[VSA] Volume Spread Analysis Part II

[BlowFish 10]

Hi all

 

I am thinking about purchasing tradeguider. Before shelling out the money, I would like to here from some users. A few questions, can you figure out VSA without purchasing the software? (I have read the full book). How can you try before you buy (no trial versions, a leap of faith in my opinion). After purcahsing the software is it easy to use and is the support any good?

 

Appreciate user comments.

 

Gmack

 

Absolutely you can figure out VSA without using the software. Actually even a novice VSA'er should be able to do better than the software (its clunky imo). There are only a handful of principles to learn. The software has 'simplified them' into 400 or so. Buy Tom's book sit down and read it. Look at loads and loads of charts and learn. Sebastian told me once that he simply printed tons and tons of charts and went through by hand with a pen annotating them until things clicked.

 

I have a pretty dim view of "professional trader and VSA expert Gavin Holmes" (the moniker he has recently adopted). Lets be clear he derives his income from selling products and services. His pitch and the claims he makes in it become more sensationalist and 'tabloid journalism' as time goes on. It is clearly designed to appeal to people on an emotional level. I would be very wary of purchasing anything from him myself.

[larsdelgars 10]

Thanks for the thread gang... Eiger the charts are really helpful. I hope that you continue to do them.

 

I wanted to ask a question. I did a quick scan and found something with a wide spread and extreme volume. It is an S&P component... I know we don't do stocks around here... but we do analyze ES and this is a component of that.

 

I am looking at EOD data so you can pull up yahoo if you want. Ryder ® had a wide spread down on massive volume closing off the lows 3 days ago. This was followed up by a down bar closing off the lows on less volume. Today the bar was an up bar on narrow spread closing up.. it is also an inside day bar. was this bar a successful test of supply sitting at yesterdays close... is this a no supply bar indicating Ryder is ready to bounce?

 

Thanks.... the chart discussions are fantastic in this thread. I wish the other threads would do daily chart discussions/annotations for example the wyckoff thread.

 

Best Regards

 

lars

[tawe trader 10]

Hello Lars,

 

I think I have attached the correct chart for your Ryder System stock query.

 

For the last bar to be a no supply / test, you would need to see it confirmed by the following bar (todays 28th Aug) closing up. Also for a test bar you need to see it close down (but off it's low) on volume less than the previous two bars, yesterdays bar closed up.

 

I would be very wary in going long just yet, this stock still looks weak to me. Maybe wait for a confirmed daily 'test' or a successful test in a rising mkt before thinking about going long.

 

There was a fine ND - no demand a couple of days ago (confirms background weakness) and it looks like it was followed by heavy selling on the wide spread down. Yesterdays bar could just be the mkt having a rest before another down-leg or even another no demand bar.

 

I hope this is some help.

 

Regards

Tawe

.

[larsdelgars 10]

can someone speak to tests specifically..... i see these terms... hidden test... high volume test... failed test... confirmation of test.... i can't seem to find clear definitions of these tests in toms book. could someone speak to this as detailed as possible. why do tests occur? how are tests confirmed? i can't seem to find a resource on this. any help is greatly appreciated.

[Eiger 10]

Tests. Valid Tests occur after a Sign of Strength (SOS) - always. This is an axiom in VSA.

 

There are several Tests on the attached chart. Note that this is only one trading day. There are other valid and profitable ways that Tests reveal themselves.

 

In VSA we look for a Test after a SOS. Typically, a Test occurs on a narrow spread. The narrow spread indicates a lessening or lack of professional trader activity, which is one characteristic we look for. The "best" Tests have a close at mid range or on the high, though admittedly, the close is the least important aspect of the Test. Always, Tests are a DOWN BAR; never an Up bar. (The way to tell the strength of the market is ALWAYS on a down bar, never an up bar.) Also, Tests occur on LOW VOLUME. Low volume is the most important characteristic as it shows that professional traders have a lack of interest in the downside. The best Tests occur on volume that is lower than the prior two bars.

 

In the attached chart, D is a clear SOS. Two bars later at E, there is a nice Test. Note that the bar is a down bar and that the volume is less than the previous two bars. The market rallies well until F when there is a potential indication of weakness. However, the next bar is a Test, indicating no supply by the professional traders. Later, at H, we see another Test-like bar.

