Anonymous

Thank you for starting this thread. I hope it will continue to grow and be a real source of learning and sharing of ideas. Volume Spread Analysis is a very valuable tool in my opinion. Just some quick observations: 1. We have a wide spread candle with volume that is higher than any volume bar that can be seen on the chart. This candle closes lower than the previous candle, but in the upper portion of its range. Clearly there is demand (buying) going on in this bar. VSA does not care about the open, so the fact that the candle is red means little to use. (personally I do like to see the open on some candles, but technically we do not use them.) The more you use VSA, the more you will see Professional activity around the key numbers (aka Floor pivots). Time and time again, the Smart Money shows itself around these levels. 2. The very next candle is narrow, closes down from the previous bar, closes near its low and has volume less than the previous two bars. THIS IS NO SUPPLY. immediately after the Smart Money enters in the form of demand (buying), there is a No Supply bar. That means all the excess supply was soaked up on that wide range previous bar. Note surprisingly, the previous bar has a long tail where supply was swamped by demand (buyers swamping sellers). 3. While not VSA, the No Supply bar shows a divergence with your Delta tick tool. Very interesting. VSA gets its roots from Wyckoff more than 100 years ago. Way before any tick delta tool could be made. Not saying it's a bad tool, saying it is great how this new tool hits the nail on the head in this situation. the 1520 bar looks like another No supply bar and again there is a green dot on the bar. 4. Price comes back down to the area of the pivot. This bar is wide spread with volume less than the previous two bars and closes in the middle of its range. Again, No Supply. Bars that close in the middle of their range should always draw your attention. Look one bar back. This bar has high volume-relative to the volume bars before it. Now if this bar, which closes down, was truly weakness then why does the next bar close equal to it and not down? Because there was some buying going on in the bar. Note that this last No Supply bar actually has less volume than the first one in this same area. At this point, price is definitely poised to rise........... P.S. LOL I just realized that TTM (or H.A.) is on the candles, so I could be wrong about the close of these candles

Still working on them. If you're interested in the idea, take a look at Traderxman's posts about the method. Take a volume histogram and determine a way to classify volume as high, ultra high, average, etc. In Tom's book he says to compare the last 30 periods. (Tradeguider-the company that bought the rights to Tom's work, will not disclose what they use for their volume bands). On an aside, this makes at least some of what TG does Black Box in my opinion. Anyway, I place a simple 30 period moving average on volume. Then I use standard deviations of that to determine various levels. This would seem to be vary close to what MATS does. Mats trades off a 1 min chart but also looks at Market Profile. Probably a typical 30 min profile. So using a 30 minute average seems to fit into the Auction Market Theory concept as well as standard VSA.

Thank you for the kind words. May I say the feeling is mutual. As for the chart shown. The No Supply bar is a narrow bar that closes on its middle or low with volume less than the previous two bars. With volume less than the previous two bars, we know that there was no real selling pressure or interest. VSA teaches us that 85% of a volume bar is Professional Activity. And it is their activity that we are interested in mirroring. If the bar is low than they are not interested. (of course 85% of a low number is still more than zero- so they are still present.) In VSA, however we look at relative volume. That is, volume compared to the one bar ago or two bars ago. We are not concerned with actual volume numbers. We do look at actual volume as well, but again not number but we gauge actual thru the use of moving average of volume. For example, the tradeguider charts have the relative volume bands and when a volume bar is in the salmon colored area, it is Ultra High. As for the test. This test is not a narrow range test. The ideal test bar would have a narrow range, close below the previous bar, close on or near its high and have volume less than the previous two bars. Tom does not look at the open but I think sometimes the open helps. In this bar look at what must of been the case: 1. the bar opens and price is 'marked' down 2. buying comes in and pushes price up 3. Price trades higher than the open to make a high 4. Price settles back down where it opened on the close. In candle terms this is a Doji. From the VSA perspective, the Smart Money is not interested in lower prices. But before they mark prices up, they need to be sure there are not any sellers. What the Smart Money usually does not want is to do is buy supply at higher prices. They would rather buy up the "paper" at lower prices and then sell to the retail trader at higher prices. So they purposefully take price down to see(test) if there is interest. If the volume is high, then the market is not quite poised to rise. If it does rise, the up move is muted and price tends to go back and retest in the area of the original test.

I'm totally on your side here. Paper trading is a waste of time. That is why I like forex. You can trade a micro account in the real market to test ideas. In some cases, the account can be funded for like 10 bucks. Usually you need about 250.00. The idea is not to get rich on the initial deposit, just something more real than paper trading and less over-whelming than a full size contract while testing out ideas. And since a chart is a chart is a chart, it doesn't even matter if you ultimately want to trade index futures.

