WHY?

The 30 minute chart indicates weakness. No demand. Next to last bar.

You have an interesting way of looking at Taylors concepts. I can see you have put alot of thought into Taylor. Could you please post a simple bar chart of the last 20 days (if possible) of the trading sessions that would also include the days of your last chart? Also include the volume and the open and close on the barchart. I want to check something out and need more days. Thanks!

Well from what I understand about VSA (and I am in the learning stage.. at the begining) it appears to me the market here is weak according to VSA. We have distribution in the background. A couple of upthrusts. A narrowing of the range. It is like the market is stuck in distribution with not much distribution taking place at the moment. However, it is possible that the distribution at this level has already taken place and it is now consolidating before moving up again. The next bar or two might tell the story. If I were trading this I would not go neither long nor short at this point in the game but I would wait for more info. To use another of Toms concept; If a market is showing signs of weakness but instead goes up then that is a sign of strenght. To sum up, I would wait and see if the present weakness is confirmed. If the market should go down and doesn't go down then I would take a long position but only after confirming this fact. If it does break south over the next 1 to 3 bars then I would short. Sounds like double talk here but this one is hard to call. I simply could not take a position based on the info I have in this chart. I would need more confirmation at this point. The narrow range won't keep going on. It must open up sooner or later and most probably, sooner. It remains to be seen if that will be down or up. If down then that would confirm it for me depending also on the close and volume of that down bar. If up then I would be looking to go long depending again on the close and vol of the up bar.

For whatever reason, this three day cycle does exist in most stocks and commodities. Taylor identified this cycle and devised a system of what to do for each day of the cycle. Each day in the cycle has a distinct name and specific strategies. The first day is called a BUY day. This is when the market is taken down by the "smart money" to create a buying opportuntity for themselves. The next day is the SELL day and this is when they run the stock up to create a sell opportunity. On the sell day they sell the long stock they just bought on the buy day. The third day is the SHORT-SELL day. On this third day they run it up a little more and dump the rest of long stock they have left over from the sell day. Finally, they then short the stock on the SHORT-SELL day. The weight of this shorting puts too much supply on the market. When supply outstrips demand the rally of the SHORT-SELL day stops and prices fall. They then cover their short on the same day or next day (which is a new buy day in the cycle). The order is generally BUY day, then SELL day, then SHORT-SELL day. That completes a cycle. Then the cycle starts over again with BUY day and goes on.....There are variations to this theme but that is the basic theme under ideal conditions. However, conditions aren't always ideal in the market and Taylor devised means to deal with less than ideal circumstances. How can knowledge of this three day cycle benefit you as a trader? By helping you to profit from the daily price movements that take place over the three day cycle. It is necessary to understand that the rise and fall of daily prices are after a PATTERN, tend to be REPEATABLE, and because of this they become somewhat PREDICTIBLE. These patterns tend to STABILZE the market, otherwise, prices would shoot straight up one day and straight down another day. They also create trading opportunities for the astute trader. Remember this: Profits in all stocks and commodities are only made possible when prices move. If it can be established that most of these movements have a pattern and this pattern tends to repeat itself, over and over again, then a case can be made for ANTICIPATING probable prices in the near future. Check it out for yourself. Most stocks and futures follow a 3 day cycle. Sometimes there is a variation of this cycle and it may be 4 or 5 days instead of three days but the point is the cycle exist. When there is a variation Taylor had rules to deal with it. What is important to understand is that a short-term trader can capitalize on this cycle to make money. Three ideas explain the existence of this three day cycle, the structure of it, and the purpose for it. The FIRST idea is that prices in the stock market and in commodities are MANIPULATED. The three day cycle results from "smart money" moving prices to their advantage. There may be differences of opinions as to whether or not manipulation exist. I believe it does exist on almost a daily basis in individual stocks and commodities. One thing we do know. The three day cycle does indeed exist. Maybe you feel that if such a cycle does exist, then it must just be the pressures of supply and demand in a free market that causes the cycle. Who knows? What really matters is that they do happen and you can make money on them. Whether or not they are actually caused by manipulation is hard to determine, but manipulation does fit well in the theory. If you subscribe to the idea that stocks and commodities are manipulated then the appearance of these three day cycles will probally make more sense to you and the cycle will be understood as something created by the manipulators. Their reason for doing so is to create buying and selling opportunities for themselves. You might say that "smart money" has the muscle, and reason, to move stock prices. A SECONDARY idea is that this manipulation is carried out in STAGES over a period of 3 to 5 days. These stages become the elements of the three day cycle. Understanding the stages and knowing how to recognize them gives you an idea about what will most likely take place next, in terms of prices and direction of movement. A THIRD idea is that since the cycle is usually done in stages then prices will tend to form in a REPETIOUS manner. In other words, pricing action will tend to repeat because the manipulators are doing the same thing over and over. The manipulators may move the market down but they also have to support the market if they wish to continue using the cycle to make money. They may start a rise in prices but they must be able to stop the rise by selling the market with their long stock to realize profit and then shorting the stock. These two actions together increase the supply and result in lower prices. They make profits on their long stock which they sold during the rise. Then they short-sell and prices fall under the weight of all their short-selling. However, they must be able to stop the decline so they can go long again. They do so by covering their shorts. Then as they go long their buying stops the decline. This support created by short-covering and long buying stops the decline, and stabilizes the market. Thus the cycle is started over again. Smart money realizes they must be able and willing to STABILZE the market if they want to keep the cycle repeating. An unstable market can hardly develop discernable cycles. It would be risky for them if the market were unstable. In an unstable market they might short a stock and it keep going up causing them to incurr great losses. Or they might go long and it keep going down. So, it is to their benefit to have a stable stock that goes up and down in cycles. They just create the cycle and make sure they are on the right side of the cycles. All stocks and futures have many rallies and declines within their longer uptrends or downtrends. Also the cycle appear in times of accumulation or distribution. In fact being aware of the larger context of what is happening (such as accumulation...distribution...uptrends..downtrend..) helps one to understand "why" variations take place in the 3 day cycle and in fact can be very useful in helping you anticipate variation. For instance, Taylor talks of what he calls a buying day low violation. This is when early in the session of the second day of the cycle (sell) a low is made BELOW the low of the previous day (which was a buy day). These violation appears more frequently in markdowns from distribution or longer term downtrends. So by seeing the larger picture it helps you to even anticipate these sort of violations before they happen. Taylor took several measurements when "clocking" the price action of a market. Over the 3 day cycle the main rally and the main decline become the basis of swing trading. Since they can be measured and quantified, and since they follow patterns, they can be projected into the near future. Notice I said projected not predicted. Perhaps a better word is anticipated. The three day cycle gives you a handle on anticipating probable prices at which to buy and sell the stock. Based upon the day of the cycle the stock is in, and the price action from the day before, the 3 day cycle projects into the near future (tommorrow) the most likely stopping points at which you would want to buy, sell, and short-sell the stock. Thus, in effect, the three day cycle helps you to anticipate what prices to buy and sell a stock at BEFORE the market ever opens the next day. When the market opens you already know what you are looking for. You are better prepared to face the open of the stock market than the average investor. You are in a better position to discern what is happening as the day progresses. When the market opens, if the stock is fitting the anticipated pattern, then you will already know at what price to get in and out of the stock. These price levels at which to buy and sell at are called target points. Taylor called them objectives for each day. In other words, the objective is to buy and sell at these price levels. To sum up Taylor is about discovering this cycle and seeing it in the larger context of this (accumulation, markup, dist, markdown..resistance..supply demand....pivot points ...etc), understanding why it is created, and capitalizing on it's repetitious nature.

