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BEST PRACTICES – Volume confirmation

QuestionsCategory: QuestionsBEST PRACTICES – Volume confirmation
Mike Lenahan asked 6 years ago
Hi Pat - I understand how important volume is when evaluating the strength of a break out above the proper buy point, in a good Market. I know that IBD really wants to see volume confirmation of at least 140% or better when their traditional breakouts happen, on well formed bases. I see many false breakouts, and volume can help to differentiate. Sometimes, volume confirmation does not come in until a day or two later, and IBD is OK with that. Swing trading is a little different, of course. We really want to hit the proper buy point, as close as we can, to reduce the chance that a normal pull back will take out our actual entry price. Sometimes, volume can be pretty obvious, especially if it happens early in the time period being watched. Other times, it can be more elusive, and we may have to wait until the end of the time period to see it more clearly. In reviewing previous breakouts, hindsight is 20/20, of course.  :-) For example, if we are watching a 30-min bar, sometimes by the time the volume shows up as above normal relative to the preceding 30-min bars, the price has risen more than we would like to see above the buy point. Taking it down to the 10-min chart helps get a little closer, but I have still seen price lift rapidly while waiting for the volume confirmation in the time period being watched. Sometimes, price confirmation simply seems to come a little later after the proper buy point has been crossed. In your experience, what is the very best way to observe and make the judgement call in real time, that price is confirming the breakout, giving us an edge? How far, percentage or point wise, would you allow the price to lift past the proper buy point, while waiting for volume confirmation, before removing it from consideration? Thanks
Mike
1 Answers
Avatar photoOwen Staff answered 6 years ago

Hello Mike,
Video from Patrick:
https://youtu.be/0Rkz3FwDy1Q