Just a quick post. While this is not the best time of day/night to trade, we often can see good set ups. Here we force Professional Money to show itself at the POC. Note that we get a red paintbar. This bar closes on its low with higher volume. The low close tells us that this is a weak bar. The next bar, however, is narrow and has greater volume with an equal close. A close that is also in the middle of the range. There is demand (buying) in this bar. Two bars later, we see a narrow bar that closes on its lows on volume less than the previous two bar- NO SUPPLY. Perfect place to get long. Tom Williams really likes this type of set-up. Two more bars later, we see a bar that closes lower than the previous bar, closes on or near its high, makes a lower low, and has volume less than the prior two bars-THIS IS A TEST. The Smart Money is testing for supply. If you missed the first entry, here's another chance to get on board. Catching tops and bottoms is nice, but getting into a trade knowing you're on the same side as the Smart Money is better.

I truly believe that by combining Volume Spread Analysis with Market Profile/Auction Market Theory one can create a powerful way to view, understand and trade the markets. All markets are governed by the laws of Supply and Demand. Specifically, the imbalances of supply and demand brought about by Professional (or Smart Money) traders. The place to begin is with the book, Master the Markets by Tom Williams. Currently it is only available at Tradeguider.com. They have told me that they are looking for a publisher for wide spread (no pun intended) distribution. Personally, I do not like the tradeguider software and that is ultimately what they are about. However they do offer a lot of free information on VSA. Tom Williams took the Wyckoff (concepts) course and expanded on the concepts. Wyckoff looks at price and volume. Tom looks at volume, spread (range of bar) and closing price. Friday morning 0815 EST they are running a public demo. Go to the web site and click on enter site, if you are interested. Tomorrow (3/9) will be interesting as it is a big "news day". Professional money uses news driven events to manipulate the market. There should be ample opportunities to see them in action. Of course, many of you will be trading the event yourselves, but if not check it out. On the site there are a number of webinars that can be viewed for free. There are also some webinars on the CBOT site.

Yes, we would call that a buying climax. While the bar closes on its high with high volume, the next bar is down. If that bar did represent demand then the next bar should not be down. Thus, Professional Money must of been selling into the buying (supply swamping demand). The close is one way we gage "what has been done on x amount of volume". I don't know if you can be so quick to dismiss it. Moreover, and from a non-VSA point of view, the close is the last agreed upon price for that time period. So it is important. Remember, the market exists to find that point where there is a disagreement of value and an agreement on price.

Yes, the Enthios Universal Method is based on the propensity of price to reverse at a VPOC. Soul, the POC acts like a magnet for price the following day. I'm kind of surprised you don't pay more attention to it. I guess the rarer occurrence (an untouched point of control : Virgin POC) is the more sought after situation. (insert own innuendo here :o ).

So it is not just me.

This thread got me thinking about MATS. I really like that is uses no technical indicators. Moreover, I like that its concepts are rooted in Market Auction Theory . At one point I was working with this method (not the real one, but my attempt to decode it from what is on the site and what Dave Johnson told me) and did find some value. The problem was many times at tops and bottoms it would be wrong. This lead me to VSA. It does a good job of determining tops and bottoms-the result of imbalances of supply and demand. Since both methods do have volume at their core, I have been thinking if it is possible to combine the two. Still looking at it but Here is what I have so far. A Balance Area is formed when there are two or more paintbars in a row. On the first non-paintbar, after the Balance Area is established. Note there are 3 Balance Areas on this chart. The middle one is a HV Balance Area. This Balance Area is interesting. Note that the first bar is wide spread up bar on High volume that closes in the middle of its range. VSA tells us that a bar like that must contain Selling (supply). The next bar is key. This bar closes below the previous bar . Therefore, the first bar could not of been all buying. If it were buying , then why is the next bar (this one) down? So while the Balance Area is created basically by the range of one bar, we know it is a selling Balance Area. Check out the small "c" on the second bar. This is a Volume Churn, or squat bar. We have volume higher than the previous bar and an equal or lesser range. Buyers have stepped in on this bar and are keeping prices supported. Market Makers, who can see both sides of the market, are keeping the range narrow as they can see Buy orders on their books and thus expect higher prices. Note that we now see an area where the bulls and the bears are indeed "fighting" for control of the market. Mats would place an order one tick below the midpoint to go short a Selling Balance Area. However, I like the idea of waiting to see either a NO Demand bar (x's above a bar) or a Volume Churn bar. We could also look for Up thrusts preferably inside the Balance Area. There is a squat and a No Demand bar that could be used to enter at the first selling Balance Area on the chart. The close of the squat is inside the BA which is ideal. The No Demand is just outside but within reason. Of course, if you short on the squat, then the No Demand is only there to give you some confidence and not trade entry. Hopefully, Traderxman will find the time to share some of what he knows. I do think it is worth pursuing.

