Volume and structure analysis 2023

Updated

Im going to use this post for my volume and structure analysis of my indicators and for tuning my 'strategy' which is still unknown, this study will just be an analysis of my strategy and findings.

Emmett and Vera, if you ever see this, your dada loves you very much and my work will always be here for you to see.

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declining volume on hourly broken to downside. this usually indicates a fakeout especially on anything under the 6h tf. Now the first step is to really analyze what i said and understand that markets are an organism that need volume to survive. we can also track these organisms HUNT for that volume to follow and predict PRICE

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again, the first purple line in the bottom pane (from left to right) is tracking the declining volume, that declining volume is turned into an opportunity for THE COMOSITE MAN or Market Maker, to help move along the organism of bitcoin to eat more volume

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thats a 12% move above

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here are some looser trendlines following volume in below pane, you can see how price moves rapidly and unpredictively during volume contraction periods or (low volume) same thing

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1hr pictured above 6hr below

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When it comes to 6h timeframes, its the highest tf we can use to analyze this volume for bitcoin, anything higher really doesnt tell us much

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And not every big volume bar following the decline of volume is a fakeout. id say 20% of the time its not a fakeout, whether that means its not engulfed right away or price never retraces the big bar of volume that breaks the vol downtrend; its not always a fakeout, especially in higher tfs. lower ttfs is easier to call fakeouts. ill post some examples of volume downtrends being broken to the actual trend direction instantly, with no reversals or fakeouts

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From an accurate MA perspective; 155 hull. (3hr)
6/3/23
Bearish

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Lower time frame and higher MA (233 vwap)
bearish
here is the vwap code
en5 = input.int(233, "Length5", minval=1)
src5 = input(close, "Source5")
ma5 = ta.vwma(src5, len5)
offset5 = input.int(0, "Offset5", minval = -500, maxval = 500)
plot(ma5, title="VWMA5", color=#ffffff, offset = offset)

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Now, our strategy tells us that these moves arent necessarily where price is going, and that this is semi likely to be a low volume composite man manipulation, or fakeout if you will.

Our strategy tells us, though the above pictures paint bearish views, there is a way to tell if these circumstances are real, or just low volume moves. i will update the chart when our strategy is wrong and trend continues down, or when im right and these red volume bars that broke trend are fake, and are engulfed by volume stick 2x the size, here is the bullish view. (vwap 89) & (bottom pane volume trend break)

please note as stated previously these are not always fakeouts, and sometimes they are clear direction movers. but through my studies, around 73% are fake moves when volume is retracting. especially under 6hr TF

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I think i meant contracting. ^

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Now, this is where things get confusing..

This hourly bear fakeout in the price and volume chart could very well mean the bullish engulfing is coming and it was indeed a fakeout,

but what happens when that 1hr bullish engulfing volume bar turns up to be a fakeout on the 6hr? and now we are back to square one, let me explain.

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You see, we are also in a contraction phase on the 6hr chart, but unlike the 1hr, volume is still contracting and the trend hasnt been broken

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I drew in a green volume bar to represent what that 1hr engulfing green bar would look like on a higher time frame.

So are you seeing what im saying when i say back to square one? we would have to assume that the push up was fake on the 6hr, and we would be looking at the same scenario we are looking at now with the 1hr tf, we would be assuming that the move was fake.

So the green drawn in volume bar is what the 1hr engulfing green volume bar would look like on the higher time frame, the higher timeframe would signal it was a fake move because of the declining volume break, and thus the candle on the 6hr will then be engulfed by red.

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so fake move followed by engulfing of the opposite volume bar, but it translates differently throughout the traveling between timeframes. It does not mean that this 1hr bear fakeout is bullish IF it gets engulfed green, it means if these 1hr red volume bars get engulfed, it would translate to an even bigger fakeout, this time a bullish fakeout,

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grammar correction; 'composite man'

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here is how the original study from the 2nd turned out

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we will assume this is bullish and the beginning of uptrend. low risk entry

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more green engulfing price & vol. candle sticks inbound

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reds getting engulfed little by little, as price hunts stops. giga bullish

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7/20/23

ripe for a bear fake followed by bullish engulfing

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Price may move back to the levels of climax or rising candles for several reasons, which often revolve around market psychology, technical factors, and the nature of supply and demand. Here are some key points:

1. Market Psychology
Overreaction: When a climax candle forms, it often signifies that the market has overreacted to news, events, or sentiment. Traders may initially drive the price to extreme levels, but as the initial fervor fades, they often reassess the situation, leading to a retracement.
Profit-Taking: After a significant price movement, traders who entered positions early may look to secure profits, causing selling pressure that drives the price back towards previous levels.
2. Mean Reversion
Many traders operate under the assumption that prices tend to revert to their mean or average over time. Climax candles represent significant deviations from typical price behavior, prompting expectations that the price will return to more stable levels.
3. Supply and Demand Dynamics
Increased Supply: Climax candles can indicate strong buying or selling pressure. If a climax candle represents a peak in price (bearish climax), the sudden influx of sellers can create a supply zone, pushing prices down to previous levels.
Demand Zones: Similarly, if a rising candle is bullish and creates a new high, there might be a subsequent return to previous lows where buying interest exists. Traders often identify these levels as potential entry points.
4. Technical Indicators
Traders often use technical indicators and chart patterns to determine support and resistance levels. Climax and rising candles can mark these levels, and as traders recognize these zones, their buying and selling actions can drive the price back to these areas.
Fibonacci Retracements and other technical tools often align with the levels of these extreme candles, further reinforcing the likelihood of price returning to these areas.
5. Volume Confirmation
High volume associated with climax and rising candles indicates strong conviction behind the move. However, if the follow-through is weak, it suggests that the move might not be sustainable, leading traders to anticipate a correction back to those levels where the volume was generated.
6. Stop-Loss Triggers
Many traders place stop-loss orders around significant price levels. If the price moves sharply away from a climax candle, it can trigger stop-loss orders, which can exacerbate the price movement and create a feedback loop that brings the price back to that level.
Conclusion
In summary, price movements back to climax and rising candle levels are influenced by a combination of psychological factors, market dynamics, technical analysis, and volume. Understanding these aspects can help traders anticipate potential retracements and position themselves accordingly in the market.

creengrack

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