High volume nodes (also know as volume clusters) are the key to catching market reversals early. Not all reversals are identified by high volume nodes but a high percentage of them are. If you aren’t currently looking at high volume node in trading, then you really should start.
The interesting thing about high volume nodes, is that they do NOT represent an increase in trading activity.
Let’s say that your market is trading 1000 contracts a minute. 5 minutes go by and there’s 5,000 contracts traded but no high volume nodes. Then in the next 5 minutes we see a cluster of high volume nodes – but we only traded 5,000 contracts. Volume was the same but this time we got high volume nodes. How is that possible?
In this video, we take a look at a couple of different types of high volume nodes that cause reversals. We look at headfakes (false breakouts) and the way that news driven moves typically end.