Anonymous

This chart belongs in the VSA thread, but it deal so well with BF's last post. Notice what can be seen in large candles when volume is used to understand the supply/demand dynamic. Complete discussion of this chart in VSA thread.

BF; You may have considered this, but I will bring it up anyway. How do you handle, if at all, Long Shadows? Long Shadow candles are the cousins of WRBs. That is, usually, during the interval they WERE WRBs but did not remain so by the end of the interval. As you exit on the close, this could create "lost" profit taking opportunities. I know you are not concerned with the support/resistance zones they also can create, but do they offer the chance to trail a stop UNTIL the next WRB appears on the close?

While your definition of a WRB differs from mine, I believe it was my first post on WRBs that got you to re-think them as a profit taking mechanism. So you can send my portions of the profits to ......................... :D Thanks for the chart. One of the problems with static charts is you can not see the price action unfold (obviously), I think that is where you would say the real value in VCB comes in. Is your focus restricted to profit targets or do you use the primary message they contain: something is or may be changing with the supply/demand dynamics. With the way they seem to appear near turning points, this would make sense. You may have already said this, and I will take a look back, but did you look into using multiple pts (WRB profit targets) or just one? Yes, Mark emphasis the importance of news related events and this is especially true with the currencies. VSA, btw, also places much import on when news comes out. As this is an opportunity for Professional Money to get weak hands into bad positions.

BF; When I first read your posts about CV candles, I was under the impression that one reason you (and others) liked them over time based candles was because CV mute most WRBs and Long Shadow candle lines. I see that I may have been mistaken. Without neither WRBs or Long Shadows nor Changing volume, it would seem hard to detect changes in the supply/demand dynamic. You are a successful trader and many would do well to follow your steed. As a trader I know it is about the making the trade for you. That is, the buying and selling. However, my personality, and the fact that I am learning a new method means that I find myself looking at WHY at trade is made rather than simply when or how. The chart below seems to give so much information about the underlying dynamics of the market. We see a WRB on Ultra High Volume. The first clue that something is changing in the market. The next bar is ultra wide spread on ultra high volume. Even more volume than the previous bar. Note that this bar closes in the upper range and creates a Long Shadow. Clearly, this bar had demand (buying) within it. This fact is Hidden to those who only see a down bar on "heavy selling (volume)". Now can these two bars be seen on a chart that keeps volume constant? Check out the test bar. Volume is less than the previous two bars. What goes beyond VSA is the fact that this low volume test appears in the Long Shadow of the Ultra High Volume bar. Simply, that is more than just a Doji. But I don't know if I could know that without volume. So here we can see a WHY we would want to be long. Of course a long may lead to a loss, but that matters little. What matters is that there has been a shift in the supply/demand dynamics as shown thru the WRB and the Long Shadow candle (which of course, was a WRB during the interval). There has also been a test for supply back into the area of the Long Shadow. Prior to the test, we had a bar that closed on its high with volume less than the previous two bar, this is No Buying Pressure. Hence price falls down and the Smart Money tests for supply. Markets do not like wide spread up bars on high or ultra high volume. The reason being there could be "hidden" selling in the bar. However, there are times when the Smart Money is willing to absorb the selling from the weak hands. This is called absorption volume/ pushing thru supply. Here again we see a WRB. This time it is not so much a change in supply/demand but a willingness for the Professionals to buy at higher prices. If they are willing to buy at higher prices, they must expect even higher prices. I'm not trying to change your mind here. Just wondering if the essential shifts in supply/demand can be seen when volume changes are taken out of the equation and large candles or Long Shadows are muted. This is a 5 min chart. Would love to see this as a constant volume chart if you have it.

I must admit these type of topics are no more than mental masturbation. LOL Now: 1. If You (Dalby) know more about something than I do, we will have different perceptions of value, the price we trade at will reflect that. It will reflect what you know and what I do not. But it reflects it all. 2. If we both know the same thing, we do not have to come to the same conclusions about how that information affects value. There is nothing that says all information is equal nor interpreted equally. One trader seeing a push towards Ethanol will value corn and be willing to buy at higher prices. He values corn more than the money he has. The trader on the other side, does not have to be a farmer. But his focus may be on the large amount of corn being planted. More over, he may see ethanol as just the next "green issue fad". The price at which this trader sells corn (short) reflects his value to have the money now. So we have disagreement on value and an agreement on price. This is immediately reflected in the market. Simply, not everyone has to know everything. But what one trader knows effects his perception of value and thus the price at which he trades. ERGO price must reflect all that is known. Mis-information therefore would still be reflected in price until the correct information is known.

