Anonymous

Great question BF. I cannot say much from the WRB perspective, as I am just beginning to learn it. However, we do see the large support/resistance zone on the left. Also note that there is a White WRB just prior to the formation of the bullish white hammer pattern. These would place the trade in the sub-group reversal meaning we are looking for the up move to be MORE than a counter-trend trade. From the VSA perspective the situation is similar but with one more key piece of information. First, we see prices falling and then we get the large volume down bar with the wide spread. This is demand entering the market. The next bar is also ultra wide with a wide spread that closes in the middle. This is stopping volume. With the close in the middle of the range on a bar with ultra high volume, we should see this bar as a transfer of ownership from strong hands to weak hands. So if the strong hands are buying the likely direction of the trend should be up. In other words, at this point we would be looking at a Reversal and not a counter trend trade. Now the added piece of information comes on the hammer line. In VSA terms this is a high volume 'test' bar. With that amount of volume on a test bar, we would actually be expecting prices to come back DOWN and re-test that area. Therefore, if the market moves up , we do expect a possible move back down. This could be a counter trend trade therefore, depending on how far the market moves up. But we do see lots of strength in the background (wide spread down bar and the doji bar), so it appears to be an up-trend trade where we may need to look out for some type of move back to re-test the high volume area. So depending on one's perspective and trading style, this IS a trend trade (reversal). The more conservative VSAer might actually wait for the re-test of the supply or a no supply signal which means NOT trading what turns out to be a counter trend trade. The WRB(primary) and candlestick (secondary) trader could take the trade as a reversal signal-not counter trend. AND be nimble enough to take the inverted dark hammer signal that shows up at the top of the counter trend move.

LOL. Walterw you do love the "squiggly line" stuff don't you.

Here's a combination chart. Notice that VSA could be used to get the same information that WRB analysis is saying on the left side of the chart. We see a wide spread bar on Ultra High Volume that closes off of its lows. For VSA, strength comes in on weakness. The next bar is key, it closes equal to the previous bar and closes in its middle and again has Ultra High Volume, this is climatic action/stopping volume. In short, Professional Money is buying. Now shift to the right side of the chart. The white hammer line is a VSA 'test' bar. It makes a lower low than the previous bar, closes on its high and closes equal to the previous bar. However, the volume is very high for a test. High Volume on a test means to expect price to come back down into that area. Price does indeed move back down after the short up burst that could be traded. Form a WRB angle, we have the large WRB that creates the support/resistance zone where the bullish white hammer pattern is formed. We first see a shift in supply and demand then a bullish candle pattern.

Nice video Soul. What do you think about your share bar setting? I notice a bullish dark (red) hammer pattern that is contianed within the range of a white (Green) WRB-the first breakout. Couple that with the fact that its at the Value Area High and wow. Once stopped out, did you get back in?

If you post-it; they will come. Just get the ball rolling and I am sure people will support the thread with screen shots and questions galore.

Yes and No. VSA teaches that markets do not like wide spread up bars on high or ultra high volume. Wide spread means high to low. A WRB is from open to close. Thus if the open=low and close=high, then yes, but not necessarily so. Of course the open could not equal the low and the close could not equal the high and it would still be BOTH a wide spread bar and a WRB. Note this is why one would also want to think in terms of Long Shadows. As far as what is underneath the bar/candle itself, yes they are vary similar. Underneath the widespread bar we have: * shifts in supply/demand * volatility * support/resistance zones-Tradeguider does not speak about this in their public forums. Yet it is inherent in the concept. If Professional Money comes in on a wide spread ultra high volume bar, that bar is naturally a support or resistance zone. If they were buying, it only makes sense that they would not want to see price fall below that bar (resistance). If they were selling, it makes sense that they would not want to see price raise above the high of the bar (support). In terms of "pushing thru supply", yes usually those bar would be WRB's. VSA's story is different. For VSA, the pros are pushing thru the area to keep people from selling, more so than keep new longs out. WRB analysis would focus on the SHIFT/CHANGE of supply/demand dynamic without the focus on the Professional Money Manipulation. At least that is my understanding up to this point. simply, WRB's represent among other things changes in the supply/demand dynamic. If the bar is wide spread on high or ultra high volume, that change in the supply/demand dynamic would also be noted by the VSA user. Not every WRB will be a wide spread bar. Every wide spread bar will, however, at least be a Long Shadow and thus still notable via both analysis camps.

