innovation1520887469

What value is this if it doesn't give you an idea of likely outcome? What insights does it give that are useful in preparing to trade the culmination of the range? I am asking as I am obviously missing the point not trying to be facetious:)

I thought the same thing (the elements should be normalised to show relative changes) but then on reflection thought that the actual $ value shows how much money is moving around to provide support or otherwise. It might be interesting to see if what the differences are, if any.

Gringo,, thanks for sharing. I have a few questions based purley on curiosity not any opinion on the validity or otherwise of your analysis, if you don't mind sharing: Are you going to monitor intraday to determine entry based on activity or are you going to enter based on a sell stop order? - If you are watching, what would get you in and conversely what would make you scratch the setup and look elsewhere. What is your SL based on? % risk based on position size or is there some S/R involved? If price gets to 32 is that enough for you to assert that price has broken out? What are your Targets based on? Have you looked at this from the other side? Prices rejection of lower prices at the start of March on lower activity/volume than the previous attempt at the end of November (also the DB) might mean that sellers are done or at least running out of steam on that TF. The fact that volume has not materially diminished and that the gain is in proportion to the effort on the move up from the bottom of the box might mean that buying is also of good quality. This, even if it has some merit may not be important as your setup could still happen as you are only looking to get back to the midpoint of the box. I was just wondering if you had played 'devils advocate' as I tend to. I also then end up with two equally attractive but mutually exclusive setups which leaves me in a sort of 'paralysis by analysis' state. I am thinking of moving to EOD trading from intraday as current out of market commitments have grown recently (Birth of my daughter), perhaps we could collaborate? PM me if you can see any mileage in this. Cheers

Thanks Head for the example and your detailed walkthrough, I have found it very beneficial and on the whole agree with your interpretation although I would find it difficult to approach from scratch. (0) does indeed look like a push through R with a pause once it hit the yellow line with volume dropping off there is no selling interest, as you say bears withdrew. (1) & (2) the bulls pause and the bears step in, then between (2) & (3) there is a struggle where the bears are victorious . At (3) the bears have stepped back, you say: Is this not the same thing? Also does the amount of effort expended getting here from the recent high mean that a 'normal retracement' is unlikely? (4) I agree someone wants to stop price advancing (5) This one I would not be able to interpret, it could be bears trying to go down and bulls stopping them or as you say visa versa. I suppose this is one of those instance where you would need to view it in RT in order to get a feel for who stepped in and when (if you are capable of such things, I am not!). The fact that price is turned away from the turquoise line with no effort just after this : does it mean that bulls are not quite sure of themselves yet or is it unimportant? (6) Bulls are smacked relatively hard here after their attempt to go up, this would have made me think that we would see lower prices but then price recovers to almost the same level with little opposition. So again I would have a hard time understanding what was likely to come. You say that bulls tried twice more to see higher prices but I see bears trying to go down at the first volume spike an bulls successfully holding them back for now. Followed by withdrawal on behalf of the bulls until 1200 where they think their chances of success might be higher. (7) I would not have noticed this lack of participation until at least much later if at all, context context! (8) & (9) I might have seen as support being shown at higher levels and the second attempt to go lower that failed would likely see an attempt in the opposite direction. In fact I see this occur quite a lot in real time - several attempts to move in one dir that fail which ultimately result in a substantial move in the opposite dir. It is more of a feeling that the prodding isn't going anywhere than anything that can be drawn and I know I shouldn't trust any 'feelings' just yet. So I ignore it only to say oh look at that But there is trading activity (more so than the fall between (6) & (7)) so wouldn't that mean that there was supply just more demand? I am glad you say that you can't tell, these types of situations have made me think that I have no chance of reading the market as they leave me undecided too, I suppose you could reasonably expect a break either way and play it that way as the range is small. (12) would have had me reaching for the trigger as you say a sharp rejection Excellent point, I hardly ever think about ideal entries for each side... Between (12) & (13) would have made me question any short I was in based on that rejection as there and been no follow through to the down side and activity has all but dried up. Honestly, no! I can see that 8,9,10 are all bullish and that 12,13,15 are bearish but 14 is showing a higher level of support albeit costing more effort to maintain but maintained it is. I suppose any subsequent move past the level where (14) occurred on lower volume would indicate a withdrawal of bulls and that lower prices were likely? Good points, I will add them to my list of current issues I does indeed, thank you. Now I just need to work out how to see this in RT, how to trade it and how to go about back testing whatever I come up with. Shouldn't take more than today, lol Cheers

