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Stock Market Volume Analysis is Unreliable

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How to make money in the stock market. http://www.topdogtrading.net/stock-market-trading Stock Market Volume Analysis along with price action is often taught as the holy grail of trading, and some people even claim that is all that is needed to trade profitably. This video challenges that philosophy head on. Warning: very controversial. Enjoy the video! Leave your questions and comments below! Make sure not to miss a single video from Barry! Click here to Subscribe: https://www.youtube.com/user/TopDogTrading?sub_confirmation=1 ==================================================== Barry Burns Top Dog Trading TopDogTrading.com Facebook: https://www.facebook.com/TopDogTrading/ Get the Free Trade Strategy: “The Rubber Band Trade”: http://www.topdogtrading.net/stock-market-trading =================================================== Watch the related video: "Stock Market Trading Strategies: Volume Breakouts That Fail:" https://www.youtube.com/watch?v=JbHVeDhQ2EE --- Risk Disclosure: http://bit.ly/Risk-Disc --- RISK DISCLAIMER: The information contained on this video is for informational and educational purposes only. We are not registered as a securities broker-dealer or as investment advisers, either with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. Trading and investing involves substantial risk. Financial loss, even above the amount invested, is possible. Seek the services of a competent professional person before investing or trading with money. The information contained on this video, is not provided to any particular individual with a view toward their individual circumstances and nothing in this video should be construed as investment or trading advice. Each individual should assume that all information contained on this site is not trustworthy unless verified by their own independent research. Any statements and/or examples of earnings or income, including hypothetical or simulated performance results, are solely for illustrative purposes and are not to be considered as average earnings. Prior successes and past performance with regards to earnings and income are not an indication of potential future success or performance. You should never trade with money you cannot afford to lose. The information in this video is in no way a solicitation of any order to buy or sell. The author and publisher assume no responsibility for your trading results. This information is provided "AS IS," without any implied or express warranty as to its performance or to the results that may be obtained by using the information. Factual statements in this site are made as of the date the information was created and are subject to change without notice. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
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Text Comments (87)
milford halligan (1 month ago)
i did not know about "dark pools" but i am not surprised. thank you for the information.
TopDogTrading (1 month ago)
You're more than welcome Milford.
Ni zal (1 month ago)
Hi Barry I came here trying to find a way to filter out low volume trades that lack any movement. MACD and Stochastic still give me the green light to go on those trades sometimes. Any particular method to filter out these bad trades? Maybe a link to one of your videos. Many thanks
Ni zal (1 month ago)
no need. I just realised from your other videos that tick charts already smooths out sharp volatility. Thanks. Only problem is trying to find a platform that can backtest 133 or any other tick chart. Im currently on ctrader.
TopDogTrading (1 month ago)
Thanks for the request. I'll add that to my "to do" list.
Ni zal (1 month ago)
Volume does look pretty on my charts....or should i say pretty useless. Price and momentum proves what you need to know and definively, unlike volume.
TopDogTrading (1 month ago)
LOL - yes, and glad to see another trader who has a sense of humor!
Ni zal (1 month ago)
Amazing! Really useful insight. You have saved me unecessary time where i would have tried to find a macd indicator that multiplies price and volume together. No need now, macd on price alone is good enough along with other tools ofcourse but not volume.
TopDogTrading (1 month ago)
Glad you found the tutorial so helpful.
Andrés Peña Castillo (1 month ago)
I agree with volume not being a leading but lagging indicator... But how can you read the volume bars if these all show the same color? There is no distinction in the color of your positive or negative volume bars! Your reading makes little sense.
TopDogTrading (1 month ago)
That would be a great topic for me to do another video on. Thanks Andres.
JAISWAN SEKARAN (1 month ago)
Simply fantastic
TopDogTrading (1 month ago)
Thanks, I'm glad you like the tutorial so much Jaiswan.
One/Crypto/Revolutionary (3 months ago)
Enlightening!
Ferry D Moningkey (4 months ago)
An excellent explanation.
TopDogTrading (4 months ago)
Thank you, I'm glad you found this video on volume helpful.
