[VSA] Volume Spread Analysis Part II

[dandxg 10]

This is true dandxg.......sometimes. The thing with the ES is there was a time when it would never respect them and then six months later it starts bouncing right off them.

 

You are making my point. They don't work consistently IMO

 

It's the nature of the evolving beast and as such you always want to put price and volume ahead of anything.

 

Right that's obvious.

 

You can't just play John Carter's 'pivot plays' willy nilly.

 

Why are you making assumptions about the way I trade? I have never take any education lesson from John or Hubert FYI.

 

I like to have them up there to see if they're going to be respected as this gives you a bit of an indication of sentiment.

 

Great good for you.

[brownsfan019 17]

First, I would put Mark's white hammer pattern (Found on elitetrader) up against any of yours or Steve Nison's. The text book/internet patterns are not reliable.

 

OK, go ahead and prove your theory here with actual facts. I'd like to see your statistical research which shows that Mark's pattern is superior to those found from Nison's work or my candle area on this forum.

 

You said it, now show me PROOF.

 

Second, unreliable does not mean on trade can't make 8 pts. It means for every 8pt trade there are 10 2pt losses. Not very reliable in my book.

 

Again, I will await to see your evidence of this random info you've posted. You've provided a random statistic here that is based on what exactly? I'd love to see how you can prove that for every 8 pt trade I take that I then take 10 two point losses.

 

You see son, it's hard to stay in business (yes, I run a business not a hobby) if you win for +8 and then lose -10 day in and day out. Kinda hard to turn a buck that way...

 

You still have not shown any understanding of the Price Action. Why?

 

Not sure what you mean - I run the candlestick section right here on TL that has more info in it than most here will ever grasp. Instead of throwing rocks, please enlighten us there CW. I have yet to see a thread or area on the forum that YOU have made that details how to explain PA. Maybe I missed it, so feel free to show me those threads. In case you can't find mine, they are right here.

 

As far as "text book" VSA, we are not all on the same level. Surely a newer trader will miss an idealized set up. Even a seasoned trader misses things every now and then. If you want to go this route, you can't say with certainty that was a hammer or a doji or a spinning top. And I bet if you put a poll on the candle thread you would get many different responses. By you definition, very little is text book where candles are concerned...........

 

You missed my point completely. Whatever you want to call that candle is IRRELEVANT. The name of that thing MEANS ABSOLUTELY NOTHING.

 

But I can tell that I am talking to a very inexperienced trader. For you to focus on what exactly that doji is called just shows how new to this you are. The name of that bullish candle, aka price action, MEANS NOTHING.

 

Until you understand that, it's hard for us to have a discussion.

 

--------

 

side note - is it me or is this forum just full of newbies all of a sudden? Did James take out some ads on Google or something?

 

[brownsfan019 17]

Very good question. Thanks for it. I am afraid you will find my answer wanting however.

 

If you had asked my this as little as two weeks ago, I would of said I don't believe in price targets. I like to trail my stop and let the market take me out of a trade.

 

That is what I would of said then , today it is a bit different. Since I am a client of a particular site, I do not want to say anything about targets. I will give a hint: it is in a least 2 threads in this forum.

 

Even with that, I still like to simply trail my stop. I move my stop up based on the appearance of WRBs. This method is detailed by Mark in the WRB thread I believe.

 

By the way, Tom Williams says markets will trend further than one expects them too. So all the more reason to not expect and simply allow the market to do what it wants to do.

 

Actually CW, this post from you explains everything. Since your methods are changing weekly or daily and you need to pay someone to show you how to trade, that's all I need to know.

 

It's PAINFULLY OBVIOUS that you are brand new to this. It's ok, you have a lot of learning ahead of you, including how to 'read price action'.

