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TinGull

[VSA] Volume Spread Analysis Part I

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Hello Tasuki and all,

 

Here is a recent 5min chart exemple of a high probability trade that I took just few minutes ago for a nice 10 pips. In fact, could have been more as I still have the bad tendency of closing my winners too soon. Still working on it:embarassed:

 

Anyway, on this 5min chart, on the 23:55pm est candle, we see a squat bar (spread narrower than the last candle with volume higher than previous candle) immediately followed in the next interval by an up-thrust on a volume a bit lesser than the squat candle.

 

All of this in the WRB support/resistance zone of the previous 1 hour chart in my previous posts where I was mentionning that i was looking for a possible trade setup in this previous range.

 

In this trade, the confirmation came with the next interval after the up-thrust which is a dark line.

 

It is really amazing how much it become fascinating when we begin to understand the interraction between VSA concepts and the WRB and Long Shadows analysis. As I was saying, it is well worth the time to learn every single posts of PivotProfilers on VSA and NihabaAshi on WRB and Long Shadow analysis.

 

A very big thank to both of you. Recently, my trading decisions and profitability has dramatically increased:thumbs up:

 

P.S. Of course, I am still a newbee trying to learn as much as possible and my understanding of VSA and WRB and Long Shadows analysis is far from complete.

 

Sincerely

 

Shreem:)

eur-jpy7.thumb.png.8cf838fc0d87634c763e4fbe252d256b.png

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Shreem, thanks so much. Between you and PP, this VSA thread has become incredibly valuable. Now I just have to spend the hours necessary studying the charts to see these patterns in real time. Many thanks, and good trading to you.

Tasuki

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Hello Dear Tasuki, you are most welcome. It is my pleasure to share what I learned and continue to learn from very valuable people on this great forum and thread.

 

I really do believe that by sharing our differents ideas about VSA or WRB and Long Shadow analysis or anything for that matters, we can just grow more strong as personal traders and as a community.

 

My insight into VSA and WRB and Long Shadow Analysis is very little compare to those of PP or NihabaAshi.

 

It is by constantly learning those concepts in VSA and WRB and taking a lot and a lot and a lot of screening time with real time moving charts and not just static charts that we can fully grasp these great teachings and apply them.

 

P.S. little message to all, please take note that I will not be able to post next week as I am going tomorrow morning in vacation in a chalet in the north of Quebec province and will not have access to internet but will definitely be back on the thread once I came back.

 

So, please keep this thread alive and post of all your invaluable analysis.

 

Sincerely

 

Shreem:)

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Some folks in this thread have posted Forex charts---with volume bars. Where the heck do the volume bars come from? As some of you no doubt know, Tradstation has recently tried to increase its revenue stream by offering Forex, but I can't get any sort of volume bars to show on them. Yet some of you get volume bars on Forex, so I'm really really puzzled. I seem to recall that Forex markets don't report the volume (and Tom Williams had some choice words to say about that I remember--the SOBs don't want the retail traders to know the volume because that would tip their hand). Anyway, my big question is, how do you folks get volume bars on Forex charts, and is this volume true volume or "tick volume" (just the number of trades, not the number of contracts in each trade)? Thanks.

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Tasuki,

 

In Forex the only type of volume available in Tradestation is Tick volume. Total share or contract volume is not available like it is for futures contracts. To get Tick volume to display on the chart in TS you have to select Format Symbol and then set "For Volume Use:" to Tick Count. This is only available for intraday bar types (minute). I have not found a way in TS to display Tick volume for daily or weekly bar types. A work around is to use a 1440 minute bar to substitute for daily bars.

 

I hope this helps!

 

Regards,

Steve

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Looking left to trade right.

 

Good lesson in how multiple timeframes can be useful. What is really key here is the No Demand on the 15 min. Once we see that we have a better understanding of the5 min. Specifically, we see Negative Action/No Results from a Test. While we do get the dark WRB that engulfs the test bar, it closes equal not lower. Lower would be better. However, on the very next bar we get that lower close. At this time, the 15 min confirms a No Demand sign (next bar down).

 

Jump in short?

 

No. But if you were long on the test a reversal of position is the option. If you were not in the market, now you have evidence of its weakness on two timeframes. You can now look to get short.

