"Stopping Volume"zan wrote:Hello all happy new year,i would like improve my knowledge regarding(stopping volume) i think i get it ,but would like to be sure.Tahs most recent post USD JPY short trade pointed this out,good time to ask.perhaps a brake down of this stopping volume area would be a great help .Thanks enjoy your weekend.ZAN.
Folks, this term refers to when we see relatively high volume coming in after some sort of a run. I know this sounds vague right from the start, but after all, what about the market is not vague? Huh?! When the volume histogram shows such a thing happening, we need to be on our toes. This does not have to be huge volume relative to all the volume across the histogram. It only has to be relatively high compared to the "average" volume across the histogram. What might be happening is that the MMs are suddenly coming in to absorb all the orders that are pushing the price in the direction it has been going.
Let's say price is going down, and then we see it start to slow or even stall while higher volume comes in. What might be happening is that the MMs are absorbing all the sell orders left over when other counterparties with buy orders dry up. The MMs start buying in such manner as the price ceases to drop rapidly, or even stops dropping altogether. Now the MMs have longs at low prices. Where do you think they are going with the price next,.........eventually.?
"Next" might be right away or after the MMs range price to see if they can accumulate more longs. If ranging occurs, then for how long? We simply cannot know,.....a vagueness of the market, folks.
And why would the MMs even bother to stop the price from dropping? Nice question. Perhaps the next prominent move will be the start of a bull swing and the MMs were stop hunting longs and accumulating longs on the move down, to be in better shape for a bull swing. Or, perhaps the move down was nothing more than a move to sucker in shorts, in which case the next move.....when it comes.....is still likely to be back up, maybe to the previous high area of ranging, where the MMs might range it again while they close those longs at profit and work to accumulate more shorts. See? Another vagueness of the market.
We cannot know how the price will move next! What just happened? Why? What does it mean? WE CANNOT KNOW! What we can know is that something of importance just happened and it might mean the game is changing, or at least changing from what we thought it was. We should force ourselves into constant awareness of this fact. And then we can appreciate the simplicity of our TVT20 "FIFO" trading method. As the MMs whip and whack price thru the week, moving it both long and short distances, both with and against whichever "trend" you think some higher TF chart depicts, there will be these TVT20 "FIFO" setups. And they don't care about HTF trends! Look for decent setups. Gauge where the EP looks to be relative to overall PA. Don't go for it if the setup is for a short and already PA is low relative to the last lows, or if the setup is for a long and already PA is high relative to the last highs. Be sure there are decent TVT20 "FIFO" pips to be made before PA reaches the next major SR.
Well, you get the picture. We need to stay aware of new PVSRA clues thrown into the mix. We need to be able to change our thinking (bias) as new things happen. You probably noted that I did not do this on my UJ short trade. When the "double bottom" appeared, I was so set on the possibility of UJ going on down to at least previous major lows by the end of the week, that I let the trade ride. As punishment, I watched PA return to the area of my EP and later drop again, but not quite so far as where I could have easily closed the trade after seeing the "double bottom". So, I missed out on being able to make the same trade twice, and profiting twice....with more profit overall.
And so,......here is a good place to repeat an oft expressed thought. "We need to trade what we see. Not what we believe." .....Not even what we believe to be possible! Our TVT20 "FIFO" setup is a good trading method. Gets us in and out daily, exposing our assets the least amount to sudden bad happenstances, including Black Swan events. Sure, like anything else, they are fraught with possibilities for head fakes and stop hunts. But once they get going, they are good for decent pips for the day. We just need to be good trade managers, folding small red on head fakes and stop hunts.....even not knowing for sure if an adverse move is one of them! We can always hop back in later if PA again gives us what we are looking for. If we are in a trade and PVSRA shows us a new clue that something relatively more important is now happening (no matter what it might mean for future PA and the TVT20 trade), close the trade and wait to see more of what happens.
And "stopping volume" is one of those relatively more important events.