[VSA] Volume Spread Analysis Part I

[TinGull 10]

[TinGull 10]

[rayl54292 10]

  VictorH said:

Hello rayl54292

 

Thanks for your reply. I was aware of Pivotprofiler’s calculations for St Dev levels. I think the present TS Calculation (as you have shown) is flawed when you apply the basic principles of statistics to Volume.

 

If you apply the TS coding and plot the following lines you will get positive and negative values.

 

Plot3(avg-2*sDev,"-2");

Plot4(avg-3*sDev,"-3");

 

Now, do you still have faith in the following 2 lines ???

 

Plot1(avg+3*sDev,"+3");

Plot2(avg+2*sDev,"+2");

 

Calculations based on Lognormal do not create negative values.

 

In the overall scheme of things, the actual calculation is probably trivial and of minor consequence to trading outcomes. “High Volume†is still “High Volumeâ€Â.

 

Keep up the excellent posts on VSA.

 

Regards,

V[/quote

 

V,

 

Thank you for the feedback, appreciate that.

 

 

R.

[rayl54292 10]

Hello.

 

Just wanted to share some intraday VSA/harmonics combinations.

 

Attached is 15 min IWM chart over past few days. points X,A,B,C,D form a bullish gartley pattern ( http://www.harmonictrader.com/price_patternsgartley.htm ). Test bar (I believe it to be a test) confirms the pattern.

 

I trade the ER2 of an IWM chart, less noise IMHO, and do not hold over the weekend, thus my entry was the second signal, confirmation (result) after effort to rise.

 

R

[EyeQue 10]

Hi TinGull and others:

 

Excellent Threads. Because of these threads, I am currently analyzing information provided in these threads and the VSA book. After I get comfortable, I will start posting.

 

Regards,

 

EyeQue

[TinGull 10]

Glad you're enjoying, EyeQue. Look forward to seeing some analysis

[TinGull 10]

[TinGull 10]

[TinGull 10]

Just throwing up a couple charts from trades that I took a little while ago

[ranj 10]

TG,

 

What type of screeners do you use to determine when you need to start looking at a chart? I normally do a top down analysis. I start with a Rel Strenght calc for the S&P index verse the sector spiders, and then do the same procedure for the stocks within the sector ETF. I wait for a low vol signal within the Sector ETF to start the investigation into the component stocks.

 

Rajiv

[TinGull 10]

Well, I guess mine is kinda crude compared to yours. I basically search for high volume decliners or high volume gainers, then look at all the charts to see what chart looks appealing.

[ranj 10]

  TinGull said:

Well, I guess mine is kinda crude compared to yours. I basically search for high volume decliners or high volume gainers, then look at all the charts to see what chart looks appealing.

I used to do the same thing before, but I would only look at those companies that had high volume and showed up on WSJ moneyflow calculations of selling on strength and buying on weakness.

 

http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html

 

But I find I ended up getting in really early on trades for my exit style.

 

Rajiv

[TinGull 10]

Cool Rajiv, I'll definitely keep trying to refine things as I can. I'm pretty much brand new to doing anything with stocks. Just trying to see if there's something I might better swing trade than index futs.

[TinGull 10]

[TinGull 10]

And to add to the confusing mess of it all...

 

[TinGull 10]

Im such a post whore...

 

[TinGull 10]

Well, a not so good trade today...would love some feedback on what I saw wrong.

 

[MC 10]

  TinGull said:

Well, a not so good trade today...would love some feedback on what I saw wrong.

 

 

Not to find comfort in others misery but I got roasted in that exact same signal on paper today. I'd take the trade again any other day but next time I must not average down and have my hard stops in.

 

In for 1 at 064, in for the 2nd at 059 cause I was "sure" I was right.

In for a 3rd at 047 on a prayer.

 

Out 1 at 043 and then out the other 2 at 041.

 

Here's the kicker...I was up $300 on 2 car lots with 100% accuracy today. I was doing very well till then. I gave back $220 of my paper profit from being stubborn and not having hard stops on that move. :crap:

 

I'm interested in the feedback here too...E-slap me around guys.

I understand I'm only on paper but every time I lapse like this it delays me funding my account to go live.

I have the signals and just need some final tweaks to my discipline.

[TinGull 10]

I'll tell ya exactly why I lost that trade......I was being naive in thinking I could call a bottom. Wasn't looking at the most obvious market cycles....

 

[TinGull 10]

Good point of view MrMarcus...very well said.

[ranj 10]

Hi TG,

 

I would act on a similiar trade, but the bar did not set up right, for a test of supply the market should not close on the low. It should move down, find one one wanting to trade and then move up to an area that price has been accepted before.