 

Tests show that supply is no longer evident in the market. The Test paves the way for higher prices. We look for confirmation on the next bar which should be an up bar.

 

Not long ago, Sebastian Manby did an excellent video on Tests which is quite worth reviewing. He goes into very good detail on the Test and provides you with a complete course on the subject.

 

To summarize,

 

Tests:

 

• occur after a sign of strength.
  

• are a mark down of the market by professional traders into areas where supply (high volume) occurred earlier, or occur in rising markets.
  

• occur on a narrow spread and very low volume
  

• are followed by an up bar
  

 

When this ideal combination of events occurs, the odds of higher prices is very, very good.

 

Eiger

[larsdelgars 10]

thanks for the niblet.... if anyone has a link to the Sebastian video material please help me out and post it. i can't find it with a search.

 

if anyone can speak to hidden tests... high volume tests and also the inverse of tests... or link to material that explains it in detail...

 

thanks

 

also since it seems like the thread is rather slow lately i am wondering if the experts are now providing there services elsewhere for a fee ex. vsaclub or if they are still giving back to the community they once drew upon. thanks.

[mister ed 10]

also since it seems like the thread is rather slow lately i am wondering if the experts are now providing there services elsewhere for a fee ex. vsaclub or if they are still giving back to the community they once drew upon. thanks.

 

Lars - while this thread has been slow lately there is much value to be found by reading through the earlier pages (the entire thread) and the the entire original VSA thread. Principles don't date. Those who have made positive contributions to these threads have provided a gift to us all, a gift that keeps on giving (corny, I know, but true).

 

There are 5 videos from Sebastion found on this page:

http://www.videos.traderslaboratory.com/search_result.php?search_id=sebastian

[tawe trader 10]

Seeing as we are currently discussing long tests, there was a 'classic' test in a rising mkt on the FTSE yesterday morning.

 

I have attached two 15 min charts of yesterdays action, the first chart is on the hard right edge, followed by 'what-happened-next'.

 

Chart #1

 

As you can see by the upsloping trendline, the mkt is currently in an uptrend. The mkt was taken down after the open, down to previous resistance which has now become support. On the white arrow we had a downbar (and lower low) but the volume is very low and less than the previous two bars. It looks like there is very little selling pressure or interest to the downside. The next bar (yellow arrow) closes up, which confirms this as a successful test. We now have an excellent, low risk, long entry point in-line with the 15 min trend.

 

Chart #2

 

Need I say anymore, the mkt rallied over 130 pts from the morning low and test at 9.15am. Powerful stuff this VSA.............

 

Regards

Tawe

.

[Sledge 13]

I may be back trying to submit a few more items for discussion here from time to time again. Been away for a while.

 

Working on a "back to basics" approach of bars and the context of them in the market- something sparked by VSA, thought maybe we could discuss in the candle version in another corner of the TL, but thus far it hasn't blown wide open to fruitful discussion.

 

Aaron

[Sledge 13]

My advice can be reduced to one word: Don't.

The coding of their software is antiquated, hogs huge amounts of computer resources. Their signals look really excellent in hindsight, but from the vantagepoint of the hard right edge, they're not very good at all....and they're often late. Finally, you can learn VSA from Traders Lab, then you won't need their overpriced buggy software. You'll be able to see the signals yourself, and that is ALWAYS better than the software. Even their former spokesperson Todd used to admit that fact (maybe that's part of the reason Gavin threw him out).

 

Hope this helps. Taz

 

I will second this post by Taz in full. I learned VSA the "hard way" and I have read "MTM" 5 times through. It is tough to do- but if you study the concepts and apply them to your own charts- things start to be more clear to you.

 

Relying on the VSA software to give you signals of trades is against the very teachings of VSA as it started. Many times I heard things said by TG staffers that "well you don't want to use indicators to trade- if you do you have no idea of what is REALLY going on" Well if you utilize their software for "trade signals" and only trade off of them without understanding WHY it is doing what it is- then you have no better system that any other indicator you could apply (MACD, Stoch, etc. etc.)

 

Aaron

[tawe trader 10]

I may be back trying to submit a few more items for discussion here from time to time again. Been away for a while.