 

A few here understand when I write that the name of the candle means nothing. To you, this is a deal breaker as evidenced by your reply to me suggesting I open a poll to decide what that candle was called. A very amateur call. An experienced trader will look and say - wow, bullish on high volume, consider going long. That's it. Doesn't matter if you call it a doji, hammer, spinner, lasagna, crocodile hunter, blue moon special, terminator, cannon ball alley or my personal favorite - a reason to go long.

 

[CandleWhisperer 10]

Note to self: use the words for example else your words will be taken literally. the 10 pts loss is AN EXAMPLE. Do you not understand subtext?

[CandleWhisperer 10]

Actually CW, this post from you explains everything. Since your methods are changing weekly or daily and you need to pay someone to show you how to trade, that's all I need to know.

 

It's PAINFULLY OBVIOUS that you are brand new to this. It's ok, you have a lot of learning ahead of you, including how to 'read price action'.

 

A few here understand when I write that the name of the candle means nothing. To you, this is a deal breaker as evidenced by your reply to me suggesting I open a poll to decide what that candle was called. A very amateur call. An experienced trader will look and say - wow, bullish on high volume, consider going long. That's it. Doesn't matter if you call it a doji, hammer, spinner, lasagna, crocodile hunter, blue moon special, terminator, cannon ball alley or my personal favorite - a reason to go long.

 

 

Funny for one with so much experience you seem to show up on every thread. Why doesn't mr. candle man stay in candle corner, if they're so great? And you're so smart?

[brownsfan019 17]

Note to self: use the words for example else your words will be taken literally. the 10 pts loss is AN EXAMPLE. Do you not understand subtext?

 

Well, your 'example' here has NO BASIS WHATSOEVER. That's the problem smart guy. When you say that a candle pattern fails 9 out of 10 times and that you will lose money, a little statistical evidence to support this would be nice.

 

Here's an example of why you can't just rattle off mumbo jumbo - While some sites that teach you trade promise the world, ALL OF THEM fail miserably, incl. the one you go to CW. Yes, some show trades that win, but they all will lose money in the long run.

 

Note - no evidence to support this, I just felt like spouting something off.

 

Funny for one with so much experience you seem to show up on every thread. Why doesn't mr. candle man stay in candle corner, if they're so great? And you're so smart?

 

Once again, show how often I frequent 'every' thread. It's funny how you have just shown up out of the blue and have nothing meaningful to contribute other than promoting Mark's website... Hmmmm....

 

Again - go ahead and show me where YOU have explained PA. I showed you where I've done it. How about you? ANYTHING meaningful to contribute here?

 

That's what I thought. Just another newbie that thinks by paying a vendor he now knows the world of trading.

 

As for where I go on this PUBLIC forum, guess what? It's public!

 

I simply provided some ideas to others in this thread that could HELP with their trading. You meanwhile want to get into a pissing match about who's more experienced when it's obvious who the newbie here is... Or wait, let's start a poll to see what others think...

 

In case anyone doesn't realize this, CW has paid for this service and we can only guess what his motivation here on TL is.

[Ricks Inn 10]

Sebastian - May I inquire about the tool you were using as the basis of the chart posted in #725? It looks familiar, but not exactly like anything I've seen previously...

[zeon 10]

Dow is showing weakness after the FED cut rates, this shows that the Specialist's took the opportunity to distribute stock they had bought from the public at the lows at around 11800 level, rarely at a loss to themselves of course.

 

Point A, up bar with the high lower than the previous high, and look at the volume! remember that markets do not like high volume on upbars, unless tested immediately.

 

Point B, there is a test and all looks rosy and looking strong at this point.

 

C, A down bar after a test, this is weakness, well this bar says it all, I can now look forward to lower prices, look for a 'No demand' into the 12600 level to confirm the downtrend. And don't forget to post your short trades for all to study.

 

Regards S

 

Thanks, great post. But why, within the context of the last couple of days, doesn't the "low volume" on the downside equate strength? There's hardly any real selling going on, and after a 500-point rise up to 12600 some kind of pause or consolidation was to be expected.

