Trade using price & volume and not time

Hi All respected members

I have a below trading idea which I am sharing with the hope to receive constructive feedback for further research & development.

The idea is as below:

1) Identify a volume number and a price movement number.
So for example lets say for nifty we fix 1,00,000 volume number and 10 points as price movement number. This volume no. and price movement no. need to be fine tuned.

2) If the set price movement happens with less or equal to volume number, it would be considered as a trend else as sideways

The rationale is that in a trending market, it would take less volume to make a price move while in a sideways market volume will be wasted but no movement will happen or the movement will happen with consuming lot of volume.

Consider volume as petrol and price movement as km. In a trending market (highway road), less petrol (volume) is required to cover a fixed km (price movement) while in a sideways market (city road), more petrol (volume) is required to cover the same kms (price movement)

3) With this understanding, make a trading setup where lets say from 9:15, we enter the market whenever it is trending and move out when either trend reverses or becomes sideways or end of day comes.
So in conventional terms for a long trade:
entry: If price movement = +10 && volume <= 1,00,000 then Go long
Trailing SL/Exit: When price movement <10 && volume > 1,00,000 or When price movement = -10

As an example long trade:

Lets say at 9:15 am Nifty is at 8500. Now instead of time, it would be volume in multiples of 1,00,000. So lets say there is following scenario:

1) 1 lakh 8507 7 //this means that after volume of 1,00,000 price is 8507 and movement is of 7 points, as per our system it is sideways so we do nothing
2) 80,000 8517 10 //this means that after volume of 80,000 price is 8517 and movement is of 10 points hence as per our system it is uptrend and so we go long
3) 40,000 8527 10 //this means that after volume of 40,000 price is 8527 and movement is of 10 points hence as per our system it is uptrend and so we stay in

Now from here consider different scenarios:

Scenario 1) 1,00,000 8535 8 //this means that after volume of 1 lakh price is 8535 and movement is of 8 points only hence as per our system it is now sideways and so we exit

Scenario 2) 1,00,000 8524 -3 //this means that after volume of 1 lakh price is 8524 and movement is of -3 points only hence as per our system it is now sideways and so we exit

Scenario 3) 94,000 8517 -10 //this means that after volume of 94,000 price is 8517 and movement is of -10 points hence as per our system it is now down-trend and so we exit

These are the basics of Renko and volumen range bars. Most good softwares support this.

Larger the brick side, lesser the market noise, but higher the delay in entry/exit....... Lesser the brick size, higher the market ambient noise.

Hi,

The comparison you have taken of petrol and km to price and volume is wrong. Price and volume does not work like that.

The idea you have presented as per me is quite int as not many traders take volume in consideration but at this stage has little use at execution level.

in an uptrend rallies should have increasing volume and reactions should be on decreasing volume and reverse in the down trend.

how much price has moved and how much volume has moved the price has different meanings depending on the context and the background. most of the trends and continuation of trend (not all) comes out of a sideways move. it is in sideways move where (re)accumulation and (re)dist happens and where volume has significant imp (if one is able to read it ).

an uptrend (as per me true uptrend) is formed at the bottom (in accumulation/reaccumulation) and downtrend at the top (in dist/redist). Somebody who is able to read price and volume here (and its possible) can get into trade closet to trend reversal(particularly on eod charts).

other popular way of looking at trend is- uptrend hhs and hls and down trend lhs and lls. this is easy and workable stuff if you have defined rules for it as in such scenario one can easily make money with proper method/system etc. it is also imp for most of individual traders (retail traders) to use these definitions.

use volume to identify support and ret bars having high to ultra high volume are imp and they provide ret. volume tells you about how weak/strong is the reaction against the established trend. if you have good knowledge of chart reading using price and volume you will be having high confidence level and conviction in taking the trade.

regds,
s