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Trade with the Odds: How To Construct Market-Beating Trading Systems, + Website by Anthony Trongone, PHD, CFP, CTA

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Chapter 12

Identifying the Shifting Characteristics of Volume

Avoid strength, attack weakness.

—Sun Tzu

Most market strategists perceive trading volume to be a leading indicator of future price movement. So far, despite its importance, our concentration has been on price, not volume. They believe in making a collective assessment of both these variables before rendering any trading decision.

Although few day traders would refute this statement, most consider volume to be a less meaningful indicator of future price movements. This partially explains why some market participants do not adequately study the impact volume has on the instruments they are trading.

Since trading activity has dynamic properties, it cannot be studied in isolation. This ...

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