[VSA] Volume Spread Analysis Part II

[CandleWhisperer 10]

CandleWhisperer,

Are you implying that the No Demand bar that occurs in TradeGuider will only appear if the following bar closes down ... in other words this indicator will appear in retrospect (ie take 2 bars to form)....sleepy

 

 

 

When a person that is new to tradeguider looks at a chart, he sees these no demands at some very "ideal" short enter places and thinks, here it is the Holly Grail. But in truth, TG is the first to say they are not entry signals.

 

Check out any TG chart/video or picture in the book. Usually, there will be few No Demands but many up bars that are narrow on volume less than the previous two bars. That is because the software uses a confirmation (which should be called completion) bar and a range formula.

 

At any rate, It is important not to dismiss the concept just because the red triangle comes after the close of the second bar. It is not an after the fact signal. If you are familiar with Bill Williams, think about a fractal. For a valid fractal pattern, 5 bars are needed where the middle bar is the lowest low (for a down fractal) of the 5 bars. An indication could be placed on that bar, but only after the next two bars make higher lows. At first glance it might look like the low was called but in reality the pattern completes and then the sign is generated an placed.

 

As for Gavin, it is true that he waits for a change of color in the price bars or the diamonds. This makes no sense to me. If you claim to be reading price and not using indicators, then why would you enter on color bar changes like any other TA user?

[sleepy v2 10]

So we may not want to call the second bar a confirmation bar but a completion bar.

 

Yep, I like that term too ... and the accompanying explanations/clarifications.

And I wasn't referring to Gavin by the way.

 

If the diamond approach is just a 5 period moving average ...do you know what is the basis for the medium term trend indicator (ie., bar colour change) in TradeGuider?

 

I'm looking at how and where to enter on this confirming sign.

 

Id also agree this is very important ... but have yet to find anywhere this is discussed in-depth. Or do I need to look harder/further?

 

sleepy

Edited November 2, 2008 by sleepy v2

[jjthetrader 10]

Id also agree this is very important ... but have yet to find anywhere this is discussed in-depth. Or do I need to look harder/further?

 

sleepy

 

Well, Winnie, CandleWhisperer and I have been discussing this over the last 5 or so pages. Have a look over it and you'll see our discussions about entry specifics. TaweTrader posted some really nice trades with commentary and specific entry levels.

 

TradeGuiders intermediate trend is just average true range. It's way too slow in my opinion. You can't count on it.

There are people however who use it in their trading plan. If it works for you then go for it.

[Khepfere 10]

I am posting to this thread - since it seems like the most logical place to start the following dialoque. (This may have been addressed already in this - thread - however it didn't show up with a search)

 

https://www.tradestation.com/Discussions/Topic.aspx?Topic_ID=

 

The above thread in the TradeStation Forum discusses the concept of the Klinger-Goslin, Klinger-Goslin-ATR and related indicators that appear to be the forerunner and fondation for VSA. As any one looked at these in this forum? As anyone converted the EL that support these (found at above link) to NT? Curious to hear feedback. It appears that these approaches may be just as powerful as VSA but a lot simpler to process and handle mentally.

[Khepfere 10]

Here is the full URL for my previous post (the last few numbers got cut off)

 

https://www.TradeStation.com/Discussions/Topic.aspx?Topic_ID=59409

[Soultrader 12]

Here is the full URL for my previous post (the last few numbers got cut off)

 

https://www.TradeStation.com/Discussions/Topic.aspx?Topic_ID=59409

 

Could you post your discussion on the boards since many are not TS members. Thanks

[tawe trader 10]

That bar is definitely a TRANSFER OF OWNERSHIP type of bar as the volume is ultra high, the close is up and close is in the middle of the range. Not surprisingly, it comes on a news release. As you say, crafty ol buggers .

 

But it is not an "end of a rising market" bar. An "end of a rising market" bar will always be a narrow range bar on ultra high volume into new high ground.

 

CW,

 

Thanks for the clarification. The 'end of a rising mkt' bar was something I had made note of from a free video by TG (Gavin) a couple of months back. I guess I should just stick to following the master, Tom W.

 

Tawe

[tawe trader 10]

I'm not sure if the following will be of any help but maybe it will be to some of the newer traders, ie building some trading plan around VSA and Wyckoff principles.

 

As a quick VSA re-cap, what to we know ?

