Balanced Areas

[traderxman 10]

Came across this site

 

Emini Day Trader - Market Profile, Volume and Proprietary Software to Day Trade the Emini S&P

 

this guy shows the colored volume bars indicating price rejection and also acceptance...looks like he takes a couple of higher volume bars. (i.e. you will note the bars color changes with higher volume) then creates a balanced area...then looks to trigger at the middle of balance. He has charts to decipher..

 

BTW I have no affiliation and may have more details to share if anyone may be interested. Not looking to get this guy courses sold by NO means. I already have it, at least b4 he came out with this software to draw the middle.

 

Any comments on this concept with anyone?

[Anonymous 11]

Mats: market auction trading system.

 

I was into this prior to finding Volume Spread Analysis.

 

Actually the fact that there were so many times when the market would have higher volume bars and then change direction lead me to re-evaluate the method. Instead of just moving down to the balance line and then turning up, the market would continue lower, for example. It neglects the fact that weakness comes in on strong bars and strength comes in on weak bars.

 

I liked the Market Profile elements underlying it. Plus the fact that there are no indicators.

 

I do think that is has some value. He does use Squat Bars, or Volume Churn Bars. I think some other elements maybe valid. Would love to hear more about it.

 

Do you use this method? Did you take the course, or just "decode" it?

[traderxman 10]

Yup its MATS alright...

 

squat bars, jump bars, HHV & HV bars...whole new volume numbers to input for each day etc etc.

 

Balanced Area MAtrix...BAM for short

 

It is EXACTLY like you mentioned about the inconsistent useage of volume along the lines of market reversals.

 

I have spent a fair penny and my time looking into volume...cisco futures and LDB data...I honestly have to say that perhaps I may have missed something as Dave Johnston from MATS is convinced it is the best thing since sliced bread, however I digress

 

I am currently using geometry (my take from Drummond Geometry)

 

SoulTrader has placed together a terrific environment. Keeping the salivating vendors at bay with alot of his and some others input on various edges.

 

I am liking this place alot.

[Anonymous 11]

This thread got me thinking about MATS. I really like that is uses no technical indicators. Moreover, I like that its concepts are rooted in Market Auction Theory .

 

At one point I was working with this method (not the real one, but my attempt to decode it from what is on the site and what Dave Johnson told me) and did find some value. The problem was many times at tops and bottoms it would be wrong. This lead me to VSA. It does a good job of determining tops and bottoms-the result of imbalances of supply and demand.

 

Since both methods do have volume at their core, I have been thinking if it is possible to combine the two. Still looking at it but Here is what I have so far.

 

A Balance Area is formed when there are two or more paintbars in a row. On the first non-paintbar, after the Balance Area is established. Note there are 3 Balance Areas on this chart. The middle one is a HV Balance Area.

 

This Balance Area is interesting. Note that the first bar is wide spread up bar on High volume that closes in the middle of its range. VSA tells us that a bar like that must contain Selling (supply). The next bar is key. This bar closes below the previous bar . Therefore, the first bar could not of been all buying. If it were buying , then why is the next bar (this one) down?

 

So while the Balance Area is created basically by the range of one bar, we know it is a selling Balance Area. Check out the small "c" on the second bar. This is a Volume Churn, or squat bar. We have volume higher than the previous bar and an equal or lesser range. Buyers have stepped in on this bar and are keeping prices supported. Market Makers, who can see both sides of the market, are keeping the range narrow as they can see Buy orders on their books and thus expect higher prices.

 

Note that we now see an area where the bulls and the bears are indeed "fighting" for control of the market. Mats would place an order one tick below the midpoint to go short a Selling Balance Area. However, I like the idea of waiting to see either a NO Demand bar (x's above a bar) or a Volume Churn bar. We could also look for Up thrusts preferably inside the Balance Area.

 

There is a squat and a No Demand bar that could be used to enter at the first selling Balance Area on the chart. The close of the squat is inside the BA which is ideal. The No Demand is just outside but within reason. Of course, if you short on the squat, then the No Demand is only there to give you some confidence and not trade entry.

 

Hopefully, Traderxman will find the time to share some of what he knows. I do think it is worth pursuing.

[Trader_JG 10]

Where is a good place to start learning about VSA?

