[VSA] Volume Spread Analysis Part II

[tawe trader 10]

So, would the VSA indicator be available in NT or ProRealTime code?

I ve seen bits and pieces al over the Internet, but since there is a firm discussion going on over here I was hoping to find some latest developments.

 

Hi Dutchy,

 

I have read pretty much all of the VSA posts here and I can't remember anyone talking about VSA indicator code for NT or ProRealTime, sorry.

 

Tawe

[Eiger 10]

 

... I ... wanted to know if my analysis was wrong, or if Id badly managed the trade. Further, should I have tried to exit the trade before my stop was hit once I saw it going back up ... or wait to be taken out as I did in this instance ...

 

I don't see your ananlysis as wrong or a trade badly managed. Use this opportunity to learn - that is the most important thing.

 

Had I seen the bar marked C -- wider spread, close near the highs on a healthly increase in volume -- I would have exited that short. A bar like that shows that price was responding to the effort (i.e., the increased volume). Odds are very good that price will continue to rally at least until nearby resistance, which you had located your stop. Odds were good that your stop would be taken out, as it was. In cases like that, it is best to exit immediately. Most traders won't, because they are trying to avoid a loss, but the correct play is to exit with a smaller loss.

 

So, it seems you have gained a lot from one trade:

 

1. Look for no demands higher up after SOW. You had several clear signs at 1 (Stopping Volume/EORM), at 2 (UT), increased volume to the downside and the No Demand at A
   
2. You can stop yourself in on a No Demand
   
3. A strong up bar on increased volume indicates a further rally; it's best to exit short trades on a bar like this giving you the distinct advantage of a smaller loss
   

 

Not bad for one trade.

 

Eiger

[sleepy v2 10]

Thanks for the comments Eiger

 

As long as I remember the following I should do ok

'Next 1000 trades'

'Practise, review, practise, review, practise, review ....

 

Id also add ..

 

You could also wait for a clear break of the ND low before entering. ie let the mkt activate your short entry. It's not a 100% guarantee of success but it you have kept you out of this losing trade.

 

4. Place entry 1 tick BELOW No Demand bar. As Tawe implies this wont work all the time but it does provides me a rule I can follow for similar 'Short/No Demand' setups rather than guessing when/where to enter.

 

5. I should also remove all indicators, print chart and then manually work through chart bar by bar, in order to practise/refine chart reading skills.

 

6. Master 'Short/No Demand' type setups before moving on to other ones

 

Could you please elaborate on point 2. .. You can stop yourself in on a No Demand

as Im not sure what you mean here.

 

Thanks,

sleepy

Edited February 11, 2009 by sleepy v2

[Eiger 10]

....

 

5. I should also remove all indicators, print chart and then manually work through chart bar by bar, in order to practise/refine chart reading skills.

 

6. Master 'Short/No Demand' type setups before moving on to other ones

 

Could you please elaborate on point 2. .. You can stop yourself in on a No Demand

as Im not sure what you mean here.

 

Thanks,

sleepy

 

Your 5 & 6 are excellent ideas. If you can get data back for 6 months or a year, go back to those charts and do 5 & 6. Trading requires skill development. You must practice.

 

Stopping yourself in is placing a sell order one tick below the low of the No Demand, just different words.

[delta 10]

hi Dutchy

I like many here use only price volume chart. only thing I have changed in my metastock is volume bars.

1. Red hollow Bar: Volume less than previous 2 bars

2. Red solid Bar:Volume less than previous bar

3. Green hollow Bar: volume more than previous bar

4. Green solid Bar: volume more than previous 2 bars

 

That's it. Cheers

[VolumeJedi 10]

For those who attended the stellar TG event today. This is a quick chart of what the 3 min Euro looked liked when I told Gavin it was ready. By the time he entered, he had missed most of the move however.

 

The two key bars are the no demand (Blue bar with ND above it) and the next bar which is a failed test. The very next bar after these two bars, trades lower than the lows of said bars. By trading lower than the test bar it shows the test has failed. By trading lower than the ND we have a "Shapiro Effect" type entry.

[VolumeJedi 10]

Having issues with ensign so here is a 5 min chart from a different software. The focus of this chart is the same as the prior chart (Euro 3 min.).

