LARGE VOLUME DAYS
If you have been trading recently, you know that volume and volatility have stepped up in the US markets a lot recently. This is not normal, or has not been the norm for a few years.
If you are trading time based charts, like a 5 minute of 15 minute bar, the chart will look the same. The bars are still 5 minutes apart, they just have more volume. If you are using tick or volume charts however, the story is quite different.
WHAT ARE TICK & VOLUME CHARTS
A tick chart draws price bars in terms of how many trades occur. A 2000 tick chart will plot a bar when 2000 trades have occurred, showing the open, high low and closing price that were reached during the preceding 2000 ticks.
Volume charts are the same, except that they plot a new bar given the amount of contracts that were traded. One 1,000 contract transaction would appear the same as 1,000 single contract transactions.
HOW TO TRADE THEM
The easiest way is to trade them so that the number of bars goes back to approximately what it was before. Mind you, you do have to switch back to your normal chart setting once volume goes back to normal. This is only a temporary solution.
I normally trade the ES on a 2000 tick chart. The last few days however, I have switched to a 40000 tick chart just to keep up. That bars are still coming fast, but they are now manageable.
To sum up, the few times a year that we have a volume explosion, consider doubling or tripling the size of your charts ( in terms of ticks or volume ) and going back to your original setting once the market calms down.
Photo By Fisher Chia
Diary Of A Mad Scalper 