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volatilityMan
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Posts: 114
Joined: January 16th, 2015, 6:06 pm

Volume as trend detector

March 29th, 2017, 11:15 am

When trading one often observes a lot of action without knowing which direction the prices are to move.
Obviously, no one wants to trade huge amounts at once and undesirably moving the market. Instead the trades are executed continuously with "smaller" amounts thereby hiding the large position, allowing oneself to trade at the desired price without shifting the market. 

Question: 
Has anyone some good procedures on how to "detect" what the volume says about the price direction?

Obviously, one can simply visualize all the volume traded on the bid side contra all the volume traded on the ask side, plotting a simple bar-chart. But this seems rather naive. 

The tool should be running continuously and therefore incorporating all current trades. 
I'm not searching for "exotic" or "academic" calculations but rather something that is simple, easy to understand and implement.

Thanks...
 
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AnalyticalVega
Posts: 2260
Joined: January 16th, 2013, 5:03 am

Re: Volume as trend detector

March 29th, 2017, 6:04 pm

When trading one often observes a lot of action without knowing which direction the prices are to move.
Obviously, no one wants to trade huge amounts at once and undesirably moving the market. Instead the trades are executed continuously with "smaller" amounts thereby hiding the large position, allowing oneself to trade at the desired price without shifting the market. 

Question: 
Has anyone some good procedures on how to "detect" what the volume says about the price direction?

Obviously, one can simply visualize all the volume traded on the bid side contra all the volume traded on the ask side, plotting a simple bar-chart. But this seems rather naive. 

The tool should be running continuously and therefore incorporating all current trades. 
I'm not searching for "exotic" or "academic" calculations but rather something that is simple, easy to understand and implement.

Thanks...
Unfortunately there are no shortcuts. Any tool that will give you a signal by selecting the sample space that has a low PBO number for the current market regime along with a probability of market regime change that also has a low PBO number will work.
 
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volatilityMan
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Posts: 114
Joined: January 16th, 2015, 6:06 pm

Re: Volume as trend detector

March 29th, 2017, 8:00 pm

When trading one often observes a lot of action without knowing which direction the prices are to move.
Obviously, no one wants to trade huge amounts at once and undesirably moving the market. Instead the trades are executed continuously with "smaller" amounts thereby hiding the large position, allowing oneself to trade at the desired price without shifting the market. 

Question: 
Has anyone some good procedures on how to "detect" what the volume says about the price direction?

Obviously, one can simply visualize all the volume traded on the bid side contra all the volume traded on the ask side, plotting a simple bar-chart. But this seems rather naive. 

The tool should be running continuously and therefore incorporating all current trades. 
I'm not searching for "exotic" or "academic" calculations but rather something that is simple, easy to understand and implement.

Thanks...
Unfortunately there are no shortcuts. Any tool that will give you a signal by selecting the sample space that has a low PBO number for the current market regime along with a probability of market regime change that also has a low PBO number will work.
I've never heard of PBO numbers, unfortunately. Could you explain a little? 
I assumed something rather "simple" could be implemented. By simple i mean difficulty level as Black Scholes i.e.
 
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AnalyticalVega
Posts: 2260
Joined: January 16th, 2013, 5:03 am

Re: Volume as trend detector

March 29th, 2017, 10:58 pm

When trading one often observes a lot of action without knowing which direction the prices are to move.
Obviously, no one wants to trade huge amounts at once and undesirably moving the market. Instead the trades are executed continuously with "smaller" amounts thereby hiding the large position, allowing oneself to trade at the desired price without shifting the market. 

Question: 
Has anyone some good procedures on how to "detect" what the volume says about the price direction?

Obviously, one can simply visualize all the volume traded on the bid side contra all the volume traded on the ask side, plotting a simple bar-chart. But this seems rather naive. 

The tool should be running continuously and therefore incorporating all current trades. 
I'm not searching for "exotic" or "academic" calculations but rather something that is simple, easy to understand and implement.

Thanks...
Unfortunately there are no shortcuts. Any tool that will give you a signal by selecting the sample space that has a low PBO number for the current market regime along with a probability of market regime change that also has a low PBO number will work.
I've never heard of PBO numbers, unfortunately. Could you explain a little? 
I assumed something rather "simple" could be implemented. By simple i mean difficulty level as Black Scholes i.e.
https://papers.ssrn.com/sol3/papers.cfm ... id=2326253
 
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Alan
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Joined: December 19th, 2001, 4:01 am
Location: California
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Re: Volume as trend detector

March 30th, 2017, 8:21 pm

@volatilityMan,

Coincidentally, I happened to be thinking about "trading as entertainment" (it is for me) and was googling for research on that. Top of page 4 here speaks to your question. 
 
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volatilityMan
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Posts: 114
Joined: January 16th, 2015, 6:06 pm

Re: Volume as trend detector

March 31st, 2017, 10:09 pm

I think the point is very much correct. I especially like the "pleasure from gambling rises when the outcome of previous gamble is positive". And taking "trend trading" into account, I believe that is indeed what counts for a significant part of the trades executed.

But your point from page 4 is - I assume - also valid/explanation for the huge amount of trading taking place when the stock market opens and just before closing time. Or just before kick off in any match, horse race etc :)