 

So, with all due respect, I believe we are going back up to 12600 at least.

[jjthetrader 10]

You can't just play John Carter's 'pivot plays' willy nilly.

 

Why are you making assumptions about the way I trade? I have never take any education lesson from John or Hubert FYI.

 

Before you get too pissy I think you misread 'you' to mean YOU, dandxg. It was a broad statement to illustrate your point that you (not just dandxg)can't take pivot plays. It actually wasn't about you, dandxg, at all although you are included in the all that 'you' encompasses, ie you guys, if you happen to trade that way which I was not assuming you did if you're on this thread.

Edited March 27, 2008 by jjthetrader

[jjthetrader 10]

Sebastian - May I inquire about the tool you were using as the basis of the chart posted in #725? It looks familiar, but not exactly like anything I've seen previously...

 

If you're talking abuot the software, it's tradeguider.

[zeon 10]

Before the market opened today, I identified various support and resistance levels. Like I said in a previous post on another thread, support was at 1337-1339. These are the horizontal blue lines drawn across the chart.

 

Price opened above support and just went straight lower, like a knife through butter. It stopped around 1332 before going back to the support area, which should now act as resistance. I'm observing how the volume drops off gradually, so this looks typically like a low volume retracement after a breakout, right?

 

Then there's a volume peak that pierces the support level but the bar closes right down, and this is the 'shooting star' short signal I was looking for. The volume is much higher then before, so everything is according to plan.

 

However - and I can't get my head around why this is happening so often lately - price continues higher. I would almost get paranoid, but this would have been the 14th losing trade in a row. I stopped trading for real after 7 though. Perhaps I need to go short when I go long and the other way around. Certainly looks like that could work

 

I posted this chart elsewhere to, but as other people asked me yesterday to post it here, I did so because it looks like I might be getting more feedback here.

[jjthetrader 10]

Before the market opened today, I identified various support and resistance levels. Like I said in a previous post on another thread, support was at 1337-1339. These are the horizontal blue lines drawn across the chart.

 

Price opened above support and just went straight lower, like a knife through butter. It stopped around 1332 before going back to the support area, which should now act as resistance. I'm observing how the volume drops off gradually, so this looks typically like a low volume retracement after a breakout, right?

 

Then there's a volume peak that pierces the support level but the bar closes right down, and this is the 'shooting star' short signal I was looking for. The volume is much higher then before, so everything is according to plan.

 

However - and I can't get my head around why this is happening so often lately - price continues higher. I would almost get paranoid, but this would have been the 14th losing trade in a row. I stopped trading for real after 7 though. Perhaps I need to go short when I go long and the other way around. Certainly looks like that could work

 

I posted this chart elsewhere to, but as other people asked me yesterday to post it here, I did so because it looks like I might be getting more feedback here.

 

I pointed out this phenomena a couple days ago. An upthrust isn't an upthrust without weakness in the background. Just forget S&R for a minute and look at this from a VSA perspective. See the Selling climax at the bottom? That's your background. The bar you point out is merely a bar with supply on it. S&R traders may have their orders to sell there and this creates a bit of resistance but there was no follow through. This is why you can't follow 'shooting stars' alone.

[dandxg 10]

Before the market opened today, I identified various support and resistance levels. Like I said in a previous post on another thread, support was at 1337-1339. These are the horizontal blue lines drawn across the chart.

 

Price opened above support and just went straight lower, like a knife through butter. It stopped around 1332 before going back to the support area, which should now act as resistance. I'm observing how the volume drops off gradually, so this looks typically like a low volume retracement after a breakout, right?

 

Then there's a volume peak that pierces the support level but the bar closes right down, and this is the 'shooting star' short signal I was looking for. The volume is much higher then before, so everything is according to plan.