 

Note the No Supply bar that is marked and comes just prior to the No Demand. This No Supply of course is a WRB itself. But notice that it is not within the body of a WRB. Hence, even without an understanding of what is happening on the 15, we would not want to go long here.

 

The very next candle is No Demand. It is within the body of two WRBs: the prior No Supply and the Large white WRB (this is the more significant WRB, as size does matter-sorry some of you ;) ). The WRB thread talks about what makes WRB more important than others. See that thread if you have questions, or just ask here.

 

Also, if you have been reading Shreems' excellent posts, you would not that the No Demand is in the Long Shadow of a candle on the 15 min. Confluence.

 

Thus one question that must be asked," what on the 15 min would make you want to go long on the Test that happens on the 5 min"? But the rub is, if you understand how to read the chart and employ a contingency plan, you can get short recoup the loss and be in the black. Two trades, one for two, but an expanding account size. (Did I mention size does matter?)

5aa70e4da2a57_post358.thumb.PNG.ceec7f72262cc13b1a73c1d6dd3ae97e.PNG

Edited by mister ed
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Guest Fulcrum

I have seen several traders use VSA before but I still like using market delta information best for optimizing entries. I watch the intra-bar and the daily cumulative delta as I take my trading based Stoch and MACD setting signals.

 

The market delta information keeps me out of non-productive counter trend trade signals in markets that are in a strong trend.

Edited by mister ed
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Hi all,

 

Looking at AAPL today. Over the past two days it appears that supply has over come demand with 9/5, being a WRB down bar closing near the lows, on ultrahigh volume. Will look for signs of no demand in the body of the black candle to go short at.

 

414746df7dd19544f.png

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Just wanted to post something in quasi real-time that I'm seeing as YM hits the top f yesterdays range...as I post, YM's dipped 10 points so far on this lack of demand.

 

ym_execution___ym___5m__5_minutes__session_5-20070906-124059.jpg

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Guest Fulcrum

Good area to point out imo...market delta filter I use confirmed my short signal (signal from my fast setting MACD / STOCH indicators) which I took in the ES for two points. That was a classic telegraphed area of buying conviction having a dramatic drop off (which tends to create excellent price pivot locations for countertrend entries).

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Here's a strange request. This thread has detailed a legion of examples where VSA has worked. But nothing works EVERY time. Can anyone find examples where a VSA signal failed? They might be as instructive as the ones that worked.

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Hello Tasuki and all, back from the "sea trip" and it was very relaxing. Ready to start trading again fresh.

 

Just wanted to follow with Tasuki last post on an exemple about a failed "legit" VSA signal.

 

If you look at this most recent 60 minutes chart of the EUR/USD, you can first see that the Non-Farm-Payroll created a WRB that can certainely be used as a future S/R Zone.

 

Secondly, we see an Up-thrust at the 09:00 to 10:00am est candle with Ultra-High Volume. This is a failed Up-thrust and it is soon followed by a second up-thrust 3 candles later.

 

This candle make a new high during the session but closed on its lower portion which, according to VSA philosophy, clearly indicate that there was some supply present and appearing on that bar. However, price was not yet ready for a mark-down phase by the very presence of ultra-high volume on this candle.

 

In fact, the ultra-high volume certainely implied that there was still momentum to the up-side and that the smart money was certainely not yet interested to the down side but needed to test demand once again before to be sure that there is no more demand present to impeed their intended down-move to follow.

 

The interesting point in this exemple, is the 12:00 to 13:00pm est candle which is also an Up-thrust that also failed and it has a narrower range and volume less than the previous Up-Thrust; exactly the kind of high probability trade setup that we are looking for in VSA and WRB and Long Shadow Analysis.

 

So, eventhough this second Up-thrust gives us the kind of signal that we want to see unfold before our eyes, it failed to deliver its meaning.

 

The big question is why does it have failed as it is the kind of high probability trade setup that we are looking for?

 

- 1 reason can be the fact that it was a friday at the close of the european session, time of the day and week when we usually see a decrease in volatily.

 

- another reason can be the fact that the previous WRB created by the non-farm-payroll by its nature of being a center of shift or change in the supply/demand dynamic, was a factor setting the motion for the next sideway or choppy price action before the next mark-up or mark-donw phase.

