DbPhoenix

Take care not to learn the wrong lessons. You are correct in nearly everything you've done, though you should note that the 09:55 bar is also climactic, an example of buying support coming into the market. Whether it's genuine or not is unimportant at the time because you're waiting for support at 1825, as you should. And when it turns out that the buying "support" seems more likely to have been a feint to lure the vague into going long (note the character of the bar at the top of that arc and the volume which accompanies it), you don't care because you weren't there. You then near support and another potential selling climax. This is tested as you note. But you're overlooking the bar between b and c. This is an important one in that it is here, along with b, that the shift from supply to demand takes place. "C", however, is not "no supply"; it's "no demand", though not the way VSA defines it. Note what happens to price in the next bars (better "no supply" bars are at 12:55 and 13:00). As for "e" and the seeming long signal, it does seem as though selling is done and the way is clear for the upside. However, you're not using trendlines; you're using supply lines. A trendline would be drawn from one of two places, either from the top of the 09:35 bar or from the top of the 10:20 bar. If drawn from the former, price "rides" this line from 12:25 onward. If drawn from the latter, the line is never broken, at least on your chart. Eventually, of course, both lines are broken, at 13:10, after your chart (note the volume on the 13:05 bar). So you have to ask yourself if your stop was too tight, if keeping it tight and standing aside for a possible second entry or a short entry on a break below support is a better choice, or if waiting for more confirmation for a long entry is called for. The choice you make will depend on your skill at reading the action and the amount of risk you're willing to assume.

The difficulties lie in breaking "support" at 60, then entering what is an entire zone of support from 60 all the way down to 42 (to start). If you're already in, great. Otherwise, finding either a good entry or a good exit can be challenging. Since the move up on the 1st was not an air pocket, there's going to be support all the way down to where that move began, if it gets that far, though it will likely be in stages. Even with a great entry over the past day or so, the patience required here will be beyond many traders.

RULE#12: Detach yourself emotionally from the game. Please don't think... that I am showing off when I say that I know the secret of how not to lose but win. I really do know the secret; it is terribly silly and simple and consists of keeping one's head the whole time, whatever the state of the game, and not getting excited. That is all, and it makes losing simply impossible... But that is not the point: the point is whether, having grasped the secret, a man knows how to make use of it and is fit to do so. A man can be as wise as Solomon and have an iron character and still be carried away. (Fyodor Dostoyevsky)

There was a time -- not uncommon among traders, beginner and experienced alike -- when I thought I knew more than the market and got caught in a cycle of pressing, both to the upside and to the down. Eventually, the only thing that broke me out of it was to stop trading entirely and become reacquainted with the market by just watching it. When I saw the regular and continuing journey from support to resistance (just like the books had said) and followed it long enough to trust it (this took far longer than you'd believe), I began to accept that the market didn't give a damn what I wanted and it was going to follow this cycle regardless of what I thought about it. So I learned how to hop on that bus and travel that route between support and resistance. I also learned how to determine when the bus had decided to extend its route, drive through town, and move on to a further destination. Most of all, I accepted the fact that I wasn't the driver; I was a passenger. Nor did I nag the driver to turn around, much less pull out a gun and threaten him. (I also learned not to jump off the bus every time it slowed down at a turn, fearful that it would not reach its destination; every time I did, I was left in the middle of nowhere, watching the bus move on without me.) But it's difficult to learn these lessons if one continues to trade in the meantime. If one is in a trade, then being right becomes a factor, and it's difficult to negotiate the turns when one is pushing his ego around in a wheelbarrow. So keep your eye on those turning points. They don't just crop up like crocuses in Spring. They're created by buyers and sellers. And give it time.

Seems the hard part here lay not in not knowing when/where to exit but in doing it. If you're daytrading, logical support was at the top of that range extending across the 3rd and 4th, so you had your line drawn correctly for that. If you're trading for the very short term, consider using a smaller bar interval, e.g. 15m, to put yourself closer to the action. This may help you manage your emotions more effectively. Glad it turned out well.

