[VSA] Volume Spread Analysis Part II

[zeon 10]

  DbPhoenix said:

Wyckoff also provided certain criteria for detecting absorption in real time. With regard to the activity that took place on the 20th, those criteria were not met. Detecting the "absorption" after the fact is as easy as all hindsight analysis (even though it technically was not absorption), but that's not what the blog is about.

 

What criteria are those then?

 

  DbPhoenix said:

I suggest also that you avoid any chart with a bar interval of less than five minutes. An even longer bar interval may be best for you. You'll just have to experiment.

 

I'm sorry... I'm lost here. Last thing I remember is you suggesting I'd zoom in to something lower than 5-minutes, preferably 1-minute or a tick chart. Now you are saying the opposite

[DbPhoenix 42]

  zeon said:

 

Db - and I know this has been asked before - but perhaps you could spend some little more time on it to shed some clarity in the matter. The only thing you replied is that 'price reigned'. Forgive me, but that didn't exactly make me much wiser. You said you'd short at resistance if you observed buying drying up. But, apart from declining volume, how do know that buying is in fact drying up? Look again at the chart I posted from the ES. This is at it's core what we are talking about. The volume is declining and a lot of the bars fail to close above the green line on low volume. Isn't this buying drying up? So would you have taken a short here, or not? If not, I'd appreciate it if you could inform me why not.

 

You're showing me a picture of apples, then asking me to explain the character of oranges. You are also asking me, again, to explain something non-VSA on a VSA thread.

 

I suggest that you go back to post 138 on this thread and collect all the similar posts here and on the RT thread and study them. If you still don't understand what "drying up" at support or resistance means, then I will be happy to try again. But please do not ask me this particular question again on this particular thread.

[DbPhoenix 42]

  zeon said:

I'm sorry... I'm lost here. Last thing I remember is you suggesting I'd zoom in to something lower than 5-minutes, preferably 1-minute or a tick chart. Now you are saying the opposite

 

Yes, I did. But you're clearly having difficulty doing so, and you're not going to get the help you need on a thread whose denizens believe that trading off such an interval is "crazy". Therefore, again, if you want to learn VSA, learn VSA the VSA way, and that includes avoiding the interval that I use.

[zeon 10]

  DbPhoenix said:

Yes, I did. But you're clearly having difficulty doing so, and you're not going to get the help you need on a thread whose denizens believe that trading off such an interval is "crazy". Therefore, again, if you want to learn VSA, learn VSA the VSA way, and that includes avoiding the interval that I use.

 

I was under the impression yours wasn't so far off 'the VSA way' given the multiple references to volume in your posts. And even in a reply to Eiger's post, you mentioned 'absorption' as being a Wyckoff term. So you are now admitting to those who are advocating not to use a 1-minute timeframe, that VSA is seemingly "incompatible" with such a low bar interval? :\

[DbPhoenix 42]

  zeon said:

So you are now admitting to those who are advocating not to use a 1-minute timeframe, that VSA is seemingly "incompatible" with such a low bar interval? :\

 

According to Eiger, yes, it is incompatible. Again, if you want to learn VSA, then learn VSA the VSA way.

[mister ed 10]

It seems there was a consensus reached a few pages back to refocus this thread on VSA/Wyckoff analysis but yet again the thread has diverted. This, I suppose, is inevitable; as the thread attracts more and more readers and participants the potential for going off on tangents increases, which is fine except the tangents have recently exceeded the content directly and specifically addresing VSA/Wyckoff. This is evidently frustrating for those interested in VSA and Wyckoff, especially given the thread's title and intent!

 

A lot of the tangents seem to be generated from questions to Db, which he, quite rightly, helpfully responds to. So, Db, I suggest you start a thread along the lines of "Q&A with DbPhoenix", or something like that, so that questions not directly and specifically related to Wyckoff/VSA, that may perhaps be more related to your blog and its contents, can be answered and discussed, and this thread freed up for direct and specific discussion of Wyckoff/VSA by those interested. If you prefer I can start this new thread.

 

I woud therefore request that questions for Db be directed to him at this new thread, while discussions of Wyckoff and VSA can proceed here.

[DbPhoenix 42]

  mister ed said:

 

A lot of the tangents seem to be generated from questions to Db, which he, quite rightly, helpfully responds to. So, Db, I suggest you start a thread along the lines of "Q&A with DbPhoenix", or something like that, so that questions not directly and specifically related to Wyckoff/VSA, that may perhaps be more related to your blog and its contents, can be answered and discussed, and this thread freed up for direct and specific discussion of Wyckoff/VSA by those interested. If you prefer I can start this new thread.

