[VSA] Volume Spread Analysis Part II

[BlowFish 10]

Goint point Blowfish.

 

For arguments sake if you were an EOD trader would you recommend

60 min or 15 min when looking for entry/exit point.

 

sleepy

 

Personally I like 5 or 6 times the period. If they are too close they are showing similar information if too far apart then you are going to pick up too many of the 'flutterings' that you want to sit through. Remember the market cares nothing of time frames or charts, you are just zooming in or out to allow yourself to focus on the information that interests you.

[tawe trader 10]

For arguments sake if you were an EOD trader would you recommend

60 min or 15 min when looking for entry/exit point.

 

Sleepy,

 

Without trying to be funny if your an EOD trader how can you have a shorter / intraday timeframe for entry ?

 

The big thing with timeframes is each trader has he own favourite that he is comfortable with. Eventually you tend to end up with a timeframe that suits your personality after a lot of trial-and-error.

 

Going back to the above question, you wouldn't go far wrong in using a 30 min timeframe for an entry. Use the daily for your overall strength / weakness then look to enter for shorts on a 30 min no demand (or upthrust) or longs on the confirmation of a 30 min 'test bar'.

 

Tawe

Edited November 6, 2008 by tawe trader
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[taks1990 10]

Hi all

 

This is my first post so apologies if it is in the wrong place.

 

First of all, I want to make clear that I am an advocate of VSA principles and not a critic - I just need your thoughts after seeing two of Sebastian Manby's videos.

 

I know that Sebastian is regarded as a good trader and I also have a lot of respect for him in posting videos where is analysing the market live, as a lot of VSA analysis tends to be retrospective.

 

The worry I have as an aspiring VSA trader is that in Sebastian's vidoes, a LOT of the bars are called incorrectly when analysing live, including a lot of classic VSA principles and indicators. My immediate thought was: "if an experienced trader like Sebastian is making this number of mistakes AFTER many years of experience, is there any point in me even entering the arena?!"

 

I would really appreciate your comments as to how you find the accurancy of VSA when trading live and your successes as private traders.

 

Many thanks

 

Mark

[tawe trader 10]

The worry I have as an aspiring VSA trader is that in Sebastian's vidoes, a LOT of the bars are called incorrectly when analysing live, including a lot of classic VSA principles and indicators. My immediate thought was: "if an experienced trader like Sebastian is making this number of mistakes AFTER many years of experience, is there any point in me even entering the arena?!"

 

Hello Mark, welcome.

 

If you have the VSA or price + vol experience and knowledge to see Seb calling a lot of the bars wrong then it's sounds like you have a head start on most beginners and should do just fine - jump right into the trading arena.

 

I personally find VSA very accurate but sometimes I still struggle to believe what I see on the hard right edge. That's the hardest part for me and (pls excuse the cliche) if you can trade what you see and not what you think then VSA is will keep you on the right side of the major moves, the majority of the time.

 

VSA is not a mechanical system like where you would see, for example two moving averages cross-over to give you a clear buy / sell signal as once you know the VSA principles (which you sound like you do) there is a bit of thinking involved but it's mostly common sense concerning the mkt background and higher timeframes etc. Patience also plays a large part in successful VSA trading.

 

Just my 2p worth..........

Regards

Tawe

[jjthetrader 10]

The worry I have as an aspiring VSA trader is that in Sebastian's vidoes, a LOT of the bars are called incorrectly when analysing live, including a lot of classic VSA principles and indicators. My immediate thought was: "if an experienced trader like Sebastian is making this number of mistakes AFTER many years of experience, is there any point in me even entering the arena?!"

 

Mark

 

Mark, welcome. Don't get too caught up in the way Sebastian "trades" this. He may or man not actually even trade. A lot of trading educators don't actually trade (Joel Pozen). You just don't know. Also, the bar by bar commentary is a style unique to Sebastian. It's not the only way to trade the principles. When I started out trading with VSA I thought it was something I was doing wrong because their methods didn't work all that well. Once I found my own style the methodology became brilliant.