Karson Lippert (5 months ago)
Volume is a great indicator. Alone it is useless though I agree. Use Volume Price Analysis. Read Anna Coulings book on VPA it explains everything and makes total sense. You need to connect volume to price movements to help get a better understanding for where the market is heading. I definitely do agree though that looking at volume alone isn't very useful. If someone is just looking for huge volume spikes to predict price movements they won't have much success.
BrownDogIsInTheHouse (5 months ago)
Also in addition to my previous comment, it is difficult to establish the veracity of whether volume is an indicator or not by just taking a few examples, instead of providing overall probability point So for example comma if there is a back test result on a few years at least of data on several stocks where we try to look at volume and then find that it is OK not much use then perhaps we can say that it is not a good indicator. There are potentially millions of pattern that you can find in stock charts and we have to look at which is the most probable setup.
BrownDogIsInTheHouse (5 months ago)
Thanks for a useful video. You have just looked at one volume bar. Should we not look at the trend of the volume and then along with it also look at the price? And if that is true, is price volume indicator something that we should consider? As per dark pools, if they are not a part of the exchange then how does it matter anyway because the price should not be influenced
Tiny Trader88 (5 months ago)
I agree! Even as a brand new trader, I've discovered this. Thank you for a wonderful explanation!
TopDogTrading (5 months ago)
You're very welcome and I wish you all the best in your new trading career.
Karthik Marar (5 months ago)
How can you look at volume in isolation and trade? This is totally wrong. In same charts if you look at volume and the corresponding bar action it will give you a very different picture. Volume is never looked at in isolation
TopDogTrading (5 months ago)
Absolutely.
Jyotsna Akumuri (6 months ago)
U R bold
jlupdate nah77 (6 months ago)
Do one on level 2 order book
brucelee2550 (7 months ago)
what about negative vol index? is it accurate?
Ian Brown (10 months ago)
I find that if you look at the smaller volumes, you can see interest increase or decrease before the spike. Your first example shows a 50%+ increase in volume before the volume spike. You should also use volume with candle formation and/or size, and use it as an additional signal with price action. I also use a moving average on my volume as an indicator for above or below interest.
Dianne McCarthy (11 months ago)
upvolume vs. downvolume is good to know, for short term trades. the single total volume for a bar doesn't tell you if that volume is mostly buyers or sellers. dark pool (block trades ) usually happen around 4pm and do show up on the tape, filled at one price. What you see on level2 at a particular price level, may not be all the shares sitting at that level. tradestation allows you to (show only) a part of the shares you actually want to trade, so i'm sure the big players also have that capability as do the market makers.
Thank you for your awesome videos.
And for yours :-)
TopDogTrading (1 year ago)
You're very welcome, and thank you for your encouragement.
Raja Jani (1 year ago)
Thanks Barry Sir, for giving  indepth knowledge on volume and hidden gem "Non-exchange trading" ... My Regards
TopDogTrading (1 year ago)
You're very welcome Raja. I appreciate your kind words.
Sathesh Soundarrajan (1 year ago)
Thanks
TopDogTrading (1 year ago)
You're very welcome Sathesh.
daniell daveace (1 year ago)
You are completely Joker! From what i've seen here very clear to me, the way you read the volume show me that you just like majority people who don't know how to read volume properly, you can't read volume like that to understand market. Seems to me that you don't what you are talking about. it's not about the chart, it's about how you read the chart properly. It's not about the volume, it's about how to read volume properly!
Nerfe Echano (1 month ago)
You are right, he doesnt know how to read volume. every pair of volume and price has its meaning.
Russel Mtlokwa (3 months ago)
Qin Woodruff exactly he said nothing, i was willing to hear what the solution, he also doesnt have a clue of what ue is talkin about
Qin Woodruff (7 months ago)
daniell daveace u just basically said nothing. Please enlighten us or stfu.
Ray Gamma (1 year ago)
Barry, thanks for informing us about the major effect of dark pools. I've been trading for a long time, but didn't know they are that big.
Tyson Schouten (1 year ago)
volume should not be a trigger for a trade.. its only telling you there's a higher or lower level of trades taking place..