 

I woud therefore request that questions for Db be directed to him at this new thread, while discussions of Wyckoff and VSA can proceed here.

 

I heartily agree, though a new thread is not necessary. Any questions directed toward me with regard to trading can be posted to my Blog (see below). I will also be happy to address any questions regarding Wyckoff's Wyckoff as opposed to SMI's or VSA's Wyckoff.

 

At the same time, I ask that neither I nor my trading nor my Blog be discussed here. None of it has anything to do with SMI nor with VSA.

[mister ed 10]

  DbPhoenix said:

I heartily agree, though a new thread is not necessary. Any questions directed toward me with regard to trading can be posted to my Blog (see below). I will also be happy to address any questions regarding Wyckoff's Wyckoff as opposed to SMI's or VSA's Wyckoff.

 

At the same time, I ask that neither I nor my trading nor my Blog be discussed here. None of it has anything to do with SMI nor with VSA.

 

Thanks Db - let's give this a try.

 

Any questions/comments re Db to his blog please, any that appear in this thread I will try to move across.

[habi 10]

  Bearbull said:

 

As you can observe the whole drawn out debate ending with Db being told to get on his bike is due to the fact that reading buying and selling pressure via smaller time frame is being equated to scalping, this is a fundamental error and as I have said unless one has thoroughly understood the original Wyckoff teaching, it will remained misunderstood. He was not advocating taking positions via tick or 1min chart. If you wish to trade via 15min30min fine, however the smaller time frame allow a micro view into the price action, wave flows in that 15min bar, i.e how many times price knocked at the bottom or the top where it opened , how rapidly it moved to the high or low, how rapidly it was rejected etc, this then allows the trader to better understand the meaning of that 15min open/high/low/close in conjunction with the vol.

 

Yes, I fully agree with your statement. Especially in larger bars its helpful to have a look, whats going on in this bar. I have seen several TG chart of the week and they recommended to view on different time frames. I have seen, that they explained someting e.g. in a 10min chart and then switched to a smaller time frame for a more detailed illustration. If one like to switch down to a 1min time frame or even smaller is imho not a question of VSA or not VSA. For a better overviev is use the higher time frames, to see more details I go down to a smaller one. It's also a question of the available screenspace.

 

  Quote

We are all on the same path here, nobody is right or wrong, just different viewpoints and nobody is forcing anybody to adopt one or the other

 

If I read your post, then I have the impression, that we are quite close on the same path, VSA and Wyckoff must have some commonalities.

Edited March 22, 2008 by mister ed
Comments and questions for Db to his blog please.

[habi 10]

  DbPhoenix said:

 

You will learn eventually that there is a great deal of difference between real-time trading and hindsight trading and that a diet of being told what you should have done goes only so far. If you want to learn how to trade in real time, then you're going to have to trade in real time, preferably on paper. Every day. All day. You aren't going to get very many epiphanies from analyses that are all in the past tense.

 

:thumbs up:

 

 

EDIT by mister ed: Comments and questions for Db to his blog please, though I will let the thumbs up stay for now!

Edited March 22, 2008 by mister ed
Comments and questions for Db to his blog please, though I will let the thumbs up stay for now!

[rednite 10]

Newbie to VSA and have a question. I would like to know if VSA would be applicable for buying and selling in the intermediate and long terms for a market. Does it apply to day bars as well? It seems all I have seen so far is 5 minutes or maybe some hour bars in all the examples although I also read it does apply for all time frames. Please confirm and comment. Thank

[mister ed 10]

  rednite said:

Newbie to VSA and have a question. I would like to know if VSA would be applicable for buying and selling in the intermediate and long terms for a market. Does it apply to day bars as well? It seems all I have seen so far is 5 minutes or maybe some hour bars in all the examples although I also read it does apply for all time frames. Please confirm and comment. Thank

 

Hello rednite and welcome. The answer is yes, the analysis can be applied at various 'scales', including the daily chart. There is a brief analysis of a stock on a daily time-frame at this thread, for example.

[shall861 10]

hello, i was wondering if there is anything for overnight euro session trading similar to the $tick. i use it constantly during the day as a guide for us markets but of course $tick on any chart only displays 9:30 to 4:15 data. Is there a similar instrument for euro session, maybe to help guide me with pound futures at night????????????????