I am currently taking the cisco short course but after some reading on TL I am starting to think that it might be a waste as I could have received the same info from Mind Over Markets.

 

How accurate would you say VSA is at finding tops/bottoms?

 

Thanks,

Jonathan

[TinGull 10]

Yes PivotProfiler, I'm getting kinda interested in this VSA stuff you're writing about. Any place you recommend to learn a bit more of the basics of it?

 

Thanks!

[Trader_JG 10]

I have heard about Wycoff (sp?) volume analysis. Is his stuff any good and is is considered VSA?

[Anonymous 11]

I truly believe that by combining Volume Spread Analysis with Market Profile/Auction Market Theory one can create a powerful way to view, understand and trade the markets.

 

All markets are governed by the laws of Supply and Demand. Specifically, the imbalances of supply and demand brought about by Professional (or Smart Money) traders.

 

The place to begin is with the book, Master the Markets by Tom Williams. Currently it is only available at Tradeguider.com. They have told me that they are looking for a publisher for wide spread (no pun intended) distribution. Personally, I do not like the tradeguider software and that is ultimately what they are about. However they do offer a lot of free information on VSA.

 

Tom Williams took the Wyckoff (concepts) course and expanded on the concepts. Wyckoff looks at price and volume. Tom looks at volume, spread (range of bar) and closing price.

 

Friday morning 0815 EST they are running a public demo. Go to the web site and click on enter site, if you are interested. Tomorrow (3/9) will be interesting as it is a big "news day". Professional money uses news driven events to manipulate the market. There should be ample opportunities to see them in action. Of course, many of you will be trading the event yourselves, but if not check it out.

 

On the site there are a number of webinars that can be viewed for free. There are also some webinars on the CBOT site.

[walterw 10]

This thread got me thinking about MATS. I really like that is uses no technical indicators. Moreover, I like that its concepts are rooted in Market Auction Theory .

 

At one point I was working with this method (not the real one, but my attempt to decode it from what is on the site and what Dave Johnson told me) and did find some value. The problem was many times at tops and bottoms it would be wrong. This lead me to VSA. It does a good job of determining tops and bottoms-the result of imbalances of supply and demand.

 

Since both methods do have volume at their core, I have been thinking if it is possible to combine the two. Still looking at it but Here is what I have so far.

 

A Balance Area is formed when there are two or more paintbars in a row. On the first non-paintbar, after the Balance Area is established. Note there are 3 Balance Areas on this chart. The middle one is a HV Balance Area.

 

This Balance Area is interesting. Note that the first bar is wide spread up bar on High volume that closes in the middle of its range. VSA tells us that a bar like that must contain Selling (supply). The next bar is key. This bar closes below the previous bar . Therefore, the first bar could not of been all buying. If it were buying , then why is the next bar (this one) down?

 

So while the Balance Area is created basically by the range of one bar, we know it is a selling Balance Area. Check out the small "c" on the second bar. This is a Volume Churn, or squat bar. We have volume higher than the previous bar and an equal or lesser range. Buyers have stepped in on this bar and are keeping prices supported. Market Makers, who can see both sides of the market, are keeping the range narrow as they can see Buy orders on their books and thus expect higher prices.

 

Note that we now see an area where the bulls and the bears are indeed "fighting" for control of the market. Mats would place an order one tick below the midpoint to go short a Selling Balance Area. However, I like the idea of waiting to see either a NO Demand bar (x's above a bar) or a Volume Churn bar. We could also look for Up thrusts preferably inside the Balance Area.

 

There is a squat and a No Demand bar that could be used to enter at the first selling Balance Area on the chart. The close of the squat is inside the BA which is ideal. The No Demand is just outside but within reason. Of course, if you short on the squat, then the No Demand is only there to give you some confidence and not trade entry.

 

Hopefully, Traderxman will find the time to share some of what he knows. I do think it is worth pursuing.

 

 

Pivot : are does paintbars on TS ?

[Anonymous 11]

Where is a good place to start learning about VSA?

I am currently taking the cisco short course but after some reading on TL I am starting to think that it might be a waste as I could have received the same info from Mind Over Markets.

 

How accurate would you say VSA is at finding tops/bottoms?

