[VSA] Volume Spread Analysis Part II

[winnie 10]

Dear all VSA experts,

In using VSA analysis, sometimes most of you using daily bar or weekly bar or even point and figures analysis and then you real time chart like 30 minutes or 60 minutes. Does this mean you use longer time frame to determine the buy and sell trend and then use intraday chart to confirm your entry ? Could anyone give one simple example how to combine long term time frame and real time to signal a trade ?

 

Thanks

[Bearbull 10]

Dear all VSA experts,

In using VSA analysis, sometimes most of you using daily bar or weekly bar or even point and figures analysis and then you real time chart like 30 minutes or 60 minutes. Does this mean you use longer time frame to determine the buy and sell trend and then use intraday chart to confirm your entry ? Could anyone give one simple example how to combine long term time frame and real time to signal a trade ?

 

Thanks

 

Get hold of the following:

 

1. High Probability Trading by Marcel Link, has all the details on combining different time frames.

 

2. Techniques of Tape Reading by Vadym Graifer & Christopher Schumacher

Hasten to add that here tape reading is more to do with price/vol than the DOM, you will learn how to construct strategies, setups and tactics.

[Sledge 13]

Dear all VSA experts,

In using VSA analysis, sometimes most of you using daily bar or weekly bar or even point and figures analysis and then you real time chart like 30 minutes or 60 minutes. Does this mean you use longer time frame to determine the buy and sell trend and then use intraday chart to confirm your entry ? Could anyone give one simple example how to combine long term time frame and real time to signal a trade ?

 

Thanks

 

 

Winnie-

This depends on your trading style. Personally I use:

Daily Chart for major Trend

4 Hr chart to look for exhaustion, Support and Resistance

Get down to a 5 min to time entry

BUT

I anticipate which position I am looking for.

 

Take the USD/CAD this week. I have been waiting for 5 trading days to get into a position. I have been looking to go short for 5 days. When the BoC made its rate decision, it was the catalyst for it to collapse. I'm now in Short at 1.0216

 

Patience is key. Look for the "Grade A" set-ups and sometimes you just have to wait for them

[Eiger 10]

Using multiple time frames is quite helpful. My analysis of the weekly and daily charts is for two purposes: 1) intermediate term trades (several days to several weeks), and 2) to understand the general line of least resistance/trend. Knowing the general trend on the daily & weekly lets me know that intraday moves in the same direction will often run for a while. Knowing this, I can hold trades a bit longer.

 

During the day, I watch the 30, 15, 5, & 3-min charts. All are used for indications, but my trading time frame is on the 5 & 3-min. I don't take a trade off the 30 or 15-min chart, but I use them for set-ups. Here is an example from the other day showing how i use the combination of the 15 & 5-min charts where the inital indications are a bit clearer on the higher time frame:

 

On the 15-min chart at A, high volume resulted in an UpThrust. One bar later on the 5-min, there was a No Demand. Another 15-min UpThrust at B with a slight increase in volume (supply), then a bar later on the 5-min, No Demand. At C, a No Demand on the 15-min coming into the Supply Line, and No Demand on the 5-min as the 15-min bar closes (i.e., both bars close at 1:00 PM). The market falls after C and the 15-min chart shows clear supply. The 5-min then shows a very weak rally with No Demand.

 

The No Demand up bars are good bars for entry when there is weakness in the background, as there is in these charts in every case. The big clue here is to use the higher time frame chart to find weakness or strength and then use the trading time frame for the entry.

 

Hope this helps.

Eiger

[winnie 10]

Winnie-

This depends on your trading style. Personally I use:

Daily Chart for major Trend

4 Hr chart to look for exhaustion, Support and Resistance

Get down to a 5 min to time entry

BUT

I anticipate which position I am looking for.

 

Take the USD/CAD this week. I have been waiting for 5 trading days to get into a position. I have been looking to go short for 5 days. When the BoC made its rate decision, it was the catalyst for it to collapse. I'm now in Short at 1.0216

 

Patience is key. Look for the "Grade A" set-ups and sometimes you just have to wait for them

 

That mean you do not need to trade everyday ? I think professional trader need to trade everyday. Are you full time trader ? What do you do if you do not need to trade , do you still monitor the market at trading hours ?