 

Hey Aaron, I'm glad your still around, even if you've turned into a PDF file

 

Regards

Tawe

 

 

my first post but I see activity has subsided hin this thread. why this?

 

Delta, activity did go a bit quiet on this VSA thread, a bit like the low volume mkts we've had this summer. I guess it's to do with most people taking time away from their screens, having a holiday and spending time with the family etc.

[Sledge 13]

Hey Aaron, I'm glad your still around, even if you've turned into a PDF file

 

Regards

Tawe

 

 

 

 

:rofl:

Nice! Yeah I thought it was funny as well. Need to get back into some chart posting over here. Had plenty of teachers- time to give back some more!

[larsdelgars 10]

Seeing as we are currently discussing long tests, there was a 'classic' test in a rising mkt on the FTSE yesterday morning.

 

I have attached two 15 min charts of yesterdays action, the first chart is on the hard right edge, followed by 'what-happened-next'.

 

Chart #1

 

As you can see by the upsloping trendline, the mkt is currently in an uptrend. The mkt was taken down after the open, down to previous resistance which has now become support. On the white arrow we had a downbar (and lower low) but the volume is very low and less than the previous two bars. It looks like there is very little selling pressure or interest to the downside. The next bar (yellow arrow) closes up, which confirms this as a successful test. We now have an excellent, low risk, long entry point in-line with the 15 min trend.

 

Chart #2

 

Need I say anymore, the mkt rallied over 130 pts from the morning low and test at 9.15am. Powerful stuff this VSA.............

 

Regards

Tawe

.

 

yea but what are those bars testing.... the high volume bars have already been tested by low volume bars that occurred before the bars you mention. the bars you mention look like maybe no supply. i don't think tests are simply the lowest priced and lowest volume bars on a chart when looking back in hindsight. from what i can gather from eiger it seems they appear rather swiftly after supply has potentially entered the market. they seem to "bounce" off the close of the potential supply bars if the tests are valid. does this seem like an accurate observation?

[larsdelgars 10]

I may be back trying to submit a few more items for discussion here from time to time again. Been away for a while.

 

Working on a "back to basics" approach of bars and the context of them in the market- something sparked by VSA, thought maybe we could discuss in the candle version in another corner of the TL, but thus far it hasn't blown wide open to fruitful discussion.

 

Aaron

 

sounds like a discussion i'd be interested in.

[delta 10]

thank you tawe. I am around and reading vsa basics in these threads and from the book. hope I will learn it gradually but surely.

 

delta

[Eiger 10]

thank you tawe. I am around and reading vsa basics in these threads and from the book. hope I will learn it gradually but surely.

 

delta

 

A useful way to learn VSA is to annotate charts every night. There are many examples in this thread. Doing this over many different types of days will help you quickly get the feel for the charts and chart reading.

 

Eiger

[tawe trader 10]

yea but what are those bars testing.... the high volume bars have already been tested by low volume bars that occurred before the bars you mention. the bars you mention look like maybe no supply. i don't think tests are simply the lowest priced and lowest volume bars on a chart when looking back in hindsight. from what i can gather from eiger it seems they appear rather swiftly after supply has potentially entered the market. they seem to "bounce" off the close of the potential supply bars if the tests are valid. does this seem like an accurate observation?

 

Lars,

 

The bars are testing to see if there is any more large scale supply on the mornings lows and in an area (5500-5510) that previously contained a high degree of supply in the previous two trading days.

 

Looking back at my chart, maybe I should have marked the bar as a no supply bar instead of a test. I personally don't like the sound of no supply as I believe there would still be some supply (by amateurs) on that bar during that 15 mins of mkt action. I prefer the idea of less supply or less selling pressure by the pro's.

 

If there is less selling pressure after a period of demand and buying (by the pro's) then the path of least resistance is up and the mkt is more likely to rise than fall. With very little selling pressure in the background it is a sign of strength and as the mkt rises it is unlikely that it is going to be hit with any large scale supply swamping the up-move and making life difficult for those pro's who are already long.

 

Tawe

[dandxg 10]

Seeing as we are currently discussing long tests, there was a 'classic' test in a rising mkt on the FTSE yesterday morning.

 

I have attached two 15 min charts of yesterdays action, the first chart is on the hard right edge, followed by 'what-happened-next'.