 

Thanks,

Jonathan

 

Just a quick post.

 

While this is not the best time of day/night to trade, we often can see good set ups.

 

Here we force Professional Money to show itself at the POC.

 

Note that we get a red paintbar. This bar closes on its low with higher volume. The low close tells us that this is a weak bar. The next bar, however, is narrow and has greater volume with an equal close. A close that is also in the middle of the range. There is demand (buying) in this bar.

 

Two bars later, we see a narrow bar that closes on its lows on volume less than the previous two bar- NO SUPPLY. Perfect place to get long. Tom Williams really likes this type of set-up.

 

Two more bars later, we see a bar that closes lower than the previous bar, closes on or near its high, makes a lower low, and has volume less than the prior two bars-THIS IS A TEST.

 

The Smart Money is testing for supply. If you missed the first entry, here's another chance to get on board.

 

Catching tops and bottoms is nice, but getting into a trade knowing you're on the same side as the Smart Money is better.

[Soultrader 12]

Hi Pivotprofiler,

 

I always do enjoy reading your posts. Can you explain a little further on why the narrow bar is a test? I do understand the concept behind the previous bars... but am unable to fully comprehend why that narrow bar becomes a test for supply. I see volume is low.... did the markets test for supply near the low of the bar? In other words, sellers were not interested in selling so low so buyers stepped in to close the bar near its high? Thank you

[bobajob 10]

I have the VSA book. It is good. The problem is that the methods need a few more examples for me to understand them. Would be really good if someone could just walk through a few more charts with thoughts on VSA methods.

[Anonymous 11]

Hi Pivotprofiler,

 

I always do enjoy reading your posts. Can you explain a little further on why the narrow bar is a test? I do understand the concept behind the previous bars... but am unable to fully comprehend why that narrow bar becomes a test for supply. I see volume is low.... did the markets test for supply near the low of the bar? In other words, sellers were not interested in selling so low so buyers stepped in to close the bar near its high? Thank you

 

Thank you for the kind words. May I say the feeling is mutual.

 

As for the chart shown.

 

The No Supply bar is a narrow bar that closes on its middle or low with volume less than the previous two bars.

 

With volume less than the previous two bars, we know that there was no real selling pressure or interest. VSA teaches us that 85% of a volume bar is Professional Activity. And it is their activity that we are interested in mirroring. If the bar is low than they are not interested. (of course 85% of a low number is still more than zero- so they are still present.)

 

In VSA, however we look at relative volume. That is, volume compared to the one bar ago or two bars ago. We are not concerned with actual volume numbers. We do look at actual volume as well, but again not number but we gauge actual thru the use of moving average of volume. For example, the tradeguider charts have the relative volume bands and when a volume bar is in the salmon colored area, it is Ultra High.

 

As for the test. This test is not a narrow range test. The ideal test bar would have a narrow range, close below the previous bar, close on or near its high and have volume less than the previous two bars.

 

Tom does not look at the open but I think sometimes the open helps. In this bar look at what must of been the case:

 

1. the bar opens and price is 'marked' down

2. buying comes in and pushes price up

3. Price trades higher than the open to make a high

4. Price settles back down where it opened on the close.

 

In candle terms this is a Doji.

 

From the VSA perspective, the Smart Money is not interested in lower prices. But before they mark prices up, they need to be sure there are not any sellers. What the Smart Money usually does not want is to do is buy supply at higher prices. They would rather buy up the "paper" at lower prices and then sell to the retail trader at higher prices.

 

So they purposefully take price down to see(test) if there is interest. If the volume is high, then the market is not quite poised to rise. If it does rise, the up move is muted and price tends to go back and retest in the area of the original test.

[walterw 10]

Pivot : do you have a shareable version of does mats (type) paintbars ? cheers Walter.

[bobajob 10]

Insightful stuff PivotProfiler - more of the same if you could

[traderxman 10]

Just alot on my plate right now...but if I can see a way to help I will. Good discussion here. Like the talk!

[Anonymous 11]

Pivot : do you have a shareable version of does mats (type) paintbars ? cheers Walter.

 

Still working on them.

 

If you're interested in the idea, take a look at Traderxman's posts about the method. Take a volume histogram and determine a way to classify volume as high, ultra high, average, etc.