Qin Woodruff (7 months ago)
Tyson Schouten everything has a consequence.
crakkerzz (1 year ago)
dark pool volume is part of the consolidated tape that is provided to all, its all there. most of the volume action is caused by stops and squeezes. http://www.finra.org/newsroom/2014/finra-makes-dark-pool-data-available-free-investing-public
MrTruth111 (1 year ago)
Lovely video! This has nothing to do with anything, but I like your voice, have you ever considered trying a voice carreer, I think you can do all kinds of funny cartoon voices.
Thomas Bradley (1 year ago)
Yes barry how do you account for the Dark Pools?
Ron Rigney (1 year ago)
Thank you------- Barry as always very informative. Are "Dark Pools" just in stocks or Futures as well ?? Thanks again !!!!!
Martin Lo (1 year ago)
Hello, may I ask if dark pools typically occur for penny stocks too?
Nunya Bizniz (1 year ago)
Institutional players don't involve themselves with penny stocks, therefore no need for dark pools to trade them.
eddyvideostar (1 year ago)
Top: I have often wondered regarding volume and the significant increase often, as you had indicated, leads to trouble, as this is *not* a leading indicator and can be deceptive. The dark pools are a very interesting concept along with its significant volume not being evident in the charts nor the tape. I appreciate this. I bid you well.
TopDogTrading (1 year ago)
I've created 2 YouTube videos on trading Bollinger Bands which have to do with volatility. You can watch them here: https://www.youtube.com/watch?v=9hDfRMMh7nQ&t=36s and here: https://www.youtube.com/watch?v=zUvZ9OfT7qI&t=3s
Nunya Bizniz (1 year ago)
Thank you for responding. I would be interested in your take on trading it - perhaps you can produce a video?
TopDogTrading (1 year ago)
Yes, that can work very well and is important to be aware of.
Nunya Bizniz (1 year ago)
Hello Barry, What about trading volatility or the lack of it?
TopDogTrading (1 year ago)
That's a great illustration John
Thank you! makes sense! :), Helps allot as im new to this, so still trying to figure out what the best indicators are. At one point I actually thought that monitoring Volumes makes sense, as that might indicate when the "pro's" are buying.
Ibrahim Shahid (2 months ago)
Can I just say I think your reading volume wrong, ive come across so many videos where they read the volume of the entire trend instead of reading a few bars like you are doing. I havnt fully mastered volume myself to say your definitely wrong to say that volume is misleading, but I am pretty convinced that learning how to trade volume gives you more of an edge when used with price action and other indicators, and im pretty sure its a little more complicated than checking a few bars like you are doing.
TopDogTrading (1 year ago)
Yes, that's one of the most common misconceptions in trading because it makes sense, but they don't tell you about these other factors I mention in the video. Glad it was helpful for you.
Guilherme Costa (1 year ago)
Thank you so much for your answer! Is Volume unreliable in day trade operations with S&P mini, for example? What about indicators that use volume in it's formula (life MFI or Elder's force index). Are they unreliable too?
TopDogTrading (1 year ago)
They're not as exacting as most people assume. That doesn't mean they can't be used with some effectiveness when combined with other pieces of evidence. Nothing works in isolation to make money in the markets anyway. We're always using a number of non-correlated variables to establish a probability scenario for ourselves.
Guilherme Costa (1 year ago)
Hey Barry! Thanks so much for sharing your experience with us! Do you consider tape reading effective or as biased as volume ticks?
TopDogTrading (1 year ago)
Tape reading can be used effectively if you're skilled at it.
steven hobbs (1 year ago)
Thank you. Good reason to not depend on volume to signal anything reliably.
TopDogTrading (1 year ago)
You're welcome Steven. People often claim that price and volume are the most important things to watch, and some say they're all that's necessary. I'm just trying to point out that even those things are not completely transparent.
Al Mouton (2 years ago)
Thank you sir!
TopDogTrading (2 years ago)
You're very welcome Al.
FINEFELINE333 (2 years ago)
Barry, thank you for your very interesting and informative point of view on volime. From what I have heard, Dark Pool activity is not reflected in intraday prices but they do affect long term price movement via fundamentals i.e. the institutions want to get in and out of stocks quickly and safely without moving short term price but they do want the stock to move up in the long term when they are getting into a position.
