[VSA] Volume Spread Analysis Part II

[Turning Point 10]

Those who have Trade Guider, would please us know, what is the latest version?

[Seb Manby 11]

A very interesting thread this part 2,

 

You seem to be mixed up in a debate regarding predicting the future? why would anyone try to accomplish such a feat? surely your energy would be better served observing the big boys with deep pockets, ie, demand swamping supply and then 'no supply'. My personal strategy is to wait patiently for the smart money to make their move, then wait until they are done, and then follow the path of least resistance, that is what I do, it works for me and I've posted enough charts around the place in case your interested in looking them up.

 

 

Best

Sebastian

[Eiger 10]

A very interesting thread this part 2,

 

You seem to be mixed up in a debate regarding predicting the future? why would anyone try to accomplish such a feat? surely your energy would be better served observing the big boys with deep pockets, ie, demand swamping supply and then 'no supply'. My personal strategy is to wait patiently for the smart money to make their move, then wait until they are done, and then follow the path of least resistance, that is what I do, it works for me and I've posted enough charts around the place in case your interested in looking them up.

 

 

Best

Sebastian

 

I am sitting here at this moment working through a few of your charts from November, along with Tom's Undeclared Secrets book. Your material is incredibly valuable, Sebastian, for those who spend the effort. I only wish I was around back then to have had a chance to interact with you on those. One of the useful things I picked up from your charts -- aside from the application of VSA to the ES market -- is to annotate the chart at the end of the day as you were doing. The excercise really helps in reading the charts. Anyway, thanks for all your posts -- they still have legs.

 

Eiger

[Sledge 13]

A very interesting thread this part 2,

 

You seem to be mixed up in a debate regarding predicting the future? why would anyone try to accomplish such a feat? surely your energy would be better served observing the big boys with deep pockets, ie, demand swamping supply and then 'no supply'. My personal strategy is to wait patiently for the smart money to make their move, then wait until they are done, and then follow the path of least resistance, that is what I do, it works for me.

 

As always, leave it to Seb to step in and make a great point- so that we can get back on point of discussing VSA.

Thanks!

Sledge

[DbPhoenix 42]

A very interesting thread this part 2,

 

You seem to be mixed up in a debate regarding predicting the future?

 

It does seem to go on, doesn't it?

 

But whether one predicts, anticipates, expects, forecasts, foretells, looks forward to, prophesies, or divines (and so on), what distinguishes a from b is whether or not the outcome of any particular trade is knowable. If he believes that it is not, his approach toward entering and managing the trade is going to be different from the individual who believes that it is. And it's going to be more in line with the precepts advanced by Wyckoff, and, I presumre, VSA.

[Eiger 10]

It does seem to go on, doesn't it?

 

But whether one predicts, anticipates, expects, forecasts, foretells, looks forward to, prophesies, or divines (and so on), what distinguishes a from b is whether or not the outcome of any particular trade is knowable. If he believes that it is not, his approach toward entering and managing the trade is going to be different from the individual who believes that it is. And it's going to be more in line with the precepts advanced by Wyckoff, and, I presumre, VSA.

 

You are right, Db, the outcome of any particular trade is not knowable (M. Douglas). Unfortunately, many traders do try to predict. I am sure you did in your early days. I certainly did. In the 1970s, Dave Mathys, former head of training at Wyckoff Associates/Stock Market Institute (as it was then called), thought so much of this matter that he devoted an entire series of weekly tapes (13 in all, I think) to the idea of anticipation vs prediction. It is, as you say, very much in line with Wyckoff. Wyckoff, Evans, Andrews, King, and Mathys all were concerned that the trader not use, for example, the P&F chart objectives as firm targets, only as points to "stop, look, and listen" to what the market is saying. Prediction vs anticipation is an important part of the discussion. It always has been.

 

Let's take an example. Let's say you are trading the S&P E-mini on an intraday basis. Yesterday afternoon, the market was down. It made a new low after 3:00. Today, the first bar (on your time frame) is widespread up on heavy volume. It is a gap up from yesterday's close, but the bar's close is well off the highs. Probably weakness. Next bar is an upthrust -- it has run up above the previous bar's high, but closes near it's open and within the previous bar's spread. The volume is very heavy. This seems to be a confirmation of weakness and a short is taken (I certainly would). At this point, one can PREDICT a retest of of the lower end of the gap, if not yesterday afternoon's lows, maybe lower.

