View Full Version : The significance of the volume level

11-16-2015, 10:28 PM
The first thing to consider when determining the significance of the volume level - the time during which the volume accumulated.
Weekly accumulation, in most cases, will be more important than the day or the hour. Accordingly, the trading system should be developed on the basis of this.
An important principle of the work with the volume - is a movement from a larger to a smaller timeframe. It is based on the fact that the accumulation, which was formed for a long time, has more long-term effect. Accordingly, it is more logical to move in the direction of the major positions of long-term player.
I.e. the long-term accumulation serve as indicators of the direction, while the short-term ones are the areas that are optimal for the opening of trading positions.
However, I do not like to take too old accumulation (any week of the previous year), or the accumulation which was formed during a very long period of time (e.g. 1 or 2 years).
In my opinion, these levels over time lose their relevance.
It is for this reason I tend to dwell on the analysis of volume for the last month. These are the volumes, which allow me to understand the trend and see the most relevant savings that are highly likely to lead to changes in the market.
Maximum amounts of a certain week, the maximum volume of the previous / current day, the maximum volume of the previous / current contract can act as these levels..
The market starts moving up and emits a significant volume of the hourly timeframe. Given that week priority is the sales, I see this movement as a rollback, and formed hourly volume as a protection of my positions by long-term sellers. As soon as the market starts to move down (under the volume of the hourly accumulation), I start looking for an entry point into the short.
It turns out that given the context (in this case - the location of the price relative to longer-term accumulation of the volume) and determining the level of resistance, which is protected on a smaller timeframe, we increase the likelihood of a positive outcome of the deal.
We should not forget about another important point - the flow of volume. As the price goes from one accumulating to another, the flow of the weekly volume, for example, from top to bottom may tell about a possible halt. In this case, it makes sense to close a trading position partially or completely. Often, a new impulse movement begins with such moments..
I would also like to draw your attention to a situation where the accumulation of the day is much higher than, for example, the accumulation of the past week. In this case, the significance of the day's volume is magnified. We need to start a close watch on the market, as very soon a strong movement can begin.