[Sledge 13]

That mean you do not need to trade everyday ? I think professional trader need to trade everyday. Are you full time trader ? What do you do if you do not need to trade , do you still monitor the market at trading hours ?

 

Well, again, that depends on you. I want to post this for you not to be arrogant but to show you how I trade. On 6/4/08 I made 2 major trades and one minor. I waited for set-ups and these were the trades:

Short GBP/CHF- +124 Pips

Short GBP/JPY- +135 Pips

Short GBP/CHF- +3 Pip scalp

 

What I made on that one day- I will make in about 2.5 MONTHS at my day job.

 

I DO monitor Every day, spend quite a bit of time on it, analyzing my trades, anticipating my next moves or spotting opportunities. I move stops up to protect my capital or I close out positions if I see weakness appear and I don't want to ride out the pullback.

 

Basically, you'll need to find your trading style- the thing that works for you. A lot of people don't trade like I do- because it is too slow. They want $100 bucks coming in every day or $200 bucks. They want the security of being right and seeing the account grow daily. I do like to make quick money if I see opportunity to do so, but the longer term wealth building for me is to trade longer term. Plus with being away from my platform to work and sleep- longer term trading works better for me. I HAVE to be correct in my long term analysis- because I don't have the freedom to get in and out at a whim.

 

Hope this assists you.

Sledge

[Eiger 10]

Tests ...

There was a nice spring and the market tested 3 bars later (green arrow). (Also note you can see buying on higher time frames). As it moved up, there were two other test-like bars (T). I say test-like, because they didn't draw supply, even though volume wasn't less than the previous two bars. Supply did come in on the up bar marked (S). Then it was tested, and two bars later, No Demand at the Supply Line. So, even when the volume is fairly light as over the noon hour, you can still see the VSA principles in action.

 

Eiger

[Eiger 10]

So far today, the cash market has held the daily Demand Line.

[Eiger 10]

Today was a pretty interesting day with a lot of VSA indications, and, of course, opportunities in the ES on the 5-min chart.

 

The market had traded to yesterday afternoon's highs in the overnight, and rejected this price level. It started trending down into the open, and the market opened at yesterday afternoon's low. But the first three bars made lower lows, and at A, closed below Tuesday's afternoon low.

B - No Demand, and the market falls

C - the market fell 13+ points in 45 minutes, and climaxed at C on a wide spread, ultra high volume bar closing in the middle.

D - A Bottom Reversal, but volume is still quite high. Next bar has higher volume and makes no headway - still supply.

E - Another Bottom Reversal on much lighter volume and the market rallies

F - A Sudden increase in volume on this up bar with the next bar down warns of supply.

G - After a small reaction, a No Demand

H - UpThrust, and the market falls

I - High volume on this wide spread down bar suggests the lows might be broken. But, the next bar has almost as much volume and makes no downside progress - stopping volume.

J - A Test, and the market rallies 5+ points.

K - No Demand - note the shortening of the thrusts and poor net gain of the closes.

L - A 2-bar UpThrust/Top Reversal.

M - More high volume (though note it is progressively diminishing) and the next bar is up.

N - Test and another weak rally.

O - Another UpThrust preceded by shortening of the thrust and weak bars.

P - Another bounce off support.

Q - No Demand

R - Sudden increase in volume, close in the middle in the same area as F,G,H,K,L where supply had come in twice before. Next bar is an UpThrust.

S - No Demand bars

T - UpThrusts; the second showing no ability to rally away from the danger point.

[tawe trader 10]

That mean you do not need to trade everyday ? I think professional trader need to trade everyday. Are you full time trader ?

 

Winnie,

 

If your a professional trader working for a large bank or hedge fund then I guess yes, you would need to trade everyday to justify your salary.

 

On the other hand you can be a home based full-time trader and not actually have to trade everyday to end up making a profit every week/month. The key here is PATIENCE.....having the patience to wait for the right (low-risk) setup. You could be watching and monitoring, Monday, Tuesday, Wednesday, trade Thursday, have a great win, make a week's pay and have the choice of having Friday off (as you have to keep the ol' greed emotion in check).