Volume Spread Analysis teaches us that volume is activity. Volume should be looked at in two ways: 1. relatively- today's volume compared to the previous bar or bars 2. Actual volume In this case the up day has come on volume less than the previous two day's and closed on its high. This is No Buying pressure. In a perfect world, today would have actual volume that was less than average, but the fact that it is relatively low is enough. It may be the case that the Professional money is not interested in higher prices at this time. 85% of all volume represents Professional Money so if it is decreasing, their activity, or interest, is decreasing. Why would their interest be decreasing? They do expect higher prices at this time.

Think you can or think you can't; either way you will be right. (note: this is not a substitue for a trading plan )

Yes. Sorry if that was unclear. There is a reason that the rectangle contains these 5 bars. Each bar plays a role in the set-up. If there is not an up bar in the next two bars after a test, the test has failed and the market is weak. Yes, one must wait for confirmation. Think of it as a candle pattern. On another forum, there is an excellent thread on hammers. The author makes this point: a hammer is a hammer line UNTIL the pattern is complete THEN AND ONLY THEN does it become a hammer pattern. And in some of those patterns, the hammer comes before the completion of the hammer pattern. That is, the hammer itself is not always the last bar in the set-up. If there is not an up bar in the next two bars there are two options: 1. Understand that no up bar means the market is weak. Thus look for reasons (more) to now be a seller and a place to sell. 2. Wait for another test that is confirmed to go long. If the market is actually strong, there will be another test or shake out. Or maybe you will see a wide spread bar on ultra high volume that closes down. We know this bar is potentially strong. Then you see a No Supply bar. This is an off-shoot of a 'test'. I like to see them at support in order to use that area for stop placement. However, if I have to wait for full 'test and confirm', a good place to put a stop is always just below the low of the test bar. By definition, the Smart Money did not find any sellers below this level (at that time). Therefore, if price trades lower than that, something has changed. I think most people look at reward incorrectly. How much can be gained in a trade is not truly known until after the trade ends. I do not use profit targets, as that is speculating on the future when it is not necessary to do so. So I will stay in the trade until the market takes me out. I look at like this: 1. assume we have a market that has moved from 10 to 20. 2. one enters at 20. This is after a 100% rise. 3. if the market moves to 110 then the trader has gotten in within the first 10% of the move. 4. The risk was a pull back to 10, so the risk/reward is 10/100. But suppose the market only moved up to 25. The risk/reward would be 10/5. Yes, a trader will not be a trader for long with this risk/reward. BUT ONE DOES NOT KNOW HOW FAR THE MARKET WILL GO. THE FUTURE IS UNKNOWN AND NOT KNOWABLE. This is why in this case, one would not want to wait until the market moved back to 10. At about 15-13, a trader should recognize he is on the wrong side of the trade. Why wait for the stop to be hit? On the opposite side, if you are in tune with the market, grab every pip/tick/hand/point it is willing to give you. Will you get every last point? No. The market will turn around and eventually stop you out. But one need not be concerned with getting in at the bottom and getting out at the top. The middle is where the reward is at. To the extent that there is an element of control, that control comes on the risk side. Good stop placement, Willingness to admit one is wrong and get out, and precise trade entry all combine for some modicum of risk control. Reward will take care of itself. No. You have to wait and see what happens. Does the next bar close up? IF there was buying on the down day then the next day should be up. But the next bar could be Down. Wide spread down days with ultra high volume can be either : 1. Pressure to Fall (p. 166) or 2. Hidden buying. You have to wait and see what the market does with that volume the next day. Now, Tom Williams, the father of VSA, would enter on the close. He is the exception rather than the rule. Most prefer to wait for the confirmation on the next bar. If we are talking about Stopping volume or a Selling Climax. Generally, looking for the test or a no supply bar after the initial buying bar offers the best low risk entry.

Once the 'test' is confirmed. That is the close of the up bar after the possible 'test' bar. Which makes it a 'test' bar. So close of the confirmation bar/open of next bar. criteria? That's it. Professional Money showing itself at a support/resistance area-the Value Area Low. Track Professional Money then jump on their coattails. The when and the why from previous post.

Cisco futures has some good material online as well.

