Effective Volume

Effective Volume

The Effective Volume web site offers a range of free stock market discussion groups that involves more than 600 traders, an access to a database of sectors/stocks with their respective ranking, a set of stock filters that offer the best buy/sell opportunities depending on the prevailing market conditions, the 20DMF market timing model, and automatic trading robots that generate trading signals for popular ETFs.

The Effective Volume method is based on the hypothesis that because institutional investors have to take large positions in stocks - in order for them to be able to make money - they need to be very cautious as not to induce price changes while they are still busy accumulating or distributing shares. They therefore use sophisticated software programs that drip-release orders on the market. The regularity of such orders will respond to the liquidity variations that appear on the other side of the market. The market is therefore in constant search of equilibrium. Everybody knows about price breakouts that attract new buyers whose buying fuels the new price trend. What is less well known, however, is that clever funds accumulate their positions before a breakout. While accumulating shares, these funds provoke some microscopic but regular demand/supply imbalances. By studying the price changes at regular small periods of time (one-minute intervals) and by relating these changes to the size of the transactions that provoked the changes, it is possible to detect constant buying or selling patterns. Moreover, when I separate the volume responsible for price changes into two groups (large and small) and then track the large player's group, I notice that this group is responsible for 75% of all the price changes that occurred from one minute to the next. Investing when large players are heavily investing in a stock is a very good method, but only when the stock price is finding a bottom within a long up-trend.

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