Hello guys and gals, Here is a picture from another forum of a chart I asked NihabaAshi about. He graciously placed some comments on the chart. Take a look at it to see SOME of what is involved in WRB and Long Shadow analysis. The technical definition of a WRB would be the largest body (open to close) of the last 3 intervals. The number 3, however, is not important. One could use any number as long as they stay consistent. While WRB's can be used for exits (incorporated into an exit strategy), they should not be solely used in that manner. Many things can be seen from WRB's: * shifts in supply/demand * volatility * support/resistance zones * volume proxy Note how all of these things should be in consideration when looking to either exit a position or move a stop. Conversely, note how all of these things should be in consideration when looking to enter a position. With that said, I have never been a believe in one bar/candle analysis in lieu of the BIGGER PICTURE.

Yes. I was thinking about it and the range of the output is 0-1 and it is possible to open up and close outside of the Value Area. Mark Fisher's Pivot Range also can be used in this same way. It often narrows prior to volatility breakouts.

From a VSA perspective, Tom Williams would recommend nothing lower than a 3 min chart. Remember, VSA does not use volume based candles or bars. For VSA to be used one needs to be able to COMPARE volume relatively as well as actually. So one must look at the volume histogram for bar x and make comparisons to the volume histogram of bar x-2 for example. Todd Krueger recommends using multiple time frames. More generally, many people have already said it: chart interval is in some ways methodology dependant. You would not use a 250 tick chart to day trade. Nor would you scalp off a weekly chart. Yes, the above last two statements are pretty obvious, but they do hint at a the larger truth. Currently, I am learning to trade via a certain strategy that "requires" looking a multiple time charts and multiple instruments. I use a 5,10,15 min Euro AND a 30 min Euro AND a 5 and 10 min Swiss Franc. I am transitioning, however, to the YM. Once there I will use a 3,5,10,15 min YM AND a 3 min ES AND a 3 min DIA. These last two are for "sister trade set-ups". This is because I am looking for certain specific patterns that while not showing up on one time frame may be present in the ones higher or lower. Now If you were just looking to take signals off of a Pivot line , then there would really be no need to look at 4 or 5 chart intervals. If you are simply going long on a 21 bar breakout, the issue of "noise" comes in to play. Larger charts would tend to not give as many false signals. How many trades do you want to take a day? One does not want to over trade, but at the same time picking a larger timeframe may mean long periods of non-trading. Is this what YOU want? Simply, the optimal timeframe is method dependant, personality dependant, and market dependant.

BF, have you thought about exiting a portion on the first WRB and then another portion on the next WRB. Mark (NihabaAshi) goes to a higher timeframe after the first WRB. This allows one to get the most out of the trade. Currently, I am not moving up a timeframe but still look to scale out in thirds. That would mean 3 profit targets. I take a portion off as soon as the bar becomes a WRB. As I become more skillful, I know I can wait a bit get a feel for the PRICE ACTION of the bar itself. As far as what is going on during a WRB or what we can take away from them, I will defer to the master................

The short answer is no. Range = High - Low Having said that, one could try to substitute range with true range. Soul said he uses Value Area High and Value Area Low also. So I am thinking he gets two sets of numbers: the traditional %trend and the Value Area % trend. If that is correct, then I would gues one could get a True Range % trend. ***edit: Just wanted to add, that the tool is measuring market facilitation. That is, how effectively price moved thru the period. Or in a word, trend. Thus True Range may not be appropriate for the calculation. However, I could be wrong.

1. If you are asking can a trend be detected the answer is yes. You no not need to wait till the end of the day to know the market is trending. What cannot be known is how long the trend will last. 2. ABS((OPEN-CLOSE)/(HIGH-LOW) this is trend % it will tell you how much trend the day (previous) was. 100% would mean the open is on the low or high and the close is on the low or high. the idea being high trend percent days are rare and thus would not likely come is succession. So if yesterday's number was 98%, you would expect a congestion day today. Ensign software has a program that places certain day types on the bottom of the chart. It is based on a four day cycle I believe. **Now, These things are bunk. You can not know if tomorrow or the day three days from now will be trending. Moon phases, planet paths, ocean tides, hemlines, or whatever are a waist of time. Prediction is neither possible nor necessary. Learn to be in the NOW. Learn to trade REALITY. And what is reality? What price IS doing now. How long did it take you today (3/21/07) to figure out the path of least resistance was up? If you need to wait for hindsight chart to see that, you're making trading harder than it needs to be.

