I've been studying Price and Volume for a year now (Wyckoff and VSA) and rather than seeing volume as key to what causes turning points I see it as something that is there or isn't but haven't yet discovered whether it is useful to me or not. I would like it better if the "experts" explained the presence of volume or the lack of it in a consistent way. Instead it seems to be a case of each of the "laws" being able to describe why the market turned the way it did with an air of certainty. Problem is it's never done with that level of confidence in real-time. Sure I understand each person may use it their own way, but since the use of volume comes from Wyckoff's teachings I expected if volume is truly "telling a story" then they would be receptive to its message similarly. Instead volume is being used in completely contradictory ways. Clearly, volume doesn't tell it's story well enough - each trader is just trying to interpret it. In fact it's message is pretty vague at times and impossible to decipher at others.
Taken at their word the stock "lessons" I've encountered will only damage my account. I've found the more invested someone is means they aren't necessarily good at using volume. Of course they may feel their knowledge is at an "expert" level, but the problem is they tend to be rigid and defend their stance. Sometimes they should admit the market is noisy and random, it'd be fine to say more information is needed to properly assess the market. I'm also amazed how some volume experts are regarded as "Gods" even though the most impressive thing is their recollection of all scenarios rather than their ability to apply the correct timing and direction for money-making trades.
Here's a typical scenario: If an uptrend sees a pause at a top with decent volume it is called "Stopping Volume", if it is on excessive volume (subjective) it is called "Climactic", if it is either of these or anything in between but the market does not reverse it is explained as "Absorption" meaning the buyers are soaking up all the selling thus preventing it from declining. In real-time I haven't seen anybody identify which of these is occurring until the market does something afterwards, either it declines or trades sideways, but the "result" is what is needed to explain which of the 3 it is, and by then it will then be a perfect explanation of which of the 3
ALREADY happened. If it's all clear in hindsight what is the use?
To make things even more confusing lets say the market declines but does so on low volume. Well what happened there then? VSA or Wyckoff practitioners will then say it didn't fall from the aggressiveness of sellers but that the buyers simply stopped buying i.e. the lack of demand meant that any selling was more easily able to apply downward pressure. Hmmm, okay. Sounds like markets can turn an uptrend on high, medium and also low volume. If I didn't look at volume at all wouldn't I be able to wait and see the result and simply say "the market turned down right there"? Sure I wouldn't know why, but who cares? How does volume explain the turn any better? Hindsight is clear to all,
NO VOLUME INDICATOR NECESSARY.
Both camps of volume doctrines have flaws, no need to separate them and pinpoint the pros and cons since they have some overlap. "Bar by Bar" analysis seems like BS, quite a time-consuming and yet fruitless exercise. I also see "No Demand/No Supply" as semi-BS. There are times it is useful to know that ND/NS is occurring, but for me it is pretty useless since the timeframes I watch have periods where ALL VOLUME has dropped off. Knowing this (now) I can avoid getting sucked into a trade due to a lack of demand being there coz now I can see it's just lunchtime (LOL). The concept of "Absorption Volume" is also semi-BS. I dont deny it, just that it is explained only after the result. If a market trades sideways with high volume you can easily think absorption is occurring only to see the market move away in the "wrong" direction nullifying that idea. Die-hards quickly forget those instances and only use the occasions that rise as evidence AV is a real thing. Again, it works sometimes and other times it declines anyway to which they will say it was marked down so the Smart Money can accumulate some more. Whatever. All I care about is whether Absorption is identifiable and when it induces me to buy at high prices I expect if it has an edge what will follow are even higher prices most of the time. I'm not convinced.
There are more of these concepts that seem useless but those are the main ones. At least I never got so invested in volume analysis that I can't tell it like it is. A year of study may not sound like much, but how many charts do you need to see to know whether the aforementioned concepts are gonna work for you or not? I've seen a good share to feel safe about my conclusions.
Not all is lost though because this has made me study harder looking for the whole point of volume's significance. I can't say "I've got it!" but the best use seems to be when used in the context of a trend. Sounds obvious, but I've observed many traders can't help using volume to identify reversals. Reason being the high volume peaks are more obvious, but I can't say they mark the day's high or low very well. The trend turns tend to be on less exciting amounts of volume - mostly low. Occasionally a pullback will occur on very high volume, which I would say in real-time looks more like a reversal into a downtrend, but if that gets bought it usually provides a great long trade because eager sellers all got wrong-footed. In those cases it is prudent to hold off on buys since they might actually be beginnings of a new downtrend, but then to watch closely at the reaction. If it stops dead and then pushes higher it indicates the original uptrend is still intact and that the decline was a shakeout. I'm not attempting to justify volume analysis just like the Wyckoff/VSA traders I'm pointing out where I have seen it is actually useful. In future I will be discussing what does work when using volume.
