Anonymous

This should go with the previous post. Just an example of a Test in a Rising Market. As the name implies, you wont get in at the start of the move, but you do get in when the path of least resistance is clearly to the upside.

Very nice TG. A Test in a rising market is a powerful sign of future strength and allows one to surrender to the market.

I am not concerned with picking tops and bottoms; I let them pick themselves. There is no "time limit" on when a Test can occur. What is more important, at least for me, is that the Test come within the body of a significant WRB. That is, within the range of a high volume candle. Sometimes you will see stopping volume (Ultra High Volume closing on or near the high on a wide spread candle), then you get a No Demand as price begins to move up. Now if price moves down an gives a Test, you really have something. The No demand indicated that the Professional money was not yet ready to take prices higher. They needed to see if there was any supply left in the market. Supply is resistance to higher prices. Hence, they Test the market. This entire process could take many bars or as few as three (Stopping volume, No Demand, Test). So there really is not set amount of bars one needs to wait for a Test. As far as waiting for the next bar goes, one really does need to wait. A Test is really not a Test if the next bar or bar after that does not make a HIGHER close than the Test bar. One can use "multiple timeframe tricks" to get better entries. For example, if a 10 min chart shows a bar that appears to be a Test: volume less than previous two bars, close on the high, close down from previous bar and is within the range of a high volume bar, one could go up a timeframe or two looking for clues that demand has entered the market and the path of least resistance is likely up. There was an example of this in reverse given by Todd himself. He saw a bar with volume less than the previous two, closing on its low and closing higher than the previous bar on a narrower spread: No Demand. However, the next bar had not completed (it was on a daily chart), but he used the knowledge of this bar to set up his bias for the next day. He looked to go short on signs of weakness on the 30 and 5 min charts. But now we are getting into trading technique. Generally it is advised to wait for the next bar to confirm. If the NIKKEI is different because of tick size, I would at least suggest using a multiple timeframe approach.

Wow. This thread moves at the speed of light. LOL I love it. ZDO: The book is complete. However, the software has roughly 2oo signs of strength and weakness. Many are slight various of a theme. For example, there may be 10 different No Demand signs. All that really means is there are 10 different dialog boxes associated with the No Demands, yet the definition of No Demand remains constant throughout the 10 different signs. Also Tom and Todd worked on the software together and not the book. Which means Todd added a few ideas to the software that are based on VSA principles but not specifically articulated in the book. (Early on it is rumored that Tom felt that the software had too many "signs"). In sum, the book is complete and the foundation from which you should begin your VSA journey.

Soul, I will let others comment on the VSA, except to say that I do see a good Test. Followed by a dark candle that closes lower and engulfs the Test candle signaling weakness. Because you use MP, I know you know about the Value Area trade. This seems to be a classic example of that trade. Now if you do not take a myopic look: this one timeframe and those two candles, you probably would see weakness. Once the market exits the value area and then closes back within in it (on a 30 min chart) there is an 80% chance price will trade to the other side of the Value Area. Is the market also below the POC? These would be reasons to be bearish from a larger view point. I would also add that a Test is strong (not always right) when you see reasons for the Test. That is, if there had been a large down candle on high volume or a Squat or even a no supply. All these things would be the types of candles the market would want to turn around and check to see if indeed all the sellers are done. Of course, this Test does not come within the body of an WRB...but I said I would leave the VSA to others.

Cool chart. Most of the chart is the same as the others. We get a WRB and the begin to look for a low volume sign with the body of the body of the WRB. Here, we do see a Squat (Up Thrust) just after the WRB which screams that supply is entering the market. The super quick might enter here, but I can wait for the low volume signal within the body of the WRB. Again, if WRBs are indeed changes and shifts in supply a WRB that is an up candle, showing No Demand as price trades back within that range makes logical sense. Something brought buyers in at this price area before, which created the WRB. But this time there is little activity. The bulls from the first time already got out and are not willing to try again. New bulls don't seem interested either. Anyway, what is really interesting happens down the chart where we see a No Supply candle and then a Test candle. Note that the range on the Test is smaller than the range on the No Supply. NOTICE THAT THE VOLUME IS HIGHER ON THE TEST THAN ON THE NO SUPPLY, while still being less than the previous two candles. Also note that this Test closes on the high (ideal) and is indeed confirmed by the next candle which closes higher than the high of the Test candle. In other words, the Test is a good Test. Yet, we get a dark candle that engulf the Test candle and closes lower. This means we are getting No Results from a Test, which is a sign of weakness.

