CandleWhisperer

Been wanting to post this for awhile now. As far as WRB patterns go, I really like the volatility breakout pattern. Another pattern I like is one I have "discovered" on my own. At least as far as I know, I did. I call this the WRB Gap Sandwich. Basically, we need a WRB (white or dark) followed by an actual price gap (hint) and then another WRB. We also need to look at the candle prior to the first WRB and the one after the second WRB. This price action creates the Supply/Demand Delta zone. In the chart below, the left side shows the WRB Gap Sandwich followed by a no demand within the key area. Short signal generated. Traditional gaps are important and represent changes in supply/demand. This is doublely so with the appearance of the two WRBs. The second thing to note is the bottom reversal. The first bar happens to be a WRB, but that is not important for this post. What is important, is once we get to this point our entry signal zone created by the WRB Gap Sandwich is now a good profit target zone.

Nice BlowFish, very perceptive observation. I have noticed recently a fair amount of White WRBs following test bas (candles). And while no price is too high to buy or too low to sell, it does almost feel like one would be chasing to enter at that point. Despite the fact that the WRB closing higher is confirming the test. This is why I like to emphasize the Supply/Demand Delta (change) zone. To me it is sort of the confirmation before hand. Actually I think that was a pretty darn good trade set-up. I just don't like the fact that it adds fuel to the hater's fire.

As a matter of fact, I believe I heard Tom say he doesn't use stops. Although if he did say that, he was certainly not recommending the same for the rest of us.

"When you do decide to short the market, do so only on an up-day if possible (see no demand, up-thrusts, ultra-high volume up bar with the next bar level or down), and only if there are signs of weakness in the background, such as lower tops, a downtrend, high volume on up-days (bars) with no corresponding up-move" Tom Williams, Master the Markets, P. 108. So Tom is going short on the no demand bar itself. That is, with no confirmation bar. Of course the opposite would be true for long. Also I should note that he is talking about the ideal bar type as we know there are tests that close up and up-thrusts that close down, for example.

Thanks. This part is after the fact, but look at the volume on the test bar a few bars later. That's really low volume. This brings up a question for the thread. How many wait for confirmation on no demands and test and the such? I have looked at the code on the other thread and it uses confirmation. Based on that, the candle marked no demand would not qualify because the next candle doesn't close lower. The test would qualify. ***edit*** Just wanted to add to the question. In the book, Tom says one should be going long on down bars and short on up bars. This would mean NOT waiting for confirmation. As a down bar (test) is only confirmed by an up bar (higher close). And in the situation of no demand the next bar would close down. So confirmation means doing the opposite of what Tom talks about. TG doesn't place signs without confirmation however.

Well, that sucked. :doh:

Sticking my neck out. LOL

VSA is really all about understanding the supply/demand dynamic in the market. It all comes down to supply and demand. This thread is about VSA in general and an individual’s personal application specifically. That is, while all are looking to understand the core vsa concepts, not everyone will trade the same way. Yet, we all are still trying to understand and interpret the same supply/demand dynamic. I just wanted to post this very interesting thing. First, on the first chart there is a test on the left side. This could of been used to get long, but that is not what this post is about. The test is part of the contracting volatility phase. There are also possible places to get short, but that too is not what this post is about. However, if one did get short, then there is a MARKET DERIVED NATURAL target area. Which is what this post is about. Okay, here we go. Note that we see a white WRB that represents volatility expansion. Then we see some price action that represents volatility contraction. The key bar then is the white WRB that represents a volatility breakout. Now we have our Supply/Demand Delta zone. I have begun to call it this rather than Support/Resistance zone to further emphasize what is really going on in this area. This is a key area as determined by the BBs. It is not mathematically driven or based on TPO counts (although it could be in either case). This is where the BBs stepped in creating the volatility breakout which completes the pattern: Expansion/contraction/Breakout (or Spike). Price wants to fill (hint) this area. This is why it is a good target zone if you had been short. Something else is going on in these types of zones as well: some type of reconciliation of the supply/demand dynamic will usually take place. Hence the desire to take entry signs within this area. Notice that price eventually makes its way back to this area and we see a nice test (far right). The bar is narrow, closing lower than previous bar, closing on its midpoint and on volume less than the previous two bars. The second chart shows the price action after the test. This is not a post on what a great trade that turned out to be. Or on patience-one would of had to wait awhile for this set up. It is really about understanding the supply/demand dynamic and why one should be focusing on it.

LOL. Yes every candle trader in the world go long on the same Hammer. Oh, wait. The name doesn't matter. Which is code for: WE ALL CAN'T AGREE ON WHAT IT IS. I gues that text book example is not so text book, huh? PLEASE.

