[VSA] Volume Spread Analysis Part I

[mister ed 10]

Yes and No.

 

I do not presume to know what is in Tom's mind, but there is a bit of placation going on here. Tom, the father of Volume Spread Analysis, does not like technical indicators. He has the ability to read a chart bar by bar and make uncannily accurate "predictions" of future price moves. As the rumors go, Tom was not very happy with TG when it first came out because; (1) there were too many signs of strength and weakness and (2) there were technical indicators included in the software. But Tom is a realist. He does understand that most traders into this area (trading) thru TA. This is because it is easier than reading a naked chart and more accessible.

 

As far as using them together, I believe, he would say if the TA doesn't match the VSA, always go with the VSA. Think about like this: Instead of going long because macd is diverging and there are signs of strength in the background; one should go long because there are signs of strength in the background and oh by the way macd is diverging. May seem like a subtle difference but they are actually worlds apart.

 

In the end, Tom does not trade your money. You have to do what works for you. It is about making money. If moving averages or CCI help you make money and make your VSA better, then use them.

 

Hi PP, yes I was wondering if at this seminar perhaps what William's was saying was tailored to the particular audience in attendance, it was "The Society of Technical Analysts" after all, so yes "placation " indeed.

 

Nevertheless, I thought I would include it in the discussion as the recent direction of the thread has been looking to specific entries, and if someone is comfortable with using technical indicators as an important input into entry and/or exit decisions then adding VSA can be beneficial. Then there is the other direction - if you are comfortable with using VSA can adding technical indicators be beneficial? Like you say, up to the individual and what he or she finds works best.

 

I would place myself in the camp of placing primary importance on the VSA/Wyckoff analysis, to the extent that I rarely look at indicators at all, but I can see how they could be seen as helpful if used in context.

 

It would be interesting to hear how people may use VSA in conjunction with say MP, or candles, or other more directly price-related inputs (as opposed to technical indicators) into their entry decisions and their take on the relative importance of VSA versus say a candlestick "pattern" in their specific entry/exit decision.

[jjthetrader 10]

I just watched TradeGuiders chart of the week with Tom Williams and he's announced that in January he's going to be sharing some of his favorite trading setups and strategies using VSA.

This is great news for us all!

 

I've gone back over some charts to find examples like PP and others have posted and even if you were to get in too early on a VSA 'signal', you would still be notified by another VSA signal to get out, that it's not going to go as far as we thought.

 

So in some of the examples I posted about where to get in, well if you had gotton in at any one of those signs of strength, you could have ridden it until a sign of weakness or 'unreadiness' to go up, at least for a small profit. Stops would only have gotton hit if you had a static target in mind and ignored the signs that the markets was not ready to move yet.

 

Thanks to all for contributing productively to the issue. It's awesome that even Tom is going to be contributing to the subject.

 

Let me end with a quote from Tom in the "Undeclared Secrets" about the subject with regard to trading an upthrust signal: "Note that the indicators are quite inspired but you still have your work cut out for you to trade them. Any market is designed for you to lose money in. The oscillating up and down ensures this".

 

Happy holidays everyone!

[404 10]

After reading on these forums about VSA, I am wanting to take my education a little deeper with regards to VSA.

 

What would be the steps you would advise me to take?

 

Is tradeguider the "main" site for VSA?

 

Thanks for the insight...

[mister ed 10]

After reading on these forums about VSA, I am wanting to take my education a little deeper with regards to VSA.

 

What would be the steps you would advise me to take?

 

There are, so far, >120 pages on this thread alone, I think you

can go pretty deep just studying these: there is huge amount

of written material and in the later pages there are audio/visual

presentations also. Study this thread - great first step.

 

Have you downloaded and studied the ebook Master the Markets?

Thats going to be helpful and a great second step.

 

There are threads on ET also, pretty sure the links are on this

thread - good third step.

 

All of this is free so far.

 

If you want to stay with the free resources, start investigating

Wyckoff, his work can go very deep into VSA indeed - VSA is

a subset of Wyckoff analysis. There are links to Wyckoff

resources throughout this thread - there is a Yahoo group

which is probably the easiest place to start to help find more

resources.