[CandleWhisperer 10]

First, as one who really wanted this thread to get back to VSA, that did not mean get rid of DB. His take on Wyckoff should be welcomed here. Tom studied Wyckoff, Tom Studied Ney, We study Tom. By the transitive property we study Wyckoff.

 

Now one more thing about 1 minute charts. Tom, Gavin, Todd, and maybe even Sebastian say don't trade off the 1 minute because there is too much noise. However, Tom ultimately says a trader should trade his own personality. If one's personality is suited for the 1 minute, then trade it.

 

Again, what many fail to understand is that price is continuous. It flows. We, as humans, are temporal so we think in terms of time. That is why the close is so important to us. It is a momentary picture of where prices is on a continuum that is agreed upon by all. Of course the same is true for the high, low, and open. Price itself, however, is fluid. It ebbs and flows unencumbered by arbitrary measures of time.

 

Time is important in VSA mainly because we need to compare volume. We need to make distinctions in the amount of volume/activity in the market. This can be done on a 15 minute chart OR a 30 second chart.

 

Lastly we need to remember that markets are fractal. A 30 minute chart looks like an 8 minute chart, looks like a 3 minute chart. Higher timeframes tend to lead and dominate the smaller ones. Hence when we want to look at trends it is a good idea to step back. The operative words being step back. DB is advocating stepping closer to price to see price. Most step back to see trend. But trend is a derivative of price flow.

 

Gavin trades the 3 minute e-mini. Are the traders on this thread trying to say that a 3 minute chart must have 3 xs less noise, or be 3xs inherently more tradable? In other words, what makes a 3 minute chart okay and a 1 minute not. What about the 2 minute? The answer, which brings us back to where this post started, is personality of the trader. And that has nothing to do with what is or is not VSA.

[CandleWhisperer 10]

Okay, it's time we have a VSA chart. I don't care if this is after the fact or not.

 

There are 2 charts below. The first chart has some interesting things that set up what comes on the second chart. This was not a trade made but an interesting learning opportunity none the less.

 

A: Large dark WRB on high volume. Down bars on high volume usually mean selling. But look at the next bar, it is up. if all the volume was selling this next bar could not be up. Demand therefore must of entered. Note that the next bar is not labeled. Check out the volume. Less than the previous two bars. With an equal close and not making a higher high, this does not represent a good place to go long. And if one was looking to go short, this is not good example of no demand. Again because the close is equal and the high is equal. Most importantly, because we have just seen strength in the form of the WRB.

 

B: Now we see a wide spread candle that closes down from the previous bar, but closes above the middle of its range on high volume. Note how price moved down and hit the Support/Resistance line formed by the WRB and then moved up. There is price rejection in this Long Shadow. So we ask what has price done on the volume? Well it closed down but in the upper portions of its range. More demand must of entered on the bar. Simply, this bar is strength.

 

C: First entry signal. Close on the high on a bar with volume less than the previous two bars and a narrow range into previously high volume territory. This is a test. We are within the range of the large WRB and testing in a logical place. Right after the influx of demand as shown by the long shadow/close in the upper range.

 

D: Another dark WRB on high volume. Yet the volume is not as high as the first one. Again, the very next bar is up. Demand must of entered on the WRB for the next bar to be up.

 

E: No supply. Check out the range of this bar and the volume. The BBs definitely were not involved in this bar. This is a down bar, and VSA teaches that strength comes in on down bars. As a bonus, we have moved back into the S/R zone. Note that we are above the midpoint of the body of the WRB. Support within support.

 

F: Either of these two bars have volume less than the previous two bars and are no supply. See how they are being supported a the low of the white WRB.

 

3 or 4 possible places to take advantage of a change in supply/demand. See chart 2 for what happened next.

[Ricks Inn 10]

  CandleWhisperer said:

3 or 4 possible places to take advantage of a change in supply/demand. See chart 2 for what happened next.

 

CW - I'm not much of a candle guy, but chart 2 has all them thar "higher-low after higher-lows" that Sebastian talks about as well. Yes it's all rear-view mirror stuff -- that doesn't make it wrong. Maybe better called "necessary but not sufficient".

[zeon 10]

  CandleWhisperer said:

A: Large dark WRB on high volume. Down bars on high volume usually mean selling. But look at the next bar, it is up. if all the volume was selling this next bar could not be up. Demand therefore must of entered.

