DbPhoenix

As I said, I'm not a student of MP. But there are three measures of central tendency, and if the "value area" is constructed about the number of trades that take place at a given price, I'm assuming that these measures will be so close that any differences won't matter. As far as range extensions, I believe that they are simply movements beyond the range, but there may be more to it than that. When they occur, of course, the distribution will no longer be symmetrical. It will be skewed. When this occurs, the value area has likely shifted, as it did in the NQ on Friday. Whether it stays there or not remains to be seen on Monday. There are plenty of MP devotees on this site. Shouldn't be hard to find more authoritative answers than mine.

I'm not a student of MP, but I understand that it considers the value area to include 70% of the trading activity. Since the center portion of the bell curve represents 68%, I assume that this is what they have in mind. Given that, the tails on either side would represent the same as the bell curve, 13% and 2% on one end and the same on the other. I learned the same support and resistance dogma as everybody else, and it made sense, as far as it went, so that's what I've worked with all these years. But auction market theory fleshed it out and deepened my understanding of just what is going on with regard to S/R. Someone wrote that if you combine the principles of Wyckoff with the principles of auction market theory, you have about as close to a grail as you're going to get. He may be right.

I did? Apparently some of my past has leaked out in order to make room for new stuff.

This in essence is what I've been doing to find support and resistance, though I've been using plain ol' volume at price and eyeballs. The utility of it is that price will reverse at extremes and return to the "value area" (or POC, or midpoint, or whatever), i.e., that "big money" traders will find few trades at the extremes and return to those areas where they will be able to do business. For anyone looking to ride the wave, they generally begin at those extremes. Good to see you back

RULE#9: Arrive with a system... It is not enough to rely on luck or hope to carry us past the weak parts of our game. These parts must be attended to. The system must be whole and complete... The weak parts must be corrected, or disaster will appear.

While I appreciate the comments, take care that you not paint all the varieties of VSA -- from the original to the latest TG incarnation -- with the same brush. The concepts underlying VSA are sound, even if most of them aren't particularly original, and those are what I address. The various developments and modifications and tweaks over the years haven't made the original approach any better, though they have definitely transformed it into a product. There's a vast difference between teaching somebody how to understand the relationship between volume and the price spread and teaching somebody how to use a software program. I'm not clear on why TG does not have its own thread, but it doesn't, and that's a shame, because, again, the concepts underlying VSA are sound. What TG does with them, however, is something else.

Lest there be any misunderstanding about my comments on short-covering, weak hands, etc, though, I sometimes forget that not everyone carries the same baggage when reading this stuff. I don't make "calls", and I'm not calling for higher prices. There's a lot of resistance up here, and too many people are getting too excited about the "double bottom". Up and down aren't the only possible directions. After the initial easy credit thrust in 2003, the market spent two years drifting sideways. Two years. The market could as easily drop back toward the recent lows as work its way toward all-time highs. The key to determining where we are and where we're going will be, as its always been, the relationship between volume and price.

This was an interesting feature of yesterday's trading in the NQ. Support was found 10pts higher, resistance was found 10pts higher, and the midpoint was raised 10pts at the close. The entire area was uprooted and moved in toto.

This isn't an off-the-shelf trading system; it's a way of looking at the market, based primarily on the law of supply and demand and the principles of cause & effect and effort & result. The chief thrust of it is to minimize risk. So your overriding concern should be how you can minimize risk. If you're very aggressive and very good, you can enter off the climax low. But where? And where are you going to place your stop, i.e., what will the market have to do to show you that you were incorrect? What are the probabilities that such an entry will succeed (and you'll have to look at all the instances in which this exact same setup resulted in a losing trade in order to answer that for yourself; these two worked because of the context, or the "background"). Or you could enter off the retest. Doing so increases the probabilities that the setup is genuine and that the trade will be successful, in which case wherever you enter is largely irrelevant, though you still have to address the question of what the market has to do to show you that you were incorrect. If the distance to that point is too great for you and you don't yet have the confidence to assume the risk, then you either pass or you sweat. If the latter, then you'll likely exit far earlier than you should in order to halt the anxiety. (In this particular case, going long off a lower low is higher-risk than entering off a higher low; however, if you're monitoring both markets and see that one is making a higher low, as here, that may give you the added confidence to go ahead and take the lower-low trade; if it doesn't, then you're entitled to pass and paper-trade it instead.) You could even wait until price has exceeded the intervening swing high, thinking that this would be the safest point. However, at this point, many professionals are already beginning to sell, or shortly thereafter, and the odds of price returning to your entry point are quite high. Whether or not you hold depends to a large extent on your confidence in the trade (and you won't have any if this is new to you) and in your skill at reading the volume on that retracement to your entry point. (And if anyone recognizes the so-called "Ross Hook" in all of this, very little that is original has been offered since Dunnigan.) The market couldn't care less how you display price, nor does it care where you enter. Keep in mind that price and volume are continuous and that they move in waves. Some people translate those waves into bars, some into candles, some into lines. But even with bars, you can detect changes in pressure from selling to buying and back again, gauging the strength of each, gauging when one or the other becomes exhausted. This is most easily done in real time or thru replay, but it can also be done using EOD charts. People did it for centuries, in fact. But if you view the bar as nothing more than a notation on a page, you'll never get it. That bar/whatever is the consequence of behavior. Understand the behavior.

