Simple Volume

I'm going to take a few short posts that help me greatly in my trading that I hope give you insights in your trading. Test out what I say. I've said some of this before, and yes, I could draw diagrams, or input charts, but that would take more time than I'm willing to invest and would probably not write at all. So, you're going to have to pick apart what I say and draw this out for yourself.

First of all, everything is relative. Take for example on the 3 min. chart, everything is relative. Stuff that's happening in the past 5-10 or so candles compare those to the prior 5-10 candles. When I throw out 5-10 candles, this could be the past 30 candles. Whatever. Everything I'm saying is relative and you have to gauge for the situation you are in.

BULLISH: Rising price action, Rising Bullish Volume (Same Direction)
1. Ask yourself, is the trend of this rising price action stronger than what is happening to the bearish side?
2. Let's say you have rising price action with rising bullish volume, but the bullish volume candles are short, while the bearish volume candles near it are significantly bigger. What does this tell you? This tells you that bullishness is WEAK. There is a greater tendency towards bearishness, so be careful.
3. Just because you may have rising price action with rising bullish volume, draw some lines on your volume and see if the actual trend is strong. Compare it to the things that most happened recently. If you're looking at the past 30 min., maybe look at the last 2-3 hrs. What do these volume candles tell you in comparison to the past 2-3 hrs? Are these candles shorter, the same, or taller? The bigger the candles, the greater the strength of the movement.
4. Just because you have one big candle does not mean it's a trend. Is there a progressively stronger trend of significantly greater bullish volumes, and does this exceed recent prior volumes?

BEARISH: Falling price action, Rising Bearish Volume (Diverging Directions)

1. Note that the look of this is different for bearish than for bullish.
2. The rest of the stuff is similar to Bullish, but where you have "Rising Price", you would replace for "Falling Price"
3. Remember to keep everything relative.


Especially during times of what seems like INDECISION (Doji's), the big guys already know which direction they are taking things. Look very carefully at volumes, which will often be very subtle. Those volume bars will be very short, but you will begin to see the big guys either slowly dumping or loading up on positions.

Go to the bars to see if you actually have rising or falling volumes and of which type (bearish or bullish). Sometimes it is so subtle, one can barely see on the chart, and I have to actually look at the actual volume for each candle to see what is happening, even on my 22" monitor, because sometimes the volume bars look almost even/flush.

I've even seen sometimes it maybe as little as 50-100 contracts of increasing to one side or the other, so I'll begin doing what the big guys do, and sure enough, it's correct. There will be times though, they will be either loading up or dumping, but the price action will be contradictory. This is what I call a headfake, where they attempt to shake out all the people in the opposite direction they really intend to take things, so you have to be able to weather this, especially if you're in for a longer timeframe.

Once again, longer timeframe is relative. If you trade the 1 min. timeframe, 3 min. is longer or 15 min. is a lot longer.

These guidelines work, at least as far as I've tested through thousands of trades, for all timeframes from minutes to months. BTW, I've not used the tick method, so if you use this, then this may or may not apply, but I would think it would.
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