Sorry. That chart does not have the shaded area. This one does.

Just because all information is reflected in price that does not mean ALL participants will come to the same conclusion. THAT'S WHAT MAKES A MARKET.

Port80, welcome to the thread and the forum. I have attached a copy of the bar chart with some comments. Basically, you seem to have a good grasp on VSA. I am a student myself so I could be wrong with what I see. The first thing to note is the wide spread ultra high volume bar. You labeled it stopping volume. I think it is either stopping volume or a volume climax. More important than the name, however, is the fact that a change in the supply/demand dynamic happened on that bar. The bar is wide with ultra high volume, closed lower than the previous bar, and closed near the high of its range. CLEARLY THERE WAS BUYING (DEMAND) ON THIS BAR. This created a gap which was filled. I veer off the VSA path a bit to mention that this is a Wide Range Body. Note where the open is (not looked at in VSA, but so telling). Ironically, I think this is an advanced VSA concept despite that they do not look at the open. In other words, if they did look at it, they would logically come to the conclusion WRB analysis comes to. Not to get too far into this, but what I like to see is a set-up (entry signal) happen within the range of the body or the total range of the bar of this ultra wide spread bar. I believe Todd, and Tom would agree with the total range aspect and thus it is more advanced VSA, and not talked about in public forums(webinars) by Todd. At any rate, we then get a No Supply bar. The bar closes near its low, has a narrow range as compared to the previous bar, closes lower than the previous bar and has volume less than the previous two bars. You are correct about the test. That is indeed a test of supply that closes in the middle of its range, makes a lower low than previous bar, closes lower than the previous bar. Volume is higher than the previous bar but relatively low. The bar you labeled as No Supply is incorrect. The volume is not less than the previous two bars. However, the next bar is No Demand. Note that we are at the bottom of the support/resistance zone via the body of that large candle. With a No Demand indication, the Professional Money has to re-test for supply underneath. We thus get another test bar. Here what is of note is the fact that volume here is less than the volume on the first test. This is a sign of market strength. Note the shaded area. There is something going on here that is beyond the scope of this thread. Suffice to say, there is reason to expect price to move back into this area. But even without that concept, one would be looking for a move back to "test" the close of that large Ultra Wide Spread bar. How and where you actually enter the market is another question altogether............... That is, it is a personal decision. But the pattern of a No Supply followed by a test, followed by a No Demand, followed by another test on less volume than the first test and with a low less than the first test, is a repeatable pattern.

Let's move back to Auction Market theory. The sole purpose of the market is to find that place where there is a disagreement on value and an agreement of price. If there are some traders that know something and are thus bullish, PRICE WILL reflect that bullishness. We are talking about traders IN THE MARKET. And if they are in the market then their bullishness creates a disagreement on value, but that disagreement on value is matched at a point where the bear agrees on price. There is a buyer for every seller. So if the bulls know more than the bears, it must be reflected in price even before the information is known to all. What does that mean? * There is no such thing as Bullish/Bearish consensus. Price already reflects the values of the bullish traders in the market and the bearish traders. So all those reports on such are simply bogus. Any number that states the bullish consensus is 85% simply has not asked enough bears. It must be 50%/50% * There is no such thing as overbought or oversold. Each price is a two sided transaction. The market functions to find that place where the two come together. By definition this is an equilibrium. Certainly not stable , but equilibrium none the less. So using TA to find overbought or oversold conditions is felonious from the start. One is attempting to measure something that does not exist. Price is where it is at, because it is supposed to be there; and price is supposed to be there because that is where it is at. Price is king. Hence whatever says price should be doing something else is irrelevant (note necessarily wrong, just irrelevant). Price may head down from point x, but it has nothing to do with the fact your Fibonacci vortex said it should. Price simply does not move down because RSI is in "overbought" territory. INDICATORS DO NOT DRIVE PRICE. * There is no such thing as "price over-reacting". Price is where it is at because it is supposed to be; and it is supposed to be there because that is where it is at. Those that say, "the market over-reacted and moved too far..." are speaking in code. What they mean is," Price has moved further than I thought it would......" Does the market at times move 100 points in one day and then move back down 100 points the next? Clearly. BUT EVERY PRICE ALONG THAT WAY WAS A VALID PRICE BECAUSE A TRADE WAS FACILITADED THERE. That's the definition of price. Those that embark on TA to tell them what the market should do, rather than the reality of what it is doing, are walking on a tenuous path. Indicators are derivatives of price and therefore have lag. Lag does not have to be a bad thing. But as indicators are derived from price, they cannot Drive future price action. Herein lies where most people come into trouble. Price is reality. 1. Price is not driven by Technical 2. Price is the best instrument for gauging future price direction. That is, what price is doing now is the best "prediction" of what price will be doing in the future.