In a way it kinda sucks that TradeGuider has monopolized VSA. There is truth there but when you start to trade you start to see which aspects are the truth and which you can actually apply.

Many traders have turned their trading career's around by adopting VSA. I'm one of them.

[Bearbull 10]

Mark, welcome. Don't get too caught up in the way Sebastian "trades" this. He may or man not actually even trade. A lot of trading educators don't actually trade (Joel Pozen). You just don't know. Also, the bar by bar commentary is a style unique to Sebastian.

In a way it kinda sucks that TradeGuider has monopolized VSA.

.

 

Well then you have to ask this simple logical question, if these guys have the ability to read the footprints of the professional money as they claim, what is preventing them from mortgaging their house, and trading 50/100 contracts on ES especially with the support of the Master , Tom Williams behind them. They have been marketing this stuff for over 7-10yrs, by this time, should have racked in millions, not bombarding every Tom, Dick and Harry on an ongoing basis with emails of promotions of their new software, seminars and VSA clubs.

[taks1990 10]

Hi all

 

Thank you all for your quick replies and I appreciate the feedback.

 

I guess I just need to jump in and learn from my own experience instead of listening to everybody elses thoughts.

 

One poster also recommended me to return to the original source i.e. study Wyckoff and I think this is a good idea.

 

Thanks again

 

Mark

[jjthetrader 10]

 

I guess I just need to jump in and learn from my own experience instead of listening to everybody elses thoughts.

 

One poster also recommended me to return to the original source i.e. study Wyckoff and I think this is a good idea.

 

 

Mark, you got it! That's not only a mantra to trade by but to live by.

 

Regarding Wyckoff, I found VSA much easier to adapt to daytrading. Plus VSA was born out of Wyckoff so it's methodology is sound.

 

To Bearbull, I don't think these guys actually think they have the holy grail. In no way am I defending them but if you had a method that's 80% accurate would you mortgage your house to trade it? Todd Kruger himself only claimed 70% accuracy. It's just a way to help you trade and with the proper risk to reward 70% is more than enough. But not enough for a second mortgage.

Lets not mistake VSA for tradeguider.

[Bearbull 10]

Plus VSA was born out of Wyckoff so it's methodology is sound.

 

To Bearbull, I don't think these guys actually think they have the holy grail. I

Lets not mistake VSA for tradeguider.

 

It is human nature to seek evidence that will reinforce their beliefs regardless of evolving evidence and this is what we bring to our trading (Mark Douglas).

Firstly you acknowledge and many others here do as well that VSA is derived from Wyckoff, then why not encourage newcomers first to embark on a systematic study of the source instead of throwing themselves into jargon at the initial stage.

 

I can state this because we have sound knowledge of both.

 

Secondly Tradeguider was originally VSA based on Tom Williams' work in U.K, then it was glossed over with a new title, that is all, the software, signals therein, the ongoing teaching, seminar, DVD, are all based on T.W book on Volume Spread Analysis. All the terms in the Tradeguider software are exactly the same as those in the book.

e.g End of Rising Market, this has been claimed as the most potent signal in the software, does that mean it is not in VSA.

On YouTube there is the video how this signal predicted the fall of oil prices from $140 when everybody else was predicting higher prices.

Now if you listen to any of the seminars, the first thing they point out that these are not signals and then when it pans out it is hailed as the most potent signal, just this one signal is enough to cough up $2995 for the software;)

We have seen the software in action and this same signal has a similar strike rate to that of any CCI or RSI divergence method.

Like you I am neither for or against and have no desire to engage in controversy with others on this thread, if you have somehow benefited from it, fine, but to ask a newcomer to struggle through it until he or she finds something that works is not really very encouraging. Afterall whatever you have figured out into your strategy/tactics is not available to the newcomer.

Let him go to the source and then will be a better position to examine VSA concepts.

[jjthetrader 10]

Firstly you acknowledge and many others here do as well that VSA is derived from Wyckoff, then why not encourage newcomers first to embark on a systematic study of the source instead of throwing themselves into jargon at the initial stage.