Thanks for you reply Head, I appreciate the effort and I will indeed give your advice some thought. Unfortunately at the moment things are not much clearer to me as a result. I think I do understand S&R and trend and indeed do try to look at the market for what it is, a mass of buyers and sellers (bulls & bears, buying pressure & selling pressure) not at individual 'bars' or arbitrary samples of market action. I have read and digested DB's recent post on AMT. As far as context is concerned I do attempt to look at unfolding action in context but find it is hard to know what is enough context and what is superfluous. In fact this leads me back to my original post where I end up formulating several mutually exclusive scenarios each of which (in my mind) are equally likely - take for example price testing resistance for the 3rd or 4th time (within a relatively small time frame): One could view this as bullish as price was obviously not successfully rejected on the last attempts and the bulls/buyers are liking their chances of moving past R once all the supply has been absorbed. One could also view it as bearish as each attempt to break through R has failed and the bears are taking the opportunity to distribute at the best price, once they have sold their line they would apply more selling pressure to see lower prices. How can you tell if their conviction is stronger? more result in less time? "How they succeeded" - surely by then it is too late to hope to profit from the success? I must admit that I had just been thinking that "price advanced" was the result, how though can we hope to determine how they stopped or were stopped & what difference does it make to the bigger picture? Could you give an example of your thought process? I end up going round in circles I must point out that I was playing devils advocate in my original post, trying to come up with a logical counter for the 'accepted wisdom', perhaps I might benefit more if someone could explain why this could not be the case. Once again thanks. I am determined to get to a point where I have an intuitive feel for the push and pull of buying and selling but I am beginning to see it might take some time

