Learn to read between the lines
Who?
Tim Ord is a professional trader with more than 25 years experience,was 4th in the US trading championship 1988,options division,was ranked amongst the 10 best performers money managers at his firm(among 294 money managers),he is consistently appearing in the Timer Digest among the top ten market timers...and he is the developer of the TICK Index method used by most if not all professional index traders.
He was one of the Traders appearing in the book "Master Traders:Strategies for superior returns from today`s top traders",is a regular contributor at Stocks&commodities and has interesting and simple ideas about volume analysis...what are them?
Basically,his main idea is derived from his studies of Wyckoff,who is a legendary trader with real proven results that started systematizing the combination of volume and price into an effective system(Wyckoff is the "intellectual father" of Tom Williams VSA too).
Main idea:Combine volume with Price Swings(easily monitored by any Zig Zag indicator)..so,instead of analysing volume for each price bar,he analyzes volume for each PRICE SWING.
Tim Ord is a professional trader with more than 25 years experience,was 4th in the US trading championship 1988,options division,was ranked amongst the 10 best performers money managers at his firm(among 294 money managers),he is consistently appearing in the Timer Digest among the top ten market timers...and he is the developer of the TICK Index method used by most if not all professional index traders.
He was one of the Traders appearing in the book "Master Traders:Strategies for superior returns from today`s top traders",is a regular contributor at Stocks&commodities and has interesting and simple ideas about volume analysis...what are them?
Basically,his main idea is derived from his studies of Wyckoff,who is a legendary trader with real proven results that started systematizing the combination of volume and price into an effective system(Wyckoff is the "intellectual father" of Tom Williams VSA too).
Main idea:Combine volume with Price Swings(easily monitored by any Zig Zag indicator)..so,instead of analysing volume for each price bar,he analyzes volume for each PRICE SWING.Thanks Simba for this information.
Can tick volume be plotted in MT4?
How would you use volume with the price swings for forex?
Thank you
I'm more impressed with his chart coloring where his volumes are colored correctly as it goes from peak to peak. I haven't seen that kind of indicator for MT4 yet, and it is quite complicated because you would need the logic to change the color by finding the different peaks.
Also, the support and resistance lines he's drawn looks good.
His reasoning is solid, but a lot of it is in hindsight.
He needs more tools to figure out real time what is going on. He needs to find the rate at which volume is coming in real time, it is too late when the bar already closed, you need a predictive tool on volume as the volume is stacking up.
And in forex, there still isn't the type of advantage that the futures and stocks guys have because they can see the book, and how the trades are stacked up and down the prices, and how they are pulling the orders when prices move to see who is faking orders.
Thanks Simba for this information.
Can tick volume be plotted in MT4?
How would you use volume with the price swings for forex?
Thank youWelcome,
Tick volume is what you see at mt4.
I would use volume as suggested by Tim Ord
1-Measure the average volume per bar for the upswings and downswings.
2-SETUP:you need a volume difference of 50% minimum between Swing and ,This is very important,either previous contrary swing or previous same direction swing...Example,GBPUSD chart,I have calculated and texted the average volume per bar(AVB) during the last swings...first we have upswing with 1014,then downswing with 1445..so,looks like the volumes were pushing down prices,Then,next upswing is the key...it has an AVB of 1611...Is this at least 50% higher than previous downswing 1445?No..Is it >=50% higher than previous upswing at 1014?..Yes...so,we have a setup,here you have the first cue that the energy might be swithching to the upside...
3-Entry:I have measured the AVB of the last downleg,until the last closed bar,it is 1226,lower than both previous upswing and previous downswing,so what we want to see for a LONG entry is first a downward penetration of the previous low,then a turn up with upside penetration of it...at this moment we can measure the final AVB for the downswing and see if it complies with the condition of having a 50% difference with either 1611 or 1445..(logically 1611 is the level to monitor)..so if the final downswing before the upwards penetration is <=1074...the setup is confirmed...1611/1074=1.5...and we have an entry.
There are other ways to enter too,like checking relative volumes at support bars and penetration bars,and using trendlines...I will explain them in later posts,so,for the moment lets follow the set up on GBPUSD and see what happens.
NOTE:If somebody can create or modify a zigzag indicator so that it can print the AVB for each swing,
it will be much easier to spot potential set ups in the making.
Beginning of move
OK,see chart..first we had an upmove of more than 700 pips in GBPUSD,then 2 near highs A and B at the 1.8650 area...the swings that lead to those highs had an AVB of 1442 and 1648 respectively...then we have what looks like either a consolidation phase or a distribution area...when do we get a good cue that this may be distribution?..At point C we have a rejected penetration of the previous highs...AND the swing that lead to it had a very relative low AVB of 813...additionally if we use VSA(please check the links at first post,VSA is explained there much better than I could do,so I won`t explain it) we see that the actual bar of the fake breakout had 2 conditions:1-higher volume than previous 2 bars and a nice tail,this means Supply is entering the market above previous highs...so,the combination of these factors leads us to think that distribution is finished ,so shorting at bar close (point C)can be a very good reward to risk proposition...