 

It's all about finding a trading style and timeframe that suits you, Sledge seems to have found his style, that's excellent and the way to go.

 

Regards

Tawe

[Sledge 13]

Today was a pretty interesting day with a lot of VSA indications, and, of course, opportunities in the ES on the 5-min chart.

 

Outstanding post Eiger! Thank you for it, as well as having the stones to trade a market that gives you THAT many VSA signals all in one chart

Sledge

[Eiger 10]

Outstanding post Eiger! Thank you for it, as well as having the stones to trade a market that gives you THAT many VSA signals all in one chart

Sledge

 

Pretty amazing, isn't it? The truth is that every day has several good opportunities. People who have said, "VSA doesn't work," "you can't read the signals," there is "one correct entry on the day," "it's only good if there is support/resistance," and so on have never taken the time to learn it. I always laughed at this 'straw man' nonsense. I am not saying that this is the only way to trade. But I am saying that if you want to trade it, it is very, very possible to do very, very well with VSA.

 

To do well with it, I think you need to study and understand it well. Here is some straightforward suggestions on how to develop your knowledge, skills, and abilities in VSA:

 

 

• Get Tom Williams's book, the "Boot Camp Chart Reading" CDs, and, if you can, the Symposium DVDs. Study these well.
  

 

• Try to really understand the roles of the Professional Money and the Herd. Understand how risk is transferred at the top and bottom of the waves and how to spot the signs of the transfer.
  

• Look up Sebastian Manby's charts on T2W, Elite Trader and here. Study these well. This is how you begin to understand how to apply VSA.

 

• Annotate your charts every night -- keep looking to understand where weakness/strength comes in and what to look for as confirmation and in setting up a trade.

 

• Once you begin to understand things like UpThrusts, Bottom Reversals, Tests, Stopping Volume, No Demand, etc, start to look for them on higher time frames than your trading time frame.

 

• Keep running, higher time frame charts so you understand the structure of the market and you can begin to think ahead into how the market is likely to trade the next morning and where important support and resistance may develop.

 

• Write (yes, write) a draft VSA trading plan.

 

• Test you knowledge, ability, and your trading plan with Bar Replay with several months of data (for the 5-min time frame) and record every "trade." Note where you should put your stops and how much "heat" is typical on a trade. Note also your average profit per trade and what it looks like when the market starts to turn.

 

• Revise your VSA trading plan.

 

• Paper trade this real time until you are quite comfortable with your knowledge, skills, and abilities in trading VSA.

 

• Refine your VSA trading plan based on your real time paper trading.

 

• Finally, start small with real money and gradually build up your position size slowly.

 

So there it is. No secret. Not brain surgery. Just work. And, it does require work, lot's of it. But, if you really want to trade VSA .. well, this is one way to definitely do it. It is work though, but this is what will separate you from the Herd. Now, do you really think there is any other way?

 

Hope this is helpful.

 

Eiger

[Eiger 10]

I just came across this post:

 

http://www.traderslaboratory.com/forums/f30/i-look-back-now-and-wonder-4014.html

 

One of the best posts on this site. Definitely worth reading.

[jjthetrader 10]

Today was a pretty interesting day with a lot of VSA indications, and, of course, opportunities in the ES on the 5-min chart.

 

 

Thanks for all your hard work Eiger. It takes a lot of time to do up chart examples with explanations. We appreciate it.

Sebastian better watch out because I'm sure TradeGuider will be recruting you soon and giving him the boot! lol.

[dandxg 10]

Yes thank you Eiger very much for the time and effort you put in to TL. Your posts are very helpful.

[Seb Manby 11]

Thanks for all your hard work Eiger. It takes a lot of time to do up chart examples with explanations. We appreciate it.

Sebastian better watch out because I'm sure TradeGuider will be recruting you soon and giving him the boot! lol.

Eiger would be most welcome to take over, I like nothing better than the quiet life, the spotlight can be turned very quickly. Gavin and co are planning another seminar in colorado this October, Eiger, if you wish to send Gavin some charts, I think he would contact you, but beware, your free time would be gone.

Best wishes

Sebastian

[mister ed 10]

Yes thank you Eiger very much for the time and effort you put in to TL. Your posts are very helpful.

