[VSA] Volume Spread Analysis Part I

[monad 10]

Hey Tasuki,

No offence meant buddy, just want to find out more about this bid/ask vol. You said something about that it explains VSA, well that certainly was of interest for at least it would mean folks could learn how to trade with info. generated via VSA.

So would love to see more of your charts especially those dealing with your realtime trades.

[jaybird 10]

looks good to me

[MC 10]

monad,

The local surfers here in sunny southern California have an expression that's worth keeping in mind: "It's all good". In the case of Sebastian's market analysis, it's extremely good. As for my indicator, yeah, it has some value, but nothing close to an experienced eye.

 

During last night's video, Sebastian said at one point that a proper analysis can get tricky at times. Well, my indicator can sometimes help to some degree to elucidate for untrained eyes what experts see effortlessly. The attached chart gives two examples of this.

 

Sebastian said on one bar "must have been alot of selling" and yes, you can see it right on the updown volume indicator. Despite the fact that it was a nice, strong up bar, Sebastian knew from experience that there had to be alot of selling---the benefit of a trained eye. Well, for those of us who don't have the trained eye, as yet, the updown volume indicator shows you there in black and white (OK, red and green).

 

On another bar, he said, "must have been more buying than selling". Of course he was right, but if you need confirmation, the updown volume indicator shows you, plain as day.

 

Monad, I never said anything about starting a new thread. Why would I? I was just trying to make a contribution to the VSA thread, as I thought maybe my updown volume indicator could be of some benefit. Some other posters suggested a separate thread, and that's fine for them, but I never proposed anything like that. All I suggested was putting the indicator on your VSA charts and watching it for a week, see what you think.

 

Please, PLEASE, let's keep the conversation civil. Your "trumpeting" sarcasm isn't welcome, in fact, it hurts. Remember, amigo, "it's all good,"

 

It's all good indeed.

 

To me VSA can be used standalone like some of these guys if your real good on spotting key levels naked or reading VSA. Otherwise MA, pivots and other additions could help pick where VSA seems to have an even greater chance of working.

 

This is FWIW cause I'm not profitable yet, but that's due to my inexperience and emotion control which I'm working on now. I don't expect to work for 13 months and be some super duper trader.

 

Again thanks to you all and let's keep it civil cause theres no wrong way to make green right?

[jaybird 10]

looking back at it now i would have liked to have seen more volume on that bar

 

 

time will tell

 

 

 

 

 

 

jaybird

[jaybird 10]

go sweetheart go

 

 

 

lol

[bertg 10]

Taz et all,

 

Look at this bar on ESH8. The Ask volume is almost double the Bid volume and the bar is a down bar and closes off the low. What do yo make of it?

 

Also looking forward to Sebastian's recap of the day. Sebastian, maybe you can touch on this bar in your analysis.

 

Regards,

Bert

[Seb Manby 11]

ES Analysis for 14th dec.

 

http://www.megaupload.com/?d=69MMFJL4

 

I had an interesting email exchange with my datafeed suppler today, i will tell you about it monday.

 

Regards Sebastian

[mister ed 10]

Taz et all,

 

Look at this bar on ESH8. The Ask volume is almost double the Bid volume and the bar is a down bar and closes off the low. What do yo make of it?

 

Also looking forward to Sebastian's recap of the day. Sebastian, maybe you can touch on this bar in your analysis.

 

Regards,

Bert

 

Bert, this is very unusual, it can happen, and on a smaller time-frame it is not so unusual, but is unusual on a 5-min chart. So I looked at my 5 minute chart and I have completely different Bid/Ask figures - to the extent that my equivalent 5 minute bar is showing big net selling (volume hitting the bid), not net buying, as yours shows. I then looked through the chart you posted and compared it to my 5-min chart and there are number of differences.

 

Are you using tick data or snapshot data? Saying this, maybe it is my data that is wrong! If anyone else can post a 5-min chart with the vol@bid/ask information then we can compare. I am using esignal with IR/T.

[jjthetrader 10]

Check out my first pic. We see a breakout up through the Pivot on the YM. It goes up and hits a bit of supply (yesterdays close) and does what seems to be a pullback to the Pivot. See the no supply bar on the Pivot? Would this not usually be cosidered a high probability Long position?

 

Now check out the second pic. Is this just one of those times that that setup wouldn't work?

 

I know Tawe would have been short right after that upthrust and ridden it straight down through the pivot.

 

How would one distinguish a pullback from a new trend?

 

thanks

[jjthetrader 10]

Would you short this upthrust ? If not or if so, why?

[That One Guy 10]

What about that big up bar with high volume. Doesn't vsa tell us this is potential weakness? Then, there is an upthrust, which almost confirms the weakness. I am new to VSa, but the little info I have read tells me this. On my 10 min ym chart, the bar after the huge spread bar on high volume, makes a new high on much less volume. Then a huge upthrust, I spotted this all in real time, but was just a spectator and did not trade it. :crap: Either way, great thread keep up the good work everyone.