When one discusses Taylor and the thoughts that others had/have on his system such as George Angell and Raschke one has to first of all realize that Taylor quantified the market. He measured rallies and declines and averages and kept track of it in what he called a "book". IMO what Taylor did was "clock" the price on a market. He had a full set of rules he used and strategies on what to do when the unexpected happened. All of these things together kept him on the right side of the market. Apparently, that is, for we have no real record that I know of, showing his abilities in the markets with actual money. Taylors system was comprehensive. It gave him a view on the market and a way to "anticipate" what would probably happen next. Now a sentence such as the last sentence usually provokes arguments on whether or not the markets can be predicted or not. I have tired of going around and around on this subject so I will use the softer language of "anticipate". I thiink we are all positioning ourselves to anticipate the next move and to cover our hide if we are wrong??? Anyway, Angell and Raschke both only used bits and pieces of Taylor system. I have never seen either one of them encouraging use of the whole system. I suppose it would be too tedious??? Nevertheless, some of the concepts that Taylor expressed are crucial to the integrity of his system. Angell toyed with some and changed them. Perhaps for the good, perhaps for the worst. However, I prefer "pure" Taylors way on those crucial concepts. One area was the way Taylor measured rallies as opposed to the way Angell adapted a way to measure rallies. I prefer Taylors method. Angell measured rallies as the difference bewteen todays high and yesterdays low. Taylor on the other hand measured the rally as being from the buying day low to the sell day high. The decline for Taylor was from the short sell high to the buying day low. For Angell the decline was the difference between yesterdays high and todays low (or previous days high and yodays low). Taylor says that the rally shows how much of the decline has been recovered. So, the way you measure rally the also affects how you see the decline. So if you slip in another way of measuring a rally such a Angell did then you have to change the way you measure the decline which is what he also did. Then it no longer is a primarily swing trading system but a day trading system. In addition, it also is not really a 3 day cycle system any more. Personally I prefer Taylors type of measurements as they are important to the heart of the 3 day cycle. Now while Taylors was primarily a swing trading system he had a method to use it as a daytrading system and in addition as a longer trend trading system. Why someone would want to change it up I do not know. Anyway, these are some of my thoughts on Taylor. I have many more.

Ravin, could you please post the same chart as a bar chart with open and close on it and of course the volume. Thanks

What book are you talking about where she writes of Taylor strategies? I have Street Smarts and do not recall much of Taylor in there.