 

Thanks for all your hard work Eiger. It takes a lot of time to do up chart examples with explanations. We appreciate it.

 

I second these sentiments Eiger, your knowledge of the VSA and Wyckoff methodologies, and your clear explanations are of great assistance and much appreciated.

[Eiger 10]

Thanks, everyone. It is good to know you find these charts helpful. As you can probably guess by now, I am pretty passionate about VSA and the Wyckoff method

 

Sorry, Sebastian. I would never want to “take over” from you – couldn’t anyway, as you really have the chops. In fact, I was hoping to go to Colorado this fall, meet you, and learn more from you. You really have made VSA come alive for me. I understand about the quiet life, though. Here’s a shot taken from my deck of a pair of deer grazing in the meadow below my house. They come by nearly every day, as do a small flock of turkeys, assorted birds and small animals. We almost see no other house from ours. It is quite a peaceful place. I imagine Jersey has similar characteristics.

 

I must say, though, that am intrigued about connecting with Gavin & co, so I’ll send a PM on that.

 

Eiger

[dandxg 10]

That's beautiful Eiger. Did you hit those deer with paint balls. They are awfully red!:o I back to open space but not quite that much.

[winnie 10]

Dear Eiger,

According to your experience, when using VSA in trading. Would you only take the signal that is follow the higher time frame only ? For example, your higher frame trend is up, would you only take the long signal only and ignore the sell signal in lower time frame ? There seems to be so many signal in 5 minutes charts.

Thanks for sharing

[dandxg 10]

Dear Eiger,

According to your experience, when using VSA in trading. Would you only take the signal that is follow the higher time frame only ? For example, your higher frame trend is up, would you only take the long signal only and ignore the sell signal in lower time frame ? There seems to be so many signal in 5 minutes charts.

Thanks for sharing

 

Winnie I will chime in if ok? I was reviewing Eiger's posts and taking trades off the short time frame only after you see a set up on a higher time frame will help very much IMHO. That is a critical point he reminded us of. I recall when Sebastian brought it up months ago in a TG seminar, but it had slipped my mind. Kudos to both for bringing it up.

 

When I get a moment I will post a chart. For now when you see a selling climax and then a successful test on a higher time frame, say a 15 min and above, looking for a test on a smaller time frame such as a 3 min or 5.

 

The other alternative that can work from my experience and can be used in conjunction is to find areas of S/R that you believe and test them and only take trades with VSA in those areas.

 

I was fortunate enough to hear Todd Kruger speak a couple of weeks ago and he was stressing not to simply take price volume set up anywhere on the chart. They need to be in areas of S/R. Middle of range pass.

 

We need to all remember good trading is very boring, like counting cards, we look for asymmetrical opportunities and strike then. I mention this to remind myself as well.

 

Good trading to all.

 

Dan

 

Post Edit. Just thinking for clarification purposes I was referring to horizontal S/R not the trend channel form although both work great from my exp.

Edited June 17, 2008 by dandxg

[mister ed 10]

This post (a section of it reproduced below) was on another thread and I thought it relevant to post here, the highlighting is mine

 

If nothing else, this thread is a perfect example of a very common and unfortunate tendency on boards.

 

LATC = let’s acknowledge the complexity

KISS = kiss it simple stupid

 

Two types of threads. Two trajectories too…

The KISS adherents will let you know if you’re complicating their thread and will unceremoniously escort you ‘off the premises’ if you say anything that threatens their homeostasis. 'Complicaters' are not welcome.

Yet the KISS adherents readily intrude into complex topics and impose their agenda. And generally, rather than assert their rights to exploration and complexity, LATC adherents politely and quite meekly accept the degradation in thought and inquisitiveness. Just because KISS adherents help keep it real and practical doesn't mean they should be given license to subvert complex inquiry. Now that I’ve pissed everyone off… :missy:

 

re this topic - Uncertainty is the rub for both the KISS and then LATC crowds.

“higher prices will attract more buying” should read “higher prices can attract more buying”. Actual ‘money flow’ does not follow KISS Supply and Demand laws. Yet I have never seen an adequate (simple or complex) explanation of what conditions can and do attract more buying and what conditions (could but) do not. Not from Wycoff and Co., not from VSA and Co, not from behavioural finance and Co, not from MP and Co., not from practical floor traders and Co, not from …

Have you?