BF, I think you misunderstood the post. First let's again say that this is hypothetical. NO POSITION was actually taken in this example. Now, If the large dark WRB that engulf two of the three large white candles AND is larger than all three is a PRICE ACTION signal via Mark's rules, then I would trade it. So I would thus be short in box 1. Note that there are NO WRB profit targets in this box. When box 2 begins, therefore I am ALREADY short. I thus get the advantage of the WRB if you will. And in this case, from a "Big Picture" point of view, the price action that creates the trade set-up is the price action that creates the large dark WRB we see in box 2. This is the key to me. Trading during the formation of the large candle via a constant volume chart is nice. Price is moving and that is when you are in. However, can you see that there is a change/shift in supply and demand if you can not see the WRB? Which brings us to point two. WRBs show changes in the supply/demand dynamics. As of this post the EURO is UP .0046 pips. If you were watching the charts yesterday, you could SEE the shift in the supply/demand dynamics that results in price moving up today. Go back to the first chart, the 5 min. Notice that price went sideways on the appearance of the WRB and ultra high volume. The first clue to today's price action came yesterday. And it came via a WRB. Now, if that price action does not constitute a trade set-up for Mark, then what? Well, yes, one does not trade the WRB, but one SEES the overall context of supply/demand and can look to get long with understanding of the broader context of the market. If that had been a valid hammer pattern, then you would have a trade with contextual background of changing supply/demand dynamics. With price and volume leading the way, that trade would make more sense and possibly be safer. So it is not just trading a hammer line because a hammer appears. It involves price action and (for me, volume action) that create the Prism thru which the hammer line is viewed as it traverses into a hammer pattern. Simply, there is a story behind the trade. It is not just about movement. It includes Imbalances in supply and demand, price action, volume and to a lesser extent news releases. While the WRB trade may be missed, what is gained is a trade taken in the context of an overall market understanding. Rather than a simple candle here or there. Having said all that, I do like the idea of trading when the chart is moving faster. But I think that has more to do with wanting instant gratification than anything else. I am trying to be comfortable being in the market, which is probably more so the case than the instant gratification to tell the truth. That is, not being comfortable in the market causing one to want to be in and out quickly.

Well Soul, although we still do not have a definition of "WORK", we see two major reasons why TA fails in the hands of some: 1. They do not understand the fundamental premise of TA: That ALL infromation is reflected in Price. The very thing TA looks out. Even planet aspects assume price reflects all known quantities which includes the motion of the planets. 2. People do not believe in the premise of the very thing they are using. It is hard to see WHY price will fall if RSI goes above 70, if you do not believe price has factored everything already. Of course, indicators do not drive price so this is felonious on more than one level, but if you use it, Shouldn't at least BELIEVE in its essence? Now, one may not believe the essence and still use it. But that person is saying from the start that TA is flawed. If that is true, then poor results neccessarily follow....and should be expected.