Nice work, very informative. How do you view the record high volume from yesterday? Does that matter in the profiles at all?

Like I said, I don't really like indicators. But here is an example of the WEX showing divergence. Notice how we are making lower lows but the Effort to Fall is not as great. In Physics, when the momentum is slowing down, they say the momentum in the opposite direction is increasing. Here we can SEE that as the Effort to Fall decreases, the Effort to Rise increases. In fact, we move to VSA. The first large wide spread bar (in the rectangle) closes lower than the previous bar, closes near the middle of its range and has high volume. THERE IS PROFESSIONAL DEMAND (BUYING) IN THIS BAR. Note also that we close just above the lower purple, Value Area low line. We would expect to see some support at this level. The next bar does indeed move higher on lower volume. Then on the next bar we see a narrow range bar that closes near its highs on volume less than the previous two bars: No Demand. The Smart Money is not yet ready for higher prices. One more thing needs to be done..... On the very next bar, we get a 'test'. The Professional Money is testing for sellers (supply) underneath the market. While the volume is a bit higher than we would like to see, the bar does indeed trade lower than the previous bar and close near its highs. Again, notice that the test bar trades down to just outside the Value Area Low (lower purple line). The last bar in the rectangle is an up bar (higher than previous bar's close) and confirms the 'test'. While the indicator shows divergence at this level, the key to getting in tune with the market is reading price and volume. In truth, an indicator only trader may have gotten in sooner. But the Volume Spread Analysis user knows why he is getting in when he gets in: Supply and Demand imbalances brought about by Professional Money.

I do not talk much about it, as I don't really like indicators. Wyckoff Effort IndeX (WEX) Volume = Activity= Effort=Order Flow Price=Result The basic idea comes from Wyckoff. It measure the amount of effort to rise and the amount of effort to fall. Effort is the volume and is seen thru the open/close relationship. Open<Close Effort to Rise. Open>Close Effort to Fall. What is nice about this is there are no parameters or averages involved. It simply sums up Effort to Rise until it sees Effort to Fall. Note that a "doji" a sign of indecision is summed up as both Effort to Rise and Effort to Fall. For those who like such things, this tool is good for divergence. Note on the attached chart the Effort to Fall as prices moves down towards and then thru the lower portion of the Value Area. p.s. For those familiar with Ensign Software, this is also known as VolumeSum

Nice. The markets are moved by imbalances of Supply and Demand. Here's a look at the Euro. First, Markets do not like Wide spread, high volume or ultra high volume bars that close up. Why? Because of the possibility of Professional Selling into the bar. As VSA teaches, strength comes in on down bars and weakness comes in on up bars. I have placed pink lines at some areas of Resistance. These are areas of supply. Some traders have gone long at these levels. Their only hope going forward is to get out at break even. Hence, if price moves back into these areas, we would expect to see them sell (SUPPLY). Professional Money knows this. So what do they do if they know prices are going to rise? They have to absorb the supply (buy). Now if they are buying high, they certainly expect prices to go higher. Note the first bar with a green arrow. This is a wide spread bar but the volume is not that high. This is a "healthy" up bar. That is, this is the kind of up bar the market likes. The lack of ultra high or high volume lessens the chance of hidden selling within the bar. Now check out the very next bar. If you think this is weakness you are wrong. This is absorption volume (volume is ultra high). Note that this bar trades through the resistance tops and the POC (yellow line). THIS IS PUSHING THRU SUPPLY. PROFESSIONAL MONEY WANTS TO KEEP THE LONGS FROM SELLING (SUPPLY). SO THEY RAPIDLY MARK PRICES UP. IN THIS BAR, THE MOVE IS TO LOCK TRADERS IN, NOT KEEP TRADERS OUT. The late shorts now have to buy back their positions, placing more order flow on the dominant side (up side) and further hurting themselves. The next bar is key. Note that it closes up on less volume. Had this bar been down, then we would have to think there was actually Selling in that bar by the Smart Money.

The trinity of successful trading: 1. A trader must accept loss. 2. A trader must accept the uncertainty of the results of any given trade. 3. A trader needs to think in terms of overall probabilities. (Trade for expectancy not accuracy.) " Successful traders accept and expect losses. Losses are endemic to trading; they are the cost of doing business. The consistently successful trader accepts deep in his heart that his winnings will be tempered with inevitable loss. But the trader anticipates his ultimate triumph because he has structured the probabilities in his favor".----LBR

Mats: market auction trading system. I was into this prior to finding Volume Spread Analysis. Actually the fact that there were so many times when the market would have higher volume bars and then change direction lead me to re-evaluate the method. Instead of just moving down to the balance line and then turning up, the market would continue lower, for example. It neglects the fact that weakness comes in on strong bars and strength comes in on weak bars. I liked the Market Profile elements underlying it. Plus the fact that there are no indicators. I do think that is has some value. He does use Squat Bars, or Volume Churn Bars. I think some other elements maybe valid. Would love to hear more about it. Do you use this method? Did you take the course, or just "decode" it?

