[VSA] Volume Spread Analsysis Part III

[chrisp 10]

Corrrection to my post above "D & E" should be E & F

[zaprietas 10]

here you go.

for MT4 and for NinjaTrader as well

Thanks a Lot I appreciate that

[flimbo 10]

I know today are bank holiday but anyway principles are the same so just for study purposes

 

1- Bar that pussing tru old supply (absorbtion volume)

 

2 - No interest to go down price bounce from support.

 

3 - No Supply bar

 

4 - again bar that pussing thru old top but his vol is

bigger then previously bar that pussed thru old top i added more weak to this becouse spread is tigher then prev.

also close . and respond to this bar are wider then prev.

 

5 - Supply coming sign of weakness.

 

6 - No demand

 

7 - Upthrust.

 

my conclusion: we can now expect some retracements.. maybe two lower lows and lower lows.

i will be watching some counter trade. now.

 

let see how it continue ;D

Edited September 7, 2009 by flimbo

[lnangia 10]

Hello everyone..i have been using vsa techniques for a while now. I have read and re-read both the books written by Mr.William's as well as Prof Hank Pruden's book and have seen a lot of things mentioned in the book coming to life but i am still on the learning curve. The discussion on vsa here is just phenomenal and have already gained a lot reading the part 1 and 2. Looks like i have finally found an interactive traders website where i could discuss vsa and learn from others.

 

Cheers

 

Lalit

[flimbo 10]

Hi , then check out as well online chat. . vsa.pipsbuilder.com

[lnangia 10]

Hi. Take a took at the attached chart. During the time of trading i was finding it a little difficult to interpret the price/volume/spread action after demand entered the market. The next 3 bars seemed weak ,so i took a short position here on the narrow spread up bars marked by the yellow crooked line which triggered my stop loss. The reason i initiated the short position was because there was no effort (volume) on the up move , the spreads were reducing as the price was increasing. Now in hindsight i am using a term that Sebastain Manby uses , the market was resting. How do we determine when the market is resting or a price is going to tank ?

 

[bisecom 10]

Do a search. I believe it is in the coding forum.

 

Good day!

I am new to the thread and would like to thanks to its founder Eiger and VolumeJedi, who also provide amazing analytic on volume to the thread. After reading your materials I really understood much more then after reading Tom Williams!

 

VolumeJedi, I would really appreciate if you will comment / send your suggestions regarding attached picture.

There are indicated two potential trades – the first one long, the second one – short.

I have some doubts there to enter the trades.?

 

So, looking for background.

After the second candle was formed after candle 1, we could understand that under VSA, candle one has stopping volume or has selling climax action. It tells us that we should look for signals to enter long positions. The signals should be tests for No Supply.

The questions is, could we count as tests for No Supply bars 2 &3 as they both has volume less then 2 prior candles?

Or should we wait then local resistant will be broken, but at which candle we should enter long then?

 

As for short, we can see high up candle which closed not at its top and the candle has very high volume, it tells us, that SM was selling and third candle after A confirms it. After the third candle price straightly drop down. There were 2 candles B & C. Both of them has volume less then prior 2 bars. The question is there is the best place to enter short?

Would be nice to get your comments here,

Regards.

[VolumeJedi 10]

Good day!

I am new to the thread and would like to thanks to its founder Eiger and VolumeJedi, who also provide amazing analytic on volume to the thread. After reading your materials I really understood much more then after reading Tom Williams!

 

VolumeJedi, I would really appreciate if you will comment / send your suggestions regarding attached picture.

There are indicated two potential trades – the first one long, the second one – short.

I have some doubts there to enter the trades.?

 

So, looking for background.

After the second candle was formed after candle 1, we could understand that under VSA, candle one has stopping volume or has selling climax action. It tells us that we should look for signals to enter long positions. The signals should be tests for No Supply.

The questions is, could we count as tests for No Supply bars 2 &3 as they both has volume less then 2 prior candles?

Or should we wait then local resistant will be broken, but at which candle we should enter long then?

 

As for short, we can see high up candle which closed not at its top and the candle has very high volume, it tells us, that SM was selling and third candle after A confirms it. After the third candle price straightly drop down. There were 2 candles B & C. Both of them has volume less then prior 2 bars. The question is there is the best place to enter short?

Would be nice to get your comments here,

Regards.

