Many traders Ignore volume. Although it is a simple concept, it is difficult to analyze correctly due to inherent challenges in the markets. These challenges make it impossible to read actual volume with a standard volume indicator. Read this article to learn the best way to overcome volume distortions and how using TradeStation indicator called Time segmented volume will increase your trading edge.
Often traders use average volume indicators when calculating the average of the volume during a given number of last bars to see if volume by increasing or decreasing during the period of time.It's okay to look at volume in this way, but I will be the most vital missing volume information. This is not the best approach to analyze the volume.
Volume has inherent distortion caused by incorrect analysis by many traders; for example, the stock market (as well as other markets, to a lesser extent), the start of the day is full of a number of orders that had built up overnight and get all at once.This influx of the volume of trade creates a significant distortion of what is happening.
Another distortion is created in the middle of the day when the majority of market makers go to lunch and market activity decelerated. This is called lunch stagnant.
A third distortion happens at the end of the day, when merchants to customize their orders before the market closes may want to be flat at night or you might want to get into a trade, but this influx of orders at the end of the day is another distortion on the volume.
Another challenge inherent in the use of an instrument volume index is that each institution has significantly different levels of volume; for example, to compare, GE with 40 million shares per day vs. shares with 100,000 shares per day. This huge difference makes it difficult to read volume from one symbol with another symbol.
In addition, if you change from a time-frame to another will be enormous differences. volume for 1 minute of a bar chart is very different from the volume in 60 minute bar chart or a daily chart. The key to getting these challenges of the past is to use the time segmented volume TradeStation Indicator.
Time segmented volume is the way to get consistent volume data and eliminate all the distortions of the volume we have discussed above.Here is the key to why time segmented volume works: let us begin with a volume in a 5-minute chart, and this example, look at 10: 15. Now the average only 10: 15 bars during the month in advance and then compare that average for the current 10: 15. the difference will give a real reading about whether today's 10: 15 bar volume is higher or lower compared with the exact same time lines of the preceding month.
Now, when you read the 10: 15 line read row by row on the volume.For example, suppose the price action shows a larger than normal line, maybe 2 times normal.Suppose prices began near the bottom of the bar with no Wick and runs and closes near the top of the bar.This means that a strong daily line, but if you look at, and you can see fewer than average volume, then we must be careful about the movement in prices on the other hand, if you see volume 200% or 300% percent you will know that the increase in volume was the reason for the row of values very large.In this example, the price and volume line is in harmony.
Alternatively, if you saw that 200-300% volume line, but the price action was completely different, let's say it was a line that was 1.5 times normal size.Suppose that started very near the bottom for the open, it was performed to a high and then pulled back and closed during the third lowest. This is a sign of bearish.Now I say big switch took place and the volume of sales volume was cause bearish.Sellers raised over dominated buyers and this pushed from the top of the range are clear to the bottom of the range before closing. If this line that occurred at the end of a polyline to move until it is probably at the end of the cycle of the top and it may be time to reverse the direction of your transactions.
The key to understanding the volume is reading price and volume action action on the same exact bars, using time segmented volume to give you the actual information you need and to read the chart to see if price and volume are in harmony or if he is slipping time incremental volume can confirm the move, make you suspect of the movement, or to tell you if it is the end of the movement and comes a possible change of direction in any case, using time segmented volume will eliminate distortions of volume and increase your trading edge.
To learn more, you can watch many free HD Trading videos about this Web site. http://www.customizedtrading.com/
Mark David Johnson is a full-time developer, trader and TradeStation commercial coach. personally, he has developed more than 60 strategies and over 200 indicators for platform TradeStation. passion of the Mark is to match the client negotiation style, with the best possible trading tools.
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