[VSA] Volume Spread Analysis Part I

[jjthetrader 10]

ranj, I found the test that contained that bar on the 5 min and it had low volume.

[TinGull 10]

Just wanted to post a nice no demand example that I came across today. The signal was a few days back, but worked out perfectly.

 

[jjthetrader 10]

It's even more beautiful if you took it. Did you? Nice example.

 

I find using Candlesticks, like you guys do, helps you see WRB to the left a lot easier so you can see what trading range you're in, as in your example.

 

I didn't want to leave your post here all lonely since you've been so kind as to comment on all mine:)

[Tasuki 10]

Daily chart of the Dow. Today's action (hard right edge) looks like a failed test to me---tested lows, closed near high, but volume higher than last few bars. This would suggest that we haven't seen the bottom yet.

 

The only question I have is whether or not a true test should close below the close of the previous bar. There are examples of tests from this thread which go both ways--some closing above the close fo the previous bar, some below.

[BlowFish 10]

  jjthetrader said:

Everything in VSA is relative. Spread is relative. Volume is relative. What looks like low volume at one point in the day will look high at another.

 

A moving average works well to know if you have low, average or high volume. So if Volume > Avg the = high, that type of thing. But like you said this is only a general classification to assist you.

 

Same for spread. If Spread > Avg Spread then = wide spread. Use a short period for spread, a 15 and/or 30 for Volume.

 

Indeed, but variance and so standard deviation are inherently a relative measure. Guess thats why TG uses it.

 

Whilst pure VSA relies on relative volume (sometimes in a rather arbitrary way) there certainly can be useful information to be gleaned from absolute values. Low volume at 50,000+ contracts is different to low volume at 2,500- contracts It is also valuable to have an idea of relative volume at a higher level. e.g. for an intraday trader knowing it can be helpful to identify a high high/low volume day whilst its in progress.

 

Cheers.

[Anonymous 11]

  Tasuki said:

The only question I have is whether or not a true test should close below the close of the previous bar. There are examples of tests from this thread which go both ways--some closing above the close fo the previous bar, some below.

 

The best case senario is for a test to close lower than the previous close. However, a test can close equal to and even higher than the previous bar.

 

That does not look like a test to me as it does not make a lower low. Just looking at the chart, it looks like the candle opened up on the low, and equal to the previous close, and then traded up for the period. While VSA does not look at the open, the open here shows that no time was spent to the downside, and thus when where they testing?

 

Tests go lower before closing on or near the highs.

 

I would be looking to see a low volume test in the range of that Long Shadow.

[Anonymous 11]

  jjthetrader said:

ranj, I found the test that contained that bar on the 5 min and it had low volume.

 

Beautiful.

 

A test as price trades around R1. All one has to do is focus attention on what happens around certain predetermined levels (like pivots or Market Profile).

 

I know its after the fact, but look how logical the Test is.

 

1. Price is moving up towards the pivot

2. Price breaks the pivot

3. Price moves down below pivot again, but the volume is drying up on the downside action. Price closes on the high on a Test bar.

 

It makes logical sense that once the Resistance is broken that a Test of that area would occur. Now some may say that resistance did not truly act as support as price got below R1, but we can see that the move below was false in the first place. Hope you were able to take advantage of it.

[TinGull 10]

JJ, I wasn't in that trade. It's an issue that I do look at but just didn't catch it that day. Ah well, there'll always be others.

[jjthetrader 10]

  Tasuki said:

Daily chart of the Dow. Today's action (hard right edge) looks like a failed test to me---tested lows, closed near high, but volume higher than last few bars. This would suggest that we haven't seen the bottom yet.

 

The only question I have is whether or not a true test should close below the close of the previous bar. There are examples of tests from this thread which go both ways--some closing above the close fo the previous bar, some below.

 

What exactly are we testing here? The August Volume? I'd like to see a little bounce then come back to test the down move (on high volume) that made it bounce.

[MC 10]

Could you VSA pros take a look at ticker IM for me and time permitting post a chart on your thoughts.

October 18th is the main day I'm looking at. The 18th had heavy volume with a narrow spread. Then October 26th looks like more buying at the lows. So I see this as bullish longer term with the 19th having low volume on a down day, but that 18th has me wondering really how that volume could have been buying and had such a small spread. I'm wondering if you see that as distribution or as absorption.