 

As far as TradeGuider goes, there are the free COTW presentations,

get on the distribution list for these.

Then there are the paid products like the educational CDs, the software

itself.

 

I am sure I have missed some resources, but take these steps

and you should be well on your way.

[gassah 10]

- VSA is

a subset of Wyckoff analysis. There are links to Wyckoff

resources throughout this thread - there is a Yahoo group

which is probably the easiest place to start to help find more

resources.

 

 

The Original Wyckoff course might be available from the Stock Market Institute. It used to go for about $200. It's by far the best material by Wyckoff and you'll see where Williams came up with many of his ideas. They have a brand new web site and you can find the contacts there, http://wyckoffstockmarketinstitute.com/

 

nic

[sleepy v2 10]

Has anyone watched the CD by Tom Williams

"How to pick Stocks that are Ready to Move"

... just wondering if its different to the boot camp CDs.

 

sleepy

[Anonymous 11]

Has anyone watched the CD by Tom Williams

"How to pick Stocks that are Ready to Move"

... just wondering if its different to the boot camp CDs.

 

sleepy

 

Haven't seen it, but it's my understanding that the primary focus of that CD is on using the stock scanner feature in TradeGuider.

[lote_tree 10]

Hi Everyone,

 

Mr Noob here so please bear with me. I've read this thread from the start. I've read both "Master the Markets" and "The Undeclared Secrets That Drive Stock Market" by Tom Williams. Both are excllent books, (even though they are nearly the same).

 

I think it's probably the best method to trade stocks or futures that I've ever come accross because it's a very direct approach to taking advantage of what make prices go up or down, (the imbalance between supply and demand)

 

Now I mainly trade the FTSE 100 Futures contract listed on the Liffe exchange from a 7 minute chart. I follow the cash market closely. Tom Williams states that if you're going to trade futures based on Indexes you must follow what the cash market is doing before jumping into the futures market.

 

The only probelm I have is that Interactive brokers do not provide realtime volume information for the FTSE 100 cash market. How is one to trade intraday using Tom Williams' methods if you do not have access to realtime parent index volume information?

 

Do you simply ignore the cash market all together and use the volume in the futures market as the guide? If so, aren't you trading contrary to what Tom has espoused in his writings on VSA?

 

Great thread btw guys!

 

Thanks.

 

Peace...

[That One Guy 10]

I find it funny, that there is no volume for the cash indexes. I, still haven't been able to find the real answer. I did, however, ask someone and they said to compose your own index. Adding all the stocks together that make up the particular index. Truthfully, I have no idea if this can be done. I'm sure one of the guys on this thread may have more insight. Anyway, have a great new year, and a great time trading.

[treadstone 10]

Great thread here chaps with a lot of fine information regards VSA.

 

Would anyone be interested in discussing their VSA analysis of the daily DJI?

 

I'd be particularly interested in whether people think we are seeing accumulation or distribution over the last 6 months.

 

[MC 10]

Great thread here chaps with a lot of fine information regards VSA.

 

Would anyone be interested in discussing their VSA analysis of the daily DJI?

 

I'd be particularly interested in whether people think we are seeing accumulation or distribution over the last 6 months.

 

 

I'm fairly new but I see both...The 2 days that are throwing me off are the black arrow and then Dec. 21st. Black arrows wick seems like selling but I think how it closed off the lows makes it more bullish. That coupled with the fact that I don't think smart money would be unloading there, it's not high enough yet. Dec. 21st was options expiration so I've heard that most that volume was from that. I'm curious how the 21st is looked at because I see it as bullish whether it was options being executed or not.

 

Do you VSA pro's think a weekly is better to see broad market conditions? I can say when I stopped using a 5 minute chart for vsa and opened it to 15 minutes the signals got a ton more accurate. Perhaps for non intraday the same holds true and switching to weekly will smooth out the results a bit better.

[treadstone 10]

Thanks mcichoki,

 

Taking the basics from Tom's 'Master the Markets' I can see professional support stepping in to buy during the middle of August.

 

Pro's didn't seem particularly interested in higher prices during the mid October highs by the falling volume (which you pointed out in your annotated chart) as we went to new highs.