 

Question #1 (long):

 

Every trader has to make his or her own choices. You correctly identified the strength that entered at 1. Point 2 is a test, but many people would miss this entry. Point 3 is another test/no supply type candle and another viable place to get long. More accurately, point 3 is no supply and the following candle is the test. If you wanted to enter when the high of 3 was broken, then you don't get in on the next candle. Your entry would come one candle later.

 

Take a look at point 4. The two candles prior to this are a two bar reversal. This is into your support/resistance area marked by line a. For many this is the best place to go long.

 

It comes down to how much background strength or other supporting evidence each individual trader wants/needs. If you are comfortable getting long at point1, then there is nothing wrong with that. Gavin, talks about "diamonds" changing colors before entering and I would think that at point 1 they would not be green. I only mention this to make my point of trader's choices. I personally don't like or use the diamonds from TG.

 

Question #2 (short):

 

Either would work. There is another one two candles later. This one is actually the best definition of no demand (on my platform at least because the volume is also less than the previous two candles). Based on your screen shot, it is a squat and still a good place to get short.

 

Back to B&C. Note that B does not confirm because C closes higher. If you were looking to enter when the low of B was passed, it doesn't come on C. C has an increasing spread so it's not technically no demand. It does show a lack of buying interest of the smart money never the less.

[VolumeJedi 10]

Hi. Take a took at the attached chart. During the time of trading i was finding it a little difficult to interpret the price/volume/spread action after demand entered the market. The next 3 bars seemed weak ,so i took a short position here on the narrow spread up bars marked by the yellow crooked line which triggered my stop loss. The reason i initiated the short position was because there was no effort (volume) on the up move , the spreads were reducing as the price was increasing. Now in hindsight i am using a term that Sebastain Manby uses , the market was resting. How do we determine when the market is resting or a price is going to tank ?

 

 

The bar you denote as stopping volume is strength. With immediate strength in the background, why would you consider the next bar weak (no demand) ? This happens often and is the lull before the up move takes place.

 

The very next bar is a down bar on even less volume this in no supply. The next bar (green) marked low volume up bar is a test. Some tests close up as this one does. You should be looking to enter the next bar if it makes a higher high than the test. As it does.

Be careful of this as it happens often and many people mistake the no demand for weakness in this situation. Just look out for a "no demand type" bar on a nascent up move directly following strength. It's not weakness.

[bisecom 10]

Question #1 (long):

 

Every trader has to make his or her own choices. You correctly identified the strength that entered at 1. Point 2 is a test, but many people would miss this entry. Point 3 is another test/no supply type candle and another viable place to get long. More accurately, point 3 is no supply and the following candle is the test. If you wanted to enter when the high of 3 was broken, then you don't get in on the next candle. Your entry would come one candle later.

 

Take a look at point 4. The two candles prior to this are a two bar reversal. This is into your support/resistance area marked by line a. For many this is the best place to go long.

 

It comes down to how much background strength or other supporting evidence each individual trader wants/needs. If you are comfortable getting long at point1, then there is nothing wrong with that. Gavin, talks about "diamonds" changing colors before entering and I would think that at point 1 they would not be green. I only mention this to make my point of trader's choices. I personally don't like or use the diamonds from TG.

 

Question #2 (short):

 

Either would work. There is another one two candles later. This one is actually the best definition of no demand (on my platform at least because the volume is also less than the previous two candles). Based on your screen shot, it is a squat and still a good place to get short.

 

Back to B&C. Note that B does not confirm because C closes higher. If you were looking to enter when the low of B was passed, it doesn't come on C. C has an increasing spread so it's not technically no demand. It does show a lack of buying interest of the smart money never the less.

 

Dear VolumeJedi,

 

Thank you very much for your useful and soon comments!

I know a little bit about TG platform and its advantages during trading using VSA.

They use a lot of signs which are described under VSA principles.

I use NT and there is also can be used “Better Volume” indicator which also put some diamonds and triangles with some explanation.

But the matter is to understand how work price and volume without diamonds!

 

Regarding scenario of long trade its practically clear, at present level at least.. ;-)

 

As for short trade, as for me the market did not provided a lot of signs before dropped down. I think there is the most difficulties of the short trade situation. There was no “No demand” bars which could tell us about coming short.

Could you be so kind to share your opinion at which point you get into short or we should be out of the market, in this case.

Also I looked thru the threads and did not find which is preferable ratio loss / profit in VSA and which is the most workable timeframe for using VSA intraday (some traders use 3, 4 min; TG video showing 9 min frames).

Kind regards.