[Anonymous 11]

So many post I want to reply to-looks like a long weekend. Of course, by Sunday this thread might have 5 more pages of brillance to wade thru. LOL

I love it!! Now this thread is a dream come true.

 

The first couple of posts be Sebastain have a link to open the charts by clicking on the post itself. Can we get that option back? I do not want to be downloading more software and registering at more sites to get the analysis. Sebastain, please include that "m".

[Anonymous 11]

Would you short this upthrust ? If not or if so, why?

 

We should not be looking at signs in a vacuum.

 

What the background says is important. I do not agree with your interpretation of the chart. I see much strength and would be looking to go long, not short. Hence my answer to your question is no.

 

Take a look at the highest volume bar on the chart. This is a down bar with the next bar slightly up. Demand entered on this bar. Also note that the market begins to move sideways a bit.

 

The Trap Up move you labeled, to me is No result from High Volume (strength in this case as the high volume bar was down.) The bar is down on high volume and a wide spread but the next bar is up. Thus showing no result from all that volume on the down bar.

 

What I would like to see is a higher timeframe to aid in my decision making. To be clear, I would not short this bar but I would not be going long here either. In fact, for me, If that large bar is a WRB and then we get a No Supply or Test within the range of the body it would be a go.

[tawe trader 10]

I know Tawe would have been short right after that upthrust and ridden it straight down through the pivot.

 

Hey JJ, I seen the upthrust on my YM chart but I didn't go short as it was Friday 4pm UK time and I had been watching / trading the FTSE since 8am and the dog needed walking. It would have been a beautiful short to hold until the close though.

 

I was already long S&P (cash mkt) so what I did do though after seeing the upthurst, was use it as a signal to get out of my long trade at 1485.2 for a profit of 6.2 pts - not that far off the high of the day !

 

VSA is a great tool, it can be used to get you into a trade and it can also give you a signal of when to get out and take profits and bank more pts than a trailing stop.

[jjthetrader 10]

Thanks for the good comments PP and Tawe.

 

Good job on the S&P Tawe. How'd it go on the FTSE? Are you back in the "black" after the bank announcement day now?

 

Thanks again to Sebastian. Any chance of getting a walkthrough of a day you actually traded with explanation of why you did what you did and what you were seeing at the time?

 

cheers

[Anonymous 11]

Taz et all,

 

Look at this bar on ESH8. The Ask volume is almost double the Bid volume and the bar is a down bar and closes off the low. What do yo make of it?

 

Also looking forward to Sebastian's recap of the day. Sebastian, maybe you can touch on this bar in your analysis.

 

Regards,

Bert

 

My 2 cents. When I first looked at the chart two things entered my mind:

1. Bad data quote

2. Was there some news event at this time?

 

I do not know if either of the two are indeed behind the candle. So I assume the candle and volume are correct and go from there.

Edited March 29, 2008 by mister ed
Add back chart

[Anonymous 11]

PIvot, can I ask you about your analysis in post 1104 - after the initial effort to rise bar (straight after the first squat) there is a high volume bar that is basically a gravestone doji (easiest way to describe it - I know the open and close are not at the same price but only one pt apart makes it close enough for me). What are your thoughts on this bar - it would have had me looking for a down move follow through in the immediately following bars (which didn't come). If I could get your feedback on this question would be appreciated as this bar really "stuck out" for me.

 

Notice that this next bar makes a higher high but closes equal to the previous bar. The volume is about the same as the previous bar and High. And the close is near the lower portion of the bar. This is a Hidden UP Thrust (although we would like to see an even lower close in the range). The key here, however, is where we have just come from. That is, there are signs of strength in the background. With an UpThrust we want to see weakness in the background.

 

The very next bar is key here too. We see a pattern that appears many times. The bar after the UpThrust is a Test. This is a sign of Strength, not weakness. The Smart money creates an UpThrust, but test for supply on the very next bar. That means that the supply was swamped by demand on that UpThrust.

 

Lastly, I would note that the candle fails to close below that black line and is closing up from the open which was on the black line.

 

For me, After the Squat and the Effort to Rise bar there is reason to be bullish, not bearish. Hence I dismiss the Hidden Upthrust on first sight. But one bar later I get a Test. This Test in and of itself is bullish. But if it is coupled with the UpThrust it is even more bullish. As for the rest of my thinking, it is in the post.

 

One more note: a lot of people are missing the fact that if you wait for confirmation things make sense. On an Upthrust you want the next bar to close lower than the close and preferably lower than the low of the UpThrust (remember in a perfect UpThrust the close is on the low). The profit lost by not being in "early" or "at the beginning" is more than made up for by those times when early entry results in losing trades. Losses that could of been avoided with patience. Patience is a virtue and a trader's best friend.

[jjthetrader 10]

PP, are you a full time trader?

Are you willing to take a VSA trade that is setup in the middle of nowhere, so to speak, meaning a trade not off of a pivot or anything like that?

