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How could there be more sellers than buyers (by volume) and yet the price goes up?


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How could there be more sellers than buyers (by volume) and yet the price goes up?

  #1 (permalink)
 Tirtis11 
Jackson
 
Experience: Beginner
Trading: emini ym
Posts: 6 since Jul 2019
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I would really appreciate if anyone can give a satisfactory answer to this question:

I plot a volume difference indicator; difference between down volume and up volume of say a daily chart of any futures market.

Then, I look at the price action.

Logic says that when the day concludes with a significant down volume compared to up volume, then that day should end with a down bar. Why do I assume that? Well, the volume of sells were higher than the volume of buys. (Please correct me if that assumption is false)

If that's the case, why do some of those down volume days conclude with a significantly up bar?

Simply, my question is: How could there be more volume of sellers than the volume of buyers and yet the price goes up?

Obviously this does happen as my attachment sample illustrates. But I am trying to understand the logic behind this. Thanks.

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  #2 (permalink)
ondafringe
Albuquerque, NM, USA
 
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I'll take a shot at this (even though I'm half asleep!) and someone can correct me if I'm off a bit.

There were less contracts traded on up volume than were traded on down volume, but there was not enough down volume to push the close below the open.

So less offers to take out on the way up to the high, and way more bids to take out on the way down from the high, but not enough bids were taken out to push the close below the open.

This is a very simple example, but it may help...

Let's say current price is 100 and trades in increments of 1/4 point

There is an offer of 2 at each 1/4 point increment above 100

A market order to buy 14 executes, which takes out the 2 offer at each of the seven increments above 100

Price rises to 101.75

There is a bid of 5 at each 1/4 point increment below 101.75

A market order to sell 20 executes, which takes out the 5 bid at each of the four increments below 101.75

Price drops to 100.50

Volume was a net negative (-6), but price still increased (+0.50)

That's the best I can do!

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  #3 (permalink)
 cordoba 
Dubai, UAE
 
Experience: Intermediate
Platform: Quantower
Trading: Futures Spreads and Options on Futures
Posts: 34 since Feb 2016
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It is helpful not to think of a given candle as having a single outcome, informed by a binary event where a contract is either bought or it is sold (given that there are always two sides to the trade).

There are a series of micro auctions taking place within the time series represented by the 1440 min candle in your example. In aggregate, at the end of the defined period, the candle shows the price movement and the volume study provides supporting data - but both are painted with a broad brush. They don't offer any particular insight as to what volume was deployed at specific sub levels within that candle; and what influence that had in those localized regions. A simple up/down volume analysis doesn't give any substantive insight as to whether aggressive buyers/sellers were controlling the price movement, or if they were being countered by passive buyers/sellers. In this context, traders can similarly wonder why a volume delta can be negative but the price either goes up or stays where it had been before.

In the example candle you showed, there is a sizeable wick to the upside. It is feasible that the majority of the selling volume was deployed to counter the move up to the high but that the selling momentum couldn't later be sustained. In pushing the price back down from the high, a lot of selling volume may have been recorded for the sellers to win each of those micro auctions. However, if selling then dried up it would not have taken much countervailing buying volume to keep the candle positive prior to the candle's close.

A footprint chart provides considerably more insight into the auction process, compared to a candlestick. However, it looks like you're using TradeStation 10. I think there is a free footprint offering in the TradeStation app store. Unfortunately though, the platform lags behind others when it comes to orderflow tools such as the footprint.

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  #4 (permalink)
 Miesto 
Monte Carlo, Monaco
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Tirtis11 View Post

Simply, my question is: How could there be more volume of sellers than the volume of buyers and yet the price goes up?

In that case buyers absorbed all the selling (at the bid) and then they were more aggressive and bought price higher (at offer on lighter/lesser volume because there were no more sellers left anymore (no supply)).

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  #5 (permalink)
 Tirtis11 
Jackson
 
Experience: Beginner
Trading: emini ym
Posts: 6 since Jul 2019
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cordoba View Post
It is helpful not to think of a given candle as having a single outcome, informed by a binary event where a contract is either bought or it is sold (given that there are always two sides to the trade).

There are a series of micro auctions taking place within the time series represented by the 1440 min candle in your example. In aggregate, at the end of the defined period, the candle shows the price movement and the volume study provides supporting data - but both are painted with a broad brush. They don't offer any particular insight as to what volume was deployed at specific sub levels within that candle; and what influence that had in those localized regions. A simple up/down volume analysis doesn't give any substantive insight as to whether aggressive buyers/sellers were controlling the price movement, or if they were being countered by passive buyers/sellers. In this context, traders can similarly wonder why a volume delta can be negative but the price either goes up or stays where it had been before.