Within the context of VSA, it really doesn't matter. The important things are the degree of volume, which suggests professional activity, the length of the climax bar, the rejection of the low by the next bar, the volume on the retest, and the length and positions of the closes on the climax and retest bars.

See my previous post, above.

Yes. Poor brownsfan hasn't had a good thank in longer than he can remember.

For those of you who are wondering what the hell is he talking about, apologies are in order. It has been brought to my attention that neither habi nor I provided a chart of today's activity. Perhaps if I had, I would have noticed that I was offering commentary on the ES chart while staring fixedly at the NQ. The differences are negligible, but unless I offer both, the post above makes no sense. So. Note first the NQ. You've got the aforementioned climactic volume and blended bars that create a hammer (that's the blended bar to the left of the two bottom climax bars). Then you've got the retest, which makes a higher low on lower volume. These two bars also form a hammer when blended (you can do that in your head). Now the ES. Here you have essentially the same dynamic except that the retest is a lower low, not a higher one. Also the blended bars do not form hammers that are quite so in your face. Other than that, the principles are the same: climax, retest, Go! Sorry if I gave anyone a headache. .

OAC, you may want to look at the last two posts I made to the VSA thread today. I believe they address this principle only from the long side.

You're leaving out the most important part: "Thereafter, volume is largely irrelevant. What matters to the trader is whether or not price makes higher highs and higher lows." If you're not getting higher highs and higher lows, then of course volume assumes a much more important role. Taking your example above, there was nothing special about volume until 10:15. At that time, you had what was clearly climactic volume, even though price was at least ten points above support. The blended bars also formed a hammer. Price then rallied and came back down for a retest with a slightly higher low and lower volume, again forming a blended hammer. This was in principle (otherwise I wouldn't bring it up) just the sort of setup one is supposed to take, even though there is no apparent reason for it to take place at that particular level (or at least none that I could see). However, again, once price is in gear and you begin making higher highs and higher lows, volume is largely irrelevant. Only when the momentum begins to curve and price begins to hesitate does one need to pay attention to volume. Even then, though, unless the volume is climactic in nature, the more important focus is demand lines and previous swing points. If price maintains its course, there's no reason to exit. Today, for example, price made it to 83 without ever breaking stride (no pun intended, Wyckoff fans).

Also depends on whether conditions are ripe for a trend day. Breathes there a trader with soul so dead who hath not banged his head against the wall and said "Why did I insist on shorting the whole way up? Why? Why? Why?" ( or why did I exit with only 5 points.....)

Done, you poor thing. And here's a wee gifty:

How do you find this stuff?

