Investing with Volume Analysis
By Buff Pelz Dormeier
FT Press, 2011
$49.99, 352 pages
In his new book, “Investing with Volume Analysis,” Buff Pelz Dormeier, winner of the 2007 Charles H. Dow Award for his paper, “Price & Volume, Digging Deeper,” presents insights into the use of volume in technical analysis. By “identifying where the money is going,” Dormeier suggests that the “person who figures this out first is well positioned to make money.” Later he says, “Volume trend analysis tracks the accumulation of demand and the distribution of supply.”
The essence of Dormeier’s approach comes primarily in the form of an indicator he calls “The Volume Price Confirmation Indicator,” or VPCI. VPCI compares traditional Simple Moving Averages (SMA) of price to Volume Weighted Moving Averages (VWMA). He takes this approach because he believes that SMAs “do not reflect…investor participation.” Thus, “VPCI is an indicator used in conducting or contradicting price trend.” He then provides a variety of charts and tables that attempt to show how volume-weighted market analysis is superior to analysis using price only.
While the author’s intention to discuss the most widely used and known volume indicators is ambitious, we believe that effort goes to the core problem of this book – there is simply too much information presented. We would much rather have seen the author cull out the top 10 volume indicators using profit and loss lines on standardized charts from a vendor like TradeStation; the exact number of trades as compared to an original cost basis point; and then how Dormeier’s VPCI indicator stacked up against the classics. As presented in the book now, results appear vague.
An additional reservation we have about this book, and the ease with which its readers will be able to absorb it, is there seems to be some uncertainty by its author about who the ultimate audience should be. Not only do the 334 pages contain an introduction, 22 chapters and nearly 130 subsections, but the first third of the book contains such elementary information as the difference between technical and fundamental analysis, samurai trading, drawing trend lines and the definition of a basic bar chart.
We suspect “Investing with Volume Analysis” could have been edited down by at least a third. The charts, of which there are at least 16 sources, should have been standardized where possible. In one section we noted at least a dozen errors including typos, subject verb disagreement and similar sentences printed twice. Some charts were reproduced so poorly as to be unintelligible. One chart identified as a “Diamond Top” looked to be simply inaccurate. And for all this a reader must pay $50.
All this being said, and despite our wish that it had been more thoroughly edited, formatted and aimed at a specific and more sophisticated audience, this book was a serious undertaking. We hope the author will elaborate on his first book with a follow-up study at some point, but perhaps with a bit more deliberation while demanding some editing minimums by his publisher because of the subject’s importance and ultimate value to technical analysis and investing.
Robert McCurtain is a technical analyst, market timer and private investor based in New York City. He is a member of the Market Technicians Association and can be reached at email@example.com.