 

In Tom's book he says to compare the last 30 periods. (Tradeguider-the company that bought the rights to Tom's work, will not disclose what they use for their volume bands). On an aside, this makes at least some of what TG does Black Box in my opinion.

 

Anyway, I place a simple 30 period moving average on volume. Then I use standard deviations of that to determine various levels. This would seem to be vary close to what MATS does. Mats trades off a 1 min chart but also looks at Market Profile. Probably a typical 30 min profile. So using a 30 minute average seems to fit into the Auction Market Theory concept as well as standard VSA.

[walterw 10]

ok Pivot, if you ever want to share does paintbars formulas I will be very pleased... (even maybe I can help you on the programing process) cheers Walter.

[walterw 10]

Does someone have a pdf or document that clearly explains the famous Auction Market Theory ? would aprecciate that... cheers Walter.

[Anonymous 11]

Cisco futures has an extensive site on Auction Market Theory.

 

I have given what I have, in terms of "code" up to this point:

 

1. define average volume over some period x. For me, X=30.

2. Define 4 more levels of volume based on a deviation of the average.

3. why four? Mats has 4 paintbars: blue, green (cyan on the tradestation chart shown on the site),pink, and purple. Black bars are neutral (green on tradestation version shown).

 

The same idea is used in VSA as one way of determining how much volume a particular bar represents.

 

With the lowest volume bars (blue), there are a few other requirements. Like they be climbers or drifters (see Bill Williams' trading chaos). Also most of the blue bars are buying or selling bars.

 

Here buying bar refers to a bar that take out its previous bars high and not the low. A selling bar has a lower low than the previous bar but not a higher high.

 

Below we have a good example of what may be possible with the combination of "mats" and VSA. The first thing we see is stopping volume/climatic action. This bar has high volume that stops the preceding downtrend. With high volume and closing off the lows and the next bar up, we know there must of been Buying (demand) in this bar.

 

A few minutes later, a High Volume Balance Area is formed. We know it is a buying Balance Area, because the low is made before the high of the Balance Area. This concept comes from Mats. With VSA we know we have recently seen stopping volume. Hence we are looking to see if the market responds to the upside.

 

Ideal, we want to look for a No Supply sign within the Balance Area. Price moves out and then comes back inside. Note that the bar that represents No Supply does close within the Balance Area.

 

Remember, A balance Area is formed when there are two or more successive paintbars. When the next bar is a non paintbar (green) The balance Area is formed.

[walterw 10]

ok good Pivot.... I notice your chart is not Tradestation... on what platform are you charting ? does the platform has programing ? and last how do you get volume for forex ¡¡¡? certainly unusual ¡¡ cheers Walter.

 

 

pd: very nice inputs Pivot, are you familiar with this guys Technical Analysis QQQ Trading Nasdaq 100 Stock chart S&P 500 market timing system ? they also teach volume analisis

[walterw 10]

ok good Pivot.... I notice your chart is not Tradestation... on what platform are you charting ? does the platform has programing ? and last how do you get volume for forex ¡¡¡? certainly unusual ¡¡ cheers Walter.

 

 

pd: very nice inputs Pivot, are you familiar with this guys Technical Analysis QQQ Trading Nasdaq 100 Stock chart S&P 500 market timing system ? they also teach volume analisis

 

 

sorry Pivot but I am still very curios about your chart platform... cheers Walter.

[Anonymous 11]

Visual Trader (VT) thru CMS. Yes there is volume in forex. It's the best kept secret. Volume is activity and therefore tick volume works as well as actual volume.

 

Esignal provides tick based volume data for forex. Tradeguider.com has a fact sheet on the data if you are interested. Nowadays some spot forex brokers provide volume. True it is only representative of their platform but it works nonetheless.

 

As far as the program language, it is basically the same as used in MetaStock. Which is one major reason why I like it. No new language to learn.

[walterw 10]

Thanks Pivot for that information... cheers Walter.

[Trader_JG 10]

Those of you successfully trading MP, do you solely use VSA to take a position at MP and Pivot levels or do you also trade on moving averages looking at RSI etc?

 

I'm trying to put together a strategy but I keep changing it and hence losing $$

 

Jonathan