The two are mutually exclusive. That is, it is possible to know that we are trending and NOT know when it will end. Many people buy tops and sell bottoms because they recognize trend but cannot "predict" the end of the trend. BTW, Prediction is not neccassary, but that's a discussion for another thread. If the market is making higher Pivot or Swing highs and making higher Pivot or Swing lows, the trend is UP. The magnitude in price and time cannot be known but the trend itself can be defined. If trader x buys just as the market retraces, well timing and trade management come into play, not trend definition. How did you do on the Last big sell off in Feb? I suspect you did well. Why? Because pretty early on you realized being a seller for the day made more profit sense. In short, you knew the trend/momentum was down and you did not want to fight it. I know you use candle patterns particularly reversal signals. But you also have said that reversal signals should be taken when there is a trend to reverse. Hence you must therefore be able to detect trend. Did I read this wrong? I would say the first hour stuff only sets a bias that can on can not be true. However, what price actually does-higher high during the day tells what the trend is. And that can be seen on a chart. Lastly, Known the trend and creating a profitable strategy do not go hand in hand. Knowledge of the trend direction does not solve all the psychological issues involved in trading. You can see trend and still not have a "trader's mind". Thus, just because you know the trend does not mean your P&L goes thru the roof.

I have to disagree on this one (No not because you like the browns LOL). Technically speaking an up trend can be defined as when a market is making higher highs and higher lows. A down trend would be when the market is making lower lows and lower highs. It is therefore possible to see that a trend is in place during the day. More correctly, during the trend itself. The magnitude cannot be known before hand or even during, but the fact that the a trend is in place can. The end and the beginning of the trend cannot be known either (although we can see shifts in supply/demand dynamics and candle patterns taking place in the present). More specifically, there are clues that can be picked up in price action itself that can alert the trader that price is trending. i.e. wide spread bars with ultra high volume or WRBs or bars that close closer to the high of the bar (up trend) or low (down trend). Long Shadows or even the amount of white candles (close>open) than dark candles (close<open). Picking tops and bottoms is much more precarious, but picking trend itself is much less so. Now, if you want to know tomorrow's trend today (as a short term day trader), well see Brownsfan's post...........

Just curious. There seems to be some charts that were taken during the slow Asian session (although not neccessarily yours). I trade the same hours as well, but am transitioning to the YM. I think the hours are better. It also seems to be a favorite of the member of this thread. Plus, sister trades can be made via the ES contract. At any rate I was just wondering.

My first thought would be............ 29 trades way too many. But I know that may just be me and my personality and how that relates to trading style.

If you go to Tradeguider.com and view the most recent chart of the week............... you will find Todd is in complete agreement with you. He too sees all the supply in the market and says price needs to come back down and test the lows. Very Nice analysis. I also see a valid bullish white hammer pattern currently. The key will be once price reaches the mid-point of that WRB (ultra wide spread candle with ultra high volume).

Things to consider: * The low of the white hammer line is at an even number. It is best not to place your stop at an even number. The low of where price traded in the logical stop area, is also an even number. Hence a fixed stop (not the recommend type of stop) would want to be on an odd number and certainly placed like 1, 3 or 5 pips away. Note that an even number minus an odd will give you an odd number. * In this case the low was at around xxxx4 (example). Now we also would not want to place our stop at a round number-number ending in zero. More reason that our stop should be LOWER than the "logical stop area". * Market stops are better than fixed money management stops. Problems arise, however, when market based stops are further away than one's account size can tolerate. Note this is a personal problem and shows why trading can be so difficult. That is, the correct thing to do does not seem prudent. When in reality, the prudent thing to do is not to be undercapitalized in the first place. * As you know, this represents a Paradigm shift for me. In this method, three options are considered PRIOR to the trade entry. 1. If wrong, the market will stop out the position. 2. If the market moves against you and creates a CONTINGENCY signal a reversal of position will be undertaken. i.e. Sell twice as much as the original buy to get net short due to the current price action. 3. Price action may determine that the current trade is not optimal, yet a trade to the opposite side (contingency trade) is also not warranted. In this case, wait for the stop to be hit. And this is the one that gets me, because if the current Price Action says the trade is no longer valid, and a trade in the opposite direction is also not valid, why would one want to be in the market at all? * Volatility has to be taken into account. Would you really place a stop just below the hammer, which is within the "noise range" of the market? Clearly, when they "work" a stop just below the hammer makes sense and is the best. However, it is possible for the random noise of a market to go back down and test that area. Not to mention blatant stop hunting. * I also have to overcome my desire to let the market take me where it wants to go. That is sitting tight. Mark uses WRBs for profit targets as they represent various supply/demand dynamics. I still like the idea of being right and sitting tight. Not exiting a position with a profit. Just moving my stop until the market takes me out. * Brownsfan is correct: one must understand the underlying trend. Candle signals tend to fall into the trend reversal or trend continuation camp. They therefore should not be used to counter trend trade nor congestion range trade. The sub-group that I am looking at are either reversal or continuation.

