ES Thursday 9-29-11

I thought that we could use a refresher and some basics in case we have some new folks here. Most will know this stuff but hopefuly this will inspire some questions or help clear up any questions regarding the use of high and low volume in your analysis. Here is todays chart with the key areas labelled for Thursdays trade.
Click image for original size
below todays lows if anyone is looking at levels below I have High volume at 37.50 and low volume down at the 30.50 area...good luck !!
Originally posted by BruceM

below todays lows if anyone is looking at levels below I have High volume at 37.50 and low volume down at the 30.50 area...good luck !!

es chart for 09-28-2011
This is great and very helpful Bruce. I was curious to know [if] these specific prices are traded through the overnight session, if that has any significance for the RTH session tomorrow? In other words, if price breaks through these lines or they hold as support/resistance through the night, does that change your strategy or is the RTH sessions' reaction to these prices all that matters?
Great question Sean. I have found that the most import thing is look at which side of the low volume we enter from in the RTH session. Rarely is there enough volume in the overnight session to really fill in these low volume nodes.

Lets use an example from the current overnight session and Wednesdays day session. Pretend we open in the day session at 1157.50. This means we broke through the low volume of the 1152 area in the overnight but we are also still under the low volume of 1162.50. In this case I would look for buys using the 52 area and sells near the 62 area. It all depends on which side we enter the low volume area from in RTH. Let me know if that is crystal clear. I'll try harder to explain if it isn't.

And you can use some discretion too but those are the basic rules. Look at Tuesday as an example of discretion and rules. I had a low volume area of 76 - 77 coming into Tuesdays session but we opened above that. So the rules say that we should look for buys near there as we opened above it. The discretion part says that low volume gets tested so we could have taken shorts for that retest early on. The smarter and more patient trader would follow the rules and would have looked at that as support first.
Just to add to Bruce's fine comments. The current O/N high came in at 1163.75 and prices quickly reversed thus confirming that 1162.75 LVN as resistance still.

8:30 news reports are going to be very interesting to see where prices go.
Perfect comment Lorn. I also prefer to avoid trading at the high volume zones as that is the place where traders agreed on price usually. Like any good "auction" ( doesn't matter if it's a real estate auction, car auction or stock prices)I'd prefer to have fewer people attend so I can be more selective and try and get my prices.

So high volume areas are like going to a packed house - loads of people - at an auction and hoping you get the item you want. Sometimes we have other things line up at high volume ( IB highs and lows for example) that makes trades a bit more acceptable but I still prefer the low volume.
Bruce what time frame are you looking at vol. I have different nodes when looking at 5 min and 30 min charts. Also if using a 30 min how many days do your nodes represent TIA RB
I take it one day at a time shouldn't matter on your time frame...the low volume will show up on any time should not change based on your time frame if your volume is accurate...low volume is low volume...not time specific
Thanks Bruce and Lorn for your feedback. Makes total sense! Have fun trading today. Looks like we've already set up for some incredible movement!!

Bruce, thanks for all the great info. I've been struggling to be a profitable trader for some time and the only thing I am sure of is that volume runs the show. I'm understanding you explanation of where you are looking to enter. Any guidelines as to where you put your stops? Dictated be volume as well? Volatility? Thanks!
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