 

Chart #1

 

As you can see by the upsloping trendline, the mkt is currently in an uptrend. The mkt was taken down after the open, down to previous resistance which has now become support. On the white arrow we had a downbar (and lower low) but the volume is very low and less than the previous two bars. It looks like there is very little selling pressure or interest to the downside. The next bar (yellow arrow) closes up, which confirms this as a successful test. We now have an excellent, low risk, long entry point in-line with the 15 min trend.

 

Chart #2

 

Need I say anymore, the mkt rallied over 130 pts from the morning low and test at 9.15am. Powerful stuff this VSA.............

 

Regards

Tawe

.

 

Hi Tawe,

 

You mentioned something in your post which I really thinks need special attention. The test has to have a lower low. I was testing out, and take a few trades, this summer and found that the bar previous to your test, which I have heard others refer to as a test, is not nearly as stong. Sure it's a down close with volume less than the previous 2, ( I have seen some refer to it as no supply and or a test ), but the following bar is giving the market a chance to probe lower and really test supply. I just wanted to point this out for ppl. that may overlook this point, because it's simple but critical IMHO. For what it's worth I think, not sure, you test is a Wyckoff spring.

[tawe trader 10]

Hello Danxg,

 

Yes you are correct, in that a true definition of a VSA 'test' has to have a lower low and like you said, it's the 'probing' lower that is the critical action. Prices have been marked down to new lows and no large scale selling has been found.

 

A test bar also requires it's close to be in the middle to upper portion of the bar. It can also have slightly higher volume (but not too high) than the previous bar.

 

Again, like you mentioned this VSA test bar can also be known as a Wykcoff spring.

 

I apologise for not being more clear but in my little head I tend to lump no supply bars and Wykcoff spring bars together, as 'long' tests even though there are slight variations. They both are a signal to me (combined or on their own) to get ready for going long.

 

I have an excellent example of a ultra high volume downbar followed by a no supply followed by a 'subtle' test bar and a good sized rally. It occured the other day on the FTSE on a 10 min timeframe. I will post the chart later as I am not currently at my main pc.

 

Tawe

[tawe trader 10]

NO SUPPLY FOLLOWED BY A (VERY SUBTLE) TEST - 10 min FTSE Future from Thurs 14th Aug

 

Chart #1

 

At 1.30pm on bad news there is a very wide spread ultra high volume downbar, followed by high volume sideways to slightly down action.

At 2.20pm there is a no supply bar. A narrow spread, down close on very low volume and less than the previous two bars.

The next bar makes an ever-so slight lower low (1 pt) but closes in the upper portion of the range. The volume is higher but not excessive. Was this a crafty move by the marketmakers to draw in new shorts ?

 

Would you be thinking about going long after seeing the recent mkt action ?

 

Chart #2

 

As you can seen the mkt did rally to it's 4.30pm cash mkt close. There was a good 45+ pts available to the longside and any shorts entered near the lows would have been well underwater.

 

Regards

Tawe

.

[Guest forsearch]

Another free VSA webinar today by those Tradeguider people at 4:30 ET US (9:30 UK BST):

 

http://tinyurl.com/5t5uxp

[larsdelgars 10]

NO SUPPLY FOLLOWED BY A (VERY SUBTLE) TEST - 10 min FTSE Future from Thurs 14th Aug

 

Chart #1

 

At 1.30pm on bad news there is a very wide spread ultra high volume downbar, followed by high volume sideways to slightly down action.

At 2.20pm there is a no supply bar. A narrow spread, down close on very low volume and less than the previous two bars.

The next bar makes an ever-so slight lower low (1 pt) but closes in the upper portion of the range. The volume is higher but not excessive. Was this a crafty move by the marketmakers to draw in new shorts ?

 

Would you be thinking about going long after seeing the recent mkt action ?

 

Chart #2

 

As you can seen the mkt did rally to it's 4.30pm cash mkt close. There was a good 45+ pts available to the longside and any shorts entered near the lows would have been well underwater.

 

Regards

Tawe

.

 

 

why would you think any hidden buying would be contained in those bars? they closed very near the low.....

 

some supportive volume did come in on the 3rd and 4th bars after the wide spread bar to establish a temporary floor... but that easily could have been a minor breather caused by short covering before a continuation of the decline.