[flimbo 10]

Dear VolumeJedi,

 

Also I looked thru the threads and did not find which is preferable ratio loss / profit in VSA and which is the most workable timeframe for using VSA intraday (some traders use 3, 4 min; TG video showing 9 min frames).

Kind regards.

 

Hi there

 

there is no preferable ratio loss / profit in VSA . its up on trader. as well as timeframe.

you can use 1min principles work on every timeframe as tom williams says.

but 1min is quick so you must react quick and decide quick also risk reward should be not good so its up on trader.

 

on TG videos they showing timeframes that usually they trading like gavin using 5min 3min sometimes 2minutes during his live sessions.

[bisecom 10]

Hi there

 

there is no preferable ratio loss / profit in VSA . its up on trader. as well as timeframe.

you can use 1min principles work on every timeframe as tom williams says.

but 1min is quick so you must react quick and decide quick also risk reward should be not good so its up on trader.

 

on TG videos they showing timeframes that usually they trading like gavin using 5min 3min sometimes 2minutes during his live sessions.

 

Dear flimbo, thanks for your kind reply. Will take it into consideration during trading!

Regards.

[bisecom 10]

Question #1 (long):

 

Every trader has to make his or her own choices.

 

Good Day.

 

VolumeJedi and other respected traders, Your comments will be appreciated.

 

Here by I would like to send a situation on 08.09.09 with Euro / USD 5 min.

There were couple cases then high volume appeared, in comparison with volume of prior bars, so I expected for VSA price actions but got two faults.

And wish to get your feedbacks, there I was wrong.

1. So, at candle 1 we got rather high candle which has very big volume and after down candle No2, which tell us that SM comes and the price should go down or side way. Then I note candle No3, as I looked for ND bar to enter short. It was not so suitable because it has not so small volume, but practically less then 2 prior bars. On break of low of candle No 3 we enter to short but after some pips the price return and go against us - big rising. So the enter was wrong.

2. The second case, then formed candle No5. We can see rather long candle up, which was not closed at the high, after it was formed a red candle, so, I expected for SM ready to go down. In the case we have to wait for ND candles to enter short. I found the most suitable for ND candle No 7. I entered at the candle break low, but again the market goes for a time side way and after grow up.

You are kindly asked to comment my trades and how could I pervert the incorrect entries, which markets signs I did not recognize?

 

Regards.

[brownsfan019 17]

there I was wrong.

 

So the enter was wrong.

.

 

Was it wrong or just a losing trade? No system will provide 100% winners.

[bisecom 10]

Was it wrong or just a losing trade? No system will provide 100% winners.

 

Hi, thanks for your comment!

For me wrong trade = losing trade.

I agree with you that no system will provide 100% winners.

But, perhaps the market give us a signal - don't enter short?:doh:

 

More feedbacks are welcomed.

[habi 10]

Let me first look at a higher interval chart. It broke out from a trading range and as long as it stays above this range, you have a bullish background. Sept. 07 formed a sideward movement with very low volume for the whole day. The chance increased after the breakout, that all the supply below resistance was absorbed by the SM or how you like to call them.

 

Bar 1 was on very high volume and closed in the upper part. VSA tells us, that markets don't like such volume spikes, weakness comes in. But what means weakness really ? As you see, bar two and the following shows no selling presure. Prices went up further, but halted soon above bar 1. A potential reversal pattern formed and yes, bar 3 can be a no demand bar. Next bar was down, but on low volume. If you look at all the next bars, they are all on low volume and in a narrow price range. Do you fell comfortable with a short position at this time? Some weakness came in after bar 1, but just for the short time, the main trend remains strong.

 

Tom Willians talks about effort effort versus result in MTM (p 39). I this case, the effort was to the upside. Prices came down a little bit, volume decreased, thats what we like to see for a reversal. The result here was a small reversal. Be careful in strong trending markets with high volume spikes, the result is often just a temporary halt within the full move.

[sevensa 10]

Hi, thanks for your comment!

For me wrong trade = losing trade.

I agree with you that no system will provide 100% winners.

But, perhaps the market give us a signal - don't enter short?:doh:

 

More feedbacks are welcomed.

 

I don't fully agree with "wrong trade = losing trade".

 

A wrong trade for me is one where I have not follow my trading plan. If I followed my plan, win or lose, this is a correct trade for me. Even if a trade is profitable and I have not followed my plan, then this was still a wrong trade.

[sevensa 10]

Good Day.

 

VolumeJedi and other respected traders, Your comments will be appreciated.

 

Here by I would like to send a situation on 08.09.09 with Euro / USD 5 min.