 

The next bar is a down bar on narrow spread and light volume. It closes near the open. What do you do? So many times in the past I would ignore this bar and volume, despite knowing better because I was PREDICTING it would go lower. A bar like this suggests distribution may not be complete, and the large interests are likely to take it higher to potentially sell more.

 

If I were ANTICIPATING lower prices but AWARE that other possibilities exist, or I knew that this trade had a certain PROBABILITY of working, but also a probability of not working, I could take appropriate action on that bar. If I were simply PREDICTING lower prices, I have no chance. The big money will own my trade shortly. That is all I was saying.

 

Eiger

[DbPhoenix 42]

I understand what you're saying, Eiger. Unfortunately, these discussions inevitably end up as debates/arguments over meanings of words and go on for dozens of posts and which, I suggest, are beside the point. As you say, the focus should be on the activity -- whether one uses bars or something else -- and on the probability of price moving in one direction or another.

 

Perhaps traders are unused to developing scenarios for their trades. Or they're shaky on trade management in the first place. In any case, if a trader is determined to state unequivocally that price is going to move this way or that and that's all there is to it, any suggestion to him that the outcome of any given trade is unknowable is likely to be greeted with a guffaw and an Aw shoot.

Edited March 2, 2008 by DbPhoenix

[Eiger 10]

Unfortunately, these discussions inevitably end up as debates/arguments over meanings of words and go on for dozens of posts and which, I suggest, are beside the point.

 

I sure know people like that! You are right, Db, the words are besides the point. Sorry if I added to those dozens of posts.

[DbPhoenix 42]

I sure know people like that! You are right, Db, the words are besides the point. Sorry if I added to those dozens of posts.

 

Ha! One or two more won't matter. But speaking of scenarios, does VSA explain how to write scenarios (or some other word, perhaps) for trades?

Edited March 2, 2008 by DbPhoenix

[Bearbull 10]

A very interesting thread this part 2,

 

You seem to be mixed up in a debate regarding predicting the future? why would anyone try to accomplish such a feat? surely your energy would be better served observing the big boys with deep pockets, ie, demand swamping supply and then 'no supply'. My personal strategy is to wait patiently for the smart money to make their move, then wait until they are done, and then follow the path of least resistance, that is what I do, it works for me and I've posted enough charts around the place in case your interested in looking them up.

 

 

Best

Sebastian

 

Understand you are back with the TG camp for presentations at the 3 weekend Symposiums in April, 2008. Few colleagues have asked me about this, perhaps you are in a better position to clarify:

 

1. Is this going to be a repetition of the countless seminars and webinars in the past by Gavin & Co., pointing out buying/selling climax, upthrust, no demand, playing field and ofcourse that the markets are manipulated , that 90% of the volume is professional activity and that the media never reports the truth about the markets, nor do the guys at the stock exchange, ( has been repeated a zillion times.) not to mention the 60min general introductions by Gavin

 

2. or is it that after illustrating the various principles, you folks are going to get into the real nitty-gritty of trading, ie. how to trade with these signals, what are the confirmation bars, what should be the stops, how to manage the trade, where is the exist, what will negate the setup., Strategies/tactics, some solid teaching

 

For you have ask, this VSA stuff has been going around for over 7yrs and yet there is so much confusion, why? Is it that most have failed to grasp or could it be something to do with the METHOD OF TEACHING.

[BlowFish 10]

Personally I'd like to go see Sebastian speak at the London Symposium, but not sure I could put up with all the other stuff you mention Guess I could go and sit in the bar but then by the time Sebastian comes on I'd probably be too 'tired and emotional' to comprehend I guess the symposiums are sold out anyway as I am not getting spam for them. (not the case with the video, book, tea shirt, action figures etc.) Actually that's a funny though Gavin Holmes action figures for gods sake no one suggest it to him.

 

You make a couple of other good points. Its easy enough to learn the dozen or so 'patterns' but putting those together into a plan that can be rigorously stuck to is quite tricky. Also identifying the amount of weakness necessary to invalidate prior strength can be more art than science again making it tricky to quantify in a trade plan.