Hello Soultrader, glad you're still keeping an eye on this thread. Have I thanked you lately for providing such a wonder place to meet, share ideas, and just have some fun? Thanks I will answer the second question first: yes and no. Tom Williams talks about high volume bars with narrow spreads (ranges). The question is why is the spread narrow? If the volume is high, but the spread is narrow, then the market makers, who can see both sides of the market, must be keeping the spread low for a reason. In the case of a rising market, they must be becoming BEARISH. If they were bullish then the spread would be wide. They would be charging new traders to get aboard the bull. But as narrow spread implies they see large blocks of SUPPLY above the market and thus are looking for prices to fall. In this case the are more than willing to give the herd what appears to be a good price-narrow spread. Now, what we have just described is a situation where the range of the bar is narrower than the previous bar and the volume is high to ultra high. Bill Williams' short hand definition of a squat is a bar with a narrower range than the previous bar and more volume. So, while Tom does not mention the term squat specifically, he talks about the concept. The actual definition of a squat is a bar with increasing volume and decreasing MFI. However, the short hand definition does the job. According to Bill, all trends will end in a squat as the high/low bar plus or minus one bar of the same time period. Of course, NOT ALL SQUATS ARE CREATED EQUAL. That were VSA takes the lead. VSA tells us to look for high or ultra high volume with the squat. Bill says, "The squat it the last battle of the bears and the bulls, with lots of buying and selling but little price movement. There is an almost equal division between the number and enthusiasm of both the bears and the bulls.........." Trading Chaos, P.93 He is right on squats but wrong on concept. The most import group, the Smart money is decidedly bullish or bearish and the little guys are in the opposite camp. The spread is narrow not because the battle is evenly waged. It is narrow because it is not.

Just a quick observation that can be totally off the mark. You have a blue line on your chart. I am assuming that this is a pivot line or Market Profile value area line or Fib retracement line. In other words, the blue line is delineating an area where you should be looking for certain price/volume clues. Now look at the portion of the chart in the circle. Note that there was high volume up bar which contained some selling. But a few bars later the Professional Money is Testing for supply right around this line. The point: of all the things you have arrows on, the most important ones come near this "pivot area". That is the reason you have the line on there: to focus you to changes in supply and demand at certain predetermined levels. See my previous post as it also speaks about the circled area on this chart. Also, I would add that if that high volume bar is also a WRB, then I would have the type of set up I like to talk about. While most of the areas you have marked don't actually become trade set ups as I see them.

"Markets will frequently have to rest and go sideways after any high volume up-days, because the selling has to disappear. Remember, selling is resistance to higher prices! The best way for the professional traders to find out if the selling has disappeared is to 'Test' the market-that is, to drive the market down during the day (or other timeframe) to flush out any sellers. If the activity and the volume are low on any drive down in price, the professional traders will immediately know that the selling has dried-up. This now becomes a very strong buy signal for them." Master the Markets,Tom Williams P.39 Nice chart of a couple of would be signs of weakness that are actually signs of strength in their failure to produce weak results. Markets do not like high volume on up days (bars) as it could contain selling within them. Hence, very often after a high volume up day (bar) the market moves sideways. On the 5 this is what happens after we see the Squat. Notice that the market basically moves sideways on this flood of supply (selling). Within this sideways action, we get an Effort to Fall candle. This is an attempt to move the market down. Yet, note that price does not trade lower on a closing basis. A few candles later, we see a Test. An Effort to Fall, which is a WRB, without result than a Test for supply within its body.

Here you go: Price may move back into the area of this Ultra High Volume and Test or show No Supply.

It looks like a Test to me but it is not truely a test until or unless I see a close above the high of this potential Test bar in the next 1 or 2 bars. Simply, this is not a confirmed Test. Based on what TG said, we could see a Test (confirmed) then prices start falling down. Once we would get a close below the low of the test bar, we would have No Result from a Test. This is weakness. The more likely situation, however, is that a confirmed Test would signal a move higher. We do have a Wide spread bar that closed lower and closed off the low with the next bar down. Relatively speaking, this bar had very high volume. This would be Demand entering the market.

ALL OF THE ABOVE. An ideal Test would have volume less than the previous two and be lower than the high volume area it's testing. Some Tests, however, will have higher volume than the previous bar and still be low in relative terms. Read that again. A Test, which is a low volume signal, can have increasing volume. A failed Test will have high volume. That is why it fails. They are looking to see that there are NO SELLERS and are finding sellers, as evidenced by high volume. (we would also consider a Test a failed Test if the market does not make a close higher than the close of the test in on of the next 2 bars) I use a simple 30 moving average of volume. This is what Tom talks about in the book.

Thank you Nick. Your insights and participation can only make this strong thread even stronger.

You mock, but this is actually a very subtle way to understand pivots. That is, one should be using them to focus attention of price patterns, volume patterns, indicator changes :doh:, et all. In other words, just because price moves down towards s1 you should not go long. But you should start paying more attention to what price does as it nears this area.

Interesting chart(s). Again, the logic is simple. When we see a WRB that happens to be an Effort to Fall, we know that there is a change or shift in the supply/demand dynamics. Here we see that we get No result from that Effort to Fall as price never makes a lower low or a lower close. Price moves up then falls back a bit into the S/R zone created by the body of the WRB. Now, logically, if this was an area where supply was being dumped, then a "test" of this area for supply would make sense. This is what we get. Now we have our low volume sign in the area of previously high volume. On the 5 min, we just need to look for a point to get long. The first Test is such a place. We know what the 15 looks like at this point and we now see a valid test on this chart. Note that the second Test comes after we get No Demand (see previous post or book). This second Test also appears just prior to the second Test on the 15. The Test on the 15 shows up at 1815. The Test on the 5 appears at 1810 and confirms at 1815.