Be careful what you wish for Getting hung up on individual bars would not be terribly productive over this span of time, but Wyckoff (adding another chief to the council) would have you note the waves here. Note how the buying waves are longer in time and distance, for the most part, than the selling waves, at least until midday Monday. The selling wave that began there is much longer in distance and generally longer in time. Yesterday's selling wave that began midday was longer in time but not in distance than the buying wave that began in the morning. All of this has to be placed within the context of S/R. Traders have held price up here for five days now, which is interesting in itself. And they are testing the April lows. There's loads of indecision up here (all the dojis), and the volume and accompanying price move on Monday are perhaps more telling that the moves yesterday (on the daily). However, you'll note that after the selling climax in January, price remained in the upper half of the range until the beginning of March, when it dropped to test the January lows, so staying up here for this length of time is no guarantee of a breakout to the upside. Absent compelling evidence to the contrary, I see no reason to interrupt the usual buy-support/sell-resistance stance. If instead we break out to the upside, everybody knows what to do.

This will be a short answer, so I doubt BF will object. Fact is I gave them my best shot but just couldn't trade without separate price and volume. I've been trading the interaction too long, and I didn't think it was worth the effort to change the habits of twenty years. On the other hand, they make a very nice compromise between time bars and P&F. By having a CVB chart, I can plot the whole 24hr period without having a long string of relatively meaningless non-action from the close to the next day's open. Instead I may have at most two bars that cover the entire period, which isn't even enough to throw off a trendline. And lengthy midday drifts are compressed. They are also handy for finding the "volume ranges" that I use to find S&R (I've posted these in my Blog and also uploaded some sector charts yesterday to the ES/YM thread). Since time isn't so much a factor in those charts but rather price range and volume range, I can eliminate the separate volume window. Guess that wasn't such a short answer after all.

I agree. But it's interesting to note that beginners will become rabidly devoted to the first book they read that purports to disclose secrets or anything that's "hidden". And Nison has certainly pressed the "Mysterious East" component of candles, though I'm sure he's a wonderful person. What I like about Wyckoff is the lack of bull. Supply and demand. Anybody who's ever been to a grocery story can understand it. And no software required.

I empathize. And though I haven't read all 2500 posts in the VSA threads, I did read some of the earlier posts, and the view taken at that time was much broader. Somewhere along the line, all that disappeared. As for Market Profile, though it does seem a bit jargon-heavy, it is more open-minded, which is always a plus. But as for candles, there's really nothing that I can contribute since I don't trade according to them. My bar interval is just too small. Perhaps candles have developed too much of a mystique -- the exotic names, the complex patterns. Perhaps what's damaged candles is the same as what's damaged every other approach that has a sound basis: the search for signals. There is also the problem, when seeking out other traders, of having even fewer posts than you have now. The traders are busy trading. As I said earlier. Frustrating.

Blowfish, referring back to post 940, the charts below may help illustrate. The first is the day's short entry. Note the lower volume on the attempt to make a higher high. Also note the tick divergence. This is the day's bottom. Note here the difference in volume. One must have the patience to wait, of course, but there's really nothing I can do about that. The most important advantage of a combination of tape reading and trading for the longer swings is that it will aid you in increasing your profits by making your trade at the most favorable moment with a small risk, then letting your profit run into the probable distance indicated by the longer swings. (Wyckoff) .

Actually, I didn't even notice. Candles, candlesticks, tomatoes, tomahtoes.....

It's not quibbling at all, Blowfish. But I use a 1m chart, and the opinion has been expressed that anything under 5m is not "VSA". Of course, if one's datafeed and charting program are good enough, even a 1s chart can be "VSA", assuming that one understands the central concepts of volume spread analysis. As for the 5m, it might be more difficult to distinguish the potential selling climax from the retest, which is one reason why I use the 1m. T&S? I suspect one would have to be very good to detect the above. But that's one reason why Wyckoff used a type of P&F notation method while he was reading the tape. I prefer a plain ol' bar chart since it's now available for intraday. And as for the hourly bar, by the end of the bar, the whole thing would be over. This is not to say that one must use teeny tiny intervals in order to "catch the wave". After all, this originated with EOD charts, and EOD charts have their own wave patterns. But if one is going to be out by the end of the day, and if one wants to make the most of whatever movements occur, a 60m bar presents certain challenges. For myself, I want to enter when I see the turn. Sometimes I don't see it. But either way, I don't see the advantage in waiting. As I've said before, the more confirmation one requires, the less likely he is to get the best price. It's a trade-off that depends on one's goals, what he's willing to risk, and what kind of risk he's willing to assume.