Firstly I apologise for the length of this post. I thought about splitting it up into separate posts but as my queries are all related and there might be a chance that they are all rooted in the same misconception or misunderstanding I thought they would be better put in one place. This is not solely aimed at DB, anyone else (Atto, Firewalker, Head2K et al) who understands the dynamics involved in the creation of recognisable price volume footprints that appear in market data and thus our view of it (charts), please, attempt to enlighten me I am trying to get to a point where I can make reasoned statements about price action, backed up with the story of relative struggle on behalf of buyers and sellers that volume tells. I seem to go round a loop of ignorance, enlightenment, confusion and back to ignorance. My problem is that I seem to be able to see alternative, opposite and equally viable scenarios to those that are widely accepted which results in a clouded view of the market. I will number my Queries to make reference easier. 1) Conventional wisdom (Wyckoff the source?) about volume says that in an uptrend increasing volume on rallies and decreasing volume on reactions is a good indication of continuation of the trend. From 14M: "If a stock advances 5 points on transactions of approximately 60,000 shares a day and on a two point reaction the volume drops off to about 15,000 shares, the indication is that comparatively little stock is for sale, and that it is merely having a resting spell. Those who want to get out can do so. Indication of a further advance would be a gradual dropping off of this volume during the reaction until hardly any trades in that stock appear on the tape (or volume becomes quite small on the chart). But, when the volume again increases and the price advances, especially if it goes through the former high, a further material upward move may be anticipated." Why? I mean why is increasing volume on rallies a +ve thing? It could be argued that both buyers and sellers are committed or into the market and that the fact price rises means that buyers are stronger, the large number of transactions on the way up mean that there would be more resistance to price falling back through. It could also be argued that increasing volume on the way up means that the buyers are encountering more and more opposition, thus wearing them out or filling all the demand meaning the rise will stop soon as the buyers will be exhausted. If a move up occurred on low volume then wouldn't that be a good thing? Buyers are not having to exert much effort as there are no sellers to take the other side of their trades, when sellers do want to step in then there is more buying pressure left to bring to bear. Or is it the case that buying pressure could drop off as price rises purely because price has risen and no longer represents value to the buyers? Why is decreasing volume on the reaction a +ve thing? It could be said that after a reasonable rise some of the buyers will turn into sellers in order to realise their profits thus creating 'poor quality' supply and causing the reaction, the low number of transactions could point to the fact that there is very little interest on behalf of sellers (those wanting to open short positions/'good quality' supply) wanting to see lower prices at this time. It could also be said on the flip side that the reaction should not be able to proceed back through the range of price where there has been so much 'effort'/volume expended to rise on very little volume as buyers would not want to see their gains ebb away and seeing as the most volume was most recently, i.e. at the top there should be most resistance there. Also if the sellers had been putting their back into it on the way up trying to resist the currently unstoppable force of the buyers then why have no interest in lower prices on the reaction? Surely they would want to capitalise on any pause or weakness displayed by the buyers or in buying pressure. Is it all immaterial? The reaction on low volume can only be seen as a reaction when price starts to go up again otherwise it could indicate the end of the up move as buyers are gone/exhausted and sellers are not yet interested, yet price continues to drop. 2) When talking of an instrument being on the spring board on the bull side W writes: "When a stock is “on the springboard”: On the bull side a stock (or a group, or the market as a whole) is in this position following a period of preparation. This usually occurs at the bottom of a decline -- though it also occurs after the price has been in a trading range following consolidation of a previous advance in preparation for a new mark-up. The greater the decline the more likely large operators will accumulate the stock and make it the basis for a bull campaign." And on the Bear side: "A stock (or group, or the market as a whole) is on the springboard on the bear side, of course, following a period of preparation, in this case distribution. This usually occurs at the top of an advance, but it also occurs after the price has been in a trading range, following a decline, in which further distribution is taking place in preparation for a new downward plunge." I can't see the difference between them! A trading range following consolidation of a previous advance in preparation for a new mark-up is indistinguishable from the 1st bearish situation at the top of an advance following a period of distribution unless you can tell the difference between accumulation and distribution before it becomes obvious (i.e. after the fact). Is it possible to differentiate between accumulation/absorption and distribution while there is opportunity to profit from the knowledge? In 7M Wyckoff discusses a period of absorption as being so because: "*The probability that this lateral movement, or trading range, between 156-151 is an area of absorption rather than one of distribution may be determined: (1)from the fact that volume remains low on the reaction to January 29th and tapers off promptly on the reaction to February 2nd; (2)from the tendency of the price movement to narrow into a comparatively small range instead of reacting as much as halfway back to the January 19th low, which implies that stocks are not being pressed on the market; and (3)from the fact that after the recession to February 2nd, volume tends to build up consistently at the same time that there is a lifting of the supporting points from February 5th to 7th –- behaviour typical of the completion of a period of accumulation or absorption prior to a mark-up." So again we get back to why? Why is low volume on the dips indicative of absorption and why is higher volume at the top not an indication of resistance and therefore distribution? I have seen price stop just underneath R, move in a tight range only to breakdown as supply exceeded demand as well as pausing before shooting through R. 3) Also from 14M: "A small volume, that is, little activity in a stock, indicates that it is being neglected by traders and the public. When this small volume occurs at the bottom of a considerable decline, or at the bottom of a reaction or small dip, it usually indicates a lack of pressure; a drying up of the selling. A small volume may have a different meaning at the top of a rise, or a rally, or a small recovery. This frequently is a bearish sign. It indicates that demand has been filled, or has dried up. The stock will probably go lower because demand is lessening and supply will likely overcome it. There are exceptions to the above indications however. Thus a small volume and narrowing into small price movement after a rise may mean that the stock is resting and digesting its previous gains, instead of reacting, prior to a further advance. Therefore, in judging volume indications, we must always be careful to take into account the action preceding a particular volume indication as well as all of the other technical influences prevailing at the time the volume indication is given." Again, how can you tell the difference between low volume indicating a change in direction and just a pause in the current move? Is "a small volume and narrowing into small price movement after a rise may mean that the stock is resting and digesting its previous gains" the same as absorption on an up move or distribution on a downward move? 4) Wyckoff mentions a method of determining oversold or overbought conditions: "No precise definition can be given, whereby we may determine the exact points at which the market or a stock is definitely oversold or overbought. This must be determined as explained in previous references to these phenomena." Where can these references be found? Again apologies for the lengthy post, I hope that I will not be the only beneficiary of any response.

Db: Thank you for your time and effort in helping me and others understand the thought process and salient events to watch out for in the formation and culmination of a hinge, you are a credit to TL. Head2k: cheers for stepping up, I was preparing a reply but you have said it all and more Could you make that post? Whenever I have learnt any complex subject I have started with the specific/special case and then ultimately moved on to the general case. Even if you think it would serve no purpose it might just trigger some light bulb in someone's head that results in several loose threads being tied together into a firmer braid. Thanks again If I have any other questions/misunderstandings (specifically with the Sect 14M Vol Studies) shall I post them here?