The Logical Stop Area shown is actually 2 pips below the low of the White Hammer Line's Low. In a sense it looks larger than actually is. I am sure you see that the Pt1 was hit. If multiple contracts are used, one wants to wait for the subsequent Pts to be higher than Pt1. I am looking for a particular reliable sub-group of Hammer Patterns, not hammer lines. I do not think hammer lines, or any single candlestick, makes for a good signal. So while that is a dark hammer , it is not one that I would be looking at. Having said that, Note the large dark WRB. Note how the WRB does not trade lower than the low of the White hammer line in the valid pattern. This is key. Remember, Candle patterns are a secondary method in this context. The primary method is WRB analysis. Japanese Candlestick Patterns are dependant on Wide Range Body analysis. WRB analysis, however, is independent of Japanese Candlesticks. So I see 1 trade with some slight negative action in terms of a move lower than the low of the Hammer Line. Yet within the negative action there is positive price action confirmation through WRB analysis. I also see a nice dark hammer line, but not a valid bullish dark hammer pattern via the sub-group I am looking at. Now if one gets to the ultimate level, at least for me, I do think understanding the supply/demand dynamics would change things in such a way that the dark hammer line would be another entry. That is, one would be trading Price Action only, not the various hammer lines or patterns themselves.

Torero; quick question- When does your trading day begin and end?

Bullish Dark Hammer Here is a bullish dark hammer formation that formed on the Euro. This is a 5 min chart. What can't be seen here is that on the 15 min. at the same time a bullish white hammer pattern formed. Hence there would be two ways to get into the market. For taking profits at WRBs, it would make sense to move up the 15 min chart after the Pt1. Also note that this pattern requires certain price action after the hammer and not just prior to it. * we want to see a white WRB that engulfs the dark hammer line and is less than or equal to the high of the highest high of the 3 intervals prior.

Very interesting. Keep up the good work. Almost don't need the other candles and MAs

Technically a shooting star will have a body that is higher than the high of the preceding candles.........LoL. We can play this game all day long. Most of the time I use the term inverted hammer as well. The problem with candles is in the minute details of this candle name or that candle name. This is why the best approach is to understand the PRICE ACTION that comes before it. Is there a News event that was recently released? Price Action creates the prism through which to view the candle pattern. Also note that candle patterns work better than candle lines. A hammer is a hammer. But if there is a certain price action leading up the hammer and sometimes after, we have a hammer pattern. Hammers are important because they show shifts in supply and demand. But not every hammer line (candle) is worth a trade trigger. Hence whether it is an inverted hammer or shooting star, means little if the price action is not appropriate for a specific candle pattern. In this is case inverted hammer with the sub-group being reversal.

Wide Range Body and Long Shadow (wick) analysis are used to detemine changes (shifts) in supply and demand. WRB'S also give a visual interpretation of volatility. As for determining what constitutes a WRB, that is up to the trader. A WRB can be the widest range bar in the last 3 bars, or 5 bars, or 8. Once a trader determines what number to use, the idea is to stay consistent with that number. Note in the chart that PT 1 comes on a wide range bar 3 (WRB(3)). Actually all the targets shown do. Now the first candle you have highlighted is not a WRB(3) as it is narrower than the candle labeled pt 2. The next candle, is again not a WRB(3). Note that it is narrower than the first candle highlighted. Mark says he usually goes up a timeframe after the first PT 1 in order to stay in the move. That is a bit more advanced than where I am currently at, so I would just stay on this time frame and continue to look for another WRB. The total number of PTs would of course not exceed the total amount of contracts traded. Thus the last PT shown is PT 3 for a three lot trade or multiple of three even. Now, the fourth candle labeled is after the third Pt. It is also not the widest range bar as the PT 3 is wider. It depends on how many contracts one trades and the technique used to scale out. In other words, one could scale out in thirds, halves, or trading 5 lots, one at a time. As for the actual exit, a market order needs to be used. As soon as you see the candle is a WRB, you pull the trigger. So one does need to pay attention to the position while in the market. Remember, for the PTs shown, they would be exited before the close of the candle and while still WRBs. Once they close, they become LS.