If one can see those little notches. I use candles, time bars, and CVB. If I'm looking at movement, I'll use the time bar. If I need to know where the open and close are in relation to the high and low, I'll use candles (see above).

Sorry, RI. I edited my post while you were posting yours.

And frustrating, if one is trying to find people to discuss trading with.

$50 and $87.50 with two contracts? At least they were profitable. But if VSA has been transformed into a scalping strategy, it's no wonder that so many people think "why bother?" There are much easier ways to scalp. FYI, Wyckoff's take on this was as follows: Tape reading is the art determining the immediate course or trend of prices from the action of the market as it appears on the tape. It aims to detect the moves that are likely to occur in the next few minutes or hours [emphasis mine], getting in when they begin and getting out when they culminate. Now "culminate" can lead to some difficulties as there are many different views on when a move has "culminated". The MP approach, for example, allows for a much more substantial move. And many people use Wyckoff's advice to go for two or three points or even fractions of points as permission to scalp, or at least to take profits quickly, focusing on only the most trivial movements in the wave. However, one must consider that the average daily range in 1931 was something like 5 points. Today it's over 200. Those little two-to-three point moves, therefore, become much larger. Just something to think about.

I suspect that a large part of it has to do with making something which is essentially discretionary into something that's mechanical so that even the dumbest trader can use it, as long as he has the money to buy the software. There's nothing especially demanding about gauging the balance between buying and selling to determine the path of least resistance (which is what volume spread analysis is supposed to be about). Nor is auction market theory particularly esoteric. In fact, the basics of it can be written on a 3x5 card. But people don't want something they have to think much about. They want signals (Where do I enter?). Therefore, those who want to understand should not expect fascinating exchanges with those who are searching for instructions.

RULE #11: Don't fall into the "Now Trap."... Players want to win now, today. Results must happen now, in this hand, the one right in front of us... We assign a little more importance to where we are. We make it bigger, more important... But we do this timewise , too - we assign things more importance because they are happening in the present moment... Yet giving greater importance to the present in the game of poker allows us to imagine marginal hands into good hands and good hands into great hands. The market doesn't know you and couldn't care less. Couldn't care less about your entry price, either. Nor about your agenda. It's gonna do what it's gonna do, and that most likely will not include plunging as soon as you've entered your short, or rocketing the moment you've gone long. If whatever the market is doing is inconsistent with your agenda, then get out. But don't expect anything magical simply because you've pressed a key. (Db)

Here's another example, Nvesta. Volume came pouring in around 14:10, i.e., professional support. Then a lower low was made on lower volume. And all this is taking place at the April lows. So do you go long here or not? Edit (a half hour later): a moot question by now, perhaps, but do you see my point? Determine (1) where to look, (2) what to look for, (3) what you're going to do if and when you see it. If you don't know any of these things, at least you know where to begin.

Yep, right back to the April lows.....

Yes, at some point, VSA became How To Use TradeGuider. This is why I think it's more important to talk about volume spread analysis the approach than VSA the system since VSA the system is all about TradeGuider, assuming of course that one wants to learn how to trade via the principles discussed in volume spread analysis (those who want "signals" are more likely to be attracted to VSA For Dummies, i.e., TradeGuider). I discussed all this with the TG people five years ago and was impressed at the time by how little they understood the conceptual underpinnings of volume spread analysis. And now they've reached the point where volume plays such a minor role, one can hardly see it on the charts, a result I suppose of the effort to persuade potential buyers that TG can be used in any market, even those that don't provide volume at all. Of course, if one wants to use this approach to scalp 5m bars, that's great as long as he can develop a consistently profitable strategy on this basis. However, volume spread analysis is much more than this.

