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I tend to agree with Steve McGurie's comments that
the character of volume and thus the usefulness of volume based
indicators change over time or more accurately, they change with
the character of the underlying market. The greater the
uncertainty about market conditions, the more likely hot money (program trading,
hedge funds, shorter time frame traders) will make up a greater proportion on
intraday volume while longer time frame players are sitting on their wallets or
sticking with established positions. Basically, it is very difficult to
determine in real time, who is responsible for current volume.
For the purpose of DAYTRADING the common
futures indexes ( Mini S&P, etc.) I have
found that, with an occasional exception, that volume - tick volume is
often a coincident indicator and does not provide much help in determining best
entry points on the shortest time frame charts that typically provide the lowest
risk entries. Program trading is often erratic and programs cannot be
predicted just by knowing the supposed futures - cash spread at which
such programs might occur. To make money trading the hard right
edge of the chart, better to rely on price itself as the clear indication of
whether buyers or sellers are in control of the market and when that control is
changing. Trade what you see on the chart and not what you think someone
else might do.
James Alvis
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