 

Having watched Sebastian go through charts 'bar by bar' you can see him building a kind of 'composite picture' of overall strength or weakness. I don't think that can be taught per se.

 

More recently I find myself leaning more heavily on price action and to a lesser extent the change in pace of volume. Actually 'price action' is a key part of VSA though it is combined with volume.

 

Cheers.

[DbPhoenix 42]

Personally I'd like to go see Sebastian speak at the London Symposium, but not sure I could put up with all the other stuff you mention Guess I could go and sit in the bar but then by the time Sebastian comes on I'd probably be too 'tired and emotional' to comprehend I guess the symposiums are sold out anyway as I am not getting spam for them. (not the case with the video, book, tea shirt, action figures etc.) Actually that's a funny though Gavin Holmes action figures for gods sake no one suggest it to him.

 

You make a couple of other good points. Its easy enough to learn the dozen or so 'patterns' but putting those together into a plan that can be rigorously stuck to is quite tricky. Also identifying the amount of weakness necessary to invalidate prior strength can be more art than science again making it tricky to quantify in a trade plan.

 

Having watched Sebastian go through charts 'bar by bar' you can see him building a kind of 'composite picture' of overall strength or weakness. I don't think that can be taught per se.

 

More recently I find myself leaning more heavily on price action and to a lesser extent the change in pace of volume. Actually 'price action' is a key part of VSA though it is combined with volume.

 

Cheers.

 

Alex and I were just in Vegas speaking at a seminar for the Traders' Expo. The room was silent and tumbleweed went by as topics such as mental discipline, money management and psychology were discussed. The slides switched to the trading setups and instantly the whole crowd perked up like watching an accident happen in real time on the highway. They wanted to know "does this guru have the holy grail??" What they do not realize is the first "boring" part of the seminar is the holy grail.

 

[Bearbull 10]

Alex and I were just in Vegas speaking at a seminar for the Traders' Expo. The room was silent and tumbleweed went by as topics such as mental discipline, money management and psychology were discussed. The slides switched to the trading setups and instantly the whole crowd perked up like watching an accident happen in real time on the highway. They wanted to know "does this guru have the holy grail??" What they do not realize is the first "boring" part of the seminar is the holy grail.

 

 

Understand discipline, money management, psychology are the key factors to be

a successful trader, however it is also imperative to generate confidence in what one is looking at on the charts, no point being told over and over again, smart money is at work, how does one learn to read the footprints, how one can find an edge etc, then there will be incentive to acquire discipline leading to consistent execution of a particular strategy/setup. Most folks who will be at the symposium have probably heard of VSA or read Tom Williams book and realised that it is not a black box system, hence there is no question of seeking a holy grail here. We can debate this forever, it is a chicken and egg scenario.

[DbPhoenix 42]

Point of Information. And I apologize for not going through the first thread.

 

I assumed that when people referred to "VSA" that they were talking about the variations on Wyckoff which Tom Williams developed a number of years ago. However, there appears to be some melding of VSA with TradeGuider in this thread, at least recently. Is this the case, or is TG an entirely separate issue?

[mister ed 10]

Some people have the program, some don't.

Some people use it to learn VSA and to trade with.

There are bouts of TG bashing on the thread from time-to-time.

The thread has always taken a wide view of VSA, and given TG's role in marketing the concept and the software and Williams' role in popularising the approach and his relationship with TG, VSA and TG are somewhat intertwined.

[Eiger 10]

Ha! One or two more won't matter. But speaking of scenarios, does VSA explain how to write scenarios (or some other word, perhaps) for trades?

 

The boot camp CD does this in a general way, and the original Williams book certainly gives enough for you to do this with some thought. Manby's ES charts (which really are excellent) shows some of this, but there are no recipes given for trades (as there really can't be, I suppose).

 

I was lucky enough to be mentored by a Wyckoff expert. He always stressed what he called "The Wyckoff story." In other words, you want to line up a few of the Wyckoff principles before taking a trade. So, for example, you see climactic action occur at a previous support area, it gets tested, and then comes back down one more time and gives a spring, you have a nice Wyckoff story. You do the same thing in VSA -- weakness in the background via wide spread up bars closing off the highs on heavy volume, no demand, then an upthrust, etc.