 

CW, nice analysis since price goes eventually in the right direction, but for the same setup I could find numerous posts where price eventually continues on the way down. You're stating 'demand must have entered'. But if I'd count the times I'd seen an up-bar on low volume after a WRB down bar on high volume... This happens all the time, perhaps scalpers are trying to pick some points going against the trend there. And if you want to call it demand, for sure. It doesn't mean that price will reverse because there is demand. Usually this 'demand' leads to a temporary change in the buying and selling flow. But I can't imagine anyone wanting to go long there, unless he's talking a gamble. Sorry, just my 2c

 

I can put up some charts if you like.

[Eiger 10]

  CandleWhisperer said:

Okay, it's time we have a VSA chart. I don't care if this is after the fact or not.

 

 

Yes! This is what i thought/hoped this thread was all about

 

Great analysis, CW.

 

I think the bar immediately after A is also pretty important. It is an up bar, and as CW said, it indicates there must have been buying on A. Look closely at the volume on this bar. It is ultra high and nearly the same as A. If that was selling, we would have had another bar like A. Tom Williams refers to this is "bag holding." It means the herd is in panic and is unloading (whatever this market is?), and like the postman with his bag open, the professional $ is taking all offers. One other clue to this bar is that the low doesn't dip much below bar A - big $ is eagerly buying.

 

Thanks for the post, CW.

 

Eiger

[Eiger 10]

  shall861 said:

hello, i was wondering if there is anything for overnight euro session trading similar to the $tick. i use it constantly during the day as a guide for us markets but of course $tick on any chart only displays 9:30 to 4:15 data. Is there a similar instrument for euro session, maybe to help guide me with pound futures at night????????????????

 

Not that I know of. The NYSE Tick is a running calculation of NYSE stocks trading up or down from their last trade. It only calculates during the RTH when the NYSE is open. There is also one for the Naz and Dow (TIKI), but again, only when the exchanges are open.

[Eiger 10]

  zeon said:

CW, nice analysis since price goes eventually in the right direction, but for the same setup I could find numerous posts where price eventually continues on the way down ...

 

I can put up some charts if you like.

 

Yes, put some up. We can all learn from them.

 

One thing I am not too swift on is failed tests. If someone sees one, please post it. I'd like to learn more about it.

 

Eiger

[CandleWhisperer 10]

  zeon said:

CW, nice analysis since price goes eventually in the right direction, but for the same setup I could find numerous posts where price eventually continues on the way down. ...I can put up some charts if you like.

 

Please do. I hope to show the same with my next post.

 

  zeon said:

...You're stating 'demand must have entered'. But if I'd count the times I'd seen an up-bar on low volume after a WRB down bar on high volume... This happens all the time, perhaps scalpers are trying to pick some points going against the trend there. And if you want to call it demand, for sure. It doesn't mean that price will reverse because there is demand. Usually this 'demand' leads to a temporary change in the buying and selling flow. But I can't imagine anyone wanting to go long there, unless he's talking a gamble. Sorry, just my 2c

 

If you mean going long on the very next bar/candle after the large WRB then you are correct. Note that I did not call that a possible entry point. No trying to pick the absolute bottom here.

 

  zeon said:

.... It doesn't mean that price will reverse because there is demand. Usually this 'demand' leads to a temporary change in the buying and selling flow.

 

That's what a WRB is: a possible change in the supply/demand flow. It creates an area or zone where the dynamics of buying and selling change. Of course, not all WRBs are created equal. Here we had a high volume WRB and it happened to be the largest of the last 5 dark WRBs. In that way it was a volatility spike.

 

Again, look at the total picture. Price acts differently after the WRB and more importantly within the Range of the Body of the WRB. Looking to get long or short within this range is thus beneficial. Weather one gets long or short has to do with what the BBs did on that WRB.

[dandxg 10]

  CandleWhisperer said:

Okay, it's time we have a VSA chart. I don't care if this is after the fact or not.

 

There are 2 charts below. The first chart has some interesting things that set up what comes on the second chart. This was not a trade made but an interesting learning opportunity none the less.

 

A: Large dark WRB on high volume. Down bars on high volume usually mean selling. But look at the next bar, it is up. if all the volume was selling this next bar could not be up. Demand therefore must of entered. Note that the next bar is not labeled. Check out the volume. Less than the previous two bars. With an equal close and not making a higher high, this does not represent a good place to go long. And if one was looking to go short, this is not good example of no demand. Again because the close is equal and the high is equal. Most importantly, because we have just seen strength in the form of the WRB.