 

However - and I can't get my head around why this is happening so often lately - price continues higher. I would almost get paranoid, but this would have been the 14th losing trade in a row. I stopped trading for real after 7 though. Perhaps I need to go short when I go long and the other way around. Certainly looks like that could work

 

I posted this chart elsewhere to, but as other people asked me yesterday to post it here, I did so because it looks like I might be getting more feedback here.

 

Zeon, a bit of constructive feedback, but it's easy for me to do in hindsight, so take that for what it's worth.

 

1. I would have the previous day's high and low on any chart, I have found them to work well for S/R. 1334 was yesterday's RTH low.

 

2. As it approached that area there is what appears to be a selling climax about 32 so that shows strength. Market has a ton of selling volume at the low, but the candle close well of the low.

 

3. Then the market begins to stair step higher so I wouldn't short that ( ie. market making higher highs and higher lows ).

 

4. I am not sure if you generated those S/R areas off that time frame , but I would suggest maybe using a higher time frame to generate S/R if they came of that 5 minute chart. Eiger had some good ideas earlier IMO.

 

5. Lastly you might want to consider drawing a trend line connecting the highs when in a down trend and when broken, which it was no more shorts.

 

Hope it helps.

[CandleWhisperer 10]

.....

 

In case anyone doesn't realize this, CW has paid for...

 

Soultrader or any other moderator. Please note that I have never mentioned the name of the site, the link, or implied if I was sent a pm I would give it. Mark has never done it either. That is not the way he does business. Out of respect to him, I ask that you delete the link to his site.

 

Also since we cannot ignore a moderator, at least they should be required to act like one.

[zeon 10]

Eiger, two days ago you asked me post some charts explaining what I meant.

Right now, there's a very good example of what I was talking about then. This is decreasing volume, on support. So is this strength (no sellers left?) or weakness (no buyers left to pick it up)?

 

This is where I'd take a long trade. Given the odds of my trades, this will probably go down now.

[Sledge 13]

Sledge, for the longest time, about a year I used floor pivots for the ES and ER and they worked, but too often price just smoked through them without a pause. Part of problem I believe with using floor pivots is which one do you use? There are 5-6 formulas I believe.

 

I don't post this to rain on your parade by any means, I hope you have better luck with them than I have had in the last few months. Just some food for thought.

 

I do believe in using PDH and PDL and looking to supplement them with some other logical S/R areas. I have been tinkering with MP and to me the it makes sense because it based on PV which is what VSA is, but when the market gaps hard and its far from the previous day MP levels what to do then? This is what I find myself thinking. This is the reason for question above to Eiger about S/R.

 

dandxg-

No parade raining at all.

I have dabbled with them and found the same thing you did- they can get smoked in a heartbeat, I'll have to go back to my trade journal and refresh myself as to why I gave them up.

 

*Looking for notes*

 

Ahh there it is, with SOME success but no real "comfort level" in making trades with them.

Also just as I was getting into fully testing them, VSA broke into my world. Became all consumed with VSA and they went by the wayside.

 

Trend channels appear to give a better gauge, I am in the early stages of learning them (i.e. how to draw, where to draw.) I had a mini-course lesson this morning on them as a matter of fact!

Sledge

[Sledge 13]

 

Remember, I am trading the S&Ps. Cable trends a lot; the S&Ps is more of a counter trend market. Most of the time I will have my exit just below/above the resistance or support as a target for an exit. I know there will be activity there and I want to get filled. If it goes through it and continues, I just wait for a retest of that area or a retracement, and if appropriate, reenter in the direction of the origninal trade. My worries are more about price not making it to the S/R level, which sometimes happens. JJ talked about what price and volume should look like on the approach, and as usual, he is spot on.

 

Eiger-

I have heard the term "counter trend market" in the TG seminars- but I don't know what that means- can you explain for me and any others who may not know what that means?

 

As far as having an exit at support or resistance- once again-- logical, SMART! Very wise idea to set your target to the S/R ballpark, take your money off the table and see where it goes from there, utilizing that "down time" to analyze your next move. Golden nuggets of information! Most appreciative!