Not sure if this is what you are trying to get me to do but it might highlight where I am having difficulties: 09:22 - very little interest buy buyers or sellers - a move either way is imminent. 09:33 - Sellers take the initiative and are committed but buyers are putting up a fight and sellers are not getting it all their own way as the volume is very high, especially compared to the recent past. 09:34 - 09:35 - Buyers are over come by sellers or rather buyers withdraw as vol decreases. 09:36 - Sellers are done and buyers are able to recover on low vol Until 09:37 where sellers exert themselves as price nears the lowest grey line. Sellers however loose interest and so too do buyers. Then 09:40 buyers take advantage of the sellers lack of commitment and get the drop on them. Sellers presumably (can't tell on historical chart) stepped in as price went above the level that was important to them (lower grey line). Now sellers are not as sure of themselves as they were having already given up a fair bit of ground, nor are the buyers exerting themselves after the effort taken to stop the fall. This continues until 10:03 where buyers manage to exit the range established over the last 10 or so minutes with very little effort/opposition. Sellers try to bring price back into the range but are unable and more buyers join in. When price nears the upper grey line sellers start to offer some resistance to the buyers but only to get price down a few ticks where both sides seem to pause for a re think. Buyers again get the drop on the sellers and have another stab at getting back above the level that the sellers are defending but the sellers soon wake up and stop prices upward progress. A second attempt is made by buyers which is also repelled, followed by a brief pause before the sellers take price back down to the lower grey line under fairly stiff opposition from buyers. That is until price reaches the previous area of consolidation between 09:40 - 10:03 where vol tapers off (dunno why, sellers and buyers done?) Price then rises on very little vol except one attempt to push back by sellers that was nipped in the bud by the buyers (10:31). Price continues upward until the upper grey line where there is a vol spike as price is rejected. Price moves down with very little effort ( buyers loose commitment?) until it reaches the last area where sellers attempted to move down. No increase in vol this time (means sellers are not interested?) price rises still under low vol and then vol almost disapears until sellers try to move down and buyers step in to stop them. Price then moves up to the upper grey line on increasing vol and breaks out.

I understand that areas where a lot of trades occur will offer resistance to the progress of price as traders have vested interests within these areas and will try to protect those interests where possible. I thought that in your previous post you were asking me how to interpret VAP in realtime as they were being formed and how this would indicate the eventual BO direction and a safe entry point. The horizontal grey lines are where price is being turned around, they are acting as R or S. I can't see how this helps form an opinion on the culmination of the hinge as the test of R is successful which indicates weakness followed by a higher low or failure to test support which indicates strength. Perhaps I am looking at this all from the wrong perspective, I am not being purposely obtuse

I have been trying to figure out how to respond to this but can only say I have no idea how to use VAP in RT. I have only used it on historical PA to show where price might find S or R on any move back though that range. If I were to say that price was establishing a new area of value then I would be talking about something I know little about and probably wrong with it The two goals you mention are indeed what I wish to achieve but am currently at a loss as to how to proceed. Thanks

It tells me that price is above a short term level of support established between 09:40 and 10 ish (the lower red box), this was tested successfully around 10:20. Price then failed to make a new high and returned to the demand line and potentially stronger area of S/R (middle red box). The top red box probably had a different VAP histogram associated with it prior to price leaving the hinge, so I don't know how useful it is. You say there is a lot more here, please elaborate... Cheers

In this instance I had an idea that price would break out to the long side based on the increase in volume after the last bounce off of the demand line (not including prior PA). I guess I wanted to know if this was a valid/reliable indication of breakout direction or coincidental. I also wanted to see if my current understanding of the dynamics of the creation of the hinge are accurate.

I would like to identify instances where the shrewd application of W's principles of market interpretation can be practically applied for profit. Specifically I am looking to reduce price risk to its sensible limit by getting in to a trade as early as possible and by identifying instances where prior price and volume action indicate high probabilities of a specific outcome, reduce the information risk side of the equation when compared to a current price action only standpoint. I can't find the exact quote but I seem to remember that W said something like: Whatever happens in the market is a result of what has gone before. I am not looking for certainties but factors that when present will load up the likelihood of movement in one direction over a movement in the opposite or indeed no useful movement at all. Things I am currently looking at in my testing/trading are: Hinges Climax - Test Rejection at previously established S or R Penetration of previously established S or R Breakouts from consolidation after testing interest I am still working through trying to understand the possible buying and selling dynamics at work in these situations and any PAV 'tells' that might favour one direction to the other. I will have a stab at hinges here as I have spent more time on those. Btw I understand that where these things occur in the context of other things will have a bearing on likely outcomes but for the sake of discussion lets assume that the context is neutral. Hinges The dynamics of a hinge, as I understand are that buyers and sellers disagreement on 'value' reduces over time until a point is reached where there is so few trades occurring that one side or other takes the initiative and exerts pressure on the other side trying to move price to a level that they now view as 'value' in the hope of profiting from their effort. Say buyers take the initiative as in my chart, then the sellers try to oppose the momentum created by the buyers as they believe 'value' to lie below the current price level. The buyers exert more effort/pressure than the sellers and price rises. Once price rises above the supply line of the hinge some of the original sellers may become buyers (cutting losses, changing bias, accepting the outcome of the struggle) adding fuel to the buyers fire. The mid point of the hinge acts as S/R as that is the point at which the struggle began and so the point which the buyers will want to defend, assuming the same level of commitment that initiated the move in the first place. Moves that happen on low volume which would indicate (assuming a long move) that there are few sellers (low selling pressure) or that all market participant roughly agree on where true 'value' lies (up). As everyone agrees (has the same bias) few trades occur and price moves easily with very little effort (volume). This type of move can be easily reversed just because there have been few trades conducted during it, there are few participants with any vested interest in it being sustained. How can any of this be of practical value? Well, I am still relatively new to all this but have noticed that moves that result in break out of a hinge sometimes begin on the opposite side (demand or supply) to the resulting break out. The potential to enter prior to the actual breakout which would be a low info risk, high price risk trade would mean that you would have a low price risk (as your SL could be just under LSL) and potentially low info risk trade (assuming this occurs with any reliability). Has anyone noticed this behaviour or is it a sacrificing virgins to volcano, coincidental, sort of thing? Any views, observations or comments on increased probability of price moving one way or other out of a hinge would be most welcome. In fact I would like to know if anyone looks to previous volume as an indicator of future events or only as a confirmation of current action. Oh and I found this excerpt from Sect 14M - Volume Studies "Some people regard a stock (or the market) in this (springboard) position only when it breaks through an old line of resistance or support into a higher or lower field. I claim that the beginning of the springboard move is at the bottom of a range of accumulation, or in the upper levels of a range of distribution." If this is in the wrong place feel free to move it, I thought about posting to the Hinges thread but as hinges are only part of the posts subject I thought here was the best place.