 

The set-up here is very nice and worth looking at further.

 

A: Narrow range (NR7) bar closing down on volume less than the previous two bars closing near its highs. This is a test. Great example of a test as it closes lower and makes lower low. A test is a sign of strength, but we must see what happens after. In other words, the test is a "cause" and we now must look to see "effect".

 

B: 2 Bar reversal pattern. Sign of weakness after our test. This is a very nice example as the second bar makes a lower low, closes near its lows and does not make a higher high. We would actually like to see the close of the first bar closer to the high for a text book example. In fact, the next 2 bar is more text book although it fails to produce. Note that the second bar closes lower than the close of the test bar.

 

C: Wide Spread up bar closing near its lows on high volume with weakness in the back ground: this is an Up Thrust. Again, we get a higher high and not a lower low as the spread widens from the previous bar. Prices are rapidly marked up only to fall and close near the lows. Possible entry for the super aggressive type.

 

D: Note where we are- we have drifted up into the area of the 2 Bar Reversal. With these reversal patterns, we like to see them tested/ or find no demand within the area of said pattern. We see a narrow range (NR4) up bar on volume less than the previous two bars. This particular no demand bar makes a higher high but not a lower low which is ideal. We can enter short on a break of the low of this bar.

 

E: The market moves down and then drifts back up, where we see another narrow range (NR4) up bar on volume less than the previous two bars. No Demand. Again, note that this appears within the range of the 2 bar reversal pattern.

 

The stage is set. We have weakness in the background. Starting off with No results from a test (we have the cause but no effect). A 2 bar reversal pattern shows further weakness. Just for good measure, we see an Up Thrust in the correct place showing us even more weakness. For entry we like to see a No demand- we get two.

 

 

Just to finish off the thought on the 2 bar reversal. Take a look at the second one . It is immediately followed by a third 2 bar reversal, this one a bullish pattern. This countermands the previous pattern. Now take a look at the bar labeled No Supply. This bar is within the range of the third (bullish) reversal pattern. As we move forward , we do not see a No Demand type bar within the area of the second pattern. Thus, although the second pattern is the most ideal in look, it is the one that fails. In fact, notice that we see tests that fall within the range of this pattern. Since this was a bearish pattern, we would not want to see test, but rather no demand. Test would prove to be bullish and thus nullify the bearish reversal pattern.

[Sanook 10]

The two key bars are the no demand (Blue bar with ND above it) and the next bar which is a failed test. The very next bar after these two bars, trades lower than the lows of said bars. By trading lower than the test bar it shows the test has failed. By trading lower than the ND we have a "Shapiro Effect" type entry.

 

Again, if I'm understanding the previous bars indicated as being strength coming in, then both Tom and Sebastian have said many times recently that that bar is not no demand. If there is strength in the background it can't be no demand.

 

Confusing. Who do I believe, as yes I do see that the trade worked? But they have used the reason that it isn't no demand to explain why certain trades did not work.

 

You've been doing this much, much longer than me, so any advice you can give would be really appreciated.

 

Can I also ask, who is 'Shapiro'? I understand it's taking out a bar high or low, but why the name?

 

Thanks.

[bathrobe 10]

I am currently learning VSA and was hoping someone could help me by identifying setups on the ES for Friday 2/20 on 5 min chart. This would be a great deal of help. Thanks in advance.

 

Regards,

 

Chris

[sevensa 10]

Confusing. Who do I believe, as yes I do see that the trade worked? But they have used the reason that it isn't no demand to explain why certain trades did not work.

 

Believe no one. If you are going to ask 5 different people you will get 5 different answers. Go through many different charts over and over and over and see for yourself what works and what doesn't. People will always come up with "reasons" why a trade didn't work. Nothing is going to work 100% and sometimes a trade simply just doesn't work. For every setup, there will be trades that work and trades that don't. It is up to you to figure out which ones give you positive expectancy based on your rules. You will only be able to determine that by going over many charts and not by asking which people to believe.

[sevensa 10]

I am currently learning VSA and was hoping someone could help me by identifying setups on the ES for Friday 2/20 on 5 min chart. This would be a great deal of help. Thanks in advance.