 

It is really a question of identifying the alignment of principles. Williams uses terms like weakness in the background, no demand, upthrust, etc.; Wyckoff talked about buying & selling climaxes, secondary tests, shortening of thrust, etc. The prinicples come in a certain order which sets up a high probability trade.

 

If this seems new to you, you can get a few of Bob Evans's classic old tapes from SMI. Evans was probably the best teacher of Wyckoff, and expanded the course quite a bit. Starting in the late 1940s, he made weekly tapes of the then current market action and how Wyckoff applied. Evans always stressed principles and created stories around these principles to help traders learn them. Things like the boy scout jumping across the creek, the fall through the ice, the shell diver's tragedty, and the spring story are all classic Evans. They are just as useful today as they were "back then," and are just as useful in thinking through trades when using VSA (IMHO).

 

Tom Williams also stresses the use of principles, and says they will arrive "in varying intensities." The market doesn't give you the same exact "look" each time, but because VSA and Wyckoff are really based on mass human psychology as readable in the chart, the principles never change.

 

Eiger

[Eiger 10]

Alex and I were just in Vegas speaking at a seminar for the Traders' Expo. The room was silent and tumbleweed went by as topics such as mental discipline, money management and psychology were discussed. The slides switched to the trading setups and instantly the whole crowd perked up like watching an accident happen in real time on the highway. They wanted to know "does this guru have the holy grail??" What they do not realize is the first "boring" part of the seminar is the holy grail.

 

 

Yup, the Holy Grail is you.

[mister ed 10]

Thanks Eiger - nice info.

 

The boy scout and the ice I am familiar with but haven't heard of the shell diver! Evans' metaphors can help bring the concepts to life for some people. I always find the 'ice' a bit of a tricky one though, I picture this level plane, which I suppose translates onto a chart as a straight line in my mind's eye, but just as the creek is not a straight line the ice is not either - there is more to the creek than just a straight line drawn on a chart and there is more to the ice than a straight line drawn on the chart.

 

May be seeing bit of 'ice' potentially forming on the pre-market ES here now. Here is a 2-minute chart, for discussion later maybe as open is approaching!

[Sledge 13]

Understand you are back with the TG camp for presentations at the 3 weekend Symposiums in April, 2008. Few colleagues have asked me about this, perhaps you are in a better position to clarify:

 

1. Is this going to be a repetition of the countless seminars and webinars in the past by Gavin & Co., pointing out buying/selling climax, upthrust, no demand, playing field and ofcourse that the markets are manipulated , that 90% of the volume is professional activity and that the media never reports the truth about the markets, nor do the guys at the stock exchange, ( has been repeated a zillion times.) not to mention the 60min general introductions by Gavin

 

2. or is it that after illustrating the various principles, you folks are going to get into the real nitty-gritty of trading, ie. how to trade with these signals, what are the confirmation bars, what should be the stops, how to manage the trade, where is the exit, what will negate the setup., Strategies/tactics, some solid teaching

 

For you have ask, this VSA stuff has been going around for over 7yrs and yet there is so much confusion, why? Is it that most have failed to grasp or could it be something to do with the METHOD OF TEACHING.

 

I think Bearbull is REALLY onto something with this inquiry! I am hoping that it does get a very in-depth response that it deserves from the folks who can answer this question with first hand knowledge.

 

I personally have read MTM and watched many webinars off the TG site (which are very useful- please don't get me wrong.) But his question #2- is not only profound, I think many out there may be in agreement, but have never articulated it publicly.

 

Personally, I am thrilled to be learning VSA- I KNOW FOR FACT it has changed my trading edge, and changed how I will trade for the rest of my life. To listen to Tom Williams speak when he does a broadcast is, no doubt, one of the best people to listen too- after all these years- he STILL has his spark, he still gets excited to discuss what he brought to the masses. You don't hear a robot spewing the same old words with no feeling in his message. He cuts to the chase and doesn't have time to B.S. around.

