After reading this I must admit I am a bit embarrassed. I am a hypocriteā¦ I bash him for bashing a theory. To each their ownā¦ These are simply perspectives. Is PimpShip wrong for his perspective? No. Am I wrong for mine? No. Ahh the lovely world of internet arguments. Back to topicā¦
I said I would post the graphic. I have been sidetracked by personal commitments. But hereās the basic Idea:
If you see a relative volume drop after a trend is formed (up or down) chances are the trend is coming to an endā¦
This is EU on 30min you can see the uptrend from last week is dying outā¦ then we have a small down trend, but not much volume (activity) in the small down trend.
If you see relative volume begin to increase, chances are a trend is about to begin.
Here is relative volume (activity) beginning to increase before a huge up trend. Fueled by News? I wasnāt paying attention to the markets, was enjoying some holiday family time.
Is this always true? No. Why? Volume is only a single source of information, you can not rely solely on it for determining the direction a trend will take. There could just be a price battle ensuingā¦
(You see this after the first set of arrows in the first chart graphic, and the second set in the second graphic.)
So why is volume even useful? It shows activity in the market. If there is activity beginning to form chances are something is going to happen.
OK, so something is going to happenā¦ But what? Well if we look back at prior events you can see if price has attempted to move up or down. Why does this help? it gives us an idea of the market sentiment. If price has had a hard time rising, and you see volume activity beginning to form we know a positive move may be fought with resistance, and a negative move may be accepted and vice versa.
Here you see attempts to move price up. They were accepted, and a few attempts to push price down were rejected.
That still doesnāt help, prices move past resistance all the timeā¦ Yes! they do, but not without effort! Effort and volume activity can be viewed as one in the same. So we watch to see what effort the market will accept.
Von put out the idea that the big money will hide their moves in the volumeā¦ I like to look at 15-30m charts ans see the relative volume there and manage my trades all on the 8h or 1d. Why? Because if you drop down to a smaller TF you may eventually second guess your move. The big money (in my opinionā¦) is not interested in shaking out other big money holders like themselves, they trade larger time frames for larger profits and bounce around prices during the day to make money off the inexperienced who will second guess or try to follow a fake trend.
The charts I posted; I do not trade from them in this manner, I just wanted to show the basic ideas.