DON'T GET CAUGHT IN THE FOLLY We can spend much time trying to figure out what a particular bar is or is not. There is a reason to do so and it is important. However, when we look at the chart, we need to understand what has come before. I have shown a duel screen method and talked about "looking left to trade right", this concept remains even when looking at a single chart. We want to look left. That is, what is in the background? Check out the chart below. There is a logical progression on this chart that I would like to point out. First we see a High volume down bar that closes in the middle to upper portion of its range with the next bar up. Clearly, there is Demand on this bar. If the high volume represented selling, then the next bar should not be up. This up bar turns out to be a WRB. We know that WRBs mean possible changes/shifts in the supply and demand dynamic. Something is changing here. Now price starts to rise and we see a No Demand. No demand means that there is no Professional interest in higher prices at the time. But why? If they are not interested in higher prices, must price be going lower? Well, price does fall a bit. Now the LOGICAL thing to do is to test for supply under the market. If there was supply this would confirm the reason for the No Demand we saw earlier. THIS IS KEY: A REPEATABLE PATTERN MAY BE HERE-NO DEMAND FOLLOWED CLOSELY BY A VALID TEST. THIS WOULD MEAN STRENGTH. We do indeed see this pattern. With the strength we have seen in the background and now a valid Test following a No Demand bar, we have some assurance that the path of least resistance is up. Let's think about the WRB for one second again. By definition a WRB represents a possible change/shift in the supply and demand dynamic. Logically, therefore, a valid Test should appear within this range. So too would the significant No Demand or No Supply bar. But again, understanding where we have come from (left) is vital to understanding where we are (now) and to where we may go (right). So the folly: looking at any one bar in isolation. VSA unfolds and flows like a river not a single drop of water.

Quick post. For those interested, I just received and viewed Gavin's Chart of the Week. He said the price on all CD programs (BOOT CAMP) are going up $100.00 in two days (November 10,2007). While the boot camp would still be worth the price, if you are thinking about it, maybe you should act now. The software is going up too, but we know that it is not necessary.

Nice. Thank you very much. Note that we do see an up bar on low volume that is a test.

Go back to your original question. Can there be up bars that signal no supply? While a Test bar is not the same as No Supply, it can close up. Now, what is being tested for is Supply or Sellers underneath the market. In other words, an up bar on volume less then previous two does not have to be No Demand. You have pointed out such cases in your posts. In general, however, Up bars would be where we find weakness: Something else you have correctly pointed out.

Here's an old chart that shows a few different Tests. Note that the Test which is part of the valid doji pattern closes up, but is a sign of no supply. The fact that volume is low as price traders lower (although closing higer) speaks of no willngness by the Smart Money to be sellers. After the Squat there is another Test bar. Again, we close on the highs with volume less than the previous two bars, but we close higher than the previous bar. Were it to close lower than the previous bar it would be the ideal test as it has a narrower range, closes on its high and trades into a previous high volume area. The next Test which comes a few bars later, closes down from the previous bar. The point is that you can have an up bar that singals "No Supply". It comes in the form of a Test. That is what they are testing for: supply/sellers.

This would be the exception to the previous post about up bars showning No Demand. It is possible to have a Test that closes higher (up) on low volume (volume less than the previous two bars) and close on the high and trade lower into a previously high volume area. While this would be an up bar, it is not No Demand, but a Test which would indicate no supply below the market. However, this would not be considered the ideal type of Test. We would rather see the test close down. Hence being congruent with the idea that down bars on low volume are signs of strength.

It was me. I use a combination of trailing the stop based on the appearance of WRBs and VSA signs. Hence, VSA is used to manage the trade. This is incorrect. Low volume up bars shows NO DEMAND. Volume is activity and low volume (volume less than the previous two bars) means that the Professional Money is not active. That is, they are not interested in higher prices at that moment. Again, strength comes in on down bars and weakness shows itself on up bars.

Just a pic of the EURO. This is an example of Looking left to trade right. We look to the higher timeframe to indicate how we want to trade the lower one. When it all comes together, the higher timeframe will often LEAD the lower one. That is, it will actually show a signal PRIOR to a signal on the faster moving chart. Sometimes this takes patience, but said patience is usually rewarded. Interstingly, there was a valid set up during the low volume time which occurs before the big news hits the air. In other words, one could of already been long when the euro jumped up. This begs the questions, What did the Smart Money know and when did they know it?

Which is why I don't spend much time thinking about targets. However, for those who do and trade gaps, I was just showing that the gap was filled and that would be the first logical target for that type of trade. Hence the term, gap trade. I would still be long with a stop just below the candle 4 back. Whic is both a WRB and a Long Shadow.

While I don't spend much time thinking about targets, clearly the first target here would be a close of the Gap. As the saying goes, "Gaps are filled". Many traders trade gaps. If you had seen the test and the strength prior to it, then there would be all the more reason to trade the gap to the upside. It should also be pointed out that we are looking at one timeframe only. Nice trade. We don't have to hit a homerun every timed. Bat for average.