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Cameron, interpret my post as you wish, but when an anonymous poster who
claims to be an authority on TA boldly posts claims that "almost all TA
tools are based on price and volume", I can't help but step in and correct
what is clearly false statement. Take a poll of all your standard and
custom indicators in MetaStock, and you may find that it is unlikely more
than 10% use Volume data. Facts are facts.
As for explaining specific details about Volume action, it's well beyond
the ability of a simple post to do so. Besides, I don't market myself as
an anonymous "educator", so I'm not the issue here.
Cameron, there is plenty of material on the subject of Volume - all you
need to do is take the time and effort to find it. i,e., take the
initiative and don't expect others to do your thinking for you.
jose '-)
http://www.metastocktools.com
--- In equismetastock@xxxxxxxxxxxxxxx, Cameron Reid <creid.mba2001@xxx>
wrote:
>
> Jose,
>
> Your post is outrageous.
>
> You have the gall to write, "Again, the anonymous poster should take
care not to make sweeping statements and confuse personal opinion & failed
experience with facts." And then you continue on with your own
unsubstantiated sweeping statements such as: "Every trading tool has its
use, once understood. Whether one finds it or not, is another issue." ? As
if every technical analysis tool could be proven reliably profitable on a
consistent basis. Not to mention your closing remark, which I interpreted
in a decidedly insulting manor. Perhaps your comment was the result of
your own personal confusion & failed experience?
>
> You then take umbrage with the comment: "Almost all TA tools are based
on price and volume." because your narrow interpretation of this quote
didn't allow this to refer to indicators that used one of both of price
and volume. Talk about making a mountain out of a mole hill.
>
> As an introduction to your view on volume, you chose to open with the
incendiary comment: "The above statement shows a poor or simplistic
understanding of volume." This might have been excusable if you went to
explain specifically where the previous poster had been in error. But you
didn't do this. You offered vague, sweeping statements on volume that, at
first glance might suggest that you know something about volume but upon
closer inspection communicate zero value. Your post was a complete waste
of everyone's time.
>
> Jose, I am critical of your comments for a number of reasons: One, you
hold yourself out to be a professional; you sell expensive tools and you
offer your services as a consultant. And two, more that most other
members here, I believe that you have the ability to write comments that
are genuinely helpful. What is so amazing is that you choose so often to
be insulting, a decidedly unprofessional behaviour and that so many of
your posts are really devoid of value as you never present a testable
hypothesis. You shout loudly that you are knowledgeable, but you sure
make an effort to keep it hidden.
>
> Cheers,
>
> Cameron
>
>
> Date: Sat, 10 Mar 2007 15:05:06 -0800To: equismetastock@xxx:
josesilva22@xxx: Sat, 10 Mar 2007 23:04:33 +0000Subject: [EquisMetaStock
Group] Re: ETF trading may cause Volume Indicator Problems
>
>
> "Almost all TA tools are based on price and volume."Incorrect. The
greater majority of indicators are based on price alone.The anonymous
poster should take care not to confuse personal opinion with fact.>
...will have to change how they look at volume because the volume of>
poorly performing stocks are going to rise also because the poorly>
performing stocks will be bought as part of the ETF creation.The above
statement shows a poor or simplistic understanding of volume.Bullish and
Bearish volume are quite different beasts. Volume is related to price
action, and cannot be analyzed separately from it.Volume has a different
meaning depending on whether price is going up, peaking, going down,
bottoming, going sideways, etc. Volume is not a simple stand-alone
indicator - it needs to be analyzed in conjunction with price action.>
It's not that traders need new TA tools. There are thousands of TA> tools
and the vast majority have little or no value.Again, the anonymous poster
should take care not to make sweeping statements and confuse personal
opinion & failed experience with facts.Every trading tool has its use,
once understood. Whether one finds it or not, is another issue.jose
'-)http://www.metastocktools.com--- In equismetastock@xxxxxxxxxxxxxxx,
superfragalist <no_reply@> wrote:>> Personally, I like ETFs. I use them
as asset allocation tools, and> occasionally I trade them. The lower
volume ETFs are a little tricker> to trade. Most of the time, they should
be bought and sold using limit> orders so there is no momentary price
distortions caused by lag as the> specialists tries to buy the securities
needed to create more shares> of the ETF. > > There can also be a large
gap between the NAV and the market price of> an ETF. They are not
perfectly matched to the market prices of the> underlying securities. The
gap is often greater than the expenses of> the ETF and it can be positive
or negative. Some ETFs trade more like> closed end mutual funds than they
do index funds.> > My biggest complaint with ETFs is the lack of shares
for shorting.> Only the largest volume ETFs have enough shares in retail
accounts > available for shorting. Mutual funds, hedge funds and
institutional> traders dry up the shorting market because they use the
shares as> hedges. The ability to short sectors quickly and easily without
the> uptick rule was one of the big advertising points of ETFs. > > In the
past when I was trading ETFs more frequently and I wanted to> short many
ETFs, I had to call the trading desk of my dealer and have> them borrow
the shares from institutional accounts, rather than from> retail accounts.
While that works, it also creates slippage issues in> fills. It's a real
pain. Most individuals look at the ahares available> for shorting on a
website, or call their brokerage and are told there> aren't any shares
available for shorting. > > There are lots of ETFs coming out every month.