 

 

but to ask a newcomer to struggle through it until he or she finds something that works is not really very encouraging. Afterall whatever you have figured out into your strategy/tactics is not available to the newcomer.

Let him go to the source and then will be a better position to examine VSA concepts.

 

Why point to VSA rather than Wyckoff? Because it's much simpler and way easier for daytrading. And I'm not pushing it on anyone or asking anyone to struggle through anything. In essence you're encouraging a newcomer to give up because TG's sales pitch is heavy or you think it doesn't work becuase you can't make it work? I'm encouraging someone to move forward because I know it works from experience.

[larsdelgars 10]

i love VSA ... when i first found it i wasn't ready for it... i was skeptical... now its all about tracking sentiment and less about technicals....:missy:

[Khepfere 10]

This stuff is not the forerunner or foundation of VSA at all. An indicator that incorporates volume doesn't make it VSA. Maybe you should start at the beginnig of this thread to find out what VSA is.

 

Thanks JJTT. You're right - I was sloppy with my wording (up too late). Instead of saying the 'forerunner' or 'foundation' what I really wanted to convey was that the whole Klinger-Goslin methodology appears to be using the 'same' principles of Distribution, Accumulation, Divergence and Exhaustion as VSA (in other words, incorporating volume and price action just like VSA as opposed to other methods that ignore volume). Granted they are different 'systems' based on these same principles but the underlying principles appear to be very similar. Which is why I was curious to get some thoughts on this from the VSA community.

[Marsupilami 10]

Hi Speres;

 

 

 

 

I am currently writing a book similar to Tom's, but explaining all the principles that Wyckoff wanted the public to understand, going into great detail, better than any book I have read, giving hundreds of charts in greater detail than my PDF postings last November, I am hoping that I can help someone with no experience to become someone who can support themselves financially on their own two feet, through the book and training videos, then I might not have a reason to exist after that. And Tom has been asking me to write a book for the last four years, so I caved in.

 

 

Hello Sebastian,

 

how is the work on your book going along ? I'd be very happy to see you interpret the markets and explain VSA !

 

Thanks,

 

Marsupilami

[sleepy v2 10]

Some great discussion(s) recently.

 

Anyone seen Eiger?

 

And how much time is everyone currently spending (i.e., hours a day/week) learning, reading, practising, reviewing VSA charts and principles.

 

sleepy

[CandleWhisperer 10]

Some great discussion(s) recently.

 

Anyone seen Eiger?...sleepy

 

His last post said he was on his way to the VSA conference in San Fran. The next post (by TT) inferred that Eiger was joining the TradeGuider team. If that is true, Gavin will not allow him to post here. Or at least not post with the same quality and depth of knowledge we have come to enjoy and have found so useful.

[Tasuki 10]

Gavin will not allow him to post here. Or at least not post with the same quality and depth of knowledge we have come to enjoy and have found so useful.

 

WHAT? CW, if that's true, that would be really terrible. Eiger has been an extremely valuable contributor to our VSA thread. Now that I think about it, SebMan hasn't been posting here in quite a while, and if my memory serves, he stopped just about the same time that he said he was joining Tradeguider.

 

I never liked Gavin, but that was mostly because he seemed like a poser. If he's really stifling people's free speech, that would be serious. Instead of promoting VSA, this would mean that Tradeguider is trying to monopolize the concept. [i can just hear some of you saying, Tasuki, wake up and smell the coffee].

 

Which raises an interesting question---why ARE such people as Sebastian and Eiger working for Tradeguider? Maybe because they're not paying the bills with their own trading? If Gavin really has a noose around their necks, that would sure seem to take the fun out of the whole business.

[sevensa 10]

Which raises an interesting question---why ARE such people as Sebastian and Eiger working for Tradeguider? Maybe because they're not paying the bills with their own trading? If Gavin really has a noose around their necks, that would sure seem to take the fun out of the whole business.