Also even more telling, is two bars afterwards. That appears as a no demand, low vol up bar, with a Narrow Spread (NR7), closing off the highs. When I see no demand come in after a low vol test, I tend to move my stop to just below the no demand.

 

note hindsight is always 20:20 and I tend to trade off of daily charts, with more time to think about price actions, in terms of effort, (volume and spread) and results(close in relation prior closed and previous highs and lows).

 

Rajiv

[Vercingetorix 10]

Here's an update for BIDU for those that are interested. On the first day we have a up bar on high volume closing near the lows. This is selling for sure. The next arrow we have a high volume up bar closing on the highs, with the next bar down showing hidden selling in the previous bar. On the third arrow we have a up bar on massive volume followed by a down bar, this is also hidden selling. If this isn't a buying climax I don't know what is. To give you an idea of the large transfer of stock that's going on the outstanding number of shares is 34 million shares. The news about the stock is also very rosy. I couldn't find anything negative about it, one video covering the stock said it was still cheap lol... I don't know how someone can say that a stock that's doubled in 5 weeks is still cheap.

[MC 10]

  Vercingetorix said:

Here's an update for BIDU for those that are interested. On the first day we have a up bar on high volume closing near the lows. This is selling for sure. The next arrow we have a high volume up bar closing on the highs, with the next bar down showing hidden selling in the previous bar. On the third arrow we have a up bar on massive volume followed by a down bar, this is also hidden selling. If this isn't a buying climax I don't know what is. To give you an idea of the large transfer of stock that's going on the outstanding number of shares is 34 million shares. The news about the stock is also very rosy. I couldn't find anything negative about it, one video covering the stock said it was still cheap lol... I don't know how someone can say that a stock that's doubled in 5 weeks is still cheap.

 

I also see BIDU has bear divergence on near every indicator I use.

This should be a blowoff top it seems.

 

So your saying the big spike in volume often is the pros dumping shares to noob's right? And the same is often true on bottoms, Noob's last ditch surge with the EOD eaten up by the pros cranking the volume up. Any certain volume amounts you like to see to show a climax based on the O/S?

 

Great insight, thanks.

[Vercingetorix 10]

  mcichocki_ said:

I also see BIDU has bear divergence on near every indicator I use.

This should be a blowoff top it seems.

 

So your saying the big spike in volume often is the pros dumping shares to noob's right? And the same is often true on bottoms, Noob's last ditch surge with the EOD eaten up by the pros cranking the volume up. Any certain volume amounts you like to see to show a climax based on the O/S?

 

Great insight, thanks.

 

I look at volume relative to the average volume just by eye balling it.I will usually look at the volume of buying/selling climaxes the stock has had in the past and compare it to the current activity. On occasion I also like to look at the float and shares outstanding. The key is to remember to think relative when looking at volume. There's no standard metric when to determine "alot" of selling/buying is occurring; you just have to judge it based on the particular stock.

 

You are correct about the large volume showing a transfer of stock. Stocks generally go through a cycle of accumulation (noobs dumping their shares to pros at low prices) mark up (prices rise as all the weak hands have been shaken out and the stock is backed by professional money who will support the stock) distribution (stock is dumped back to the noobs). Using VSA to see these patterns is incredibly powerful.

 

Now obviously it's not always cut and dry because there are many participants in the market and it is not demarcated strictly between pros and newbies. I think of it more as a gradient with the true amateurs on one end and the true pros on the other end. Fund managers can be anywhere in that gradient and are often just as bad as the amateurs at home mind you.

 

Also, although we speak of "professional money" this is a little bit misleading because it is used in the singular. In reality there are going to be a number of professionals working in a stock and they generally, although not always, move in the same direction. I say generally, because there are periods of consolidation which appear to be a battle between pros trying to take the stock one way and another. If you look at bidu from July 9 to September 10 (roughly) there is such a 'battle'. There is significant activity at the 210 price level which is where the conflict between those wanting to take the stock higher and those wanting to take it lower occurs. The bulls finally break through mid September handing the bears their arse on a platter. I think this why prices rose so quickly after the breakout because all bears short at 210 were held by the balls and forced to cover at higher prices. I do not think it is hard to imagine that professionals often screw other professionals in this way. Remember, there is nothing sinister going on here. There is no collusion between pros. Everybody is trying to make money at the expense of someone else. The markets are a brutal take-no-prisoners game and I love it .

[RAVIN 10]

IMO it is important to look left, afterall the market structure itself provides resistance and support levels, instead most of the time we tend to focus on calculated pivot levels,

 

Mind you all the VSA principles were there for a long, however looking left a Higher Low formed around 10.45 at 14006 was broken, a previous support which would now act as resistance, hence although the entry was correct, the profit target was in question i.e risk/reward ratio. This is also the level at which the no demand bar pointed out by rajiv poped up.