Dow jones plunges 512 points in one day; nasdaq down 136; s&p down 60

VXRT getting Gov funding for Covid under operation warpspeed. Ran yesterday with no news.

Nothing to see ....

 

Market lesson 101 - Markets rarely care about news.

 

I swear we will make a trader out of you yet Brummie.

What Spejic said is generally true regarding volatility expansion and increased volume. It isn't necessarily "bad" unless you are on the wrong side of the trend of course . Volume analysis isn't that reliable I have found. It's a bit of a fools errand, as what the books and websites teach you sounds good in theory, but the actual accuracy of the analysis is spotty.

Some people swear by it but I gave it up. Supposedly healthy trends exhibit volatility cycles where expansion is followed by contraction (pullbacks or sideways movement in price. This is the "resting period." You can see glimpses of this in your chart, especially the downtrend. But don''t react to the actual explosion of volatility/volume, study the reaction to it. Again, you will see this is charts and convince yourself by confirmation bias it works all the time. Putting it into practice you probably won't be as pleased.

http://pring.com/articles/article15.htm
Again, This is how its supposed to work, but making trades off it isn't that simple.

Now not giving trading advice, but it seems increasing volume occuring after a prolonged horizontal dead period (a channel) and a breakout usually gives better signals. But that isn't what we have with the S&P. Thats just a side note. (this doesn't show volume, but had it done so, you would see a large run up)

 

Kind of. Volume is simply where a buyer meets a seller and the amounts traded. You could have a huge amount being traded at any given price and the stock won't move because equilibrium between buyers and sellers quantity wise.. It usually though has an imbalance which causes a move because buyers exhaust all the given supply at a price level and are forced to pay higher prices to get more available shares causing a run.

 

That's exactly what happens. Its called finding a "natural." traders shop around their orders to contacts on other desks and agree on a large quantity and a price. (this is done to avoid having to move the markets when you are buying/selling larger quantities) They legally have to report it so it hits the tape which all the software vendors calculate their charts off of.

This is one reason it makes volume analysis on stocks less accurate. Hugely traded and liquid futures, not so much because so much liquidity exists at price levels, it isn't necessary. (I didn't want to go into the weeds on this but since you asked.)

 

Volatility returned in 2018 IIRC

The relatively low levels of volatility before that were quite unusual

And now we have a lot of macro factors in terms of politics, economics etc that reduce stability. So overall there is far more risk in the markets.

 

On a break out (or expansion) it helps to have MAs in your chart for pullback entries. I like using EMAs (9 and 20). Also what works great is having levels of major support and resistance drawn out. You can also use Bollinger Bands to make is easer to see the contraction/expansion periods.

 

I don’t use them but Look into the Hull MA if you need to use one. Just beware of MA’s lagging issues. Agreed on S/R. Scanning software that allows for bollinger “squeezes” can be useful for finding opportunities.

Not saying you do, but Don’t fall into the common trap of adding too many squiggly lines to your chart. A lot of people head down the wrong road with that.

a lot of the common stuff is useless as advertised and deceptive as it provides no edge. It looks great in hindsight, and your charts look sexy, but doesn’t work when applied. I suggest looking into Suri Dudella’s work as well as Adam Grimes. Grimes especially. He debunks a lot of the myths and explains why most traders lose money.

he is one of the few honest guys out there in a world of hucksters and scam artists.

 

Well, as far as volume is concerned I don't, but if you want to an idea that has a following look into "market profile/auction theory". I never really looked to much into this ( I trade stocks), but some people swear by it. It is mainly used for trading futures/commodities (very liquid instruments.) It is a bit complex, but worth a look depending on how in depth you want to get..

https://www.tradamaker.com/what-is-auction-market-theory/


As far as trading, I like Adam Grimes "The Art and Science of Technical Analysis." It is meant for intermediate level traders/investors and higher, (I am guessing you are relatively new?) but what I like is how he is brutally honest on why trading is so hard, rather than pitch to you some elusive holy grail that doesn't exist.. Him addressing everyone's common mistakes helps speed up the learning process..

I found a free copy floating around the internet so it shouldn't be hard to find. If parts get too complex just skip those as there is value all over in that book.. (Chapter 11: Psychology is one of the best)

(I am not recommending short term trading to everyone btw. It is difficult and usually takes along time to become profitable, but researching it as a hobby on the side and trying ideas on a simulator account until you gain experience it isn't a bad thing.. )