 

and besides what would warrant a long entry? you haven't established a bullish context in the background

 

the thing with VSA that i see around the internet is this ... "VSA teaches that fading monster bars is a good idea" personally i think that is a really crappy way to look at this whole concept.

 

i mean its easy to cherry pick examples where it works out... but picking tops and bottoms after monster bars is really poor business.... unless you are selling out longs or covering shorts.

 

the only long entry i see is 10 bars after the wide spread bar.... and thats still high risk

 

thats my take

[tawe trader 10]

why would you think any hidden buying would be contained in those bars? they closed very near the low.....

 

I did place a question mark by my note. There was obviously still more supply than demand in the mkt as it went down a bit lower but hidden buying did appear on the 1.50pm bar, as the next bar closed up and the 1.50pm bar lows wasn't penetrated.

 

... "VSA teaches that fading monster bars is a good idea" personally i think that is a really crappy way to look at this whole concept.

 

VSA does not encourage you to fade monster bars - as you put it. VSA teaches you to only enter after seeing a ultra high volume wide spread up / down bar AFTER it has been confirmed by a successful test bar. I agree, picking tops and bottoms is very, very dangerous.

 

i mean its easy to cherry pick examples where it works out

 

The current thread discussion was regarding, no supply and test's. The 'cherry picked' example I have shown is something I've had in my head for the last couple of weeks due to the very subtle nature of the (sly) test and also it bugged me for a while because I missed seeing it, in realtime.

 

I personally don't have anything to gain by going back and only cherry picking VSA setups that have been successful. I am not an employee of Tradeguider, I not even a customer of TG and I don't (and never have) owned their software. I haven't a blog, website, book / course / subscription service or anything else to sell, so I have nothing to gain by promoting VSA. After many frustrating years of stumbling around, trying so many different indicators and methods I was very lucky to come across VSA last year which opened my eyes to supply & demand and helped to turn me from a losing to profitable trader. VSA is not the holy grail but if I have a losing day, 99% of time it will be down to my impatience, lack of focus or discipline.

 

So now I would just like to give something back and if I can be of some small help to any new traders out there, if by posting a few 'cherry picked' charts and somebody learns from it then great.

 

thats my take

 

Yes it's a free world (well to most of us anyway) and nobody is forcing you to trade via VSA or visit this thread.

 

also since it seems like the thread is rather slow lately i am wondering if the experts are now providing there services elsewhere for a fee ex. vsaclub or if they are still giving back to the community they once drew upon. thanks.

 

Lars, this really got my goat up the other day. You can criticise me or VSA all day long for all I care but to make the above statement after recently coming into this VSA thread I thought was a bit out of order. Have you read all the free posts and charts by Eiger ?? These posts would have taken him many, many hours of his spare time to compile and yes I know his background but I have never seen him 'plug' anything service of his here on TLab.

 

Tawe

Edited September 4, 2008 by tawe trader
_

[Eiger 10]

Trend Day Down again today. When we get used to countertrend trading and fades, it can sometimes be challenging to shift to a trend day mode. The background, early indications after the open, and a series of VSA indications gives us a nice structure and methodology to stay on the right side of the market.

 

We were already in a down trend (see 60-min chart) with no indication of demand on the higher time frames. The market opened below yesterday's low and gave clear indication it was having difficulty rallying much above it during the fist 45 minutes after the open..

 

5-minute ES:

 

A - An Up Thrust into the conjestion area just above yesterday's low. Note the inability to rally over the first 45 minutes.

 

B - Volume picks up substantially at over 94,000 shares. This is quite a bit of voleume on a 5-minute bar. Is it stopping volume? It can be, but look at the 60-minute chart. There is a good support area along the 1260-63 line. The heavy volume we see on the 5-minute chart is the result of professionals pushing through that support coupled with trapped longs bailing on their trades and break-out traders adding to the liquidation.

 

Although we see some Shortening Of the Thrust after bar B, closes are on the lows and new lows are made - hardly bullish behavior. (You can compare the market behavior following B with that following the other sudden high volume bars on this chart. Even though we are in a downtrend, the subtle signs that the market would attempt a rally or rest after D and H were there. Of course, a better comparison can be made with sudden high volume that turns the market on other days).

