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Alex-
Looks like you've thought about this issue
too? Tks for your response. Perhaps the best I can do is to FORGET
ABOUT
making an issue of trying to use volume as an
indicator. Wordon wrote a great paper (I no longer have a copy) about
why
his tick volume made it's way onto the rubbish
heap of volume indicators; expecially as applied to the overall market
and
indexes. The service his sons run I think are still big on volume regards
individual stocks. I don't do individual stocks.
BTW; does anyone know where I can run this by Ben
of RT fame? I think volume is important in his decision making.
Chas
----- Original Message -----
Sent: Wednesday, February 02, 2005 9:58
AM
Subject: RE: [RT] PROGRAM TRADING
Pure volume has very little meaning for the reasons you
state. In stocks it has been quite some time since you could get genuine
directional volume data. It's worse in derivates where probably two
thirds of the trading is hedge relayed. Some people try to filter back
to public only, but that data is rarely realtime.
-----Original
Message-----
From: Charles Meyer [mailto:chaze@xxxxxxxx]
Sent: Wed
2/2/2005 9:55 AM
To: REAL TRADERS
Subject: [RT] PROGRAM
TRADING
Group-
I was wondering if I can get some feedback
on the subject of program trading; as it relates to volume analysis.
I've been doing a lot of studying on this subject and here's the issue.
In the old days; total volume of shares traded was just that; insofaras it
accounted for all the exchange trading. Today; end of day volume of
shares traded on both the NYSE and the NASDAQ is greatly influenced by program
trading. It is said to account for about an estimated 50% of all
volume. Stated simply; program trading greatly influences total
volume. Now; it seems to me this has to greatly impact the
INTERPRETATION OF VOLUME BASED INDICATORS; because we are no longer seeing the
pure forces of supply and demand as in the days when program trading didn't
exist?
To further complicate matters (if it is necessary to do so; but
I am getting ahead of myself here) of all program trading;
only 10% is the
index arb variety where stocks are sold; and futures are bought
simultaneously; and vice versa. However;
there are OTHER and perhaps
MORE IMPORTANT types of program trading strategies which must impact the
analysis
of supply and demand vis a via volume based indicators? If I
may provide an example. Last Friday sell programs drove the Dow down
about 50-points when sell price levels were hit and program trading came into
the market. For DAYTRADING purposes this was valuable information since
one could have front run these orders on the short side. However; on
some days one would lose money and the correct strategy would be to fade a
sell program by buying into the market at those levels and times.
Daytrading impact aside; is there a way to modify volume based
indicators which would provide a clearer representation
of pure
supply/demand market generated information for the purposes of swing and end
of day trading? If someone could
please share their experiences and
there are no answers to this dilema; it will at least save me a lot of wasted
time and energy trodding a worthless path.
If you have been with
me this far; thank you for your time and attention; and any
feedback.
Chas
for by program
trading
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