 

- or simply it is a right setup where there is no real follow through and is a good exemple of a "negative action" as VSA called it.

 

My point here is, as Tasuki has rightly mentionned, there is no trading style that can work 100% of the time and we need to accept this fact as traders.

 

Wishing you all a great trading week.

 

Sincerely

 

Shreem:)

eur-usd1.thumb.png.223610397c3d5690811ef26cad90f14b.png

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Great to have you back Shreem. I enjoy reading your posts.

 

It does pain me to post this.

 

Your interpretation of the chart is incorrect. You are correct about the critical candle (WRB). This candle, however, is an example of Pushing thru Supply. While weakness comes in on up bars, this is a strong bar. Basically, the Smart Money wants to lock in the traders who just hope to get out at break even at that old high. They went long and were wrong and have been holding on trying to not take a loss. (a loss is not a loss until you take it: bad thinking. Herd thinking. FORMER trader thinking.)

 

Smart Money is willing to buy up the supply at this level. If they are willing to buy high, they must believe price is going higher. The next bar, while some supply does enter, actually shows the strength of the first bar and is not an Up-thrust. Up-thrusts will have closes closer to the bottom of the range. A perfect Up-thrust will close on the low.

 

As for the second candle you have labeled as an Up-Thrust, it is not one either. Also note that it is not within the shadow of the Long Shadow. Simply, not a candle to look to go short.

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EDIT: I posted this before I read PivotProfiler's reply (above). Having read Pivot's post I urge readers to save themselves some time and don't bother reading mine - Pivot's is much better and much more insightful!

---

 

Hi Shreem and all. Great post Shreem, and I wonder about signals on a New York Friday afternoon and whether they fizz out just due to lack of interest! In this case, though, can I highlight a point that may have been missed?

 

Let me say first that one of the dangers of an analysis like VSA, where the signals are somewhat open to interpretation is a tendency to find an explanation for every failure of a signal. One of my strongest criticisms of a method such as Elliot Wave is that many practitioners will find a reason why a clear signal did not work, often going to ridiculous extremes to explain away a failure. On the other hand, traders that use technical indicators of the "buy when the blue line crosses the red" type school will accept that sometimes their signals do fail. They will either accept that a signal failed, or go and rejig their system parameters.

 

At the risk of appearing to be trying to find an explanation for a signal failure, here goes!

 

I have attached your chart with the support/resistance zone created by the WRB coloured in. One of the points of the hybrid VSA-WRB analysis is to seek low-volume signals that fall within the zone created by the WRB. The bars that have been labelled as upthrusts are not within this zone, so this may perhaps be a reason why we would not consider them as the sort of signals we are looking for?

 

On the other hand, they do lie somewhat within the upper shadow of the WRB candle, so maybe they can be considered as being valid signals? Also, do you have a lower timeframe chart, perhaps a 15-minute candle chart, this may be worth looking at for evidence of signals?

 

Thanks for the post Shreem, like Tasuki said, lots to be learnt from failed signals too!attachment.php?attachmentid=2754&stc=1&d=1189383278

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Hello PP and Mister ed, thank for your posts.

 

PP, absolutely no need to feel bad when you post your reply to my post. I am a still a rookee:embarassed: of VSA and WRB and Long Shadow Analysis and the posts that I made is to share with people and learn from traders more experienced than me as yourself.

 

So, it is my pleasure that you corrected me on my analysis and please continue to do so in the future if the need may be.

 

As we all know, the market do not care about our ego, so no need to feel offended by another trader comment.

 

As I look through your post, you are definitely correct about definination of Up-thrust. It needed to closed lot more near the low to fall in the definition of an Up-thrust. Also, it is true that the second "supposed" Up-thrust do not fall in the S/R Zone of the shadow of the previous other "supposed" candle.

 

As usual, your anaylsis is very enlightening and I feel most priviledged to have somebody like you to help me when I see things wrongly

 

Sincerely

 

Sreem:)

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Here's a strange request. This thread has detailed a legion of examples where VSA has worked. But nothing works EVERY time. Can anyone find examples where a VSA signal failed? They might be as instructive as the ones that worked.

 

VSA always works. As traders that are human, however, we can fail in our interpretation of what we see.

 

* Things happen in different levels of intensities. The trader always needs to be mindful of this.

