[VSA] Volume Spread Analysis Part II

[Eiger 10]

I am not sure if this is redundant or not but it may help some folks so here goes?

 

Have any of you that use VSA noticed that when you get a good trade set up occur you can drill down to a really fast chart even a 1 min a have a virtually risk free scalp most times. I need to test it a bit more but it shows a lot of promise. For instance you see dist. on a 240 min chart if you are trading forex and then you see a UT, a 2 bar UT, or ND, any combo thereof and then go to a fast chart could be 5,3, whatever and then wait for a corresponding short and hit it. The higher the time frame the easier it tend to propel your scalp because the big money is propelling the trade in your direction ...

 

 

I use the 10 or 15-min and the 3 and 5-min charts in this way all the time. Here is the 10-min chart i posted last night along with the "faster" 3-minute chart. The circled areas on the 3-min are where the high odds trade locations took place. When you study the 3-min, you will see a VSA principle that serves as trigger for the trade. So the 10-min or 15-min is the chart I watch for the set-up, and the 3-min or 5-min is the trigger. Also, because the set-up occurs on the higher time frame, you can hold the trade for more than just a scalp.

 

Eiger

[Eiger 10]

I thought there was a fair amount going on today. I really was impressed with the way price traded all around the 1331.75 line. I was a little surprised by the strength that came in during the afternoon, though. I almost got nailed on the Upthrust late in the afternoon, but was able to bail out when I saw the reversal and Test about 10-mins before the close. There really wasn't any climactic action preceding the Upthrust, but I found it hard to tell in the moment. I should know better than to fade new high ticks late in the day, but at the time, I thought that UT looked so good . You can really see all of the VSA principles at work. The real art of trading VSA (I think) is to maintain concentration and keep with the flow of the market while looking for each principle to take place. BTW, the attached chart is the 3-min ES.

 

Eiger

[CandleWhisperer 10]

Sticking my neck out. LOL

[CandleWhisperer 10]

Well, that sucked. :doh:

[gassah 10]

Well, that sucked. :doh:

 

You demonstrated discipline and taking a small loss. Probably more important than showing a big winner, IMO.

[CandleWhisperer 10]

You demonstrated discipline and taking a small loss. Probably more important than showing a big winner, IMO.

 

Thanks.

 

This part is after the fact, but look at the volume on the test bar a few bars later. That's really low volume. This brings up a question for the thread. How many wait for confirmation on no demands and test and the such?

 

I have looked at the code on the other thread and it uses confirmation. Based on that, the candle marked no demand would not qualify because the next candle doesn't close lower. The test would qualify.

 

***edit***

 

Just wanted to add to the question. In the book, Tom says one should be going long on down bars and short on up bars. This would mean NOT waiting for confirmation. As a down bar (test) is only confirmed by an up bar (higher close). And in the situation of no demand the next bar would close down. So confirmation means doing the opposite of what Tom talks about. TG doesn't place signs without confirmation however.

Edited April 16, 2008 by CandleWhisperer

[BlowFish 10]

Well, that sucked. :doh:

 

I like looking at trades that didn't work out, often much more enlightening. Of course its easy to look back to try to find some piece of evidence to support the other side but to be honest, if I had not been round earlier, I'd have probably been all over it too. Seems to me that there where clear signs of weakness in the background and a push down to 70 or even 60 was quite plausible.

 

Just out of interest which pair was it? I am starting to take a bit more interest in the currencies though its pretty casual right now. I guess that's obvious (that its casual) or I would know what it is by where its trading! I'm just interested to see how it behaved later.

[BlowFish 10]

Thanks.

 

Just wanted to add to the question. In the book, Tom says one should be going long on down bars and short on up bars. This would mean NOT waiting for confirmation. As a down bar (test) is only confirmed by an up bar (higher close). And in the situation of no demand the next bar would close down. So confirmation means doing the opposite of what Tom talks about. TG doesn't place signs without confirmation however.

 

Are you sure about that? I know he says that strength appears on down bars and weakness on upbars, but I don't recall him talking about taking entries on them? Of course just because I dont recall dosen't mean he didn't say it I do find my memory is really not as sharp as it used to be! I wish he'd written a chapter or two on trading (as opposed to analysis). Though many might disagree, I am of the opinion that there is much to be learnt from how others manage there trades and why.

