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You are currently browsing the archives for April, 2011.

Investing With Volume Analysis: Identify, Follow, and Profit From Trends by Buff Dormeier, CMT

April 10, 2011

Buff Dormeier, CMT, continues to share high quality research on methods for applying volume to market analysis. He recently released a book which adds to the Body of Knowledge of Technical Analysis while offering actionable guidance for traders. It’s also that rare book which is interesting and a fun read. Although we never make guarantees in our profession, I am confident that I could guarantee everyone will learn something form this book as Buff combines historical stories with new techniques.

Investing With Volume Analysis: Identify, Follow, and Profit From Trends by Buff Dormeier, CMT

reviewed by Mike Carr, CMT

Recognized with the Dow Award for his 2006 paper on volume, Buff is already a recognized expert on the subject. In that paper, he introduced the Volume Confirmation Price Indicator (VCPI). With this book, he furthers not only his reputation as probably the foremost expert on the subject but he also demonstrates that he is a talented story teller as he makes the history of technical analysis come alive for readers.

If we are perfectly honest, at least in my opinion, too many technical analysis books devote their first few chapters to the basics of technical analysis with a few comments on its historical perspective. I usually barely skim these sections because I’ve already read the story several dozen times and wonder why it needs to be repeated. Buff tells it differently, starting in the beginning with examples from Biblical times and moving forward through time to draw on Wyckoff and Schabacker rather than simply the standard facts about Edwards and Magee. He offers a story from Ralph Acampora about how John Magee faced an SEC inquiry where he was forced to defend the principles of technical analysis. While there are few true historians in the field, Buff joins their ranks with his very readable Part 1. Later in the book he references other important but lesser known technicians like Harold Gartley.

Academic research often supports technical analysis but is often overlooked as a reference. Buff provides a complete review of the literature, again in a readable manner eliminating the jargon found in the papers but retaining the main points. His objective seems to be in making the research accessible and explaining practical ways to employ the research.

Volume analysis begins with a basic framework to define the process. Trading volume reflects changes in the supply and demand of stocks. Sellers create supply and buyers provide demand. This simple concept drives stocks prices – more sellers than buyers will lead to lower prices and vice versa. Obviously there is much more to be learned than that, but by explaining the basic idea, Buff ensures a common starting point for novices and experts to comprehend the details that follow.

Behavioral finance theories factor into the explanations of why volume leads price. Technical analysts can appreciate that fact, but many only care about whether or not an idea makes money in the long run. A number of money-making tools are introduced in the book, including volume-weighted moving averages, volume-weighted MACD, and the Trend Thrust Indicator. Practical applications of these are developed, with the underlying logic and strategy explained. Traditional volume indicators are also included, making this a comprehensive review of volume analysis and is the only source needed to gain expertise on the topic. Not surprisingly, the book expands on the VPCI.

Test results are shown for many of the indicators, and the testing is very well designed. That is also different than what is commonly seen in technical analysis books where testing is often overlooked and many times the promised results can’t be obtained. Buff shows what has happened, and does so in a way that inspires confidence that the indicators will work in the future.

Technicians look for ideas they can use to make money. The goal is actually difficult to quantify since risk is such an important consideration relative to returns. Academic treatises tend to rely on measures such as the Sharpe ratio and other mathematically derived concepts of risk. While these numbers have an important role in the literature, Buff boils test results down to what’s important in the real world. For example, when testing volume-weighted moving averages, he uses a simplemoving average system as a baseline for comparison and then evaluates how the new idea compares with respect to”

  • Responsiveness: are signals more timely?
  • Reliability: are signals more accurate?
  • Risk: is drawdown, a trader’s measure of risk, reduced?
  • Return: are dollar gains bigger with the new indicator compared to the baseline?

Improved and well-defined testing parameters are most likely an unitended benefit derived from the book. Buff set out to demonstrate how volume should be incorporated into the technicians’ toolbox. However, the testing regimen demonstrated in support of that premise can be adapted to any work in the field.

This book can be enjoyed as a quick read, or studied as one would use a textbook. Ideas are fully presented and explained, but so many of them could be explored further and each chapter could become the basis of research and testing for technicians. The VCPI turns out to have been only a starting point for volume analysis, and hopefully Buff will continue his research into the application of volume into trading strategies. By writing Investing With Volume Analysis, he provides the knowledge for others to advance that research with him, and create the technical tools for the next generation of technicians.