In the example candle you showed, there is a sizeable wick to the upside. It is feasible that the majority of the selling volume was deployed to counter the move up to the high but that the selling momentum couldn't later be sustained. In pushing the price back down from the high, a lot of selling volume may have been recorded for the sellers to win each of those micro auctions. However, if selling then dried up it would not have taken much countervailing buying volume to keep the candle positive prior to the candle's close.

A footprint chart provides considerably more insight into the auction process, compared to a candlestick. However, it looks like you're using TradeStation 10. I think there is a free footprint offering in the TradeStation app store. Unfortunately though, the platform lags behind others when it comes to orderflow tools such as the footprint.

Thank you Cordoba. Can you direct me to finding the footprint chart app in Tradestation? I searched it and all that came out were market profile indicators. Thank you in advance.

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  #6 (permalink)
 Tirtis11 
Jackson
 
Experience: Beginner
Trading: emini ym
Posts: 6 since Jul 2019
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Mich62 View Post
In that case buyers absorbed all the selling (at the bid) and then they were more aggressive and bought price higher (at offer on lighter/lesser volume because there were no more sellers left anymore (no supply)).

Thank you for taking your time to respond. Your respond is short and makes a lot of sense. Thank you.

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  #7 (permalink)
 Tirtis11 
Jackson
 
Experience: Beginner
Trading: emini ym
Posts: 6 since Jul 2019
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ondafringe View Post
I'll take a shot at this (even though I'm half asleep!) and someone can correct me if I'm off a bit.

There were less contracts traded on up volume than were traded on down volume, but there was not enough down volume to push the close below the open.

So less offers to take out on the way up to the high, and way more bids to take out on the way down from the high, but not enough bids were taken out to push the close below the open.

This is a very simple example, but it may help...

Let's say current price is 100 and trades in increments of 1/4 point

There is an offer of 2 at each 1/4 point increment above 100

A market order to buy 14 executes, which takes out the 2 offer at each of the seven increments above 100

Price rises to 101.75

There is a bid of 5 at each 1/4 point increment below 101.75

A market order to sell 20 executes, which takes out the 5 bid at each of the four increments below 101.75

Price drops to 100.50

Volume was a net negative (-6), but price still increased (+0.50)

That's the best I can do!

Thank you for your example to explain your answer. I now understand. I really liked your answer. Thank you!

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  #8 (permalink)
 cordoba 
Dubai, UAE
 
Experience: Intermediate
Platform: Quantower
Trading: Futures Spreads and Options on Futures
Posts: 34 since Feb 2016
Thanks Given: 14
Thanks Received: 62


Tirtis11 View Post
Thank you Cordoba. Can you direct me to finding the footprint chart app in Tradestation? I searched it and all that came out were market profile indicators. Thank you in advance.

I was thinking of this one: https://www.tradestation.com:443/platforms-and-tools/desktop/

It is fairly basic and I can't say anything about whether the paid version is worth the cost. I wouldn't recommend this particular footprint as a trading tool - just as something to gain better insight into the auction process within a candle. There are much more informative and well executed footprints available for other platforms.

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  #9 (permalink)
DallasCowboysFan
Dallas, Texas / USA
 
Posts: 17 since Aug 2016
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Tirtis11 View Post
I would really appreciate if anyone can give a satisfactory answer to this question:

I plot a volume difference indicator; difference between down volume and up volume of say a daily chart of any futures market.

Then, I look at the price action.

Logic says that when the day concludes with a significant down volume compared to up volume, then that day should end with a down bar. Why do I assume that? Well, the volume of sells were higher than the volume of buys. (Please correct me if that assumption is false)

If that's the case, why do some of those down volume days conclude with a significantly up bar?

Simply, my question is: How could there be more volume of sellers than the volume of buyers and yet the price goes up?

Obviously this does happen as my attachment sample illustrates. But I am trying to understand the logic behind this. Thanks.

Maybe the sell volume remained at a consistent price level and the buy volume was much higher ?
Perhaps the 100 buy / sell exchanges were in a much narrow range than the up volume which may have been statistically higher.

Just a guess

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  #10 (permalink)
JMTO
Houston+Texas
 
Posts: 1 since Jan 2021
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Tirtis11 View Post
I would really appreciate if anyone can give a satisfactory answer to this question:

I plot a volume difference indicator; difference between down volume and up volume of say a daily chart of any futures market.

Then, I look at the price action.

Logic says that when the day concludes with a significant down volume compared to up volume, then that day should end with a down bar. Why do I assume that? Well, the volume of sells were higher than the volume of buys. (Please correct me if that assumption is false)

If that's the case, why do some of those down volume days conclude with a significantly up bar?

Simply, my question is: How could there be more volume of sellers than the volume of buyers and yet the price goes up?

Obviously this does happen as my attachment sample illustrates. But I am trying to understand the logic behind this. Thanks.

Hi Tirtis11. Is the differential volume indicator able to be downloaded outside of the tradestation app store? I'm in a topstep combine and use tradestation but do not have access to the app store...

Thanks!

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