 

Regards,

 

Chris

 

Why not post a chart of your analysis and where you think setups were and ask for feedback? I am sure some of the VSA experts on here would be more than happy to provide their feedback if you do that. I think you will learn much more that way.

[deanz 10]

 

So, would the VSA indicator be available in NT or ProRealTime code?

I ve seen bits and pieces al over the Internet, but since there is a firm discussion going on over here I was hoping to find some latest developments.

 

 

Cheers, Dutchy

 

I have not tried it but there is a Beta version for Ninjatrader over at:

 

http://www.ninjatrader-support2.com/vb/showthread.php?t=12908&highlight=VSA

 

[bathrobe 10]

Here is the 5 min chart marked as I understand so far, any and all help is much appreciated.

 

Regards,

 

Chris:cool:

[VolumeJedi 10]

Again, if I'm understanding the previous bars indicated as being strength coming in, then both Tom and Sebastian have said many times recently that that bar is not no demand. If there is strength in the background it can't be no demand.

 

Confusing. Who do I believe, as yes I do see that the trade worked? But they have used the reason that it isn't no demand to explain why certain trades did not work.

 

You've been doing this much, much longer than me, so any advice you can give would be really appreciated.

 

Can I also ask, who is 'Shapiro'? I understand it's taking out a bar high or low, but why the name?

 

Thanks.

 

Before I get to the ND in question, some background.

 

The technical definition of No Demand is a narrow range up bar on volume less than the previous two bars. This is the MTM book definition as defined by Tom himself. Note in the definition no mention of the next bar being down nor "weakness" in the background are included.

 

A problem arises with the definition and Tom has begun to address it. The problem is that these signs come in varying degrees of strength (or weakness as the case may be). Some people were mistakenly trying to short on any up bar with volume less than the previous two. This is a recipe for disaster. Thus Tom has begun to emphasize the background. But if you look at the definition, a no demand bar is a no demand bar regardless of background. IT IS, HOWEVER, THE BACKGROUND THAT MAKES IT TRADABLE.

 

Speaking of background, we can now look at the no demand in the chart. What can not be seen is that the trend was down on a 1 hour (60 min) chart. If you were looking at this 3 min chart at the time you would see that we were in down to sideways trend at the time in question.

 

Therefore, momentum and supply over whelmed the demand of those two high volume bars.

 

As for who Shapiro is, I do not know. I believe it was the term used by Larry Pesovesto (SP?) to describe the notion that if a trade is good now, it should still be good in 5 minutes from now. Check out the Market Stats thread for a more exact/better definition.

[CandleWhisperer 10]

Here is the 5 min chart marked as I understand so far, any and all help is much appreciated.

 

Regards,

 

Chris:cool:

 

Bathrobe. Here are a few things I see. It's always nice to see new people on this thread. Welcome.

 

First question, have you read the book?

 

I took the liberty of adding some things to your chart. Here is some of what I see:

 

1. Wide spread up candle on ultra high volume closing near the middle of its range with the next candle down. Supply enters on this candle.

 

2. Not very high volume up candle here. The candle does close off its high and is more weak than strong but this is not a "significant" candle. With that said, if we look at market structure we are failing to make a higher high so that shows weakness.

 

3. This is an up thrust. Wide spread candle closing near its low on increasing volume. This is in the right place as we have weakness in the background.

 

4. Stopping volume. Down candle closing off its low on very high volume with the next bar up.

 

5. -5a. The two bars together are pushing thru supply and are thus strength and not weakness as you usually find on up bars on ultra high volume. Note that the supply level is the top of the up thrust. 5 has some supply enter as it closes well off its low and while 5a closes on its high the next bar is down. We would like to see a test to prove that the high volume was absorption volume or not.

 

6. We don't get it. What we get is a no supply candle that is not where we would like it to be. 2 candles later, we get an up thrust. Since the high volume of the 5-5a candles has not yet been tested, we can expect that the market will fall back down into that area for a test. This up thrust offers more credence to the notion that price should fall at least into the area of those candles.

 

We still don't get a test candle but the market finds support...............

[bathrobe 10]

Thanks for your help, I just got the book and plan on reading it this weekend.

