In this class, professor Gabriel Fernández-Álava gives three fundamental tips to interpret volume and thus be able to improve your trading operations. Do you want to know what they are? Well, don't miss the video! Remember that you can see the entire class by joining Trader Club at:

Video transcription

If you are going to take into account the volume in trading, never operate looking candle to candle, never operate in micro. Another key thing about trading volume: the difference between a pullback and a trend reversal. Climate volumes alone from that, said Tom Williams, can be lived.

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If you are going to take into account the volume in trading, never operate looking candle to candle, never operate in micro. Another key thing about trading volume: the difference between a pullback and a trend reversal. Climate volumes alone from that, said Tom Williams, can be lived.

Most traders use only two of the three most important elements there are: one is the price and the other is the time: 50 minutes, 60 minutes, 3 minutes ... but there we lack one thing, we lack the volume. Why should trading volume be taken into account? We'll see. There are liquid and illiquid markets. Basically, markets are liquid when many trades intersect. They are markets where people like to be because they move and how they move they give opportunities and as they give opportunities, more and more people like to be. Within liquid markets there are wide markets and narrow markets. A wide market is one where, in addition to having a lot of volume, many people participate, and a narrow market is a market that does have liquidity, that moves in volume, but has far fewer participants; for example: oil. To give you an idea of ​​the difference we are going to put here a 5-minute candle and another 5-minute candle. Let's say that this 5-minute candle is from the future of the S&P and that this 5-minute candle is from the future of oil. This candle in 5 minutes in the mini S&P in normal period; that is to say, that there is no news, that it is not the day before Christmas, that there are no strange things, that we are not in the middle of August; This candle will have a combined participation of buyers and sellers of approximately plus and minus thirty thousand contracts every five minutes. That same candle, at the same time, in oil has, plus or minus, 5000. Realize the difference between a narrow market and a wide market; however, the mini S&P is moving at a Chiquito de la Calzada rate and oil is moving at a much higher rate. So, we said that price very well, time very well but in the end if my mother had a bakery and I now since I'm older and I've done a master's degree and I'm going to eat on Sunday at my mother's house and in a cool way I tell her : "Mom, how much volume do you bill at the bakery" and my mother would say to me: "Paella wants to eat you, stop talking nonsense and what do you mean by that volume?" I would say:

Trading volume is nothing more than the number of contracts that move at a certain time in a given time free. Suppose this is an uptrend and all of a sudden this appears here, which we call it, how ?: Shooting star. This shooting star arrives and it does so: how would we say that? Don't tell me technical names, how would we say that? Hello, I am the professional and I come to take all your money! Who has the capacity to enter this number of contracts? The professional. Neither you nor I, even if we ask for a loan. When you have a normal volume and a shooting star appears, the end of the trend, right? With a volume of 187,000, what's going on there? Someone has put a lot, and someone who can: we see the presence of the professional. And they greet like this: "Hello, I am the professional who came to take all your money", and there is no problem, if this is the game. This candle, how was it before? This candle was green and it pushed, it went up and there is someone who, from above, has said: no, no! Then all this volume that has entered me is sales volume. "Well, how much bread do you sell a week, by the hour, if you have seasonal periods where the same is sold, if in other periods, such as Christmas, you sell more and sell threads of Christmas- etc… ”and we could perfectly calculate with a graphing system how the market moves at the micro level of my mother's bakery today, where there are areas of value and areas of low value, etc.

First lesson: the professional is there ready to take away all our money, it is his job; in fact, their job is also to get us to participate, so cheerfully, that we hardly notice.

Two very basic and interesting things about trading volume. The other day, the oil opened down and suddenly did this, within 20 minutes of opening. Then he did this, the same example as before, that is not a hammer, a hammer would have to come to me here, it is a candle that undresses. This means a lot of volume, anticipating a change in the micro trend, since we had started the session. A student wrote to me saying how it was possible if this anticipated a change in trend that the price would go up. Is about

First lesson that I give you, in addition to identifying the professionals for the high volume bars, never operate, if you are going to take into account the volume in trading, that you are going to take them into account, never operate looking at candle candle, never operate In micro, you should look at the general structure, the whole. supervolume. The first thing we have to value when we see a supervolume candle: It must always be tested. You take its upper limit and its lower limit, and the candle, at least in this area, there must be a price test with less. It is only testing, if there is a residual offer in this case.

Another key thing about trading volume is the difference between retracement and a change in trend, when the price turns. If the price comes here and all of a sudden it does this to me, is this just a pullback and is the trend going to continue or is it a trend reversal how do I know? The setbacks, when they are setbacks, are always with little volume, it is a bit of a break, to continue climbing the ladder. Do you remember that kind of championship that goes up the stairs of the Empire States, the 50 floors? Well, that is as if on a landing you stop and take a break. Another key for me of the volume in trading at the time of trading is the divergences of volume, for me the most important. The climatic volumes, if you wait for the test and indeed there is a turn in the trend, only that, said Tom Williams, you can live. As the professional is not always present, I really like the differences in volume. Volume divergences are nothing other than when the price is rising and the volume is falling. The price that goes up with the volume that goes down, this price does not have an engine, or a time has come when the slope you are going with the car, the car cannot raise it and by sheer inertia it will go after. I really like volume divergences.

When in a more macro analysis than the operational one I would enter, as I foresaw yesterday, that in the short mini SP, short general ideas, and when the bull market starts in the opposite direction to your initial idea, but with volume divergence, also it is a confirmation that this is going to fall because it is losing steam. I would tell you about trading with trading volume these three things: climatic volumes, super operable. There are people who only expect climatic volumes. To give you an idea, I know a firm in London where there is one of the operators of the capital table that operates only when there is news. He doesn't show up at the office if there's no news. It operates oil inventories, it operates central banks, it operates FOMC minutes, it operates non-farm payrolls ... It goes to the office 5 days a month. Just operate that. It only operates the times of the month in which the largest volume moves in the markets. This guy specializes in climatic volumes, and the market response after those lashes that hit the price. So, the first: when the professional appears, he does it with climatic volume, only that can be lived. The second: the issue of volume divergences that we have mentioned, and the third: the setbacks. The difference between a pullback and a change in trend is the low volume.


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