 

 

Maybe because they think it is just fair for them to be compensated for their knowledge and experience obtained through years of studying and research, instead of just giving it away for free?

[Tasuki 10]

Maybe because they think it is just fair for them to be compensated for their knowledge and experience obtained through years of studying and research, instead of just giving it away for free?

 

Good answer, 7. This just demonstrates my ignorance of (and distain for) the corporate world. For most of my life I've been a scientist, protected by the fierce independence of academia. Jeans and a T-shirt were all we wore to work, and any boss who tried to make us dress up would lose his techs so fast it would make his head spin. The concept of your boss curtailing your freedom of speech is unamerican, as I see it, but the corporate world makes you sign away your rights and your liberty in their non-disclosure clauses, and people, millions of them, sign up for this servitude, swallowing their pride for a fat paycheck. Can't fathom it, myself. One of the best parts of being an independent trader is that nobody gets to tell you what to do. Why anyone would trade that freedom for anything is beyond me. Freedom rules.

Edited November 10, 2008 by Tasuki

[BlowFish 10]

 

I never liked Gavin, but that was mostly because he seemed like a poser. If he's really stifling people's free speech, that would be serious. Instead of promoting VSA, this would mean that Tradeguider is trying to monopolize the concept. [i can just hear some of you saying, Tasuki, wake up and smell the coffee].

 

 

It is pretty clear to me that GH has no interest in VSA, trading or traders beyond how it/they can generate revenue for tradeguider. Tasuki wake up and smell the TG BS hehe:)

[tawe trader 10]

Well then you have to ask this simple logical question, if these guys have the ability to read the footprints of the professional money as they claim, what is preventing them from mortgaging their house, and trading 50/100 contracts on ES especially with the support of the Master , Tom Williams behind them. They have been marketing this stuff for over 7-10yrs, by this time, should have racked in millions, not bombarding every Tom, Dick and Harry on an ongoing basis with emails of promotions of their new software, seminars and VSA clubs.

 

Why does it seem that so many profitable traders end up down the seminar/course/book selling route ? My guess is that after a few years it becomes mentally easier to obtain a steady (nearly guaranteed) income stream (or part income) from sales etc rather than the day-in-day-out grind of trading for a living.

 

This is such a mentally tough way of trying to make a living and some have said that you should only really be trading for the love of it, the challenge of it, the chance of being your own boss and not just for the money, as no amount of money can compensate for the emotional rollercoaster and daily highs and lows we experience while we try and trade for a living.

 

Even with an advanced knowledge of VSA, it needs to be combined with a bottomless pit of mental strength and fortitude to allow us to succeed and any days that we are not 'balanced' or in the right place, mentally speaking, we will 99% of the time, suffer losses to our trading account.

 

Tawe

[BlowFish 10]

Consistency is not just a day to day and month to month thing it's a year to year thing. If you take Shwagers market wizards as a sample of some of the 'best' traders of our time it is sad and somewhat worrying that a large number of them have 'blown up' since the publication of the book. Many not for the first time. Actually I suspect its the same 80/20 ratio as supposedly occurs amongst newer traders. Perhaps it is to protect themselves from this eventuality.

[tawe trader 10]

You're right BF, we are currently seeing nearly everday, big name, 'star' traders and hedge managers declaring massive losses. These are the ones who have been very successful and profitable for the last 10, 15, 20 yrs.

 

Have they failed to alter their trading method to suit current mkt conditions due to the fact that they believed they were invincible, infalliable and their ego was becoming a little bit too large ?