Chatroom crashed? It seemed to be crashing Firefox browsers for everyone then my Google Chrome window said that I was disconnected from the server. Tried to reload in both Chrome and FF and just stuck on the initialisation screen. just a heads up

Thank you for your prompt and comprehensive reply, lets see if I understand: I thought I knew what a springboard was: a culmination of accumulation or distribution, an establishment of support or resistance for the ensuing move. I also understand that volume should decrease with time until the move begins. Where could I read more? I have read your blog post on springboards. If the volume had been higher with the same outcome in price would this alter the outlook? Would one assume sellers were not yet done? Glad you say that, I thought I was missing something fundamental. W suggests placing stops under the low of Dec 17th is it because he deems 136-140 to be a zone of support which would not be truly broken until price went below 136?. I would ordinarily opt for under the low of the 29th. I can see this now. What sort of volume would have made you more comfortable that the move was genuine? (More than the 24th? in line with previous days ~ 2M ?). Does the relevance only become apparent at the end of the 26th when volume is higher but the end result is lower prices? I would probably have thought that the prospects of a move up had dissipated and moved on to something else.:doh: By this do you mean that volume has to confirm the price pattern? otherwise it is a coincidental pattern in price? I agree a move was imminent, I would have been prepared for a down move (I would know where to place my stop) but would not know a logical place to limit my risk on an up move (146 would be a convenient but not reasoned place to put a stop). btw are you agreeing that this is an example of a 'hinge'? This makes sense & on second reading is particularly illuminating, thank you. Would the same apply to charts where the interval is more arbitrary(610 tick, 25 seconds etc...), where the open and close have virtually no significance? As the volume might get obfuscated by the chosen bar interval/ I suppose you would have to watch the price action in real time to see where the volume occurred and what happened to price as a result. Does the action on the 9th differ from a test of demand in a period of accumulation by its high volume? does this also mean that the period of the 3rd to the 12th is a period of distribution, or am I over egging it? Do you have this part of his course? Are supply lines trend lines joining pivot highs & demand lines trend lines joining pivot lows or is there more subjectivity involved in their use? I am spurred on by the fact that sometimes things seem very clear to me as a result of looking at the market this way. Unfortunately the times when it is hard to make sense of or produce contradicting views of the price and volume information still out number the moments of clarity . I am becoming more aware that I need to know when to have more patience and wait for confirmation of tentative indications and when to act straight away, still very hard to distinguish between. I mostly trade e-minis intraday but usually only catch lunchtime onwards by the time I get home from work here in the UK. I will check out the chat room, thanks. By "an anchor chained to its ankles" do you mean the revisit of the lows happened in too short a space of time? If the volume on the 28th had been higher I would have thought that a move down was odds on but the reduction suggested to me that the sellers were done. I suppose (on 4th look!) that the low close indicates that buyers are not ready and there fore the prevailing direction will win out. Would there be any interest in any more of my queries on W's walk through being discussed? (I don't want to monopolise your time and you may have no desire to carry on if it is only for my benefit). Thank you for your time. Matt