VSA Questions

[Prepared Investor 10]

Hey folks! Happy new year!

 

Have a few quick technical questions ..

 

1. In the VSA analysis, when the literature talks about UP bar or a DOWN bar, what does that actually signify:

a. The open price > prev close?

b. the open price > close on the same day?

 

2. When the literature says, narrow spread, what does that refer to:

a. distance between Open and Close

b. distance between High and Low

 

3. I understand that when we talk about high volume it is very relative. But I assume there is probably a standard volume moving average above which the volume is termed as high volume. Any suggestions on what volume moving average to use and what percent violation over the moving average would you consider to call it High Volume.

 

4. When you say narrow spread, is it narrow with respect to the whole range (High - Low) of the bar OR is that just a relative to other bars?

 

Though I understood the vsa concepts generally, the above questions seem to plague me with few doubts. Thanks for your coaching ..

 

PI

[NeoTrader 10]

I am no guru, but I have studied VSA pretty closely for the past few months and I believe I can give you some answers. I'm sure others that are more practiced can correct me if I am wrong.

 

1. An UP bar is simply a bar where the close is higher than the close of a previous bar and a DOWN bar is simply the opposite. As far as "on the same day" a bar is just a bar whether its a 5 minute bar or a weekly bar. It is simply a comparison to the close of the bar prior to the one you are looking at.

 

2. In VSA "spread" refers to the high and low of the bar. You'll find that VSA basically ignores the open of the bar in all cases.

 

3. & 4. As you seem to realize the terms "high" or "low" volume and "high" or "low" spread are relative terms in VSA. Specific to your question about a bar being "narrow" this means relative to previous bars. Narrow on one chart might be 5 points/pips/cents and on another chart narrow might be 100 points/pips/cents. Also be aware that when you make these comparisons the most recent price action is more relevant. You might find that what was "narrow" 6 months ago on an instrument might be "wide" in more recent weeks because it has become less volatile.

 

As far as what to compare or how much to average that can vary quite a bit. I've seen everything from the average of the last 100 bars to 10 bars to any variation between and beyond. There are also various ways to average the spread and or volume. I'm sure you can find many methods people have shared on how they like to compare spread and volume but as far as I know there is no 1 "way" that works for everything. It really depends on the volatility of the instrument and your own psychology. While someone might use a 100 bar average and it works perfectly for them, it may seem too slow or frustrating for you.

 

Hope that was helpful.

Edited February 21, 2014 by NeoTrader

[Prepared Investor 10]

Neo Trader, Thanks for sharing your thoughts on that ... I agree with your comments..

[lchunleo 10]

Hi all,

My new to this forum and have been self studying vsa. I like to do my trading system based on vsa, but I having difficulty doing so. How can I codified the vsa? Thanks

[zdo 20]

Hi all,

My new to this forum and have been self studying vsa. I like to do my trading system based on vsa, but I having difficulty doing so. How can I codified the vsa? Thanks

 

lchunleo

To fully code VSA correctly actually requires 3 layers.

1. code that identifies the ‘big picture’ context, what stage the ‘campaign’ is in, etc

2. identifying the correct underlying context ... which is basically the setup created by the last n bars (~10 - 30 bars for this method). This setup will condition which micro volume and ‘spread’ patterns/triggers are valid as they occur.

3. then coding the micro volume and ‘spread’ patterns/triggers themselves.

 

Most VSA traders attempt to work all three using wetware instead of software.

A few do number 3 with software and attempt the other two with wetware.

Very few even attempt and even fewer succeed at coding 1 and/or 2 above.

 

Point is - and contrary to what the ‘voice of trading’ industry and the ‘best’ trading instructors are telling you - codewise, whether via wetware or software,

Successful triggers require correct setups

Successful setups require correct context.

(and btw this is true for almost all trading methods ... I may post more about this for noobs later...)

 

/

 

Most traders who study VSA attempt to learn (or code) it 3, then 2, then maybe 1. The best order to learn ‘it’ is 1,2, then 3. When 1 is mastered first then 2 and 3 fall into place. But when 3 is mastered first, 2 and 1 do not automatically fall into place

And when 2 is mastered first, the others do not automatically fall into place

Also, all (but a few lucky exceptions) who attempt to trade VSA and omit 1 above and work only 2 and 3 --- and weeks, months, or years later they wonder where they went wrong. ... and this is the way all the naysayers about this and other various methods are created.

(and btw this is also true for almost all trading methods ... I may post more about this for noobs later...)

 

Imo, any due diligence coding efforts with micro volume and ‘spread’ patterns/triggers would also require including additional ‘micro’ price/volume patterns not found in the strict VSA in the set of triggers coded. (see wyc koffy, her shey, etc. )

 

Over the years there has been free code uploaded that identify the micro volume and ‘spread’ patterns... maybe some of them are still up. I might still have some of that code. PM me if you would like me to look in my archives.

 

hth

 

zdo