Providing commentary in hindsight is difficult if for no other reason than one knows what happens. One can put oneself into a state of complete ignorance when, for example, replaying a day at a later time to analyze his moves (or failure to move, as the case may be), but it's not easy. Therefore, when going over charts such as these, one has to rely on principles and not take the easy Oh, yeah, well, I would have done so and so. So. As I mentioned on the RT thread a few days ago, 1370 was the S/R level to watch since this went all the way back to January. Once that was reached at the end of the day on the 1st, one had only to sit on his hands and wait to see what price did there. The following day, price extended itself either side of this line, like a dog on a leash. WARNING! Market Profile Will Be Mentioned Here! While I'm not expert on MP, this is what I believe is called a tentative search for a new value area, or what Wyckoff would call a search for equilibrium. If all of this were the result of short-covering, the buying would have dried up abruptly and there would have been nothing to sustain the market at this level. If it were distribution, the market would have reversed since whatever other buying had taken place would have been weak. However, price stayed up here, hovering between 1363 and 1377, at least initially. Later in the day, resistance at 80 was confirmed, as was at least preliminary support at 63. The following morning, given the reaction to the jobs report, one could expect at least a test of 60 since price was only a point or two away. If price had not reached that level, one could use 61 (life is not quite so exact as we would sometimes like). In any case, price poked just below that level at 09:15. Using the chart posted, this occurred at point A. Using the 5m OHLC bar, note the position of the "open" and "close" of the bar. (Tune noted yesterday elsewhere that price does what it does regardless of what bar interval we choose or what type of bar we use or even if we use a bar at all; therefore, a rejection of 60 is a rejection of 60, whether it's a tick or a 1h candle.) The test of this occurs at "B", at 09:45, and one can see even with the 5m bar that this level is soundly rejected once again. Those who use candles and are used to blending them in their heads will also note that B and the bar following create a "hammer-type" candle. Whether one enters here or not is a matter of whatever his trading strategy happens to be. Thereafter, the situation is tossed due to the ISM report. But any entry would already have been taken, so the scrambling around would have had no effect unless price had gone the opposite direction. Instead, one notes that price hit the midpoint of the S/R range -- 70 -- within a tick. Since he's already in, there's nothing for him to do. If he isn't already in, he can wait for the retest. There may be no retest, in which case the trader can elect to do nothing or look for a less-than-ideal entry. But, in this case, there is one, in the "F" area. The only volume of note inbetween is at 10:25 (the volume bars in the posted chart are offset by one). This results in a bar with a "close" that suggests buying coming into the market. It's not climactic and it's not "stopping" volume, but it does retard the decline. When price does get around to testing support, there's nothing remarkable about the volume, but the close is well off the low. The drama is provided by the following volume bar and price bar at 11:05. This says, "Yes, you were correct." Thereafter, volume is largely irrelevant. What matters to the trader is whether or not price makes higher highs and higher lows. There are many bars that might be considered troublesome, but if he focuses on traders rather than on bars, he has no reason to be concerned until at least the midpoint is reached, here near lunchtime. At that point, he notes the near-term potential S&R that have been established and remembers that lunchtime is often a time for consolidation or simply drift. The line drawn on the posted chart at "G" addresses this, and price does in fact find support there in the "J" area. When price then resumes its advance thereafter, the trader has nothing to do but wait for a test of resistance. This occurs at 13:25 when we get as near as 78, two points away from 80. At this point, the trader has several choices. He can draw a demand line from "J" across the bottom of the 13:10 bar and exit on a breach of that. Or he can wait for a breach of the last swing low at "K". Or he can wait for a breach of the demand line as drawn under "M". It all depends on how much confirmation he requires that the market is done and how well he's dealt with any tendencies he may have toward hope. As to alternate entries, he understands that there is a trade-off between information risk and price risk, i.e., the more he wants to know, the further away from the ideal entry he will be and the more price risk he will assume. If, for example, he chooses to wait until he can draw a tentative demand line, which would be drawn here under the bar following "F" and the bar marked "H", he would then later be faced with having to juggle the seeming support provided by the swing high at "G" and the fact that his demand line had been broken (though he would also remember that a demand line of that angle would be begging to be broken). He could go ahead and take the risk of entering around "J" and would be proven correct in that it wound up being a profitable entry. But it would have been worth up to six or seven points less. Plus he'd be very near the midpoint and potential reversal. Or he could wait for a pullback, here at "K". But then he'd be entering very near the top (which is not unheard of). Thus entering off trendlines or channel lines is by definition a later entry than entering off retests -- preferably at support or resistance -- since the lines can't be drawn until price has made a substantial amount of progress. Again, it's a trade-off between information risk and price risk.

