guru_trader
485 posts
msg #40693
- Ignore guru_trader |
1/25/2006 3:46:12 PM
What percentage of volume is considered strategically and/or statistically sound when buying and selling stocks? I know there needs to be enough average volume to allow for a relatively "stress-free" buy/sell; so, what are the preferred ways of determining this minimum volume?
How does this percentage of volume change when dealing with penny stocks? Should we consider price-to-volume ratios when calculating these percentages, as some mentioned? Someone mentioned purchasing no more than 20% of average volume(10), while others have mentioned calculating minimum volumes based on average trade length.
I've read some archived threads about this, but can't easily find them again.
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nikoschopen
2,824 posts
msg #40696
- Ignore nikoschopen
modified |
1/25/2006 4:08:17 PM
I take any reading above its 17-day average volume to be valid, although I prefer it over 50% with a steady increase over the last 2-3 days.
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guru_trader
485 posts
msg #40725
- Ignore guru_trader |
1/27/2006 6:20:51 AM
So, what percentage of daily trading volume ownership is considered too much?
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judgetrade
107 posts
msg #40731
- Ignore judgetrade |
1/27/2006 2:08:32 PM
I trade small priced stocks below 1.
I try not to get into positions where I have more then 10% of the average daily volume (100 days) and do not trade more then 5000 per position.
I work with GTC orders first, then if I can not get out after one day after the sell signal, I take the bid. Usually I can get out at the ask, if I wait for a day.
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nikoschopen
2,824 posts
msg #40735
- Ignore nikoschopen |
1/27/2006 2:54:56 PM
Check out these websites for an explanation on some important volume patterns:
http://www.hardrightedge.com/wheel/hrevolume.htm
http://www.streetauthority.com/terms/pricevolume.asp
http://www.investopedia.com/university/tm/TradingIndicators/VolumeClues.asp
Have you also read any of Martin Pring's books lately? He writes indepth about price/ volume characteristics as well as what patterns to look out for. Here are some titles that might interest you:
Technical Analysis Explained
Introduction to Technical Analysis
Investment Psychology Explained
Momentum Explained (Vols I & II)
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alf44
2,025 posts
msg #40894
- Ignore alf44 |
2/2/2006 11:22:19 AM
nikoschopen,
"I take any reading above its 17-day average volume to be valid, although I prefer it over 50% with a steady increase over the last 2-3 days."
----------------------
Why 17 day Average Volume ?
Just curious ! tia
Regards,
alf44
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nikoschopen
2,824 posts
msg #40898
- Ignore nikoschopen |
2/2/2006 12:07:39 PM
In times when a stock is about to be cured from its constipation and set free, you often see large volumes over several days. Having looking at numerous charts over multiple timeframes, I came to a conlusion that any given rally extends out to about 20 days. However, if I'm not mistaken, people of all walks of trading life are already obsessed with anything that has 20, 50, or 200 in their charts. So, what the hell, I figured I could front-run everyone by using a 17-period. It probably ain't what you call "a little known fact that's more often overlooked to be of any use", but it serves me well.
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alf44
2,025 posts
msg #40901
- Ignore alf44 |
2/2/2006 12:32:06 PM
Good enough !
Thanks for the reply !
I generally use a 65 day Average Volume...thought being that 65 days is the approximate number of days in a Quarter...and...that 65 days would be...well..."Normal Volume" !
I'm always looking for things that might add something to my analysis. I remembered this thread from a while back and the "17" number sorta stuck in my head. At the time it seemed a curious number and my curiosity finally got the best of me and I had to ask.
You know...you could have come back with..."well 17 is exactly half of 34...which of course is a Fib number...and well...the implication of that should be obvious !"
Now that would have been a much more intriguing answer ! LOL
Thanks again for the reply !
Regards,
alf44
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nikoschopen
2,824 posts
msg #40902
- Ignore nikoschopen |
2/2/2006 12:49:48 PM
LOL. I wish I had the magic potion to match the prowess of Fibonacci power. While I do use the Fib on prices I've yet to utilize it on volume. An intriguing analysis Indeed.
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nikoschopen
2,824 posts
msg #40948
- Ignore nikoschopen |
2/3/2006 2:06:09 PM
Here's Martin Pring's take on price/volume relationship:
1. A price rise accompanied by expanding volume is a normal market characteristic and carries no implications of a potential trend reversal.
2. A rally that reaches a new (price) high on expanding volume but has an overall level of activity lower than the previous rally is suspect, and warns of a potential trend reversal.
3. A rally that develops on contracting volume is suspect and warns of a potential trend reversal in price.
4. Sometimes both price and volume expand slowly, gradually working into an exponential rise with a final blow-off stage. Following this development, both volume and price fall off equally sharply. This represents an exhaustion move and is characteristic of a trend reversal. The significance of the reversal will depend upon the extent of the previous advance and the degree of volume expansion.
5. When prices advance following a long decline and then react to a level at, slightly above, or marginally below the previous trough, it is a bullish sign if the volume on the second trough is significantly lower than the volume on the first.
6. A downside breakout from a price pattern, trendline, or moving average that occurs on heavy volume is a bearish sign which helps to confirm the reversal in trend.
7. A selling climax occurs when prices fall for a considerable time at an accelerating pace, accompanied by expanding volume. Following a selling climax, prices may be expected to rise, and the low established at the time of the climax is unlikely to be violated for a considerable time. A price rise from a selling climax is by definition accompanied by declining volume. This is the only time when contracting volume and a rising price may be regarded as normal. Termination of a bear market is often, but not always, accompanied by a selling climax.
8. When the market has been rising for many months, an anemic price rise accompanied by high volume indicates churning action and is a bearish factor. Following a decline, heavy volume with little price change is indicative of accumulation and is normally a bullish factor.
(Source: Martin Pring, Technical Analysis Explained, 3rd ed. (1991): pp. 271-72)
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