 

Thanks guys...keep up the great posts.

[ranj 10]

  mcichocki_ said:

Could you VSA pros take a look at ticker IM for me and time permitting post a chart on your thoughts.

October 18th is the main day I'm looking at. The 18th had heavy volume with a narrow spread. Then October 26th looks like more buying at the lows. So I see this as bullish longer term with the 19th having low volume on a down day, but that 18th has me wondering really how that volume could have been buying and had such a small spread. I'm wondering if you see that as distribution or as absorption.

 

Thanks guys...keep up the great posts.

Hey Mcichocki,

 

I see what you mean the 18th had UHV on a narrow spread. That to me looks like a ton of effort with no results. If that was into new high ground it would "end of a rising market". I can't get a feel for the rest of the chart.

 

Sometime I will look intraday to see when and where the volume occured on those very high vol days. Also I will look at the sector, and if the sector ETF of index sold off that day and this stock had high volume closing higher, that might imply buying when the news is bad.

 

But normally a bar like the 18th would make me feel bearish on the stock.

[MC 10]

  ranj said:

Hey Mcichocki,

 

I see what you mean the 18th had UHV on a narrow spread. That to me looks like a ton of effort with no results. If that was into new high ground it would "end of a rising market". I can't get a feel for the rest of the chart.

 

Sometime I will look intraday to see when and where the volume occured on those very high vol days. Also I will look at the sector, and if the sector ETF of index sold off that day and this stock had high volume closing higher, that might imply buying when the news is bad.

 

But normally a bar like the 18th would make me feel bearish on the stock.

 

Thanks, yeah if that was at a new high I'd say 1000% distribution and bet the next day would be red with more sellers . The part that's throwing me off is that volume and spread in the range its in. Very odd and I'm not sure what to make of it. In my limited experience I'm leaning towards absorption since it closed up and the next day wasn't followed with more selling. But I also note the volume is quite similar to that of 8/8 so maybe those buyers unloaded. Also demand wasn't there recently to break resistance.

 

Another odd thing is I pulled the intraday charts but the 18th volume has nothing like what's shown on the daily chart. I know the insiders are and have been selling so maybe those were insides sales or other pre/after market actions?

 

Thanks again

[jjthetrader 10]

I posted the chart to make it easier for others to comment on it.

 

I see selling on both bars you inquired about. The 29th appears to be a no demand after that high volume up bar. If it where buying then the price would have continued up.

[jjthetrader 10]

Wonder if PP and others can help out here with VSA reading

In the attached chart the market has risen over 100pts , this is a TG chart with VSA indicators,

 

Now At "A", we have an upbar closing near middle on high vol, VSA signal indicates hidden selling.

At "B" the indicator lights up a No Demand bar.

and at "C", there is the upthrust

 

All the elements appear to be in place, a substantial rise, hidden selling, no demand, sideways move indicating distribution and finally an "Upthrust",

 

Question: Where and when if at all would one consider going short. and what would negate that ?"

[tawe trader 10]

This is my kind of low-risk set-up, I would go short after the low of 'C' is broken (Upthrust bar), with a stop a couple of pts above it.

 

Isn't the whole purpose of the Upthrust bar in this situation is to bring in new longs just when the mkt is looking like it's ready for a down move ?

[jjthetrader 10]

Upthrusts are tricky because they don't tend to travel alone.

[bertg 10]

  jjthetrader said:

I posted the chart to make it easier for others to comment on it.

 

I see selling on both bars you inquired about. The 29th appears to be a no demand after that high volume up bar. If it where buying then the price would have continued up.

 

jj,

 

if the 28th was the last bar on the chart, would you still have seen selling in it? If yes, is it because high volume (hidden selling)?

 

Thanks,

Bert

[jjthetrader 10]

  bertg said:

jj,

 

if the 28th was the last bar on the chart, would you still have seen selling in it? If yes, is it because high volume (hidden selling)?

 

Thanks,

Bert

 

Hey, I was actually refering to the original posters questions about October 28, not Nov.28 which is the last bar on that chart. So on October 28th there appeared to be hidden selling and this would explain the drop off after that.