Sam Trader (2 years ago)
You are the greatest. You are so full of such in-depth knowledge. Thank you.
TopDogTrading (2 years ago)
You're welcome Sam
louisaparker1 (2 years ago)
But if the dark pool trading does not affect volume charts, then the dark pool trading should also not affect publicly quoted prices. Isn't that so? If that is so, then we should not even care about the dark pool trading, because what we ultimately care about is price.
Ken Stockdale (2 years ago)
some some
TopDogTrading (2 years ago)
I see where the confusion is. In a normal, transparent auction place based on supply/demand, large orders by "smart money" would typically cause the price of the market to move, which is exactly what the institutions don't want to happen because then they aren't able to get the price they want on their entire order. They go to dark pools so as not to create that change in price. So they affect publicly quoted prices by keeping prices artificially the same, when they would normally be expected to move. Thus it makes it harder for traders who rely on price and volume signals to trade, to accurately read market signals because they're "disguised" at the time they occur. Hope that helps.
louisaparker1 (2 years ago)
Thanks for the link. My understanding of dark pools is not very clear. However, the article that you linked contains a following passage: "On a stock exchange, when an order is sent in, the price of the stock is adjusted and everyone with a data feed sees it. Dark pools only report data after a trade has occurred. At that stage, information about the trade has little influence on the price." The passage seems to imply that dark pool trades don't affect price.
TopDogTrading (2 years ago)
Great question. That's one of the biggest problems - it actually DOES affect public price quotes. In fact, that's one of the main reasons the institutions use dark pools. The complete explanation is too much to detail in a brief YouTube comment, but you can read more details on Reuters website here: http://www.reuters.com/article/us-markets-darkpools-analysis-idUSBREA3605M20140407
Douglas Adamian (2 years ago)
Once again......Dr. Burns cuts through another slice of "conventional market wisdom".......and cautions all traders, inexperienced as well as experienced.........to not "let your guard down" ........with respect to your evolution on the path towards professional trading. Your approach to your trading "as a business" must be accompanied by years of practice, sound understanding, market savvy, and basic wisdom. And if you do not have, as one of your "foundational tenets", the principle of "to live AND to learn", every day of your life.........well then, you will not achieve your full potential. Dr. Burns offers you innumerable keys and insights into those doors you must pass through and master.......in order to become the best in this business. Most will never achieve it. But you will not be able to say he did not try to help you.
pmcllc (2 years ago)
good info thank you
James Kelly (2 years ago)
Thanks Barry !!  I heard that institutions still have to report volume after the close..  so it eventually has to show up on the chart, do you know if that's true ?   Thanks again for another very clear and informative video !!
HELLO BARRY, it is interesting break schemes against financial storms, however you can configure in subtitles in Spanish, because more than 10,000 aggregates that I have on facebook, are mostly Spanish-speaking. a hug.
TopDogTrading (2 years ago)
Thanks Miguel, I hadn't thought of that, but I should have!
Bill Bowers (2 years ago)
Dr. Barry - Thank you again! As someone who doesn't know how to trade, I need to be reminded that i may not figure this out.(ha-ha). But you are so right, as I know I don't know, there is so much info about volume prints and so on, they seem to work some and one can purchase special indicators but it seems to me that if you dont know how to trade, no indicator will work....keep up the great work!
TopDogTrading (2 years ago)
Absolutely 100% correct Bill. Great comment.
Charles Patterson (2 years ago)
Thank you for this extremely insightful video Dr. Burns!
TopDogTrading (2 years ago)
You're very welcome Charles
Assassin 404 (2 years ago)
what about order flow or money indicators are they any good.
TopDogTrading (2 years ago)
Since they are using the volume numbers provided by the public exchange, they have the same problem. It doesn't mean it can't be used ... just understand that they don't represent all the trading and that when institutions make big orders they often attempt to do it through dark pools so as not to move the market price while they're entering. In other words, the publicly quoted volume can be used as one piece of evidence in making a trading decision, just understand it isn't as accurate as most traders assume and therefore other factors MUST be considered as well.

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