There's no need to worry about whether it's going to go up or down. Since the outcome of any given trade is unpredictable, your task is to figure the odds. This is done through (1) careful observation of the relationship between price and volume and (2) placing these observations in context. If you're using bars, then you'll want to focus on the sort of bar that is the result of the volume, along with the spread of that bar. This in large part is the essence of volume spread analysis. But the "meaning" of this stew is dependent on the context. If, for example, you search for what are currently defined as "no demand" bars, you'll find loads of them. Which of them, if any, signifies buying exhaustion will depend entirely on the context, i.e., where the bar is located. Ignoring this means a lot of poor entries. Today, for example, there were many opportunities to short on the way up for those who ignore resistance and volume. For those who incorporate both in their trading, the opportunities were very few, at least in the NQ. Without getting into all the quibbling about what is an "approved" bar interval and what isn't, the biggest volumes were at or around 10:20 and 10:50. At 10:20, however, price wasn't at resistance. By 10:50, it was. However, if one had shorted at or around 1862 and continued to be observant, he would have noted that volume was not picking up on the down side, and he would have kept his stop tight as price bounced off 1860. On the other hand, when price then makes a higher high at or around 11:30, volume though higher is not anywhere near as high as it was during the previous swing high AND price drops below the high of the arc. This signals possible exhaustion. This therefore constitutes another place to short (which one might miss if he's still smarting over the previous trade and is no longer observant). One can also wait for a lower high, but unless he's using a 1m chart, or thereabouts, he's going to be entering near the midpoint of the range and will find himself in chop. And for the most part, that's really all there is to it. Though one can complicate this to an extraordinary degree, there are very few principles and they are very simple. But if one cannot trust his own observations due to being concerned about being trapped by unseen forces that are plotting his downfall, he will find it next to impossible to learn and apply these principles in anything approaching a consistently profitable manner.

All of which is closer to my own viewpoint. As I posted somewhere years ago, brokerages aren't going to upgrade something they haven't already bought, not are they going to downgrade something they haven't already sold. Anybody with any appreciable amount of money at their disposal is going to try to influence the market in some way, and market-makers and specialists are only a segment of this crowd. To suggest that professional money is the herd and that market-makers and specialists are the herders misses what to me is the point. If one subscribes to the puppet-master view, he will find himself in a continuous state of looking for the trap, suspecting every directional move, trading against the herd (the trend) when he ought to be trading with it, always searching for those shadowy figures lurking in the corners, ready to leap out and catch his stop. On the other hand, if one gets past all that and focuses on the central concept of continuation and exhaustion and the means by which one can detect this via the relationship between price and volume, independent of whatever bar interval one chooses to display the information, then he comes a hell of a lot closer to being able to develop a consistently profitable trading strategy out of VSA or anything else that focuses on price action. What was secret twenty or thirty years ago is no longer a secret. Everybody but the greenest newbie knows what a specialist is, or a market-maker. But even if no one did, it wouldn't matter. If one knows how to spot exhaustion, for example, the cause for the exhaustion is irrelevant. This may be of interest, from Wyckoff, who popularized the ideas upon which VSA -- at least in part -- is based: There is no Composite Operator, but the effect of the combined operations of bankers, pools, large operators, floor traders and the public is, when boiled down on the tape, of the same effect as if it were produced by one man’s operations. It is important that you observe the market from this standpoint, and that your trading operations are based, not on what you formerly regarded as the market’s characteristics but on the fundamental law of supply and demand, which is at the bottom of every move that is made in every stock in the market at all time. This law is working and will continue to work always and forever. There can be no getting away from it. It does not matter whether the buying and the selling, or both, are genuine or artificial, that is, manipulative, designed for a purpose. No matter who makes these tests – the Composite Man, a pool manager, large operator, or a big floor trader – the result of the tests show immediately on the tape. You , sitting at the ticker, can observe at once whether these tests bring a bullish or bearish response, and you are just as free to set upon them as if you had made them yourself. Therefore, never fail to observe these and other details in tape reading. You can never tell what they may lead to or signify. I have derived some large profits from tape indications which most people overlooked. You can do the same when you learn to be highly observant.

Not exactly. A methodology which places so much importance on bars and the position of the close and the context -- i.e., the surrounding bars, multiple bar intervals, etc -- ought to be able to tell the individual exactly where to exit, or at least tell him in detail what two or three options that are consistent with the methodology are available to him. If it can't, then the methodology is not sound.

Another important aspect of all this which is not mentioned often enough and so often missed is that by trading at the extremes, one avoids being chopped to death inbetween. Once one begins trading off support and resistance, he will find himself making far fewer trades, holding them until their natural culmination, and better resisting the temptation to "jump in" when he knows full well that he missed -- if he did -- the correct entry.