There were couple cases then high volume appeared, in comparison with volume of prior bars, so I expected for VSA price actions but got two faults.

And wish to get your feedbacks, there I was wrong.

1. So, at candle 1 we got rather high candle which has very big volume and after down candle No2, which tell us that SM comes and the price should go down or side way. Then I note candle No3, as I looked for ND bar to enter short. It was not so suitable because it has not so small volume, but practically less then 2 prior bars. On break of low of candle No 3 we enter to short but after some pips the price return and go against us - big rising. So the enter was wrong.

2. The second case, then formed candle No5. We can see rather long candle up, which was not closed at the high, after it was formed a red candle, so, I expected for SM ready to go down. In the case we have to wait for ND candles to enter short. I found the most suitable for ND candle No 7. I entered at the candle break low, but again the market goes for a time side way and after grow up.

You are kindly asked to comment my trades and how could I pervert the incorrect entries, which markets signs I did not recognize?

 

Regards.

 

Be careful to think that just because there is a bar on high volume that the market should do something as you mention in your first point. The market does not have to do anything just because there is a high volume bar and will do what it will do. You need to go with the flow and act on what you see is happening and not on what you want to see happen.

 

Bars like 1 and 5 only alert you to that there is potential that something might happen. It is not a sure sign that something will happen and you need to wait for confirmation. In both cases, there were potential of weakness, but after both, the market powered higher shortly afterwards without giving any short signals, providing confirmation of strength in the background and not weakness and that short trades would be ill advised.

[bisecom 10]

Let me first look at a higher interval chart. It broke out from a trading range and as long as it stays above this range, you have a bullish background. Sept. 07 formed a sideward movement with very low volume for the whole day. The chance increased after the breakout, that all the supply below resistance was absorbed by the SM or how you like to call them.

 

Bar 1 was on very high volume and closed in the upper part. VSA tells us, that markets don't like such volume spikes, weakness comes in. But what means weakness really ? As you see, bar two and the following shows no selling presure. Prices went up further, but halted soon above bar 1. A potential reversal pattern formed and yes, bar 3 can be a no demand bar. Next bar was down, but on low volume. If you look at all the next bars, they are all on low volume and in a narrow price range. Do you fell comfortable with a short position at this time? Some weakness came in after bar 1, but just for the short time, the main trend remains strong.

 

Tom Willians talks about effort effort versus result in MTM (p 39). I this case, the effort was to the upside. Prices came down a little bit, volume decreased, thats what we like to see for a reversal. The result here was a small reversal. Be careful in strong trending markets with high volume spikes, the result is often just a temporary halt within the full move.

 

Dear Habi,

 

Thanks you very much for your comments of my trades.

It was really interesting to read your opinion about the situation.

You informed that after 06.09 there was a bullish background. And yes, I agree with you tha ton 60 min chart we could see a very long down candle with high volume –equal to 38467. So, it was a background of coming strength into the market and really after that the price went up and mowed sideways during all 07.09.

The question is – after the up move market took side way form. Is it means that background of the strength is over? Or we should just wait for break out of the channel to take some decision?

 

I would like to disagree with your point of view regarding your explanation of 5 min chart. Because as tells us VSA, we should enter to the market on short after break of candle No3 low as it was ND candle. I agree with you that I would not fell comfortable with a short position at time after candle 3, but at that time I would already have opened position.

It would be nice to get more info from you how to use bigger time frame correctly.

Regards.

[bisecom 10]

Be careful to think that just because there is a bar on high volume that the market should do something as you mention in your first point. The market does not have to do anything just because there is a high volume bar and will do what it will do. You need to go with the flow and act on what you see is happening and not on what you want to see happen.

 

Bars like 1 and 5 only alert you to that there is potential that something might happen. It is not a sure sign that something will happen and you need to wait for confirmation. In both cases, there were potential of weakness, but after both, the market powered higher shortly afterwards without giving any short signals, providing confirmation of strength in the background and not weakness and that short trades would be ill advised.

 

Dear Sevensa,

 

Thank you very much for your feedback.

As you understood, I am learning with the method and if I see very similar signals to enter the market with supporting background, I enter. In that case it was ND candle (No3) with weakness in background.

 

As I understood from your message, you confirmed that I took wrong decisions, because “after both, the market powered higher shortly afterwards without giving any short signals”.

 

Yes, I also can see clearly what happened after my alerts.

But kindly point me which markets signal I missed / to which situation should I look to avoid that decisions.

 

Best wishes.