 

B: Now we see a wide spread candle that closes down from the previous bar, but closes above the middle of its range on high volume. Note how price moved down and hit the Support/Resistance line formed by the WRB and then moved up. There is price rejection in this Long Shadow. So we ask what has price done on the volume? Well it closed down but in the upper portions of its range. More demand must of entered on the bar. Simply, this bar is strength.

 

C: First entry signal. Close on the high on a bar with volume less than the previous two bars and a narrow range into previously high volume territory. This is a test. We are within the range of the large WRB and testing in a logical place. Right after the influx of demand as shown by the long shadow/close in the upper range.

 

D: Another dark WRB on high volume. Yet the volume is not as high as the first one. Again, the very next bar is up. Demand must of entered on the WRB for the next bar to be up.

 

E: No supply. Check out the range of this bar and the volume. The BBs definitely were not involved in this bar. This is a down bar, and VSA teaches that strength comes in on down bars. As a bonus, we have moved back into the S/R zone. Note that we are above the midpoint of the body of the WRB. Support within support.

 

F: Either of these two bars have volume less than the previous two bars and are no supply. See how they are being supported a the low of the white WRB.

 

3 or 4 possible places to take advantage of a change in supply/demand. See chart 2 for what happened next.

 

Nice to see you back PP Your contributions were missed.

[CandleWhisperer 10]

  dandxg said:

Nice to see you back PP Your contributions were missed.

 

From my third post on this thread:

 

"JJ:

 

I managed to save a few screen shots from PP from other sites and this one. I have been studying his posts diligently. I have gone so far as to set up my charts exactly like his/hers. Are you saying he or she was not a real trader? I would hate to be trying to emulate a keyboard jockey."

 

But thanks for the comparison. I spend a lot of time reading his or her posts.

[NAVEEVIa 10]

Newbee here

i am studying the methodology in original VSA thread & applying to my trading.

Heres a trade i took for a measly profit

Saw a No demand inside WRB, confirmed & went short( Note the ND bar did not make higher high & was an inside bar not buying bar i.e higher low & higher high, so i maybe wrong in first place)

After the ND got confirmed went short & exited on circeld bar( thought it was test), volume was high on test but tawe trader mentioned in previous thread that for Futures test can have a higher volume.

 

Now my question is how should one trail stops based on VSA.

Some ideas given earlier were

a. Trail based on WRBs

b. look for VSA signals, e.g. if short look for No supply etc & move stops

c. If strength/weakness does not appear within n bars then exit

 

whats do u guys think on this

Good Trading

Naveen

[jjthetrader 10]

  NAVEEVIa said:

Newbee here

i am studying the methodology in original VSA thread & applying to my trading.

Heres a trade i took for a measly profit

Saw a No demand inside WRB, confirmed & went short( Note the ND bar did not make higher high & was an inside bar not buying bar i.e higher low & higher high, so i maybe wrong in first place)

After the ND got confirmed went short & exited on circeld bar( thought it was test), volume was high on test but tawe trader mentioned in previous thread that for Futures test can have a higher volume.

 

Now my question is how should one trail stops based on VSA.

Some ideas given earlier were

a. Trail based on WRBs

b. look for VSA signals, e.g. if short look for No supply etc & move stops

c. If strength/weakness does not appear within n bars then exit

 

whats do u guys think on this

Good Trading

Naveen

 

Naveen, great trade. Profit is never measly even if it's 1 tick. I liked your trade. You waited for the technical bounce to show exhaustion and shorted it. Personally I think your exit was good. That bar did have the makings of a reversal. There was no follow through but you didn't know that at the time so it was a good call. Better to take your position off the table and re-enter if necessary.

 

Tawe Trader is right that a futures 'test' can have high volume. But as you can see there wasn't much to test to the left. It was testing the low of the range but most instances of real tests are testing high volume areas for supply. This one just seemed to be a bit of demand on support. S&R traders could have had their orders there.

 

As far as trailing stops, this isn't really a VSA thing. It's a personal money management thing where you do what you feel comforitable with. VSA lays out the opportunities to trade then it's up to you wo work out your own style within that strength or weakness.

 

As far as exits are concerned, it's good VSA reading skills to exit into the next high volume bar. Like I said, you can always re-enter. Personally though my exits are small preset profit targets, 1-3 ES points depending on the level of strength or weakness in the background.

 

Nice trading, thanks for posting.