 

OK, so zdo is asking, in the areas I have highlighted, for a discussion of:

1. conditions where buying will attract more buying,

and

2. conditions where buying could, but does not, attract more buying.

 

These seem to me to be excellent questions, and in providing answers from a VSA perspective on this thread (and perhaps from a Wyckoff perspective if Eiger (or anyone else of course) is so inclined) we may well provide a valuable service to newcomers to VSA/Wyckoff analysis.

 

Any takers?

[mike_ITL 10]

Hi Eiger,

 

would you mind posting an analysis of mini S&P today's session (June 19) ?

 

I had the impression that the market was taking me for a ride ...

 

Thank you!

 

Mike

[Eiger 10]

Hi Mike,

 

I will do it later tonight or over the weekend. I still do a little work for a clinic in NYC (I am also a clinical psychologist), so I can't get to it right now, but will.

 

Eiger

[Eiger 10]

Hi again Mike,

The market on June 19 was very interesting from a VSA perspective. If you had difficulty reading it, you now have a good opportunity learn more about VSA and how to use it in the market. I’ll do my best to give you as clear a read on this day as I can.

 

Each night, I review the market and pay particular attention to support & resistance (S/R). You can almost always expect trading to occur around the S/R levels the next day. How it trades at these areas will tell us what to expect next, in terms of the next move, and this is very helpful. There are many valid ways to identify S/R (Fib levels, floor trader pivots, Darvas Boxes, etc), and all work. But as I said in some earlier post, I just look for the obvious, as this works very well, too. I figure if I can see it, so can everyone else . A VSA indication off an obvious S/R level is usually pretty solid. I pay particular attention to yesterday’s high & low, Globex high & low, and the S/R levels on the 60-minute chart. Trend lines are also noted, as these are also areas where supply and demand can be expected to come in.

 

The first chart (60-min) shows key S/R levels:

 

• 
  1333.25 – the low from June 12,

• 1348.50 – yesterday’s high in the day session.

 

ES Analysis for June 19, 5-minute chart:

 

A – An UpThrust (UT) into the Globex high resistance area. Next bar is down on wide spread, closing on its lows. The UT and this subsequent bar indicate supply is in the market at this level.

 

B – Some buying comes in on B – B dips below the previous bar, turns around and closes on its high. The bar before B also showed some buying (note the close).

 

C – An UT. There is weakness in the background (A) and even though some buying had come in at B there was no climactic action. Expect lower prices.

 

D – Wide spread down bar closing above its middle on ultra high volume. This is buying and a definite change in character from the weakness already seen. Note that this is occurring at 1333.25, a support level we identified earlier. Next bar is down, however, which is not a bullish sign. We want to see an up bar after a potential sign of strength, so we must be patient.

 

E – Bar E and the preceding bar both dip below D, turn around, and close higher, back into the spread of D. Volume is lighter than at D, and volume does not increase to the downside. Note also the Shortening Of the Thrusts (SOT) – the lows from D to E have shortened and are not showing ease of movement down; it’s a struggle to go lower. These indications, coupled with the climactic action at D are bullish. Supply has been taken out of the market. The next bar (after E) is up aggressively, and the market rallies.

 

1 – F – As the market rallies back into the area of C (where we had supply and weakness in the form of an UT), it struggles to rise. You can see this best in the lack of progress made in the closes. This is analogous to the SOT seen on the lows at D – E, but here it is seen in the closes. Also, the closes between 1 and F are occurring in the middle, rather than on their highs – a further sign of weakness.

 

G – A Test. Bar G is a test that occurs as a down bar, average spread, close off the lows and, significantly, volume less than the previous two bars. Because of G, the weakness seen from 1 – F can be read as temporary. The Test at G shows no real supply in the market at this moment. Next bar is up and the market rallies.

 

H – An up bar, close in the middle on an increase in volume as the market approaches the resistance at the old top at A. Supply is coming in here, seen by the marked increase in volume and poor close.

