do. If he capitulates on his rediculous rants about healthcare, then I'll donate $200 today. I'll trust that he has had a sincere change of heart. I myself have had several over my short lifetime. It's no loss of face to admit a change of heart in a situation like this.
Oh Lonely...
I'm not familiar with the situation in US. My govt doesn't give us a choice - everyone has some sort of medical insurance under our pension scheme.
It's tough living in the US...D's mum lives in LA, has medical insurance and assets and all but is still feeling VERY insecure.
so lonely trader - I should say yes to the current dem plan for reform and get $200 abd let other pay thousands of dollars more per year to make a broken system even more costly and more broken.
I totally believe the current system is a mess and needs to be reformed. I can give you so many ideas that would reduce costs it is not funny but most of them would cost somebody votes.
I got to see a sitution here where a person had great insurance and has no DNR and is brain dead. The moment they stop the breathing machine the person will die in 15 minutes. The family was considering to keep him on life support for a week so a long lost relative could fly in and say good bye. This little nice thing would cost the insurcance company and pasted to all of us is costs over 100k. No where on this planet this should be allowed.
In my daughters case at one point the doctor said if she needed an operation they would only want to do it if it would help her get out of the hospital not just to prolong her life a couple of days. It was horrifing to be told this but I agree with his thought process.
To start the reform process, I would reform the tort laws in this stupid nation and the saves from that alone would give us the money to cover someone that does not have insurance.
Another than my speech above, I have many choice words for you and I will not let here.
please everyone - if you want to debate the health insurance mess in the US - go to my blog and leave your comments - not here - Jules deserves better.
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