Sledge

[Sledge 13]

Eiger, two days ago you asked me post some charts explaining what I meant.

Right now, there's a very good example of what I was talking about then. This is decreasing volume, on support. So is this strength (no sellers left?) or weakness (no buyers left to pick it up)?

 

This is where I'd take a long trade. Given the odds of my trades, this will probably go down now.

 

Zeon-

If you are wrong to go long, I'll grab the other oar in the boat and row with you. Just looking at the last six bars on the chart. Looks as if you have a Wide Spread Down bar (Hidden Potential Selling)

You then have climactic action on the next couple bars (look at that volume)

You now have (as the dust settles) higher lows (pro $ buying on the lows on decreasing volume)

The only caveat is this, LOOK OUT FOR A SHAKEOUT at the end of these smaller bars. Very likely to see a thrust downward into the territory of the Climax Bar and then shoot upward!

 

Sledge

 

[zeon 10]

Zeon-

If you are wrong to go long, I'll grab the other oar in the boat and row with you. Just looking at the last six bars on the chart. Looks as if you have a Wide Spread Down bar (Hidden Potential Selling)

You then have climactic action on the next couple bars (look at that volume)

You now have (as the dust settles) higher lows (pro $ buying on the lows on decreasing volume)

The only caveat is this, LOOK OUT FOR A SHAKEOUT at the end of these smaller bars. Very likely to see a thrust downward into the territory of the Climax Bar and then shoot upward!

 

Sledge

 

 

It looks like that was exactly what happened, another shake-out and then up went price. But at least price went up, which gives me some consolation...

 

My target would be the next resistance level. After two "selling climaxes" during the day, surely the pro's have been buying at the low prices and are ready for the mark-up?

 

Unfortunately as I'm typing this, price has just come down again, approaching the entry-point hmm.

[dandxg 10]

Eiger, two days ago you asked me post some charts explaining what I meant.

Right now, there's a very good example of what I was talking about then. This is decreasing volume, on support. So is this strength (no sellers left?) or weakness (no buyers left to pick it up)?

 

This is where I'd take a long trade. Given the odds of my trades, this will probably go down now.

 

Zeon, FWIW I think you read is spot on, you might want to filter trades like this with NYSE tick, I believe that is what Eiger does? These set ups can be tricky though and IMHO if taking it you would have to defend it to as much as 5 points below the lowest low so depending on where you enter it could make for a big stop. Trades such as these offer the biggest return but also the biggest risk as there is no confirmation as of your chart posting that there is a confirmed change in trend.

 

Just a suggestion you might wait for it to make a set of higher lows and then pullback on lower volume which could give you indication of a confirmed change of trend. You get less possible points but have more confirmation, pros and cons to each. The expectation would be that you could reasonably assume a retest of the resistance just made at 430-450. As it approaches this range you would like to see a burst of volume, Williams' would call it pushing up through supply ( the resistance range ) and then you would most likely get a pullback on lower volume where one could enter long again.

 

Hopefully this is helpful. Didn't mean to steal Eiger's thunder as I think he adds a lot to this thread and will be interested to see his response.

 

P.S. As an important side note I believe, it's necessary to realize that all of these indexes are attempting to form an accumulation base on the daily and this can take a very long time so it's quite possible that the intraday trading can zig zag back and forth in a range. Paraphrasing Williams and Wyckoff accumulation normally take a lot longer than distribution.

[brownsfan019 17]

Soultrader or any other moderator. Please note that I have never mentioned the name of the site, the link, or implied if I was sent a pm I would give it. Mark has never done it either. That is not the way he does business. Out of respect to him, I ask that you delete the link to his site.

 

Also since we cannot ignore a moderator, at least they should be required to act like one.

 

I moderate one area of this forum CW - the candlestick corner. That's it.