 

Chris

[Tasuki 10]

I believe it was the term used by Larry Pesovesto (SP?) .

 

VJ, just for the record, his name is Larry Pesavento, of Gartley/Butterfly fame.

Taz

[traderandreas 10]

Just a question for the experts on this thread on when to actually place a trade. Do we wait for high volume ie the smart money to make their move. Then we make our move? And what about medium to low volume do we ignore this with out big volume in the back ground?

 

thanks,

Trader

[johnnyguitar 10]

Hi everybody.

thanks for this great thread.

Here is my VSA journey.

When i first time read the info about vsa in forexfactory 3 weeks ago.

i was attracted by it deeply.

i traded forex six years and never cared about volume,never thought it is important and an useful tool.I am so glad those days has passed.

I read Tom's book "The Undeclared Secrets that Drive The Stock Market".(excellent book) and VSA threads in tw2 and here(tons of great information).

That's really making a big big progress for my trading view and skill.

I practiced and draw the text on my chart everyday.

In the beginning,vsa just looks like used to predict next bar for me,but after more reading and learning.i realize it's a different story.

I know i need to see the big picture ,and now by using what i learn here, I can see it more clear than before.

I am very appreciated with all of you.

I will do more effort learning VSA and Wyckoff.

Although there are still lots of work to do ,i know i am on the right way.

 

THANK YOU ALL AGAIN.

 

Regards.

[StrangeTastingFishSticks 10]

 

... I practiced and draw the text on my chart everyday ...

 

 

Making notes on your charts every day of VSA signals is a great thing to do

[CandleWhisperer 10]

Making notes on your charts every day of VSA signals is a great thing to do

 

Very good idea. Make a "book" of past charts with various set-ups and interesting things related to the price/volume action.

[Dutchy 10]

Hello all

 

Great discussion

 

I am keen to know what these following signals consist of in terms of Spread and Volume, the formula so to speak.

 

1. tests (successful and unsuccessful)

2. shakeouts

3. no demand

4. stopping volume

5. pushing through supply

6. upthrust

7. selling/buying climax

8. climactic action

9. support/weakness coming in

10. trap up/down move

11. no result after strong effort

12. selling/buying pressure

13. bottom reversal

14. end of a rising market

 

VSA character of each signal above would be defined by

 

A) Bar up or down

B) Close position on the bar

C) Vol compared to Average

D) Spread H-L

E) Diff/Change on Close

 

Can anyone help me connect the dots between the signals and its characteristics ??

 

Cheers, Dutchy

 

1)Bar 2)Close 3)Vol 4)Spread 5)Diff/Change

UpDown HML HML Narrow-Wide Narrow-Wide Signal

-----------------------------------------------------------------------------

Up High High Narrow Narrow Likely Market Top

Down Low UHigh UWide Wide UpThrust

 

etc

Edited March 3, 2009 by Dutchy

[brownsfan019 17]

Hi VSA Friends!

 

Here's your chance to show the forum what it's all about!

 

Any takers?

 

[humdesggg 10]

Hey VSA friends

 

I just hinted by a friend at elitetrader not to bother with software, but check out trader's lab, as there is tons of knowledge shared on how to use VSA. I have both MTM and US, but have only read Undeclared Secrets and watch a couple of tradeguider's Gavin's videos at youtube.

 

Right now, the comments are attached in the chart.

 

Please let me know what u guys think.

 

PS this is my 1st and historic attempt at VSA. Pardon the newbie sloppiness

 

 

hummie

Edited March 5, 2009 by humdesggg

[Dutchy 10]

Hey VSA friends

 

I just hinted by a friend at elitetrader not to bother with software, but check out trader's lab, as there is tons of knowledge shared on how to use VSA. I have both MTM and US, but have only read Undeclared Secrets and watch a couple of tradeguider's Gavin's videos at youtube.

 

Right now, the comments are attached in the chart.

 

Please let me know what u guys think.

 

PS this is my 1st and historic attempt at VSA. Pardon the newbie sloppiness

 

 

hummie

 

 

Hy hummie

 

Great idea, VSA is mindboggling. Any help welcome. Do you have a link to the info metioned ?

 

Cheers Dutchy