 

I – No Demand. This is a narrow spread up bar, closing on its highs on volume less than the previous two bars. As the market approaches the prior supply area at A, the professionals withdraw, indicating in advance that the market is unlikely to rally through the old top.

 

J – An UT at resistance. Note we have several VSA indications of supply, starting with some weakness at F, supply at H, No Demand at I and now an UT at J. All are occurring at resistance (Globex high and A) where we might expect weakness to re-emerge. Next bar is down and the market falls.

 

K – As the market falls back into the demand area of D, buying re-occurs indicated by the fairly wide spread down bar closing in the middle on sustained volume. Both the VSA indication and the location (near support) are important. Next bar is up.

 

L – Although an up bar occurs after potential strength, it is a No Demand bar (narrow spread, significantly low volume) indicating that the market is not ready to rally. Next bar is down.

 

M – A Spring at the 1333.25 support area. This bar dips below E and rallies to close on its high. Note the close is higher than the previous bar. Also look at the volume. Compare the volume at M with E and D and also K. Volume is less than these down bars. All of this indicates supply has dried up at support and demand is in control. Next bar is up.

 

N – Two Tests occur at the Ns. The first is a test on volume less than the previous two bars, the second is a low volume test. Note how the bar lows are rising between the two Ns. Very bullish.

 

O – The market rallies back to resistance and stalls. Note the weakness two bars before O. There is churning at resistance in the noon hour, and the market is unable to rally higher and reacts.

 

P – A narrow spread down bar closing above the middle on volume less than the previous two bars – a Test indicating a lack of supply. Note how this reaction did not fall back to the support at 1333.25. Instead, it is holding its gains, and this is a bullish indication.

 

Q – A Hidden Test that occurs after minor weakness and the market rallies back into resistance.

 

R – An UT at the now fairly formidable resistance area of the Globex high, A, J, & O. Note how the volume, spreads and closes on the rally to R are lackluster. The market reacts.

 

S & T – Buying comes on these bars as the market reacts back into the area where buying had taken place on two earlier occasions (D and K). I drew a red line to indicate the support area. This is also a ½ - way retracement of the rally from M to O. The mid-point (50%) retracements were important to Wyckoff and indicate a normal reaction where he would look for support to come in. Note also the rising lows after T (bullish). There was also a Test on the 3-minute chart. The market rallies.

 

U – Wide spreads and high volume pushes up through the resistance level (A, J, O, R). Compare the character of this rally (spreads, closes, volume) with the rallies from E to J, M to O, and P to R. These differences are subtle but readable, and tell whether the opposition formed by the resistance level will be broken or will repel price. The same clues occur in the opposite direction when price approaches support.

 

V & W – The high volume at U is tested at V (a Test, though the spread is a bit wide) and again at W – a Hidden Test. With strength in the background, the market rallies higher.

 

X – A 2-Bar UT/Top Reversal. The volume on the bar before X was quite high (compare to U) and it closes off the highs. Next bar goes higher on fairly high/sustained volume and closes on its low and below the prior bar’s close. Why does this happen after the strength seen on the push through the resistance at U? Recall our nightly analysis. Yesterday’s (the 18th) high was 1348.50 and we are in that resistance area here. Knowing these areas in advance is important because they reinforce the VSA indications we see and bring life to them. The market falls.

 

Red Circle – I wanted to point this area out to you. Compare this area with the green circle area at S&T. In the red area, closes are mostly poor and tend to hug nearer the lows. We also see lower highs and lower lows within this area, especially at the end of the small trading range. These are all indications that price will not hold. In the green area, closes are better, spreads widen to the upside, and there is a lifting of supports (or lows) after T. Subtle, but again readable with practice.

 

---------

 

Sorry for the length of this, but there is a lot packed into this chart that can be studied and learned from for the next time this occurs (and it will). Although hindsight, every indication occured in real time. Useful guidelines include:

 

• 
  Map out S/R in advance and as the market unfolds during the day

• Look for VSA indications in these areas.

• Look for confirmation of VSA indications.

• Compare and contrast the up and down waves as they unfold.

• Look for changes in character in both the waves (e.g., the holding of a higher low over the noon hour) and in the bars (via volume, spreads, and closes).

 

Hope this is helpful,

 

Eiger