RULE#8: You cannot apply the principles of Zen until you know the game perfectly -- inside and out. Having the proper attitude of Zen calm and confidence does no good if you do not know the game. Zen will not make up for, or offset, incorrect . . . play. As a result, there is a certain amount of ordinary, old-fashioned work involved in mastering the game -- a certain amount of sweating the white beads before the days of tranquility come along. The most important thing to know, above all things, is exactly how to play the game. No outlook, attitude, or philosophy is as important as this. Good [trading] is not a "mood", it is a series of individual decisions. It does not occur by "Buddhistically" meditating ourselves into some dreamlike mental state, but rather by knowing the game well and being in synch with it -- by inserting ourselves correctly into the flow of what is going on in front of us. No Zen attitude will make up for this lack. You may be quite Zen-like and have all the attributes of Zen calm, but if you play incorrectly, the result is that you will get destroyed. Practice, and long hours at the table, are indispensable. When I first began to cut up bullocks, I saw before me whole bullocks. After three years' practice, I saw no more whole animals. And now I work with my mind and not with my eye. My mind works along without the control of the senses. Falling back upon eternal principles, I glide through such great joints or cavities as there may be, according to the natural constitution of the animal. I do not even touch the convolutions of muscle and tendon, still less attempt to cut through large bones. A good cook changes his chopper once a year, -- because he cuts. An ordinary cook, one a month, -- because he hacks. But I have had this chopper nineteen years, and although I have cut up many thousand bullocks, its edge is as if fresh from the whetstone. For at the joints there are always interstices, and the edge of a chopper being without thickness, it remains only to insert that which is without thickness into such an interstice. Indeed there is plenty of room for the blade to move about. It is thus that I have kept my chopper for nineteen years as though fresh from the whetstone. Nevertheless, when I come upon a knotty part which is difficult to tackle, I am all caution. Fixing my eye on it, I stay my hand, and gently apply my blade, until with a hwah the part yields like earth crumbling to the ground. Then I take out my chopper and stand up, and look around, and pause with an air of triumph. Then wiping my chopper, I put it carefully away. (Chuang Tzu)

There doesn't seem to be much discussion of intraday MP, or at least I haven't found it, so I appreciate your effort. I don't use MP per se, at least in terms of all the calculation, but I do look at the day in terms of a volume range and a price range, which I hope is not too far off the MP intent. Therefore, your take on this seems perfectly reasonable to me, though I arrive at more or less the same conclusion from a different route. For instance, the price and volume ranges established Wednesday put a midpoint around 625 (this may or may not coincide with the POC). Therefore, I'd be looking to enter somewhere near 550 and exit somewhere near 700 (or vice versa), depending on what opportunities present themselves before the open and during the day. But I'd also watch the 625 area since price may just decide to reverse and end up back where it started. And, yes, it is interesting to see how price travels among the midpoint and the extremes. Auction market theory definitely brings something to the table.

Perhaps it would be more appropriate to post these questions to the forum where the comments were originally made, though it's entirely up to James et al. My only reason for posting here in the first place was to find out what was on James' mind when he was approaching support.

I agree entirely, Bearbull, and, no, it's not necessary. To attempt to arbitrate what is or is not allowed in a discussion of "VSA" when several different versions of VSA are under discussion, including the TradeGuider take, is an approach that is far more likely to generate heat than light. There is, for example, no "ice" in Undeclared Secrets, nor are there any "creeks". So why are ice and creeks and springs allowed? Because TradeGuider says so? After 2000 posts, is the thread about TradeGuider after all? Or is it about analyzing price movement by means of volume and the spread? I've said that I'm not interested in VSA per se, but that doesn't mean that I'm not familiar with it or that I don't understand it. I'm not interested in it because it can generate a nonproductive mindset, particularly in those who do not yet have a firm grasp of price action and how it relates to volume. Nonetheless, I am fully capable of bringing what I know to the table and explaining these charts in terms of the interaction of price and volume and time without getting into all of the extranea that a software program brings. As you say, whether using Wyckoff or candles or VSA or even MP (which has and could again provide much needed added perspective), it's all about price and volume and why they behave the way they do and how one can profit from those movements. To insist that one must use a 5m bar, for example, even when Undeclared Secrets rarely does so, suggests a lack of understanding of just what VSA is all about. Yesterday's activity was a good example of where such a lack of understanding can lead. And the thread was oddly silent during the 80pt (NQ) upmove on Tuesday when the market was "supposed" to be declining. If the thread is to be about TradeGuider, then that answers a lot of questions. However, both threads should be retitled in order to clarify exactly what it is that the content should address. On the other hand, if it is to be about volume spread analysis, then I suggest that those who insist that it must be defined in a particular way that isn't necessarily the same as that defined by someone else who sees it in some other particular way ought either to pull themselves together and open a few windows or else make liberal use of the Ignore button.

If I understand what you're saying, I've found that to be true as well, that if I enter a trade in the middle with the idea of exiting at support or resistance, the trade is much more difficult to manage than if I enter at one or the other of the extremes and hold to the other, or possibly unload at least some of it at the midpoint. Yesterday is a good example.

That's a very good point, Mr Tune. The only difference between a 1m chart and a 1h chart is that, with a 1h chart, price moves up and down in a tube for an hour, then it jumps into another tube. The 1m gets on with its life, travelling down the chart's highway, leaving little messages about the relationship between buyers and sellers throughout its journey. The task is to be able to read the notes. Destination's the same. Time it takes to get there is the same. Journey's different.