Wow thread moves fast, so I will begin at the beginning. GREAT POST. THIS WHAT WE NEED MORE OF AND WHAT THE DETRACTORS HAVE ASKED FOR. I suggest doing more of these but on Fridays. That way people have 48 to answer. Unlike the candle crew, VSAers have lives outside of TL!!!!!

First I do not want a long drawn out discussion over this either, but I think you and others are missing some key points. 1. Tom does not look at the open. He does talk about taking low volume signs with the range of high volume (usually wide spread) bars. It is my contention that if he looked at the open, he would refine that to with the body of a WRB or Long Shadow. Simply, WRBs and Long Shadows narrow the focus from simply "the range". 2. Mark uses the term Support/Resistance Zones so I do as well. Yet, to me WRBs represent three (interlocking) concepts: * Changes in the supply/demand dynamic. This is technically NOT the same thing as support and resistance. Simply, All support and resistance areas are areas of changes in supply/demand, but not all areas of change in supply and demand are at support and resistance. * A defined area to look for entries. Again this is the low volume sign within the range of the high volume idea. Of course, with up thrusts it could be high volume sign within high volume areas. * Profit target zones. I have a hard time looking at the previous chart and NOT concluding that something happened on the appearance of the WRB. As evidenced by roughly 90% of the following price action has been contained with its body. Again, that area may not be support or resistance; although price seems to be respecting the boundaries. But that area is clearly an area where a shift of some kind has and continues to take place. ***edit**** It should be noted that I have never mentioned WRBs in relation to being swing points or continuing price action. With the former, the more traditional ideas of support and resistance do come into play. These are important to Mark and I am working on these areas. But again, it still comes down to what happens within the body of the WRB.

Wanted to post a pic of a beautiful set-up with not so beautiful results. :doh: This chart actually shows two set-ups, but I will just focus on the first one. I hope some other VSAers will tell me what they see and what they would have done (or not done) in this situation. Let's start at the beginning. First thing we see is a ultra wide spread candle on ultra high volume. Markets don't like this type of candle. Unless it is tested immediately or unless there are tops to the left, in which case the BBs could be pushing thru supply (absorption volume). The BBs are willing to buying into the selling because they expect prices to rise. That was not the case here. This WRB on ultra high volume starts the set-up. Note that the next candle is up. However the volume is lower and the range is narrow. This is an indication that something is holding a ceiling on price: supply is overhead. We also note that the WRB did not close on its high. Supply must have entered on that bar. The next candle of note is the Doji. While it is not within the "required" area, it is a very key candle. It is a narrow range bar, with a lower low, closing up and closing near its high. This is a test. But the volume, while relatively low, is up. In short, the test fails. The very next candle is a Dark WRB that closes lower than the low of the test bar. This is not at place to enter for me as the test is not within the correct area, nor is the dark WRB engulfing. However, this is a clear (up to this point) sign of market weakness. A few candles later we get another test. This is a better looking test in some ways. The range is narrow, the close is on the high and the close is down from the previous bar. To be ideal we would want to see a lower low, however. But check out the volume. It is less than the previous two bars but still high. Another failed test. A failed test means price MAY still rise but any rise should be muted by the latent supply in the market. Price does rise a bit. Now we have the key candle(which also happens to be a Doji). A higher high, closing up and closing near its lows on volume less than the previous two bars. This is an up thrust in the form of no demand. We have seen weakness in the background in the form of two failed tests and an ultra high volume wide spread up candle. Notice where this up thrust occurs. It is with the WRB support/resistance zone. More specifically, it is within the area overlapping the white WRB and both a Long Shadow (upper) and Long Shadow (lower). This is the area between the cyan lines. Short on the close of this candle. Initial stop just above the S/R Zone. The stop is moved to the open of the dark WRB only after the appearance of the second dark WRB that closes lower than the first. This second dark WRB finds resistance at the bottom of the S/R zone. Price moves up. We see a couple of no demands prior to a white WRB that closes on our stop level, taking us out of the market with a small gain. :crap: Stepping back for a moment, it is clear that the white WRB on ultra high volume represents some kind of change in the supply/demand dynamic. Which is why it, and they in general, make good zones for entry. Although that is only one of their many uses.

Why not? Champion on. VSA has served you well and it will serve others in kind. Is it the only way to trade? No. But it is a darn good one. Keep up the good work. There will always be detractors.

KEEP UP THE GOOD WORK LADIES AND GENTS!! TG would never say it, but the recent new emphasis on "no red/green signs or indicators" is partially due to the two threads here. I have been waiting for an webinar like this, hope it got taped.