[Tasuki 10]

Taz et all,

 

Look at this bar on ESH8. The Ask volume is almost double the Bid volume and the bar is a down bar and closes off the low. What do yo make of it?

 

Also looking forward to Sebastian's recap of the day. Sebastian, maybe you can touch on this bar in your analysis.

 

Regards,

Bert

 

My one cent's worth: I was really hoping that SebMan would address this anomaly, but he did not. Unfortunately for this question, he chose a 10 minute timeframe, but if you looked carefully at the time in question, his chart did NOT have a volume spike. In fact, the volume went down during that time period on his chart.

 

I use Tradestation, which also had the volume spike that appeared on your chart. Bert, what charting package are you using?

 

The reason this is a serious issue is because Volume Spread Analysis has an Achilles Heel---BAD DATA. On this thread we have occasionally heard disparaging remarks about oscillators and other such indicators, but the one thing they have in their favor is that they smoothe out the data, so one or two bad data points won't throw you off your game. With VSA, if you get a couple of bad bars in a row, it can really throw you for a loop.

 

I'm sure that a more thorough discussion of data quality belongs on some other thread, but just a heads up for this VSA forum--bad data can lead to bad trades (caveat emptor).

[jaybird 10]

My 2 cents. When I first looked at the chart two things entered my mind:

1. Bad data quote

2. Was there some news event at this time?

 

I do not know if either of the two are indeed behind the candle. So I assume the candle and volume are correct and go from there.

 

 

pivot please review my response and the way i viewed that candle on my attachment

 

i traded it off that candle long expecting a big push up based off the vol beinig higher that the two previous down bars volume and closing off the lows-----------yes it worked this time but i would like to know for the future if my analysis of the bar was incorrect

 

 

thanks

 

jaybird

[mister ed 10]

One more note: a lot of people are missing the fact that if you wait for confirmation things make sense. On an Upthrust you want the next bar to close lower than the close and preferably lower than the low of the UpThrust (remember in a perfect UpThrust the close is on the low). The profit lost by not being in "early" or "at the beginning" is more than made up for by those times when early entry results in losing trades. Losses that could of been avoided with patience. Patience is a virtue and a trader's best friend.

 

Thank you very much for the extra analysis on that chart PP, much appreciated. And the comments on the value of confirmation.

[mister ed 10]

My one cent's worth: I was really hoping that SebMan would address this anomaly, but he did not. Unfortunately for this question, he chose a 10 minute timeframe, but if you looked carefully at the time in question, his chart did NOT have a volume spike. In fact, the volume went down during that time period on his chart.

 

I use Tradestation, which also had the volume spike that appeared on your chart. Bert, what charting package are you using?

 

The reason this is a serious issue is because Volume Spread Analysis has an Achilles Heel---BAD DATA. On this thread we have occasionally heard disparaging remarks about oscillators and other such indicators, but the one thing they have in their favor is that they smoothe out the data, so one or two bad data points won't throw you off your game. With VSA, if you get a couple of bad bars in a row, it can really throw you for a loop.

 

I'm sure that a more thorough discussion of data quality belongs on some other thread, but just a heads up for this VSA forum--bad data can lead to bad trades (caveat emptor).

 

Hi Tasuki, if I may add another cent worth, that makes two cents between us which I believe is the minimum required:)

 

Interesting you had the data Bert had, but Sebastian did not. Topic for another thread like you say.

 

I must say I am not a big fan of oscillators/indicators, I have used them in the past though, and I was just as attentive/paranoid about correct data for them as I am for analysis now; the data may be smoothed or averaged in an indicator but any bad data also has the potential to be in the indicator for a long period of time (depending on parameters being used). The saving grace of what appears to be a bad data value in this example, is that was not in the price data, that is a much bigger issue for the vast majority of traders who may not consider the volume data at all.

[bertg 10]

keyboard still skipping. apologize in adance.

 

I use TransAct data whch is supposed o be reliable...

 

I use tick data.

 

PP, thanks for the anaysis. Very useful, as usua.

 

Does anybody elses's data look lik mine for that bar? It's scary mister ed's bid/ask plot was the opposite of mine.

 

yes, I know daa provider isues should be in anoter thread. sorry.

 

Regards,

Bert

[mister ed 10]

yes, I know daa provider isues should be in anoter thread. sorry.

 

Regards,

Bert

 

Don't apologise Bert - at the time of your post you did not know it was data related, it was just a good VSA-related question.

[jjthetrader 10]

Taz et all,

 

Look at this bar on ESH8. The Ask volume is almost double the Bid volume and the bar is a down bar and closes off the low. What do yo make of it?

 

 

 

Regards,

Bert

 

Hey bert, I have tradestation and esignal and neither had a volume reading like that for that bar.

Bad data is scary when you're dealing with VSA.

You want to see a horrible data source? Subscribe to Qcharts. The actual volume isn't updated until 24hrs later!