[tawe trader 10]

This part is after the fact, but look at the volume on the test bar a few bars later. That's really low volume. This brings up a question for the thread. How many wait for confirmation on no demands and test and the such?

 

I have looked at the code on the other thread and it uses confirmation. Based on that, the candle marked no demand would not qualify because the next candle doesn't close lower. The test would qualify.

 

CW,

 

Thanks for posting your charts, it really is the trades that fail, that we learn the most from.

 

I have found some notes I took after watching TW commenting on a Gold video back in Jan.

 

In this example, after a down move on increasing volume, Gold goes on to make a lower volume test. The next bar is UP and Tom said the 'test is successful' and it is safe to go long.

 

We can flip this over for shorts. After seeing a no demand, we need to see the next bar close down (which confirms weakness) before going short.

 

On page 33 of MTM Tom says 'we need confirmation before shorting the market following an sign of no demand'.

 

At the end of the day, it is going to come down to the personality of the trader and/or what they have 'read' in the mkt background. Is the trader conservative and needs to see no demand's / no supply's / test's confirmed, or is the trader going to make a higher risk and potentially higher reward trade, by not waiting and entering before confirmation ?

 

Tawe

Edited April 16, 2008 by tawe trader
.

[CandleWhisperer 10]

Are you sure about that? I know he says that strength appears on down bars and weakness on upbars, but I don't recall him talking about taking entries on them? Of course just because I dont recall dosen't mean he didn't say it I do find my memory is really not as sharp as it used to be! I wish he'd written a chapter or two on trading (as opposed to analysis). Though many might disagree, I am of the opinion that there is much to be learnt from how others manage there trades and why.

 

"When you do decide to short the market, do so only on an up-day if possible (see no demand, up-thrusts, ultra-high volume up bar with the next bar level or down), and only if there are signs of weakness in the background, such as lower tops, a downtrend, high volume on up-days (bars) with no corresponding up-move" Tom Williams, Master the Markets, P. 108.

 

So Tom is going short on the no demand bar itself. That is, with no confirmation bar. Of course the opposite would be true for long. Also I should note that he is talking about the ideal bar type as we know there are tests that close up and up-thrusts that close down, for example.

[BlowFish 10]

Thanks for digging that out CW. I don't have my copy where I am living currently. Sounds like time for another re-read with a view to uncovering other titbits about taking trades.

 

Tawe really I don't think it wise to wait for confirmation, the no demand is usually very narrow, very low volume (by definition) quite often an inside bar (not VSA I Know). The next bar is often a 'thrust' as it breaks out. i.e it is wide it opens one end closes the other. Actually seems that a fair few of the WRB type guys are looking to exit right around there. If you wait for that bar you are going to get poorer trade location. Watching live on 'smallish' intraday timeframes you can see volume dry right up and price just hang there before it cracks. Each to there own of course.

 

CW did you see my question about what instrument that was?

Edited April 16, 2008 by BlowFish

[tawe trader 10]

Tawe really I don't think it wise to wait for confirmation, the no demand is usually very narrow, very low volume (by definition) quite often an inside bar (not VSA I Know). The next bar is often a 'thrust' as it breaks out. i.e it is wide it opens one end closes the other. Actually seems that a fair few of the more WRB type guys are looking to exit right around there. If you wait for that bar you are going to get poorer trade location. Watching live on 'smallish' intraday timeframes you can see volume dry right up and price just hang there before it cracks. Each to there own of course.

 

Blowfish,

 

I partly agree with you, I tend to enter after seeing a no demand and don't usually wait for the next bar to form and confirm. It depends on each traders own personal preferences for entry, if they are conservative or not, doesn't it ?

 

In this instance, if CW had waited (I know it's easy with hindsight) for confirmation (which never came) he wouldn't have gone short and had a losing trade.

 

CW did you see my question about what instrument that was?

 

If you look on the chart I think it's EUR/USD.

 

Tawe

Edited April 16, 2008 by tawe trader
.