What is the name of Raschkes book?

It is difficult to just dive in. You either have to make a book up somewhat like Taylor or have some software that determines what day of the 3 day cycle we are in.

ok thanks. You actually see it going down that far? It that using VSA principles or do you think that might happen because of some other reason?? Anyway, I guess it isn't that much further. It almost made it there on the last WRB! So, I guess it is concievable it could head on down. But if it does what VSA principle would you think explain such a bearish action?

Explain last swing high???

Thanks TinGull for your comments. I am thinking them over. Would like to hear also from others about what happened on the last bar and if the market is now weak or strong??? Williams says strenght shows up on down bars. We had a big one today!!

I may be stepping out on a limb here and it might break off and I crash to the ground BUT I'm am willing to say that the next bar will show price will go up, or at worst track sideways. My reasoning. It tested the gap to the left. then closed in middle all on relative high volume. The first part of the session no doubt brought selling on but by the close demand came in. That is why the close was off the low. Is this good VSA principles or have I missed the boat altogether???? Comments please. Thanks!

Some one want to take a shot at explaining what happened here? From VSA principles that is. I am reposting my previous chart called "test"that I had posted earlier and some comments were made about it. The second chart I am posting is after the next bar formed. Since we are trying to "anticipate" price (not predict...so as to avoid arguments..but really all the same to me) then could someone please tell me what happened here according to VSA principles. I thought that after reading the comments by others on the first chart that the market didnt want to go down. But it did in fact go down and went down a good bit. What is happening here? Boy does this get confusing to me!!

Just wondering fo any of you guys have heard of this system here? http://www.gemsbot.com/home.html After hearing what TinGull said...well.. it looks like this system could take some of the daily grind out of intraday trading. The developer of this trading system has open house tomm. You sign up with http://www.tradingrooms.com and go to his trading room tomm October 12 at 8:00 a.m. EDT. You can find the instructions on how to get setup to watch this live trading ffor free tomm. at this link below. http://gemsbot.com/members/openhousedays.html. Apparently, somehow he does his live trading at the other site (tradingrooms)where other systems are also tested. He does have a video at the gemsbot.com site. Not real good quality at least on my computer but it sure sparked my interest. Enough that I signed up at the trading room site and got myself all set up with password and all to watch the live trading tomm. Just follow the instructions above on how to sign up. Also here are some other places where folks discuss his system. http://www.askatrader.com/forums/showthread.php?t=144 http://www.elitetrader.com/vb/showthread.php?s=&threadid=83592&highlight=gemsbot Not sure if t2w has any thing on the system. Sure does look it could take the "grind" out of day to day trading. He only has these free open houses ever so often I think so if it sparks your interest I would suggest signing up tonight so as to be ready for live trading tomm. I am gonna look at it and try to keep and open mind about it. Let me know what you guys think.

What does closing in the middle or higher signify when a test is being made? Would that then mean no supply or smart money is supporting it to keep price from falling? But if they were, wouldn't it have more volume?? So, are you saying that I should wait to see if the next bar confirms that the last bar is a test before I do anything? Ok, lets say it does confirm. Would I then be right in saying the market is strong, and take a long position?? I am not trading this stock so don't worry about giving me bad advice..etc:) Just trying to understand "when" i would take a position in it hypothetically, so i can begin to see how VSA works. I looked back 3 years there was no top to the left of the WRB. Does that mean the WRB would not be absorption volume, pushing thru supply? I am right on that? Would that just mean it was demand? That makes sense to me except why would there be some supply in the WRB?? That part I don't get. Couldn't it be pure demand? Would I then be correct in saying that IF smart money were interested in pushing the price down that the range on the bar after the WRB not only would have closed low, but would have also been a WRB itself?? And that it would be an opportunity to take a long position?? When would I take that position? When a new bar completes and proves that the last bar in the chart is a valid test?? These are daily bars so would that mean I wouldnt take a long position until 2 trading sessions from the end of the last bar?.

I am not sure how to take this statement??? What is the use of VSA if it can't help me place a trade? Why would I place a trade if I have no idea what can happen to it?

Thanks Rajiv for your comments. I thought it might be testing to see if there is any supply but you say it needs to close off the low? I wonder why it must close up? What would the close signify? You mean you would wait until a bar went down into that gap created on the 5th? Why? Not sure I understand how that would prove or confirm the second to the last bar in the chart??? I dont use candlesticks. They are confusing to me so if you could explain with just regular bar charts. I have Tom Williams book but I still don't understand all he talks about. Frankly it gets a bit confusing to me. I want to learn this way of looking at the markets but see I have a long way to go. Any help or comments will be appreciated! WHY?

PivotProfiler Would be so kind as to look at the attached chart? Would the second to the last bar be a test? And if it is why didnt price go up on the last bar (next bar)? Finally, what do you see happening on the bar yet to come?? Trying to get grip on the VSA stuff. Thanks! WHY?