 

Outside of my humble abode, I can interact as any other member.

 

Lucky you.

 

:rofl:

[zeon 10]

Zeon, FWIW I think you read is spot on, you might want to filter trades like this with NYSE tick, I believe that is what Eiger does? These set ups can be tricky though and IMHO if taking it you would have to defend it to as much as 5 points below the lowest low so depending on where you enter it could make for a big stop. Trades such as these offer the biggest return but also the biggest risk as there is no confirmation as of your chart posting that there is a confirmed change in trend.

 

Just a suggestion you might wait for it to make a set of higher lows and then pullback on lower volume which could give you indication of a confirmed change of trend. You get less possible points but have more confirmation, pros and cons to each. The expectation would be that you could reasonably assume a retest of the resistance just made at 430-450. As it approaches this range you would like to see a burst of volume, Williams' would call it pushing up through supply ( the resistance range ) and then you would most likely get a pullback on lower volume where one could enter long again.

 

Hopefully this is helpful. Didn't mean to steal Eiger's thunder as I think he adds a lot to this thread and will be interested to see his response.

 

P.S. As an important side note I believe, it's necessary to realize that all of these indexes are attempting to form an accumulation base on the daily and this can take a very long time so it's quite possible that the intraday trading can zig zag back and forth in a range. Paraphrasing Williams and Wyckoff accumulation normally take a lot longer than distribution.

 

Thanks for a very informative post. I only mentioned Eiger because he asked me to post some charts, but I prefer posting charts live then get some older charts where hindsight analysis might be easy to do. In this case, I had no knowledge of what was coming after the "long entry". Your contributions or those from other people are certainly appreciated.

 

It looks like finally I might be getting somewhere. I agree that waiting for further confirmation comes at a disadvantage: a higher entry and less potential for profits. But so is the case in trading, the longer you wait the more convinced you are, but the less potential.

 

Also, you seem to agree that a re-test of resistance in this case is likely, so this is where my target would be. It remains to be see whether we'll get there, because at the moment price is back at 370 and not exactly in a hurry to go higher by the looks of it. :\

 

Finally, I'm also thinking this intraday action last couple of days is building up for another move higher. Glad to see someone think along the lines of what I'm thinking for a change

[brownsfan019 17]

Ignoring my previous posts to CW, take a look at this one from today guys:

 

 

 

I know this is not standard VSA work, but just take a look and see if it can help in your trading at all.

 

That's it. I'm not looking to get into an argument about whether that is hammer or spinner b/c it does not matter. What matters is that yet again this week we found another reason to get long using candles and a simple glance at volume. I know that's overly simplistic, but perhaps trading does not need to be so complex... :hmmmm:

[Nvesta81 10]

I'm just a newbie compared to you guys but from my observations I'd say candle formations and VSA compliment eachother very nicely. They sort of go hand-in-hand, no use comparing one against the other. Use both and things become much clearer. I'm sure there are plenty of trades that can be taken just by using candles alone, but VSA can give you a greater understanding of the potential of certain moves. Just my humble opinion...

[habi 10]

Before the market opened today, I identified various support and resistance levels. Like I said in a previous post on another thread, support was at 1337-1339. These are the horizontal blue lines drawn across the chart.QUOTE]

 

 

Zeon

 

Before you focus too much on horizontal lines you should have some ideas about the prevailing trend. In the 15min chart you see a strong uptrend and followed by a downtrend with overlapping waves. As long as this picture not changes you can expect, that the previous low will not act as resistance.

 

When you was looking this morning on this chart, you saw something like a falling wedge, which has a bullish implication. Additional support came from the regular session gap and the increasing volume was another sign of strength.

 

In the 5min chart you see strong up candles after the low was in, most with higher volume. The shooting star in this case was just shorttime weakness and the uptrend was confirmed, when it's high was exceeded. The high came then in within yesterday's downcandle.