 

If we see background strength say on a daily or 60 / 30 min timeframes by way of high volume downbars there is hidden potential buying (demand) by the pro's. If the mkt is tested and the background strength is confirmed, the path of least resistance is now up and the mkt should start forming higher highs and higher lows, ie an uptrend.

 

What if we drop down to an intraday timeframe for an entry.

 

With background strength and the mkt in an uptrend it is now 'safer' to take long trades in-line with the pro's.

 

Long entries:-

 

1. Low volume test's which are confirmed.

2. Bounce's off support levels and pivot points.

3. Bounce's off upsloping trendline (demand line)

4. Trendline (supply line) break to the the upside

5. Breakout - up

[tawe trader 10]

If we switch it around for short entries.................

 

If we see background weakness say on a daily or 60 / 30 min timeframes by way of high volume upbars there is hidden potential selling (supply) by the pro's. If the mkt is tested and the background weakness is confirmed, the path of least resistance is now down and the mkt should start forming lower highs and lower lows, ie a downtrend.

 

What if we drop down to an intraday timeframe for an entry.

 

With background weakness and the mkt in a downtrend it is now 'safer' to take short trades in-line with the pro's.

 

Short entries:-

 

1. No demand which is confirmed.

2. Upthrust.

3. Bounce's off resistance levels and pivot points.

4. Bounce's off downsloping trendline (supply line).

4. Trendline (demand line) break to the downside.

5. Breakout - down.

[jjthetrader 10]

The above thread in the TradeStation Forum discusses the concept of the Klinger-Goslin, Klinger-Goslin-ATR and related indicators that appear to be the forerunner and fondation for VSA.

 

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

[winnie 10]

Dear all ,

 

If we are in a down trend and we find a "no demand" sell signal in the support price level, for example : pivot or yesterday low. Should we still take the short signal ?

 

Thanks

Winnie

[tawe trader 10]

Winnie,

 

What I have noticed, is that even during a downtrend the mkt will more than likely hesitate or put in a small bounce off a support level or pivot point.

 

If there is a no demand on a support level I would maybe hold back from going short, at that moment.

 

If the mkt bounces and puts in a small rally and another lower high forms, the downtrend is still intact. Then you could be on the lookout for any no demands for lower-risk short entries. You would usually find a no demand bar at the top of this mini-rally.

 

The ideal scenario is a no demand bar touching / coming up to overhead resistance or a downsloping trendline (supply line).

 

Tawe

Edited November 4, 2008 by tawe trader
.

[sleepy v2 10]

So we may not want to call the second bar a confirmation bar but a completion bar. Does that make things less confusion?

 

To complete a no demand signal the next bar must close down. And a test must do the opposite.

 

With regard to the 'Completion bar' are we simply looking for a lower close (ie., down bar) cf to the previous no demand bar . Or should we also be mindful of the volume, spread etc on the 'Completion bar'.

 

sleepy

[jjthetrader 10]

With regard to the 'Completion bar' are we simply looking for a lower close (ie., down bar) cf to the previous no demand bar . Or should we also be mindful of the volume, spread etc on the 'Completion bar'.

 

sleepy

 

I would just be mindful of the close. The fact that a bar closed down after a no demand bar tells us our story.

[winnie 10]

Dear JJ ,

Thank for sharing your trading idea. Would you close the short position if the immediate close after the no demand bar is an up close instead of down close ?

 

Thanks

Winnie

[jjthetrader 10]

Dear JJ ,

Thank for sharing your trading idea. Would you close the short position if the immediate close after the no demand bar is an up close instead of down close ?

 

Thanks

Winnie

 

No. It all depends what happens next really. A second low volume upbar might be a good thing because it's showing you a no demand on a higher timeframe. But this is an individual thing. I'd probably tighten up my stop.

[CandleWhisperer 10]

With regard to the 'Completion bar' are we simply looking for a lower close (ie., down bar) cf to the previous no demand bar . Or should we also be mindful of the volume, spread etc on the 'Completion bar'.

 

sleepy

 

it can get a bit tricky.

 

If the volume is less than the previous two and closes down, you may have No Supply. But you would have to wait for the next bar to find out. If the close is in the middle or high, it could be a test. Thus, what we would like to see is volume that is higher than the No Demand bar. That means it at least can't be No Supply. It can still be a test, but a test on increasing volume usually is not bullish.