 

With a break of significant support on heavy volume and a downtrend already in place, the odds were good for continuation to the downside.

 

C - An up bar, on narrow spread, volume less than the previous two bars after a series of lower lows and lower highs -- a lovely No Demand. Next bar is down (Up Thrust).

 

T - Appears to be a test - but there is no strength in the background, only significant weakness.

 

D - High volume down bar on wide spread, next bar is up and this knocks the market sideways, Note the inability to rally. There is no demand for the upside going into the noon hour. An UpThrust at E caps the rally. Next bar is down. The small rally that follows E is on low volume and shows no demand.

 

F - Although the volume had dropped off over the noon hour, you can still see that up bars were No Demand or on very low volume as the market drifts lower.

 

G - Even over the lunch hour when volume is low, the market shows an increase in volume as it breaks the old low at D, signifying further weakness. The No Demand that follows confirms.

 

H - As usual, a sudden increase in volume turns the market and we have the longest rally of the day. It lasts a little over an hour and struggles to reach the high of the sideways movement/very weak rally at 2:00. The market finishes this rally with an Up Thrust at I, next bar is down, followed by a further reaction to close on its lows.

 

Eiger

[CandleWhisperer 10]

Trend Day Down again today. When we get used to countertrend trading and fades, it can sometimes be challenging to shift to a trend day mode. The background, early indications after the open, and a series of VSA indications gives us a nice structure and methodology to stay on the right side of the market.

 

We were already in a down trend (see 60-min chart) with no indication of demand on the higher time frames. The market opened below yesterday's low and gave clear indication it was having difficulty rallying much above it during the fist 45 minutes after the open..

 

5-minute ES:

 

A - An Up Thrust into the conjestion area just above yesterday's low. Note the inability to rally over the first 45 minutes.

 

B - Volume picks up substantially at over 94,000 shares. This is quite a bit of voleume on a 5-minute bar. Is it stopping volume? It can be, but look at the 60-minute chart. There is a good support area along the 1260-63 line. The heavy volume we see on the 5-minute chart is the result of professionals pushing through that support coupled with trapped longs bailing on their trades and break-out traders adding to the liquidation.

 

Although we see some Shortening Of the Thrust after bar B, closes are on the lows and new lows are made - hardly bullish behavior. (You can compare the market behavior following B with that following the other sudden high volume bars on this chart. Even though we are in a downtrend, the subtle signs that the market would attempt a rally or rest after D and H were there. Of course, a better comparison can be made with sudden high volume that turns the market on other days).

 

With a break of significant support on heavy volume and a downtrend already in place, the odds were good for continuation to the downside.

 

C - An up bar, on narrow spread, volume less than the previous two bars after a series of lower lows and lower highs -- a lovely No Demand. Next bar is down (Up Thrust).

 

T - Appears to be a test - but there is no strength in the background, only significant weakness.

 

D - High volume down bar on wide spread, next bar is up and this knocks the market sideways, Note the inability to rally. There is no demand for the upside going into the noon hour. An UpThrust at E caps the rally. Next bar is down. The small rally that follows E is on low volume and shows no demand.

 

F - Although the volume had dropped off over the noon hour, you can still see that up bars were No Demand or on very low volume as the market drifts lower.

 

G - Even over the lunch hour when volume is low, the market shows an increase in volume as it breaks the old low at D, signifying further weakness. The No Demand that follows confirms.

 

H - As usual, a sudden increase in volume turns the market and we have the longest rally of the day. It lasts a little over an hour and struggles to reach the high of the sideways movement/very weak rally at 2:00. The market finishes this rally with an Up Thrust at I, next bar is down, followed by a further reaction to close on its lows.

 

Eiger

 

Have not posted in a while. Eiger you have done some nice work. Thank you. There is much we all can learn from you. The openness and the quality of insight is what makes this place different. The quality of traders like you, make this place different.

 

With that said, I do want to call into question a couple of things:

 

T: is not a test. Tests (ideally) close in the middle or high of the bar and usually make a lower low. This bar closes near its lows and neither makes a higher high or lower low. Simply, this is an "inside" bar on low volume not of particular note in VSA.

 

Actually, that's the only thing. Everything else is spot on imho.

 

Where would you have entered the market initially? What about add-ons?