Brownsfan; Also take note of the price action in box 1. Notice that we have three large white candles (open<close). Then we have a dark (close<open) WRB that * engulf the most recent white candle * has a body greater than all three prior white candles. I suspect that Mark would trade this type of price action. Hence it is possible to be short prior to the large dark WRB that follows at 1400. Even if it is not a valid set up, I am sure he would say that this action sets the stage for the large WRB. In other words, one needs these large candles to set up the even larger candle that follows. The supply/demand dynamic begins in box one and culminates in box 2. Constant volume candles mute the range disparity and thus belie the underlying shifts going on. This is part of the "why" price does what it does. Now let's suppose that this is a valid set up. I would be looking to exit on the close of the WRB. Why? Firstly, because of what a WRB means: changes in supply/demand dynamics. Secondly, I exit all trades around 1400-1430 and no later than 1500 except on Fed days. I also do not enter a trade after 1300 except on Fed days. But the key here is that as the NY session comes to a close, we SEE a shift in the underlying buying/selling forces. Of course, Mark uses the WRB as a profit target and would be getting out of at least some of the position on a bar like that. I still like the idea of just trailing the stop. Yet, as a daytrader one has to be out at the end of the day. So there are layers of reasons to get out on this bar. With the most compelling being THE SIZE OF THE BAR ITSELF. Take away the size of the bar and you take away a large portion of the story being told.

BF, It turns out I was mistaken and that is NOT a valid hammer pattern. However, something very important can still be learned: WRB is where changes in supply/demand occur. Demand did indeed come in on that bar. It was not enough to send prices shooting up, but it did move price sideways. WRBs are also highly correlated with VOLUME. Hence, constant volume candles do not show the true supply/demand dynamic going on in the bar. More over, a bar like this would not be present. So the essential information about the changing supply/demand dynamic is NOT SEEN. To be sure that candle may be traded on a Constant volume chart, but can you see the forest in spite of the trees? Simply, changes in supply/demand and volatility are seen via WRBs. Holding volume constant mutes this information to some extent. Avoiding long shadows and large candles takes away the meaning of long shadows and wide range bodies. That is, something is changing. Also note that time is a factor. Currencies trade 24 hours a day, but trades should not be made at any time. The WRB comes later in the NY session. It comes at 1400 hrs New York time. Not a good time to be entering trades. The area you mark as 3, therefore is also during the natural slow period that should not be traded. Simply understanding time, would tell one this. No need to fewer candles to know it is not ideal trading conditions. How do you handle Candle blending and unblending with constant volume candles?

* Please do not equate when news comes out and is known to ALL as meaning that there are not those who ALREADY know it. The playing field is not level. Smart Money has better, quicker, and more thorough access than the typical retail trader. ERGO price must reflect ALL known events. And the news shocks? Well, if they are truly shocks then price will reflect them instantly. But it is a good bet that somebody knew something. *

Technical analysis, also known as charting, is the study of the trading history (the price and volume over time) of any type of security (stocks, commodities, etc.) to attempt to predict future prices. In its purest form, technical analysis is concerned only with the actual price behavior of the instrument, based on the theory that all other factors affecting valuation will be reflected in the price before an investor can become aware of them through other channels.---wikipedia Like it or not, if you use TA you are assuming that EVERYTHING THAT IS KNOWN ABOUT A STOCK, COMMODITY, INDEX, OR CURRENCY IS REFLECTED IN PRICE. Does that mean that there is no such thing as a news surprise? Of course not. However, that news event will be immediately reflected in price and usually before most retail traders can react to it. My personal dislike of the above definition has to do with the word PREDICTION. The future is unknown and not knowable. Prediction is not possible nor necessary.

Here is view from a 30 minute timeframe chart. Again we see the WRB representing a change/shift in supply/demand. While no trade was signaled on the 5 min, on the 30 we do have a valid bullish white hammer pattern....... Sometimes you're the dog and sometimes you're the hydrant The valid pattern did not work out and a contingency plan trigger might of caused a reversal to the short side. This too would not work out. Contingency plans are beyond the scope of this thread, but the advanced WRB users among you will note that there is another WRB involved. I say might because I am still learning this myself.