It's a possible test. We would want to see a higher close in the next two bars without a lower low then the test bar.

Because of a discussion with Torero, I am moving to MBTrading from a bucket shop. MBTrading does have charting- it just sucks. I don't know much about EFX, but you may want to go the two pronged approach. Have a broker to trade thru but a completely independent charting package. Like MBT plus Ensign or Intra Bank Fx and Esignal.

This is in response to something said in the VSA thread. WRB analysis is independent of candlestick analysis. I and many others use candles because of the picture of price action they present. As such, we have no idea, nor do we care, about the names of the candles or patterns associated with them. Interestingly, some advanced candle traders like BrownsFan and James don't care about names either. If you have a bar chart with open, high, low, close information, then you can use WRB analysis. WRBs involve supply/demand, volatility and Price Action. Simply, calling WRB analysis, Candlestick analysis shows a lack of understanding of the former.

As far as I am concerned it is. P.S. Good to see you back here.

As we all know, no method for exits is perfect. You can be sure that any method used will at times get you out of the market, only to see price continue on in the direction of your trade. Here is an example of an alternative stop method using WRBs. This is a trailing stop method. Entry would be after the failed test in the body of the high volume WRB is confirmed by another dark WRB that engulfs and closes lower than the low of the test. 1: initial stop level. High volume bar closing in its lower portion after the test bar. The way this works is this. Once you have your stop, you move it to the close of the WRB ONLY after the appearance of another same color WRB that is lower. 2: This becomes the stop level after the appearance of WRB A. 3: This becomes the stop level after the appearance of WRB B. 4: This becomes the stop level after the appearance of WRB C. 5: Stop is moved to this level once we have WRB D. 6: Current stop level and formed with the completion of the dark WRB E. Simply exiting on a WRB doesn't make sense to me, because WRBs just as often represent CONTINUATION. More exactly, they can be involved in strong continuation patterns. In my opinion, if one is using price action to get into the market, one should use the market's price action to get out. And the best way to do that is not thru profit targets, but trailing stops.

Leave it to BF to ask the tough questions. LOL. Great questions really. Your first questions says "you" and the answer is no. However, I would state that "one" CAN only play WRBs based on news. This depends on personal style and instrument(s) traded. Some markets are more predisposed to news than others. I should mention that news includes things like a speech at a luncheon by the Governor of the NY Fed. Or the Chairman's testimony to the house. So we are not simply talking about Jobs reports, GDP, trade figures, housing starts and the like. If one is trading corn, a speech by treasury secretary Paulson might not matter so much. So if you, or others, are wondering if there are enough news events for an active trader, it really depends on the instrument and of course the day. News events are a good basis to start with. As I said in the previous post, there are many types of significant WRBs and some do overlap. I like high volume WRBs even if they are not news related. There are also some WRBs that are based on volatility patterns that I like. In truth, even at my early stage of development in this area I can see that one is probably better off limiting what WRBs one wants to focus on. By the way, I want to make a quick point about news events that some may be thinking. Suppose there is a GDP report at 0830 NY time and you are trading off a 3 minute chart. If a WRB is formed during the 0836-0839 interval and not before, than that is the news related/caused WRB. Also, and this gets into question 2 a bit. If there is not a WRB on the 3 min but there is one on the 15 minute, it would be expectable to look for entry signals on the 3 but within the range of the WRB on the 15. Currently I am only focused on one timeframe: the 5 minute.

A couple of key points first. A. VSA is concerned with volume, spread and close. One wants to ask "what did the market do on all that volume? By not mentioning where the close is with respect to the range, it makes things difficult. B. A WRB is defined as a bar with a body (open-close) greater than the prior three intervals. This is important. If you have three consecutive dojis (open=close) and the next bar has a close 2 ticks above the close, you have a WRB. I believe you are talking about Large WRBs that are also Wide spread bars (range) but that does not have to be the case. With all that said. 1. Down bar on ultra high volume with the next bar up (demand entered on this bar) Without seeing a chart or an explanation of some prior price action, can't tell if this is volatility expansion. 2. Next bar up on high volume. This confirms the selling on the first WRB and show demand entering. This bar is bullish. IS the bar closing higher than the first WRB? If so its a bottom reversal in VSA parlance. 3. While a no supply bar should really have a narrower range than the previous bar and volume less then the previous two bars, this is showing no supply. If the close is on the absolute low of the bar and it is a wide spread bar it is no selling pressure. hope this helps.