 

The last bar on that chart doesn't appear to be selling. The bar before that could even be a test which would be bullish.

[zdo 20]

Anyone done an analysis of the Dow this week in terms of VSA - especially 11/28?

The strength = weakness ?

Thanks, zdo

[tawe trader 10]

I have attached todays FTSE Future 5 min chart. The uptrend today has been strong due to US futures being up due to the possible rate rise. I have been patiently waiting for a place for a quick short.

 

Reasons for taking a short trade.

 

1. Upthrust bar at R2 resistance level (green arrow) at 12.35 pm UK time.

2. Under this bar there is the highest volume (green arrow) since the opening bar at 8am - selling ?

3. The volume in the bars leading up to this point has been rising - possible selling into the current high of the day and R2 level.

 

I did enter a small stake short trade once the low of the upthrust bar was broken and I had a target of just above the R1 level.

I decided not to be too greedy due to the strength of the uptrend.

 

After 25 mins I exited around the yellow dotted line for a 20-odd pt gain.

 

Any thoughts anyone.

FTSE Fut_Fri 30th Nov - Short at R2.docFetching info...

[RAVIN 10]

  tawe trader said:

I have attached todays FTSE Future 5 min chart. The uptrend today has been strong due to US futures being up due to the possible rate rise. I have been patiently waiting for a place for a quick short.

 

Reasons for taking a short trade.

 

1. Upthrust bar at R2 resistance level (green arrow) at 12.35 pm UK time.

2. Under this bar there is the highest volume (green arrow) since the opening bar at 8am - selling ?

3. The volume in the bars leading up to this point has been rising - possible selling into the current high of the day and R2 level.

 

I did enter a small stake short trade once the low of the upthrust bar was broken and I had a target of just above the R1 level.

I decided not to be too greedy due to the strength of the uptrend.

 

After 25 mins I exited around the yellow dotted line for a 20-odd pt gain.

 

Any thoughts anyone.

 

 

Way to Go, you had the patience to wait for the setup, read it well and sound trade execution, wish there were more posts like yours ,

[jjthetrader 10]

  tawe trader said:

 

I did enter a small stake short trade once the low of the upthrust bar was broken and I had a target of just above the R1 level.

I decided not to be too greedy due to the strength of the uptrend.

 

 

That was an excellent trade. There are usually a boat load of sell orders around the pivots which could have accounted for the upthrust but once you saw the close below it you were told it was more than that.

 

Thanks for sharing the trade. It helps us all.

[jjthetrader 10]

I was inspired by Tawe and thought I'd like myself a nice upthrust trade as well.

This is a 5 min of the ES that just happened this morning. High Volume, Narrow Spread Up bars start out our day with a top reversal mixed in there. Then we get a beautiful upthrust. I set my order entry based on the stop I can afford above the high of the upthrust and bam! I'm in and out just like that. At $50 per point per contract that's enough for me:)

[RAVIN 10]

  jjthetrader said:

I was inspired by Tawe and thought I'd like myself a nice upthrust trade as well.

This is a 5 min of the ES that just happened this morning. High Volume, Narrow Spread Up bars start out our day with a top reversal mixed in there. Then we get a beautiful upthrust. I set my order entry based on the stop I can afford above the high of the upthrust and bam! I'm in and out just like that. At $50 per point per contract that's enough for me:)

 

You guys are getting at this, nice to see posts getting into strategy and tactics, think have enough of text book hindsight analysis.

Great trade execution in the context of immediate previous price action, one can just aim to master a couple of these setups, learn to identify them in realtime, and increase size, you do not need to understand every bar in terms of VSA, will drive you nuts:)

 

Notice you haven't got much response on your post 889, yes it is also an upthrust, a swift markdown in prices followed by an upward drift and a No demand , place to short. However if prices refuse to go down or bars that follow are on low vol, watch out, that is a sign of strength and a potent one at that.

[jjthetrader 10]

Thanks Ravin,

 

Here's a continuation of my chart to show the potential of a setup like that, even though I only captured a miniscule amount.

 

It made an 11 point down move, so far, from my entry point.