I have stated elsewhere that things that are true tend to correlate from one method to the other. WRB analysis and VSA are two such methods that correlate very well together. The fundamental principle of WRB analysis is that WRBs represent CHANGES/SHIFTS in Supply or Demand. Now, when these WRBs are accompanied with high or Ultra high volume (VSA terms) the stories coincide. Demand (buying by the Smart Money) comes in on down bars. The wider the bar, the heavier the volume, the more likely that there is professional activity in the bar. 85% of a volume histogram is Professional Money. Note after the WRB we get climatic action/stopping volume. The market does not just head straight up, but the direction is sideways. If there was more selling on the high volume down bars then price should NOT be moving sideways. Clearly, there must of be a small change/shift in the supply/demand dynamic on these two bars.

Before I get into the meat of the discussion, I would like a few terms DEFINED: 1. WORK : A skillful trader can throw darts at a dartboard and win 2 times out of 10, but if wins 10x as much on the winners as he loses on the other 8, he is break even. Now break even may not be "working", but there are other forms of TA that produce 7 winners out of 10 and the users LOSE money. So let's first define WORK. 2. TECHNICAL ANALYSIS : Do all things NOT fundamental fall into this category? Market Profile may in fact fall outside our definition of TA. Moon phases are not fundamental, but should that method be placed in the same area as Volume Spread Analysis? 3. FUNDAMENTAL ANALYSIS : Management teams, account balances, position within a certain industry, domestic economy, interest rates, run rates, weather. These are fundamental factors, correct? Although we first need to define TA: It is the fundamental tenant of Technical Analysis that EVERYTHING THAT IS KNOWN IS ALREADY REFLECTED IN PRICE. PRICE IS REALITY. Crop reports, GDP, the FED, all is ALREADY baked into price. Auction Market theory would state that the sole purpose of the market(S) is to find that place where there is an agreement on PRICE and a disagreement on VALUE. Here Value does not refer to the Market Profile notion of Value Area. ex. Trader 1 values the money he can get now more than the beans he has. Trader 2 values the beans more than the money he now has. Both traders disagree about value and the auction process will find the appropriate price. but I'm getting ahead of myself....................

HORUS; If you have a problem with TG, I can give you Todd's or Gavin's home number so you can take it up with them. As for this thread we do not need it. Since you know soooo much about what does not work, why not start a thread about what DOES work?

Again, I do not recommend the software nor do I like it. Just get your facts correct. Tom Williams first wrote the book called "The Divine Secrets of the Stock Market". TG bought the rights and changed the name. Tom's first software was called Wyckoff VSA, the precursor to Tradeguider. These are the facts and are not hidden by them. The book , "Master the Markets" has images from the origianl software with Wyckoff VSA clearly labled. There are 400 signs and none are buy nor sell indicators.

We are at 2300 and all the arrows are red. But it is the first day of the month !!! We'll see green arrows soon I bet. Nice job Soul. Thanks for the great place. I just want the quality to stay high. Then again, if evey member sets out to keep the quality high, then it will be. Soul what do you have planned for 5,000?

Personally, VSA is my primary method and Japanese candlestick patterns are my secondary method. VSA is used to understand the context of the candlestick pattern-the actual buy/sell set up. More generally, however, I would say this...... Is there a Pivot line, like R1 or Value Area Low, around the various bars indicated? In other words, if two bars seem to be the same, I would tend to take the one that occurs around a known support/resistance area first. Also note that two bars later, we see a narrow bar that closes up from the previous bar, closes in the middle of its range, and has volume less than the previous two bars. This is No Demand. So we see that we are possibly early if we are already long. I would also note that we are looking at only one timeframe. While this is after the fact, it is more likely the case that the second bar (Stopping volume-strength) shows up on MORE THAN ONE TIME FRAME. Simply, one needs to understand where support/resistance areas are, use mutiple timeframes, or have certain entry criteria beyond just one bar on high volume. And in the end, if you were wrong (early), one needs the ability to get out and re-evaluate and then get back in. ****edit************** I just wanted to add that Demand did indeed enter the market on that bar of which you speak. However it was swamped by supply. Now look closer at the two bars. Where are the repective closes? What are the sizes of the ranges? In short, there is a differnce in the two bars. That not withstanding, where are the support/resistance areas?