Anyone who is> interested can track most of them on www.amex.com select
ETFs from> the left column.> > In addition to finding out what a new ETF
is all about, once they been> on the market for awhile, someone can scroll
around on the amex site> and find a list of the shares that comprise any
ETF. That creates> other kinds of trading opportunities.> > ETFs are
quickly replacing basket trading. Many people will buy and> sell ETFs but
they would not have created the same opportunities using> basket trading
techniques. So from that perspective ETFs are> definitely changing
things.> > What I was pointing out about the article and the volume issues
is> traders need to be aware that ETF buying and selling causes the
volume> of both the good and bad performing stocks in the ETF to rise the>
same. On the surface this looks like a net zero impact, but it's not. > >
Essentially as there are more ETFs and as ETF volume rises, traders> will
have to change how they look at volume because the volume of> poorly
performing stocks are going to rise also because the poorly> performing
stocks will be bought as part of the ETF creation. The> volume of poorly
performing stocks will be rising while the price is> falling. The degree
the price would have fallen due to selling> presures may now be offset by
the buying that is necessary to fulfill> ETF demand. Some may consider
this a distortion in the demand for> weaker stocks. > > Volume today has a
completely different meaning than it did 20 years> ago. Many TA volume
tools were created 20 years ago. Data suppliers> like Reuters need to
supply the actual up and down volume rather than> simply total volume.
That would be a good place to start. > > Almost all TA tools are based on
price and volume. There is only so> many ways to analyze price and volume.
The information which can be> extracted from price and volume is limited.
As volume becomes more> difficult to discern the usefulness of it may
decline meaning that> most information will have to be extracted from
price alone. > > The question is without rational gaps in the efficient
market, or the> creation of distorted gaps that are hard to read, how much
opportunity> will there be for in the future for individuals to profit
from the> efficiency gaps?> > If these gaps close, then the market has
reached random walk> territory. Most of the academic studies do not
include data on the> current market. Often the studies are dated to the
1980's and 1990's.> ETFs weren't around then. > > Ten years from now,
what will the new academic studies say? Financial> engineering is creating
new products faster than individuals can learn> to use them and faster
than academics can measure their impact on the> markets. > > It's not that
traders need new TA tools. There are thousands of TA> tools and the vast
majority have little or no value. Traders need> differentiatable data to
apply the tools to, or create tools that use> the data effectively. On
most services right now traders get to> download high, low, open and close
price and total volume by bar. > > Is that going to be enough to make TA
useful in the future, or will> the change in product and the expansion of
the fund industry and> institutional buying and selling diminish the value
of the tools?> > Will traders have to focus on the shares of companies
that are off the> ETF, fund and institutional radar? How many companies
will that be as> ETFs expand to cover every kind of basket someone can
think of?> > > > > --- In equismetastock@xxxxxxxxxxxxxxx,
"jawjahtek" <jawjahtek@> wrote:> >> > super,> > > > I agree that too many
ETFs are being created and that narrow sector > > ETFs can distort some
market sectors. > > However, I cannot tell from your post if you are
against all ETFs > > and/or if you are a supporter of Random Walk theory.>
> ETFs in market segments with significant market cap have little > >
impact compared to institutions and hedge funds.> > And even the most
ardent academic supporter of Random Walk thoery > > agrees that the
original version of the theory is wrong.> > My take from the article cited
below in that some ETFs in narrow > > market sectors are distorting volume
as an indicator.> > But institutions and hedge funds have been causing the
same > > distortions for years; why point out ETF impacts without
mentioning > > the impacts of institutions and hedge funds.> > I'm sorry
if this appears to be a rant; for some reason CNBC and some > >
commentators have been ranting about ETFs during the latest market > >
downturn even though ETFs had absolutely no impact on the computer > >
glitch in the Dow.> > > > Ross> > > > > > --- In
equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@> > > wrote:> >
>> > > Anyone trading small caps might be interested in an article in > >
today's> > > Wall Street Journal 3/9/2007 which discusses how ETF trading
is> > > distorting volume and may hurt volume as a technical indicator. >
> > > > > The article is in the Money Section. ETFs Build Presence in
Shares> > > > > > http://users2.wsj.com/lmda/do/checkLogin?mg=wsj-
users2&url=http%3A%> >
2F%2Fonline.wsj.com%2Farticle%2FSB117340540305631813.html%3Fmod%> >
3Dtodays_us_nonsub_money_and_investing> > > > > > Most people do not
understand ETF volume, the impact ETF volume has > > on> > > individual
share volume or individual share prices. They think ETFs> > > are priced
on supply and demand and that ETF volume works the same > > as> > > the
volume of ordinary stocks. In addition, there are differences in> > > how
mark to market pricing is done on the trading exchanges. > > > > > >
Vomund explains some of this in his book ETF Trading Strategies > >
Revealed > > > > > > There are also articles that explain bits and pieces
on the > > internet. > > > > > > Specialized, or sector ETFs, are having
the same impact on stock> > > volume totals in individual shares in a
sector or in a specialized> > > area like socially responsible stocks. As
the specialized ETFs grow > > in> > > popularity so will their ability to
distort the meaning of share> > > volume and share pricing. > > > > > >
When an ETF fails to achieve enough trading volume to cover its > >
costs,> > > the sponsor will liquidate it and cause the opposite volume
issues > > to> > > the downside.> > > > > > All this will provide more
support for Random Walk.
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