[sevensa 10]

Dear Sevensa,

 

Thank you very much for your feedback.

As you understood, I am learning with the method and if I see very similar signals to enter the market with supporting background, I enter. In that case it was ND candle (No3) with weakness in background.

 

As I understood from your message, you confirmed that I took wrong decisions, because “after both, the market powered higher shortly afterwards without giving any short signals”.

 

 

I am not confirming anything. As I have mentioned above, if you have followed your trading plan, then this was a good trade and this is not for me to tell you that you were wrong and made an incorrect decision.

 

 

Yes, I also can see clearly what happened after my alerts.

But kindly point me which markets signal I missed / to which situation should I look to avoid that decisions.

 

I thought I did?

[bisecom 10]

I am not confirming anything. As I have mentioned above, if you have followed your trading plan, then this was a good trade and this is not for me to tell you that you were wrong and made an incorrect decision.

 

 

 

 

I thought I did?

 

Ok, thanks for youor comments and wish you good trading!

[bunny 10]

Hi traders,

This is my first post here, though a mute spectator since a month.

 

Anyways, please see the below EOD chart and let me know how it looks to you from the VSA angle.

 

Some background info: After selling pressure of yesterday(2nd last candle), the price again sunk today in the first few hours of trade. The volume of contracts traded was not high though. Then, in the next few hours, the volume and price both started shooting up and the price recovered from its low to close on its high, with high volumes.

 

So what do you think? Is this indication of strength or weakness.

 

 

(Note: I have purposely blurred the name of the security to avoid any bias).

 

Thank you,

-Bunny.

[chrisp 10]

Greetings, this is from the recent action on the ES. I was interested in what seems to me an ambiguous test bar. This is how I see the chart:

 

Bars 1,2 break out from congestion. Increase in supply at 2 is successfully tested at 3. Conclude there is strength in the background. Bar 4 mid close increase in supply: potential weakness,but next bar is up, closing near the high & volume is not excessive.

 

Price comes off, but on low volume.

 

5 is the crucial bar:if there is strength in the background this would be considered a successful test of supply at 4. If we decide to go long 1 tick above bar 5 then bar 6 brings us into the market when it makes a higher high. But Bar 6 then reverses quite

dramatically and we are probably stopped out.

 

After bar 6 the chart is easier to read: the market has declared its hand and we have a nice no demand bar entry at 7.

 

Trying to analyse my mistakes:

bar 1 has a weak close: does this suggest a weak breakout, so no strength in the background?

does the test bar at 3 have too great a range?

do the 3 the successive lower lows preceeding bar 5 invalidate the test?

[VolumeJedi 10]

Thanks for the chart.

 

This is how I see things.

 

1: Wide Spread up bar on ultra high volume. This is the highest volume bar up to this point ( I am not sure if this is an open or what cause all the previous bars look like they are part of a low volume period). Anyway, the close is off the high and the next bar is up. Even though the next bar is up, the close tells us that some supply entered here. Why else would the close be so low in the range? With the price action behind, this may be pushing thru supply, which would be bullish, but then we need to see it tested almost immediately.

 

2: This bar appears to be a bit narrower, but the volume increases. So we have an increasing volume bar closing off the high and this time the next bar is down. More weakness enters here.

 

3. Volume less than the previous two bars on a narrow range bar closing down. This is a test. This not a very good test bar. We would rather see this bar make a lower low and close in the middle or high. It does not. Plus the range here is a bit wide. This test like bar is confirmed with the next bar up.

 

4: Increasing volume (second highest since 1) on a average ranged bar that closes off its high. With the amount of volume here, the range should be wider and the close should be higher. So there is some weakness present here as well.

 

Price may be rising, but weakness continues to appear. This can happen as there is a such thing as momentum.

 

The bar after 4 is up but the volume is down. MTM tells us that in general, bearish volume is increasing volume on down bars and decreasing volume on up bars. This is the latter.

 

5: Another test. Note that the range here is narrow. While we don't get a lower low on this bar, we do get volume not only less than the previous two bars, but also less than any candle since 1.

 

6: Wide spread down bar that closes below the low of the test bar. This means our test has failed. As you correctly pointed out, prior to our test we have begun to see lower lows and lower highs. After seeing weakness enter, we would be looking for this situation-a change in trend.

 

Basically, every up bar starting with1 has been weak. The trend eventually changes and then we get the test at 5. At that point it is a bit risky to take a long. If 5 did not fail, you would likely see a "re-test" bar soon that you could use for a long entry.