 

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Book Review: ‘Investing with Volume Analysis’

April 7, 2011

In addition to his “real” job managing money, Buff Pelz Dormeier develops technical indicators. He shares some of the fruits of his—and his noteworthy predecessors’—labor in Investing with Volume Analysis: Identify, Follow, and Profit from Trends (FT Press, 2011).

When I started reading this book I suspected that it would be like so many others: long on generalities and short on actionable ideas. The first hundred pages or so do indeed deal with general relationships between price and volume, and some of the material is familiar. But even the familiar material is often presented in an unusual way. Here’s one example.

To read more:

http://seekingalpha.com/article/261709-book-review-investing-with-volume-analysis

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Buff Pelz Dormeier Launches New Book — “Investing With Volume Analysis: Identify, Follow, and Profit from Trends”

April 4, 2011

“Any new study of volume and its great technical importance demands immediate immediate attention. It is good to have Buff Dormeier’s new ideas and discoveries added to the history and importance of volume in technical analysis. My sincere thanks to Buff Dormeier for his great work and contribution.” Joseph E. Granville, The Granville Market Lette

Quote startIn navigating the markets, investors should sharpen their skills with technical analysis, specifically volume analysis.Quote end

Ft. Wayne, IN (PRWEB) March 31, 2011

In his new book, “Investing with Volume Analysis: Identify, Follow, and Profit From Trends” award-winning technical analyst, Buff Pelz Dormeier, reveals how volume validates, interprets, and leads price. Using volume analysis, readers will learn to uncover surprising shifts in investor enthusiasm, identify disparities in market opinion, and sniff out coming trend reversals. (FT Press: ISBN-10: 0137085508, April 2011)

Dormeier reviews many traditional volume indicators, introduces his own groundbreaking approaches, and shows exactly how to apply them. Investors will learn how to assess strength and weakness in both supply and demand; identify common market narratives buried beneath volume data; integrate volume analysis with other portfolio allocation techniques; and much more.

“In navigating the markets, investors should sharpen their skills with technical analysis, specifically, volume analysis,” says Buff Dormeier, founder of VolumeAnalysis.com. “This book delivers state of the art portfolio management tools that empower investors to make more timely and intelligent investment decisions.”

Read this book and discover that the market is saying “turn on the volume!”

  • Overcome the paradox between responsiveness and reliability. Identify opportunities sooner while simultaneously increasing the probability of making more reliable decisions.
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  • Is market movement accelerating– or is it about to halt and reverse? Discover how to use volume analysis to evaluate the “state of the trend,” and why the majority of the public is ignorant of volume.
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  • Apply the classical laws of motion in securities analysis. Achieve profitable trading strategies by identifying trends earlier with more accuracy.
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  • Go beyond standard volume analysis by discovering new breakthrough techniques. Buff up your market analysis with Capital Weighted Volume and overcome volume distortions to improve visibility.

 

Buff Pelz Dormeier, CMT, is a foremost expert in the field of volume analysis and founder of VolumeAnalysis.com.He has nearly 20 years’ experience dynamically managing private investment portfolios for affluent individuals, institutions, trusts, and endowments. An award-winning industry innovator, Dormeier is the developer of Volume Weighted Moving Averages (VWMAs), the VW-MACD, the Volume Price Confirmation Indicator (VPCI), VPCI Stochastics, the Anti-Volume Stop Loss (AVSL), the Trend Thrust Indicator (TTI), Capital Weighted Volume Indexes, as well as a host of cap weighted volume based breadth indicators. His work with market indicators and trading system design has been published and/or referenced in Barron’s, Stock’s & Commodities, SFO and Active Trader magazines, as well as the IFTA & MTA Journals. A Chartered Market Technician, he received the 2006 Charles Dow Award recognizing research papers breaking new ground or which make innovative use of established techniques in the field of technical analysis. The Charles H. Dow Award is considered one of the most important awards in the field of technical analysis. He has also been a featured speaker at national and international conferences and author of the much praised book “Investing With Volume Analysis”.

FT Press, an imprint of Pearson, publishes high quality books in the areas of Business, Finance and Investing, Sales and Marketing, Social Media, Leadership, Management Strategy and Human Resources. Our brand is built on the concept of signing and publishing the world’s best minds on the most relevant topics.

For an interview with Buff Pelz Dormeier, please contact: Darlene March – Phone: 714-887-8021 or
Email: Darlene(at)marchmediarelations(dot)com

 

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