The Perception of Volume Patterns

BarroMetrics Views: The Perception of Volume Patterns

At one stage, one of the ‘hot’ tools was Richard Arms ‘equivolume charts‘. Then in 1992, Gregg Morris developed “candle volume charts“; he called it CandlePower. His candlevolume charts were candlesticks drawn the equivolume way: where the horizontal axis was volume rather than time. The software I had that drew the charts ceased to work when Y2K came around.

At the time, I thought ‘that’s a pity’ because Candle Volume Charts suited the way I trade. I am a visual trader and my first port of call is always the graphics and then the numbers.

Recently I came across Insider TA which draws Candle Volume charts as well as Equivolume and its moving averages. It does much more, but I am using only the CandleVolume function. What CV charts allow me to do is see at a glance the ebb and flow of volume in respective time periods.

Figure 1 (Australian All Ords Index) shows what I mean. Once I get a feel for the periods when there are noticeable differences, I can then apply my statistical analysis.

Let’s take a look at another example.

Figure 2 is the cash S&P. The first thing I note is that the volume in period 1 is much greater than period 3. Period 2’s volume is about the same as period 1 but the ranges appear smaller. With those first impressions, I can use Market-Analyst’s Probability Box to confirm or reject the initial hypothesis.

(Usual disclaimer: I receive no referral fee for the products mentioned. I use them in my own trading and I find the items useful).





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