 

As for range, here too things can be a bit tricky. If the range is large and the close near the low, a personal decision needs to be made. That is, price may have moved beyond one's entry tolarence. So while the bar confirms (completes) the No Demand it may close too low to be a valid entry point. The level where a down close is too low for entry is personal. But many will find those times when a No Demand completes at the same time a short entry is invalidated.

 

Of course some don't care and are willing to "chase" and do not consern themselves with the above.

 

To be clear, I am talking about the amount of price change from the No Demand bar to the close of the completion bar.

Edited November 5, 2008 by CandleWhisperer

[jjthetrader 10]

it can get a bit tricky.

 

If the volume is less than the previous two and closes down, you may have No Supply.

 

To be clear, I am talking about the amount of price change from the No Demand bar to the close of the completion bar.

 

What do you want to bet in the next Tradeguider event they start using our term 'completion bar'? lol.

 

Candle, one thing I'd like to point out in the way I trade VSA is that if there's weakness in the background, especially if it's proven, that I discount low volume downbars. I don't do the whole bar by bar thing. That method isn't really tradable to me. What I look for is strength or weakness and then try and pinpoint my entry with a signal such as a no demand. Have you ever notices that the completion bar of a no demand reversal is almost always low in volume? This happens because it's an area where people don't really know if it's going up or going down because it's moving so slow in both directions. So at that point downward pressure doesn't really exist even though we know that it will because of our background. Then the volume will usually pick up on the bar after the completion bar.

But the way you're reading it is technically correct and if you were emulating Sebastians technique then you'd probably be spot on. I'm jsut pointing out how I read it and make it easier on myself.

Then there's TaweTrader who has a completely different way to read VSA but just as good or even better. It's a wonderful methodology that gets adapted by your style.

[sleepy v2 10]

It's a wonderful methodology that gets adapted by your style.

 

Speaking of styles, niches ..

 

JJ,

What markets are you trading ... and why?

Intraday or EOD?

And how many VSA trades do you take on any given day etc..

 

And has the above influenced your current take on trade entry (i.e, completion bar).

 

sleepy

[jjthetrader 10]

Speaking of styles, niches ..

 

JJ,

What markets are you trading ... and why?

Intraday or EOD?

And how many VSA trades do you take on any given day etc..

 

And has the above influenced your current take on trade entry (i.e, completion bar).

 

sleepy

 

Well I don't care much for working full days so I only trade the morning session. On the 3 min I can expect at least 3 good setups in the morning. The ES is the only thing I trade at the moment. It's volatile enough to make your money in the morning. One of the reasons I like it is because the biggest traders in the world are trading it and since we're trying to follow them it makes sense to be where they are.

Not that they aren't anywhere else, they're just in the ES in high proportion.

 

With the recent volatility I've actually gone down to a tick chart because for a while I couldn't afford the stops needed on the 3 min. It's back to a reasonable speed now so the 3 min works for me again. However I took a liking to the tick chart so am still using it.

[winnie 10]

Dear JJ,

 

Would you tell me when is the morning session of your trading period ? When is it end ?

 

Thanks

Winnie

[winnie 10]

Dear JJ,

I have one question for you. If you see an no demand bar appears in your resistance area, but it close at the high and the next bar take out the high of the no demand bar first , will you still sell at the low of the bar ?

 

Thanks for your time

Winnie

[BlowFish 10]

On the subject of waiting for confirmation (or completion bars), this precisely why people use lower time frames to trigger entries. You would look at say a 30 minute or hourly chart (as an example) for your big picture to spot the signs of weakness in the back ground, (climax test etc). This is going to be fairly major intraday strength/weakness. Having established that you want to trade to the long side you would drop down to a lower time frame (e.g. the 5 min) to find the 'pattern' to trigger your entry. This allows you to fineness your entry.

[sleepy v2 10]

Goint point Blowfish.

 

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

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

 

sleepy

[jjthetrader 10]

Dear JJ,

I have one question for you. If you see an no demand bar appears in your resistance area, but it close at the high and the next bar take out the high of the no demand bar first , will you still sell at the low of the bar ?

 

Thanks for your time

Winnie

 

Winnie, this would be even better because you'd then have the potential for a trap upmove to form.

 

My morning session goes from 9:30am EST to 12pm EST.