Basic Technical Analysis From The Butcher, page-43

A day you don't learn something is a day wasted. That is the mantra which I live my life by.

I had been looking at volume for a long time and could not find a good way to use it, but tonightI have finally stumbled across it and it will be incorporated into my trading style from now on. Of course I still need to iron the wrinkles out over time, but this is what I have got at the moment.

Volume seems to work as a herd fear/greed index. The more people are either fearful or greedy the more parcels they are likely to sell or buy. What I am using for the following charts is a 5 day moving average over the top of the volume graph to get my patterns from. I think an EMA would be better as it would give weight to previous point more, but my setup doesnt allow for that so I will need to think of something to wok on this. I found a 3 or 4 day works well also but the line tends to get a bit "noisy".



I'm going to use a Wyckoff idea (because I'm reading about his stuff at the moment) that you need to imagine the market as one person, and you the chartist are watching his behaviour. It works quite well for this example here. So imagine that your beloved stock you have invested in has started to dive and you're a flighty trader/holder. Flighty traders sell/buy as much as they can all at once. There is no "drips and drabs".
The blue and yellow horizontal lines are dips and peaks in the volume as they are happening. Now not all these I've marked are perfect examples, but I must say that they are pretty good indicators, that pick either the top or the bottom of a current move. And whats best is that with the curve up in the 5MA you get an indicator of the level which the sweat is beginning to drip from the brow, and therefore whether things are getting over heated.

This is going to take a few months of fine tuning but I think I've got something here. The idea is that you're getting an indicator that something is going to happen by the curves, rises, and falls of the 5MA which is actually pretty accurate.

Have a play and let me know what you think.