 

* I have shown some examples were a contingency plan was used. By definition the initial position is incorrect and the market moves in the opposite direction. Contingency plans allow the trader to take advantage of the market reality rather than bemoaning the "Power, or lack thereof, of VSA".

 

* Note the attached chart. A valid long signal is on the chart. It makes sense. After we have an effort to rise, price falls but then we have No Supply within the body of our WRB (Effort to Rise) candle. Bigger picture the market was in an uptrend.

 

However, If one is looking at another timeframe, the reason to go long is less compelling. In fact, there is a No Demand sign that comes in after the signal on the lower timeframe. Now if one waits for something to happen on the higher timeframe before acting on the lower, then this is the time to be actively looking for a signal on the lower.

 

Ultimately, the market is dynamic. One minute the Smart Money may not be willing to support higher prices (No Demand) and the next minute they are (Effort to Rise). There are times when an Up-Thrust appears out of place. In the Boot Camp, Tom talks about a "polar bear in Africa".

 

Understanding where and why things appear is important. Using multiple timeframes, contingency plans and stops are important. Core supply/demand make up is always true. That dynamic, however, can change bar to bar.

5aa70e4da7a99_post371.thumb.PNG.9b39b8bd80e28ee418f1050a23ab18d2.PNG

Edited by mister ed
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Let's review the definition of an upthrust:

1) spread high

2) volume high

3) close off the high, preferably low (preferably, says Tom, not definitely)

4) appears AFTER sign of weakness ("distribution area directly to left)

 

Shreem, your putative upthrusts both fail test #4, as least as presented in the chart you posted. This is crucial, because without any weakness to the left, what you've got is a market pushing up.

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Hello Tasuki, thank for your reply.

 

You are absolutely right about your statement of point 4. As PP explained what can have the appearence (it has trap me:)) as a sign of weakness with a wide spread bar with ultra-high volume was in fact pushing through supply and a sign of strentgh and not a sign of weakness.

 

I guess it is by making these kind of mistakes that we learn more.

 

Anyway, thank a lot Tasuki, PP and Mister Ed for your valuable comments on the right definitation and placement of an Up-thrust

 

Sincerely

 

Shreem:)

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It's all about READING the chart.

 

When elephants walk thru your front lawn, they leave tracks.

 

This was an nice little counter trend trade set-up with very little advanced VSA knowledge needed.

 

Key concepts:

 

1. Ultra High Volume and Ultra Wide Spread candles (bars)

 

2. Ultra High Volume and Narrow range candles (bars)

 

3. If you see an Ultra High Volume candle with an Ultra Wide Spread, that closes off its high. It is likely that some selling went on in that bar (assuming the bar was up, opposite if down). However, we still need to look at the next bar. If this bar is down, then there MUST of been selling in the first Wide Spread candle (bar).

 

4. If you see an Ultra High Volume candle with an Ultra Wide Spread, that closes off its high and the next bar is up BUT on HIGER volume and a narrower spread, there might of been some selling on the Wide Spread bar, but there certainly was selling on the narrow range (squat).

 

Note: while on both chart the Ultra Wide Spread candle creates both a Long Shadow support/resistance zone and a WRB support/resistance zone, the entry signs are contained only within one. That is, they come in the Shadow rather than partially within the range of the WRB's body.

5aa70e4daed32_post374.thumb.PNG.43021bf42a629efb628740ab4e997c63.PNG

Edited by mister ed
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........I noticed after reading through the VSA thread that you had mentioned the CD that Tom Williams put out. How is it in relationship to the price?....

 

This was a part of a pm I got. To all interested, TradeGuider just sent out an email that all prices are going up by $100.00 USD. Also All foreign transaction will be done in the currency of the country the transaction originates. The book will stay the same price, but if you want to buy the boot camp, you might want to do so soon.

 

Even with the increase in price the boot camp is worth it. I am no shill. I do not recommend the software !!!!!!!!!

 

P.S. Todd K has a new blog out that should have some good learning examples. Has anybody checked it out yet?

 

I also hope some of you got the specail email chart of the week on reading the chart.: understanding the bars when there are no signals (TG) present. Great. If somebody out there got it and knows how to set up a link, please post it here. I do not know how and do not want a bunch of pms or emails about it. Thanks.

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