Hi. There are TWO failed test prior to the No Demand sign. This means the Smart Money was testing for supply AND FINDING IT. If there is indeed supply in the market, price should move down. Now we need to keep the background in mind. We have seen supply come into the market. We have seen an Up Thrust. These are signs of weakness in the market. Then we get two failed tests, more signs of weakness. And finally, we have the No Demand bar just prior to the fall.

I am not a fan of the software but will defend some of it here. First, some of the "signs" do change. If the "sign" was a light green triangle, it may change to a dark green rectangle a few bars later. This happens because the software has determined that the amount of demand is greater than originally calculated. I went to many webinars before I saw this happen in realtime. Admittedly, I was a bit confused by this. So, the darker signs which signal heavy supply or demand will tend to be "optimally positioned" on the chart. NOTE THIS DOES NOT CHANGE WHAT THE BAR ACTUALLY REPRESENTS, ONLY THE SOFTWARE INTERPETATION. That is , this is a software "selling ploy" and not a VSA weakness. One must understand the signs themselves. Take a look at the chart above. I have shown where we had stopping volume/climatic action. Now, in TG, the sign will not show up until the bar AFTER the bar with the arrow. Why? Because we need to see what happens on that volume to make a determination of its meaning. Tom Williams, the father of VSA, would enter on the close of the bar with the arrows, but most others (like Todd K. or Sabastian Mamby) would wait for the close of the next bar as confirmation. This is not unlike many candle patterns that need certain price action before and after a particular candle. So the sign ends up being placed underneath the stopping volume bar, the low, and it looks really good. HOWEVER, IT IS NO A BUY SIGNAL TO BEGIN WITH. PEOPLE WHO USE INDICATORS WRONGLY ASSUME THEY SEE INDICATORS ON TG. IT MAY LOOK LIKE BUY AND SELL SIGNALS TO THE INDICATOR CROWD BUT IT IS NOT. If you look at the previous chart, look at the No Demand. Those who understand VSA will know at the close of that bar that it is NO DEMAND. TG, however, will not place a sign on that bar unless the next bar closes down. SO THE SIGN COMES LATER THAN THE ACTUAL UNDERSTANDING OF WHAT IS HAPPENING. Now that makes it look "spot on" to the uninformed , but that does not change the power of the method. As far as signs changing positions on the chart, I can not comment on that. It is not a good thing to be sure. This should not be happening and may be a glitch in the program version you looked at.

I have attached the chart with a few arrows. First, let's start at the left side. The first bar with the double arrow points to a bar where SUPPLY entered the market. The bar is wide, closes up from the previous bar, closes near the low of its range, and has ultra high volume. If this bar was buying, then why did it close near its low? Many people will see up volume and up close and think demand. VSA, however, tells us that Weakness comes in on strength and strength comes in on weakness. Next skip to the next double arrow. Here we have an UP THRUST. This bar makes a higher high, closes higher than the previous bar, closes in the middle of its range and has high volume. The Professional Money is trying to get traders to go Long, when the next likely direction is down. They are trying to trick the retail trader into a bad position. So an UP THRUST is a sign of weakness. Now we come to the bar in question. We have a narrow range bar that closes up from the previous bar, closes in the middle of its range and has volume less than the previous two bars. YES, THIS IS NO DEMAND. If the Smart Money was interested in higher prices, then the volume should not be so small. The narrow range also tells us that the Smart Money is not interested in higher prices. They keep the range narrow because they know the market is weak. The retail trader thinks he is getting a good fill, and then the floor drops out.......... The last two arrows point to Stopping Volume/climatic action. Wide spread bar with Ultra High volume that closes in the upper portion of it range and lower than the previous day. BUT THE NEXT BAR IS UP. If all that volume represented selling, then the next bar could not be down. Moreover, if all that volume was selling, then the close should be on the low of the bar, not in the upper portion. On an aside, without seeing the open of the bars, It looks like we have a valid white hammer pattern setting up there. Or at least a Long Shadow that we need to take a closer look at. WRB analysis also tells us about the change/shift in supply that is happening at this key bar.