Hello BF nice posts. Some of my response will be in this thread and some in the vsa thread. I hope this can breath new life into a worthwhile thread. I have used the term WRB support/resistance zone, as PP and Mark have. To be sure, there are many times when you will find the body of a significant WRB acting as support or resistance. However, I think a more appropriate term of the area is "METHOD ENRTY (and exit) FOCUS ZONE". "Method entry (and exit) focus zone". No matter how one enters: moving average cross, ADX, red bars become green, CCI, VSA, or candle patterns the body, or zone, of a significant WRB is the ideal place see one's method give a signal. To be sure, VSA, with its focus on supply and demand is in my opinion superior to use than say a moving average cross system. WRBs represent possible shifts in supply and demand so any other method that is like-minded would be better suited then some, but all would work. It is very easy to see a WRB appear and then (1) place a line at the body's open and a line at the body's close or (2) write the numbers for the open and close on a post it. It really isn't difficult and many traders would actually be able to simply SEE the zone on the chart. Simply, determining the zone is not difficult, what is more so is determining what a significant WRB is. Yet, that is not all that hard. First and foremost one needs to ask was the WRB connected to a news release? Clearly, a WRB created on the Jobs release means more than a random non-news generated WRB. WRBs are about price action. Understanding what cause the WRB is a necessary condition to understanding price action. Volume is another key. A large dark WRB on very high volume with the next bar up means there was some hidden buying going on. This is what VSA tells us, but once you know just that, one can now focus on what happens within the body moving forward irrespective of VSA. But again, we can move a out of the VSA and just think the more the volume the more we need pay attention. Something you probably already do with respect to candles and such. Another way to determine what WRBs constitute significant deals with volatility. The chart I posted shows a volatility spike which would have me already predisposed to look to fade it. Had it been a volatility breakout, then I would been looking for a continuation trade... (This is the part I hate. I can't say much about this aspect. I like WRBs and want to share all I know. I hope much of what there is to know can be found in my posts and those of others on this thread and the VSA thread. I would rather an interested person NOT spend money to learn this stuff. With that said, I am bound not to disclose some things.) With that said, Volatility in some ways also equates to candle size. A white WRB larger than the previous 5 white WRBs probably means something. This is just an idea to play around with, but the point would be set a number and stick with it to take out arbitrariness going forward. BTW, If one looks at the chart you posted of my chart, it is clear that you would of gotten in on the second trade prior to my entry signal-the first test. So for those who are concerned with getting in first, WRB zones are not the panacea.

First, very nice thread. Thank you. Second, I am a bit hesitant to post because I do not want to disrupt the flow. Please let me know if you would rather not have posts such as this. I recently posted a chart in the VSA thread that has some applications in my mind to what has been said here. Many traders, both VSAers and others, are trying to catch tops and bottoms. There is a desire to buy bottoms and seller tops. I think this is a mistake. In the chart the best entry is after the appearance of the second test (from left to right). While it is true that many methods would show other and sooner entry points, with INACTION one is able to enter at the most PROBABLE point. In other words, the "Best" price does not necessarily mean the most probable entry price. One can let the market tip its hand. As someone here once said, surrendering to the market is about letting go. It is about NOT forcing the issue. It is about inaction. Getting in tune with the market is about detaching oneself from the market to clearly see it. Often probability and inaction lead to profitability without the ego of top and bottom fishing.

Interesting take BF. WRBs represent a change in the supply/demand dynamic as well as so much more. They can play various roles. The attached chart shows WRBs playing multiple roles as the market transitions into an up trend. However I want to focus here on the two tests. Leaning Lesson: Note this first test. This test is rather hard to see and would be missed by many (including some of the BBs). It is made easier for those who were predisposed to look to go long as part of a "fading the volatility spike" trade. The bar has a narrow range closing up and closes on the middle of its range on volume less than the previous two bars. Very tricky. In fact, many would be looking at this bar as a possible no demand until the next bar is up. As you can see price moved up from this test. However the BBs are not sure if there is latent supply in the market. They have seen demand enter on both volatility spike and the next up bar. Yet, the nature of the test bar leaves something to be desired. Now we skip to the second test. This is almost text book. It closes equal to the previous bar, has a narrower range, makes a lower low, and closes on its high. Two very important things about this test: (1) Not only is the volume less than the previous two bars, but it is less than the previous test as well. (2) This test trades back into the range of the body of the WRB but does not trade as low as the first test. If there had been any doubt after the first test, its was all removed on the second one. This pattern actually repeats often and is very powerful. One test on low volume followed by another test with less volume than the first test and not trading as low as the first test.

Thanks Seb. Good point . As VSAers we talk a lot about the BBs fighting the herd and tend to forget that they are fighting amongst themselves as well.