[Sledge 13]

Sledge is probably the best to ask about how he deals with the change in FX volume characteristics from the Asian session into the European and then London open. And nothing wrong with VSA controversy if the point is to further our understanding and learning, which yours is dandxg.

 

Dan and Ed-

Although their is some disagreement, I use what I call the "lull time" That period between 4:00 EST and around 1:00 AM EST as a marker for future price activity. Yes the volume is very low, and it must be taken into account that their is less activity, but the market does not just "stop" at that time. My "Lull Time" analysis has gotten pretty good at confirming the next set-up.

 

Perfect Example was last night on the Cable. You saw the market ride down all day in the NY session after a London Bull push. When the dust settled, you saw yourself in new low ground, followed by two very nice tests (you could tell their was buying on both bars- I think this was around 7:00 and 8:00. I placed my Long and put a 54 pip target. I woke this morning to a very nice closed out trade.

 

It actually pummled the 54 pips and pushed over 100 last night before the retreat. But hey- I made 54 pips while I slept!

 

I firmly believe that this "lull time" is not a time to "write off" it is a time to pay particular attention. As Tom Williams says- Market Makers will use Low Volume time to accumulate or distribute.

 

My .02

Sledge

[habi 10]

I'm just rereading some parts of MTM and found an interesting statement:

 

The market is an on-going story, unfolding bar by bar. The art of reading the market is to take an overall view, not to concentrate on individual bars. For example, once a market has finished distributing, the ‘smart money’ will want to trap you into thinking that the market is going up. So, near the end of a distribution phase you may, but not always, see either an up-thrust (see later) or low volume up-bars. Both of these observations mean little on their own. However, because there is weakness in the background, these signs now become very significant signs of weakness, and the perfect place to take a short position.

 

This means, we need first signs of weakness/strenght and then focus more on single bars like up-thursts, no demands ...

[Eiger 10]

Here's a live trade that corresponds to something I am working on in myself to improve. I sold ES short at 1350.75 on what I perceived to be stopping volume/climactic action at significant resistance (higher time frame horizontal and supply line resistance). What I am working on to improve is holding trades longer than 2-3 points. But, i am also a pretty conservative trader. So, I covered 1/2 the short position at 1348.75, and locked in a profit. I brought my stop down so that even if stopped out on the second 1/2, I will cover my costs of the trade. So, I am trying to hold a short position on a free trade, so to speak, to see what the market might give me. We shall see.

[Eiger 10]

Oh well, so much for that trade.

[TinGull 10]

As many of you know, I don't trade very often anymore, just a few times a week. This trade came up today and I figured I'd take a shot of it for ya.

 

Note the lower volume on a narrow spread as price reached support. Sellers had dried up there, and I went long some inside that narrow spread bar. Then as price reached resistance, I exited the position. Just a quickie 4 pointer. Damn....quick 4 points. I remember last year when 4 points could take a day.

 

[Pirate 10]

"When you do decide to short the market, do so only on an up-day if possible (see no demand, up-thrusts, ultra-high volume up bar with the next bar level or down), and only if there are signs of weakness in the background, such as lower tops, a downtrend, high volume on up-days (bars) with no corresponding up-move" Tom Williams, Master the Markets, P. 108.

 

So Tom is going short on the no demand bar itself. That is, with no confirmation bar. Of course the opposite would be true for long. Also I should note that he is talking about the ideal bar type as we know there are tests that close up and up-thrusts that close down, for example.

 

Tom is an aggressive trader and does not always wait for confirmation but I am sure he will have tight stops.

[CandleWhisperer 10]

Tom is an aggressive trader and does not always wait for confirmation but I am sure he will have tight stops.

 

 

As a matter of fact, I believe I heard Tom say he doesn't use stops. Although if he did say that, he was certainly not recommending the same for the rest of us.

[CandleWhisperer 10]

......................Tawe really I don't think it wise to wait for confirmation, the no demand is usually very narrow, very low volume (by definition) quite often an inside bar (not VSA I Know). The next bar is often a 'thrust' as it breaks out. i.e it is wide it opens one end closes the other. Actually seems that a fair few of the WRB type guys are looking to exit right around there. If you wait for that bar you are going to get poorer trade location. Watching live on 'smallish' intraday timeframes you can see volume dry right up and price just hang there before it cracks. Each to there own of course...