 

But some nitty-gritty- would indeed be welcomed and appreciated. What Tom has in his brain- ALL OF IT, will be lost if at some point he is not around anymore. From a historian perspective it would be a shame that all that knowledge that is in that brain were never put to paper and saved to be studied for the next 100 years!

Sledge

[DbPhoenix 42]

I think Bearbull is REALLY onto something with this inquiry! I am hoping that it does get a very in-depth response that it deserves from the folks who can answer this question with first hand knowledge.

 

I personally have read MTM and watched many webinars off the TG site (which are very useful- please don't get me wrong.) But his question #2- is not only profound, I think many out there may be in agreement, but have never articulated it publicly.

 

Personally, I am thrilled to be learning VSA- I KNOW FOR FACT it has changed my trading edge, and changed how I will trade for the rest of my life. To listen to Tom Williams speak when he does a broadcast is, no doubt, one of the best people to listen too- after all these years- he STILL has his spark, he still gets excited to discuss what he brought to the masses. You don't hear a robot spewing the same old words with no feeling in his message. He cuts to the chase and doesn't have time to B.S. around.

 

But some nitty-gritty- would indeed be welcomed and appreciated. What Tom has in his brain- ALL OF IT, will be lost if at some point he is not around anymore. From a historian perspective it would be a shame that all that knowledge that is in that brain were never put to paper and saved to be studied for the next 100 years!

Sledge

 

But that's the difference between growing roses and going to the florist and buying them. Unless the grower teaches somebody else what he knows, then all of it is lost. (There's an ancient saying that when an old man dies, a library burns down.)

 

I can't speak to TG per se. I'm not interested enough in it -- or any other software program -- to explore it fully. But if the program doesn't teach people exactly how to write scenarios, then it's just pretty pictures.

[mister ed 10]

I think Bearbull is REALLY onto something with this inquiry! I am hoping that it does get a very in-depth response that it deserves from the folks who can answer this question with first hand knowledge.

 

The question may well be better put direct to TG rather than on here? I can understand why the question would be put on a public forum but there may be a better chance of a response if a customer of TG puts such a question directly to the reps of the firm rather than on a forum where it may or may not be seen and may or may not be responded to?

[Sledge 13]

The question may well be better put direct to TG rather than on here? I can understand why the question would be put on a public forum but there may be a better chance of a response if a customer of TG puts such a question directly to the reps of the firm rather than on a forum where it may or may not be seen and may or may not be responded to?

 

Ed-

I know that Bearbull was quoting Seb, and asking if Seb himself would indeed be presenting? If Seb is to be presenting, maybe he could answer this question for him.

 

I think it is fair to ask that question here in this forum for the following reason:

People gravitate here to learn VSA, with that being said, with new and older traders alike with all levels of VSA grasp on the subject, some folks such as myself may say to myself- "hey if this webcast will discuss these subjects- I may be more inclined to make the investment so that I can learn these things" - without that possibility, I may just pass and save my time and possibly money. So I think it is a fair question he raised. Since Seb is a straight shooter- I don't anticipate him fibbing to Bearbull or anyone else about the answer to said question.

Sledge

[Bearbull 10]

The question may well be better put direct to TG rather than on here? I can understand why the question would be put on a public forum but there may be a better chance of a response if a customer of TG puts such a question directly to the reps of the firm rather than on a forum where it may or may not be seen and may or may not be responded to?

 

Tradeguider at its very core has VSA programming built into it, that is why Tom hired a programmer in the first place to see if his VSA principles could be computerized. There is no question of reps. of the company, they are all a team , have their photos on their website together for the symposiums. Todd was supposed to be the expert besides Tom , since he left, Sebastian has returned and now he is the resident expert with Tom, and since he is going to be the main presenter as far as teaching VSA is concerned , he should be well placed to respond to the question, wouldn't you say;)

[zeon 10]

I was lucky enough to be mentored by a Wyckoff expert. He always stressed what he called "The Wyckoff story." In other words, you want to line up a few of the Wyckoff principles before taking a trade. So, for example, you see climactic action occur at a previous support area, it gets tested, and then comes back down one more time and gives a spring, you have a nice Wyckoff story. You do the same thing in VSA -- weakness in the background via wide spread up bars closing off the highs on heavy volume, no demand, then an upthrust, etc.

