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Develop a ‘feel’ for what is happening

Hey Joe! How can I get a feel for what's happening in the market?

One of the things that has helped me was beginning to use tick charts for my day trading.

In a past issue of Chart Scan, I explained that there are two kinds of volume: Contract Volume and Tick Volume. Almost everyone is familiar with contract volume. It's usually shown as a histogram at the bottom of a price chart. For a given time period (5 minutes, 60 minutes, daily etc...) you can see how many contracts have been or are being traded.

However, Tick Volume shows you how many trades are being made. If there is divergence between the contract and tick volumes, it can be a warning that something is happening or is about to happen.

Use all your senses to trade the markets. If trading behind a screen, watch both tick and contract volumes. One trader I know booked a $9000 day trade profit, because he noticed a drop in volume. On the chart, prices were making new daily highs, but the contract volume, and in particular the tick volume fell sharply down. This situation is not supposed to happen in a strong bull market making new highs. Watching volume told him that something was about to happen. Sure enough, the market fell 22 cents less than two hours later.

Using your senses is part of trading what you see. If you are watching intraday, watch closely the way prices tick. While doing so, try to picture in your mind what is happening to make prices move the way they do. After a while, your comprehension will begin to expand, and you will develop a "feel" for what is happening, and you will instinctively know a good trade from a bad one in many instances.



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Comments 2

Guest - Corrado Bortolotti on Saturday, 06 February 2021 04:33

Good morning and happy week end!
the February 5th issue of Chart Scan was a very interesting one...
where can I get more info about Tick Volume, Cumulative tick volume indicator and Trade delta indicator? seems very useful to trade MES on a 5 minutes...
thank you.

Corrado

Good morning and happy week end! the February 5th issue of Chart Scan was a very interesting one... where can I get more info about Tick Volume, Cumulative tick volume indicator and Trade delta indicator? seems very useful to trade MES on a 5 minutes... thank you. Corrado
Guest - Joe Ross on Saturday, 06 February 2021 10:28

Corrado, I wish I could give you a more definitive answer, but all I have ever done is to look at the tick volume on my chart while day trading. If I see a divergence between that and contract volume, I know something is happening or about to happen. One example I often see is when a major report is about to come out. The pros will stop trading waiting to see what is in the report. They know when reports are due to be posted. However, the masses of day traders never bother to look at a trading calendar so they are unaware of the report. They will keep on trading, even as trade volume drops off. They end up getting killed due to ignorance.

I don't know what you mean by Trade delta indicator. Maybe I know it by another name?? You might try looking up Tick Volume on the Internet. There is all kinds of good information to learn from.

Corrado, I wish I could give you a more definitive answer, but all I have ever done is to look at the tick volume on my chart while day trading. If I see a divergence between that and contract volume, I know something is happening or about to happen. One example I often see is when a major report is about to come out. The pros will stop trading waiting to see what is in the report. They know when reports are due to be posted. However, the masses of day traders never bother to look at a trading calendar so they are unaware of the report. They will keep on trading, even as trade volume drops off. They end up getting killed due to ignorance. I don't know what you mean by Trade delta indicator. Maybe I know it by another name?? You might try looking up Tick Volume on the Internet. There is all kinds of good information to learn from.
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Tuesday, 22 June 2021

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