 

Nice BlowFish, very perceptive observation. I have noticed recently a fair amount of White WRBs following test bas (candles). And while no price is too high to buy or too low to sell, it does almost feel like one would be chasing to enter at that point. Despite the fact that the WRB closing higher is confirming the test.

 

This is why I like to emphasize the Supply/Demand Delta (change) zone. To me it is sort of the confirmation before hand. Actually I think that was a pretty darn good trade set-up. I just don't like the fact that it adds fuel to the hater's fire.

[LLL 10]

Hi Everyone,

 

I have a beginner's question. Do you consider the following cases as a hidden potential buying bar? When Tom said strength comes from down bars, is it has to be in a down trend?

 

1. If a stock is in a trading range, one day it has a huge gap down with a very high volume.

 

2. if a stock is in an up trend, it also has a huge gap down with a very high volume.

 

 

 

Thanks

 

 

LLL

[LLL 10]

I forgot to attach a chart. But here is the example of VIVO 's chart from stock chart website. It has the huge gap down today.

 

http://stockcharts.com/h-sc/ui

 

 

Thanks

 

 

LLL

[Sledge 13]

Ok folks- LIVE TRADE SET-UP:

GBP/USD On the 1 hr charts you see 2 wide spread up bars today- very nice sign of weakness. Before the NY close you saw selling on the "upthrust" bar, you then saw a "test" on the next followed by the next few hours of jockeying.

 

You then see no demand bars to confirm downside potential (Marked with X's)

 

I'm setting up for a Short tonight on the GBP, a slug of weakness came

in today and rapidly overbought the market, should be a nice buckle under

the weight of all of that coming in:

Sell Stop at 1.9872

Target-1.9830

 

The Sell Stop is 10 pips below the low of the last "test" As well as--If it is a true breakout, the 1.9830 with the time lapse will be above the trendline off the down trend we are coming out of so that trendline can act as support now.

 

See you in the AM!

Sledge

 

[milliard 10]

Hey Aaron,

 

I hope the folks on this here thread don't mistake my comments for bashing this method of analysis. That's not the intention at all. Just coz some choose or prefer not to recognize it doesn't render it ineffective, but I'm not sure I go with your commentary on the fade out of prices into the NY close.

 

I can understand your work/research of the flows during peak activity, especially as those highlighted bars were actioned on the punch thru layered (short covering & spec buy) stops @ 9815 thru 50.

 

You're showing a spot graph there yeah? Again, I'm not going to be drawn into the argument bout accurate volume prints on the cash. We have our own views on that debate.

 

But those itty bitty bars at the end of the run are simply profit take & book encashments. The activity dies as London closes up for the day on the spot. After aggressive shifts like today on the British currency, the foot soldiers will cash out & balance off. Not only is there no demand at that time of day, there's also no supply. Folks have done their business into the London fix & the only ones left wandering aimlessly around the park are either retailers or wounded souls sticking band aids on their bleeding accounts.

 

They'll now be sniffing next stage stops above 1.9950 with bids building back below your trigger short level.

 

That's not to say prices won't dip to check the strength of those bids, but your "no demand" bars aren;t really counting for anything. Sure, if those kinda bars are printing during London hours, then fair enough, I guess you could make a case for them.

 

I've heard that these VSA folks maintain that you can adjudge the analysis on the spot instruments (as well as futures which utilize volume) regardsless of the time of day. Well, I'll tell you now, that's horse shit. And I'll stand face to face with the best of these guys & tell em so.

 

Be very careful with this vsa stuff on the spot (with no definitive volume print outs), particularly as London shuts it's doors.

 

I can tell you now for sure, the folks who run this show are either sitting in a club eyeballin pretty girls wrapped around shiny poles or they've banked their booty & adjusted their stops for next day delivery well before NY beds down for the night.

[Anna-Maria 10]

Oh god almighty. Leave you alone in here for 5 minutes....

 

Stick the cap back on that bottle of bourbon, pick up that water pale & go mop the corridor upstairs.

 

Sorry folks, he's in mischievous mood beings it's a Friday.