Here is an example of what I was talking about. The entry is on the open of the bar with the green arrow. As this thread is not about VSA, I will not get into the set up much. I will say that the entry comes after a confirmed 'test' of supply. Professionals checked for sellers underneath the market and found none. The lower purple line is Value Area Low. The pink line would be the initial stop. Here we have the best of both worlds: 1. Close stop 2. Stop based on reality (market). With a stop that close, you might not even have a chance to exit prior to it being hit. On the opposite side, note that only one 5 min bar with equal close to the close of entry bar. After that bar, we are in a surging market and on the correct side. We are in tune with the market. Pretty instant gratification. We are patient while looking for the set-up, but once in we want immediate gratification. Now, suppose are stop is lower. From a market structure point of view, a close below the Value Area Low Pivot is bearish. Therefore, even before our stop is hit, conditions for the long trade are nullified. Why then would we need to wait for the stop to be hit?

Like I said, a time stop is not about what the market wants, but rather about what I want. However I do understand some of what Mark Fisher is talking about. Assume there are two types of traders: 1. the quick 2. the dead. The quick are characterized as those that can both see and seize opportunities in the beginning stages. The dead need more and more confirmation to recognize opportunities. They rely on word or mouth, news events, and various other ways for confirmation. The dead are thus late to the party. They tend to be buying tops and selling bottoms. Now let's suppose you are on of the quick and you buy the market at 100. 30 minutes later, price is still around 100, say 99-101. Now the dead are starting to come to the party on the long side. Mark is saying, if everybody can get in at the same price you did then the trade cannot be all that good. Here we see that. The dead are now able to enter at pretty much at the same price you did. This is a clue that you are not in a good trade. By definition, the dead are late and wrong more than right. So if they are going long.............. We are not so much talking about buying bottoms and selling tops here. What we are really talking about is the idea that once everyone else recognizes the value of the trade, the largest part of the opportunity (and some would say, easiest) is usually over. Now, If you could focus on entries that are closer to the point where the dominant order flow changes, then the market should spend less time in a 'no-go" state. If you can go long as the loser (the dead) has to sell against himself (close his short) than you can use the oder flow in your favor. From VSA, we can see where the Smart Money entices the herd into a losing position so the herd has to close out at a loss, but in so doing create even more movement against themselves. In other words, if you can enter at points where the market tends to react from, then the positon doesn't have to move against you. Nor do you have to sit and wait for the actually price run to start.

Here we go again LOL. I really do like hearing your thoughts. Hope the same is true for you. A protective stop is used for protection. It is placed to get a trader out of a bad trade. During the trade itself, some traders would be inclined to sit and wait , and worse, hope. Hope that price will turn around and prove them right. The stop loss is placed to keep a loss from becoming bigger than it has to be, because the trader couldn't do what needed to be done-admit he is on the wrong side and get out. If you place your stop at a level where the analysis that caused you to go long (for example) would be no longer valid, then it is true that your stop being hit would mean you are wrong. But if you use a money management stop, it can just mean you are wrong on timing and not wrong on direction (or overall analysis). As far as too far away, you know the 15 ticks was just an example. As previously stated, the "best" type of stop is a market stop. Many times I find that this stop (based on old highs or lows, pivot levels, Value Area,etc) can be too far away for most people. If that is the case, then the stop used is based on account size and says nothing about market reality. But if one's stop is just about account size, why does one have to lose all the entire amount of the stop? Wouldn't it be prudent to exit prior to the stop loss and save money? Yes one may be willing to lose 150.00, but that does not mean one has to. Get out after losing 75.00. I hesitate to use numbers for two reasons: during a trade one should not think in terms of money gained or lost, but rather points/ticks/pips. And two , people will question the 150.00 number as if it is real. It is just an example. BTW, thanks for your help in the previous thread. You helped me get back on track. I was not really a fan of the time stop,luckly, it had not been an issue in real time.

Nice video, thanks. I like how you use the daily for levels rather than trend identification. For me, if I determine the daily trend is up, then it would be hard to take short trades on a lower timeframe. Which is why I don't attempt to define the longer term trend. It is good, however, to step back and see the forest every now and then.