[Bearbull 10]

It is pretty clear to me that GH has no interest in VSA, trading or traders beyond how it/they can generate revenue for tradeguider. Tasuki wake up and smell the TG BS hehe:)

 

Well you don't find Sebastian or Tom Williams complaining about it, why do you think T.W incorporated all this stuff in a computer program and marketed as VSA software in U.K back in 2000;)

 

as to tawe comments: if you examine closely there are some logical inconsistencies in VSA/TG claims about reading the footprints of Professional Money and then the onus on the marketing. If they really possess this ability, then all they have to do is piggyback the bigboys, where is the question of mental preparation, emotions , stress etc encountered by normal traders who are employing various types of other methodologies and indicators. Moreover TG have so many potent signals in their software which should tell them what to do without any sweat e.g END OF RISING MARKET:cool:

[Tasuki 10]

Why does it seem that so many profitable traders end up down the seminar/course/book selling route ? My guess is that after a few years it becomes mentally easier to obtain a steady (nearly guaranteed) income stream (or part income) from sales etc rather than the day-in-day-out grind of trading for a living.

 

This is such a mentally tough way of trying to make a living and some have said that you should only really be trading for the love of it, the challenge of it, the chance of being your own boss and not just for the money, as no amount of money can compensate for the emotional rollercoaster and daily highs and lows we experience while we try and trade for a living.

 

Even with an advanced knowledge of VSA, it needs to be combined with a bottomless pit of mental strength and fortitude to allow us to succeed and any days that we are not 'balanced' or in the right place, mentally speaking, we will 99% of the time, suffer losses to our trading account.

 

Tawe

 

One explanation for good traders "selling out" (that's what I call it) to the corporate world is because they have priorities like children, a family, and perhaps aging parents that need caring for. Or, they may just enjoy the good life, like that most famous of traders, Jesse Livermore, and rack up large bills that need paying off. My idea of independence is to be free of all that baggage. but my spartan lifestyle is not the norm. Lots of people fall in love (poor suckers), and that will change a trader's priorities in a heartbeat, and when you require a regular income to support a family, the lucrative world of traders education starts to look pretty promising.

 

I admit that I haven't gotten there yet, but I do know traders who have reached a plateau of success, such that they don't have to mentally struggle the way novice and intermediate traders do. For these friends of mine, trading is an enjoyable game, and they are very successful at it.

[larsdelgars 10]

Building the proper grid.

 

I like to zoom out and look at a two week or one month line chart. (see first attachment)

 

Look for an area that has been tested from above and below. Most of my lines are areas that had been tested from above and below more than once or they were the top or bottom of a major consolidation. This lets you know these are areas that have large pockets of standing orders and can stop and start moves. This grid should create S/R lines that are approximately 30-40 handles apart (depending on average ranges)...

 

Take a look at the second chart. My S/R lines from last week provided a perfect topping level in pre-market and a bottoming level at the end-of-day (this happens more often than not)... my middle level provided the weekend gap jump-over and during the session was temporary support and a good VSA shorting area on the kiss-back. These levels were re-drawn beginning of last week... In all fairness the lowest level was adjusted intra-day friday last week and was very close to but not from the 1 month line.

 

If you like to use a 5 or 8 minute VSA chart to look for entries these are the perfect grid lines for you. The 30-40 handle range provides plenty of profit opportunity to offset a slightly larger risk. Simply use the lines like weekly pivots... as one is broken to the downside expect the next lower to be tested and vice-versa. Remember the proper levels have a high potential to create volume and since price is always seeking volume the proper levels provide excellent entry/exit areas to get in/out of trades and most importantly to define risk.

 

Building the proper support/resistance is more than half the battle. With correct support/resistance you can be a basic S/R trader without VSA... add VSA to the mix and entries become more precise and risk is reduced. Using VSA also helps the trader to decide how the lines are going to be "negotiated."

 

Now these areas are known and sometimes they are "gamed" (but much more often than not these areas hold) so using VSA really helps to understand these nuances. Last week one of my levels was broken and at first glance appeared to be legit... however the two legs up and over resistance showed major distribution based on VSA principles... also price "sat" on new support after mounting the line and didn't really do much other than display more re-distribution... since price had no "life" and hugged the line I simply waited for price to break down through and then kiss-back to the line on low volume and a VSA shorting entry point. Profit target was the next support line down and risk was very low compared to potential gain.

 

Thanks for taking the time to read this.... God bless and good trading

Edited November 10, 2008 by larsdelgars