Applying volume could be considered the ultimate ingredient to any trading strategy.
Day traders and scalp traders that analyse volume are sure to have the edge over the rest of the market.
While volume provides strong confluence, how you read it will determine the success rate of your setups.
The strategies demonstrated in this tutorial will focus on volume charts and how you can use them to identify liquidity runs and buyback runs.
Such observations can be useful to highlight swing failure patterns (SFP).
Study this tutorial and decide whether this strategy will align with your trading routine.
Even if it doesn't, there are many principles in this strategy that will give you great oversight in the market.
Time Stamps
3:10 – ETH/BTC Previous COTW (DO NOT TRADE THIS)
- Daniel changed his approach a bit – ETH was voted as the asset that most people on the stream were interested in. Daniel then deleted everything from the chart and started from the beginning
- Speed fan is a very powerful tool
- Daniel takes the fib from where the move gets very impulsive
30:02 – VOLUME SPECIFICS – DANIEL’S SCALPING/DAY TRADING STRATEGY
- The first part (next part next week)
- We look at the H-L to identify the liquidity in the market
- If price is breaking through a level but the H-L are larger than the average it is likely to be a fake-out
- When price breaks through a key level of the day (POC, monthly level, weekly level, CC, a high or a low etc.) and the candles are larger than the average it is likely to be a fake-out.
31:47 – AN EXAMPLE OF LOW LIQUIDITY TRADE
- It is such an advantage to trade with volume candles because it ignores all the noise, the candle only gets printed when it needs to and also you can see the strength and momentum of the move as well as the liquidity in the market.
- You are looking for the liquidation run into a SFP and then the rapid buy-back on a very few big candles (lack of liquidity)
- When something like this occurs and you see order books really thin you look to fade that move. Price may also form a range
36:13 – AN EXAMPLE OF HIGH LIQUIDITY TRADE
- Lots of small H-Ls equal high liquidity. If price hits a key level (any) and the H-L are smaller than average but CVD is breaking up, it shows bigger traders are absorbing buy orders (or sell orders, depending where it is located)
- In this example, there are lots of small candles going into HTF resistance. Price forms bearish CVD divergences and then sells off.
- NOTE: trade CVD divergences in high liquidity environments
- When price builds up on very small candles it shows a lot of volume is going into this but the price is not advancing sufficiently = larger traders are absorbing several hundred million of orders. When price then retests that same level on OI building up with it (=a lot of new longs opening) and you get the bearish CVD divergences on top of that and the sell-off occurs on a lot of small candles, it is sustained. That shows the bigger trader is getting out of his position on a sustained move. There is an acceptance in price going down. This type of day trades are the best.
- On top of this, you can check the trade count. You should look for low trade counts because they highlight exchange/high volume traders. When there are for instance ten 5 million candles and eight are built up with 1000 trades and then two 5 million candles in a row are built with one or two trades. That shows larger traders are trading at that level. If this is starting to be a trend, the larger player has made a decision, following the footprints you should be monitoring and recognising what is happening.
40:56 – ANOTHER EXAMPLE
- Price rises on large candles and then goes sideways as bearish CVD divergences form. Sell off on low trade count. Whoever was absorbing orders decided the direction of the market. You want to trade with the trend and in this case short every rise that occurs.
42:36 – RECAP
- Takes time to master this. Firstly, you have to recognise that high or low liquidity, then understand the TA that you use within that environment would be scientifically different.
- To know whether you want to join a move or fade a move gives you a massive advantage, because the majority of the market does not understand that.
43:54 – Q&A
- Quarterly and yearly levels are relevant, but in crypto, there is not too much data so Daniel does not really refer to them (only the stock market)