Will continue on next post.
Continuation
There is a big downward swing confirmed by AVB...then we have again what looks like a potential consolidation phase...We get a first cue about potential strength coming into the market at D with high AVB...but this is negated at E and weakness is confirmed at F with an upswing that can not test previous high on very low AVB...
ALL of this you can be aware of at the point in time marked with the arrow,Monday 07:00/08:00 CET...and ,additionally,you can see several bars below previous support area,which now is resistance...so,I am not saying that on Monday 29th of September at the beginning of european session you should have sold like crazy,but AT LEAST,it was clear that going long was extremely dangerous...
Will continue.
More
Next,t point G we have another cue of potential strength returning into the market since the upswing has a very good AVB...unfortunately there is no breach of the lows so,the setup is not triggered though you can observe that the low AVB(1068) of the subsequent downsing led to a rebound until point I.
Now at point I you know 2 things...one,if there is a breakdown of previous lows,the setup would be invalidated(you can`t buy ) because then the swing that led to I would have a Non Qualifying AVB of 1442...Two,if you had taken time to learn about VSA,you will know that both H and I are tests for supply that confirmed the presence of supply in the market...additionally the swing that led to I had lower AVB than previous upswing and couldn`t even retest previous highs( located at G) before supply entered into the market.
So,those of you into Fibonaccis or fractal break outs,by using volume analysis would have gotten confirmation for your short entries,everybody else would have gotten at least a "tell" from the market clearly signalling to stay away from longs.
Now
We are at present time,we see at L that we have potential strength coming back into the market since the upswing has a very good AVB and additionally the upswing broke the previous highs(for the first time since the beginning of the move)...then the actual downswing where we are at now,if it were the final one has an AVB of 1280 that doesn`t qualify for a long entry after the breakdown of lows...so,if we want to rspect strictly the rules,we do nothing...we just take note that we are starting to see stronger upswings and weaker downswings,so,there could be potential strength(accumulation) coming into the market which has yet to be confirmed.
If we just want to use this information and then trade with another system,at least we know that ,for the first time during the downwards move,there could be a rationale that justifies a long entry,though it is very weak yet and not confirmed,so,depending on your risk acceptance and the confidence you have on your other systems you can make an informed decision.
Using this method helps you in making informed decisions,that is what it is about,getting additional clues that help you in trading with confidence and improving your results.
NOTE: An interesting question to ponder 
...All those people that bought at actual consolidation area and were still long afew bars ago...Where were their stops located?You can use data from Oanda,dukascopy,Saxobank,GFT,or just use common sense...stoploss(sell) were located at 1.7525/1.7540 area for the weak hands...now...they have been cleaned by the last spike downbar...so,smart money have started to clean weak hands from the market,getting to buy at lower prices...Now,where is demand coming in? Demand has shown to be present at 1.7520...But there are more stops near the 1.7450 area and these are not from weak hands,just check a longer term chart and you will see...explosive combination indeed .
Thanks Simba for all these informations, it's all very interesting.
I hope that some of our genius coders could help you
Update
Thanks Simba for all these informations, it's all very interesting. I hope that some of our genius coders could help you
Thanks Big Joe for your kind comments.
Update:The pin bar with 1879 above it shows strong supply at the 1.7640 level area...so,now all those late buyers trying to catch a bottom who are in between 1.7515 and 1.7645....What is going to happen with their stops?
Some of them have been triggered as evidenced by the breakdown of the lows..if enough of them are triggered this will create a sell wave that will bring prices at least to the next support area..1.7420...we still haven`t got any signal from the system.
EDIT:Support area was 1.7450 area not 1.7420,in case somebody was wondering about that number
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
Want to read between the lines?
Then use Volume Spread Analysis(VSA),you will be astonished at how soon you start understanding what is happening in front of your eyes,who is moving the market and who is being herded to the killing fields.
There is an exceptional short thread at FF that explains the basis of this method,I strongly suggest that anybody interested takes a look at it
Application of Volume in Forex.
Objection : Volume in Forex is not reliable..Reply,you can use tick volume and it works exactly the same,the thread originator shows it and explains it with several examples...
My own experience:I use volumes at Dukascopy,and compare with tick volume at WHC trader...the resulting patterns are the same,so,I am convinced that you can use mt4 tick volume to apply VSA to Forex...take a look at that thread and decide for yourselves.
Now,another way to apply volume,a very intelligent one, has been described by Tim Ord in "The Secret Science of Price and Volume"...but who is Tim Ord?