Flow Volume - How to read the input and output volumes from the market
from Gianluca Salvatori
on Vimeo .
Today, the model of the volume profile is regarded almost as a unique tool analysis of the volumes. Indeed, this logic and this type of representation, with new software rather than with the flow and powerful real-time data very accurately, in my personal opinion is an outdated model, past, dated and its usefulness is limited in part to identify some support and resistance and nothing more, the same way as support and resistance barchart.
The reason for this belief is simple ........ Steydlemayer in 1983 to create the histogram representation just because at the time was the only one that would allow him to identify the deduction to "value zone" and particular point of greater value, or the volume and peak volume. This is because if you do not have of technical means to identify the intraday volume (there were no quotes telematics in 1983), the only way that you can use is that of deduction, or if the price goes above certain levels over and over again, but undoubtedly the trading I can not know, but I can only be inferred indirectly. If in fact step over certain prices and quantities at each stage N exchange (not known), I can deduce that the more step above those prices, and many more quantities / volumes I traded at those prices, and thus the only way I can identify (with technology era) the areas of Value / Volume.
Today, however, this logic, even if applied to volumes with the most modern and precise Volume Profile, given the analytical tools available, is outdated.
The direction toward which I think we have to move is that of the dominant dynamic of the market or the analysis of the flow volume of the market.
areas of volume, both peak volumes or other, are areas / areas that fill and empty volume as a function of market dynamics that constantly change the logic and assumptions.
macro data, news, corporate earnings, etc. .... etc. ..... create the pressures and dynamics in the market that change continuously in the balance and perspective, allowing the creation and mobilization of positions of short / medium / long period. These positions do not remain open indefinitely, and indeed often are retirement / empty volume very quickly, sometimes even the same day. Especially in recent months with the advent of so-called "machines" or High Frequency Traders who have transformed the market in a place where prevailing logic of speculative short to very short term and no longer the place where prevailing investment. So how can I trust a zone / area to volume we can not know the dynamics that created and sustains it, especially if this dynamic evolution of short?
Why in some cases these areas will support or reject the prices and other times they are holes, as if nothing had passed without even stopping for a moment, even if they are areas created recently (yesterday or even the same day)?
The answer I believe lies in the fact that the method of observation of the market according to the logic of the volume profile histogram, a method is obsolete, dated, old, a way out of alignment with the times, a mode that represents the past and that today makes it impossible to analyze the flow volumes entering and exiting the market following the current logic / dynamics of itself.
E 'to be compared to the same league as the analysis done on candles / bars than the daily intraday bars, provided they show us the price dynamics within of the day, while the first day we only provide a framework for static and not very significant that leaves room for a few ideas of reflective analysis, if not quite logical to overcome the power of technology and analysis available today.
Be honest ...... how many of you now have to analyze intraday charts "only" bars a day?
So I wonder if I ........... we translate this logic to the Volume Profile, because it analyzed only the volume profile of the entire session and not create a single volume of intraday profile in 60min or 15min or less ? The basic logic is the same price that differentiates analysis carried out on daily bar rather than intraday bars ..........
The reason I believe is that we analyze the dynamics of the volumes with the wrong tool, a tool that could now be passed correctly and very clever indeed in 1983 when prices were not available, data transmission, but now .......... Today is definitely outdated and useful only to identify potential levels of support and / or resistance, the same way as support / resistance barchart.
Below and in video is an example of recent days .......... Question: Why
areas of volume and in some cases the same volume peaks are easily pierced with the first step ? Why reaching the area of \u200b\u200bvolume, the market does not stop and sometimes penetrates well beyond the zone of volume ? If you do not stop immediately, then .......... where do I consider support / resistance, above - or below half the area of \u200b\u200bvolume?
Notice how prices pierce the purple lines with arrows leading to the purple base of support or resistance of the roof of the volume, which showed that levels are virtually never heard.
(click on image to enlarge x)
The correct logic and much more modern and timely is the flow of the volumes that follow the dominant dynamics of the evolving market. MACRO
News, news, corporate earnings, etc. ........ shift the balance ? So here is that the volumes entering and exiting the market, causing price movements, filling or emptying the market with volumes in or out in an attempt to accommodate and adjust to new balances and new perspectives.
So my suggestion is to not stop and analyze the volumes along the route that has been covered initially, because I think that is a way outdated, outdated and certainly not in line with the new dynamics of the market. The way in my opinion lies in thinking outside of those patterns "classics" that unfortunately affect us today and we limit, showing a single location or one already taken by others and it was old. I'm not saying to reinvent the wheel, but that simply is not written anywhere that the right way to analyze the volumes, given the technology available today, is that cross all that often ............ just because someone said to "all" that this is the way ahead and behind us all, let me say (absolutely no offense in what I'll put me in even half as I did I even for months / years )..... .......... as "goats"!!
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