 

It is really a question of identifying the alignment of principles. Williams uses terms like weakness in the background, no demand, upthrust, etc.; Wyckoff talked about buying & selling climaxes, secondary tests, shortening of thrust, etc. The prinicples come in a certain order which sets up a high probability trade.

 

[...]

Eiger

 

 

I hear what you're saying, but I've read the books of Tom Williams and I did read a lot of what people would call "recommended literature", but one thing hardly every is talked about: exits. All is fine in determining climatic action and then a classic test on low volume: there you have your entry signal. And all the talk about no-demand bars and so are very nice, but they usually lead to "ah this could be an entry". But what happens after that remains a mystery and how the trader manages his position is apparently a much more difficult topic to master :\

 

I agree with dbphoenix on this, scenario's and strategy hardly ever are a topic of discussion for VSA teachers or authors.

[Eiger 10]

I hear what you're saying, but I've read the books of Tom Williams and I did read a lot of what people would call "recommended literature", but one thing hardly every is talked about: exits. All is fine in determining climatic action and then a classic test on low volume: there you have your entry signal. And all the talk about no-demand bars and so are very nice, but they usually lead to "ah this could be an entry". But what happens after that remains a mystery and how the trader manages his position is apparently a much more difficult topic to master :\

 

I agree with dbphoenix on this, scenario's and strategy hardly ever are a topic of discussion for VSA teachers or authors.

 

You are right about that. Stragedy is rarely discussed. I used to think (and trade) that all I needed was a climax for entry and a climax for exit. Many, many losses later ...

 

I certainly don't have a great answer to exits. Point & Figure charts work well, but are difficult to keep up when trading intraday. They are great on the intermediate trades, though.

 

I miss a lot of trade opportunities, and once in a trade, tend to leave money on the table with every trade. These are two things I constantly work on. This was what I meant by my quip above that "The Holy Grail is you." It really is, and so you work on areas that are what I call current limitations -- those things that if you could improve on (like exits), would make you a better trader. That is really what trading psychology is all about.

 

This morning, for example, I totally missed the first run up in the ES on the 5-minute chart, even though a long trade was readable from the chart. After it fell back to Friday's low (1325.25) there was buying evident on the chart (1, 2, &3). You can also see that all the closes in this area were holding at that level (a clustering of closes), and there was shortening of the thrust. That was enough of a story to think about a long trade, and so I waited for confirmation. This came at 4 with no supply and I entered. The next bar was a bottom reversal, so I was good in this trade.

 

The very next bar, however, closed below the middle. I exited the trade right after that bar (blue arrow). Of course, it went higher.

 

I am always drawing support & resistance lines, and when the ES came back to support at 5 with no supply and had a key reversal at 6, I went long again (also, the 3-min chart showed an orderly reaction on narrow spread/light volume). The market popped up and I took the trade off (blue arrow). I thought that the market gave me a nice gift, but of course it went higher.

 

I did buy the second reaction (7), but scratchted it because it didn't rally quick enough. I was thinking it was after 12:00, and it might go nowhere. Again, it went higher.

 

At 8, the market came into the old top at A. There was a lot of activity in this area Friday afternoon, so its worth paying attention to. On the run up from 7, volume increased with wide spread and good close, but look at 8. The close is lower than both the old top at A and the previous bar. It has this result on an increase in volume from the previous bar. That is supply. The next bar, 9, is another upthrust and volume remains realitively high. There was also a shortening of the thrusts and five waves to the swing (an Elliott concept). This was enough of a story to take a short.

 

I almost closed the trade on the next bar becasue of the mid-range close. Instead, I brought my stop to break even and held on, thinking I'll probably get stopped out. I closed it at the blue arrow where support came in earlier. But, again, I left money on the table.

 

When looking at a strategy, I try to put principles together. The principles never change, but the "look" of the chart always varies. Principles include support/resistance, climactic action, tests, shortening of the thrust, etc. In classic Wyckoff, there is a sequence of events that often happen, and it is good to be aware of those. Then I try to read the market as I manage the trade. But, as you said and as you can see, entries are easier than trade management.

 

Eiger