 

Prices promptly came down and I'm wondering if the lows towards the end of November can be considered a test of supply as we came pretty close to the August lows again, but didn't find much selling.

 

What seems clear to me is that we are in a period of consolidation, and as I've stated before I'm looking for clues as to whether this is accumulation or distribution.

 

Something else I noted was that distribution tends to occur during good news and accumulation during bad news. From that point of view I suppose we can treat all the constant credit crisis articles as bad news.

 

I welcome anyone more experienced than myself with VSA to correct the obvious mistakes I may have made.

[erierambler 10]

Great thread here chaps with a lot of fine information regards VSA.

 

Would anyone be interested in discussing their VSA analysis of the daily DJI?

 

I'd be particularly interested in whether people think we are seeing accumulation or distribution over the last 6 months.

 

 

Sure.......We have tested the Aug 16th lows with some activity so we may test the lows again, hopefully on lower volume to be successful. Accumulation and distribution will show itself in the result of this sideways action. Firstly though you should have your price bars one colour so as to see the price range only. The volume bars should be the same colour as well in order to note the amt of volume as activity only. That way one is not thinking in terms of up and down, but what is price and volume doing. Secondly you make up a composite of the Dow stocks to see the real price and the real volume on your charts. That way you know whether there is no demand or no supply at the top /bottom of a swing. Since i'm new here, hello everyone, really like this thread.

 

erie

[treadstone 10]

Thanks for the fast replies chaps.

 

From my basic understandings of 'Master the Markets' I see the following;

 

1) Professional support at August lows as buying steps in.

 

2) The October highs occurred on light volume (which mcichocki marked on the chart) suggesting a lack of professional buying interest.

 

3) Test of supply on the November lows, quite high activity suggests another test may be likely (as you point out, erierambler).

 

In the book, Tom suggests that accumulation occurs under a bad news climate, such as we've had with the relentless credit crisis coverage.

 

We're clearly in a trading range, and due to the obersvations above I'm leaning more towards accumulation than distribution.

 

If any VSA pro's can spot obvious mistakes on my behalf I'll happily stand corrected.

[gassah 10]

I'd be particularly interested in whether people think we are seeing accumulation or distribution over the last 6 months.

 

There is a third option which is neither, no accumulation or distribution, which is why Wyckoff broke his bases into phases. The market doesn't always know which way it wants to go.

 

nic

[mister ed 10]

Thanks gassah. The group you moderate, the SMI/Wyckoff Yahoo group, given the huge amount of information in the postings of that group do you have any links to particularly instructive posts/threads or series of posts/threads that you can single out? If you have the time?

 

I am sure a lot of the information there would be of use to those (like me!) following this thread.

[gassah 10]

Hi mister ed,

 

I've only been trading for seven years and will have to pass you on to somebody with much more experience. I have found the most instructive posts by cofferspeculator. He has been trading Wyckoff-style for 40 years and a few years ago posted some real-time trades on IBD's board over several months that returned something like 40% in stocks. He has since been an incredible resource. He has his own board on Silicon Investor and I'd suggest going through all his posts, http://siliconinvestor.advfn.com/subject.aspx?subjectid=54872

 

nic

[mister ed 10]

Thanks gassah - much appreciated. I can see lots of work ahead!

 

E.

[gassah 10]

Another excellent Wyckoff-Williams type of bar-by-bar volume analysis is provided by the Hutson book, http://www.amazon.com/Charting-Stock-Market-Wyckoff-Method/dp/0938773062/ref=pd_bbs_sr_2?ie=UTF8&s=books&qid=1198724382&sr=8-2

 

David Weis has a stunning chapter.

 

nic

[Anonymous 11]

Nothing to say, just thought this was a nice looking chart.

Edited March 29, 2008 by mister ed
Add back chart

[BlowFish 10]

The market doesn't always know which way it wants to go.

 

nic

 

Worth repeating and remembering. There are many participants some 'smart' some not so 'smart' all have different agendas and different time horizons. Sometimes they are not active sometimes they are.

 

For example think about what a test is. The market is marked down to discover if there are still sellers at a lower level. If there are then we see a failed test. The market is there to facilitate trade it will move around until it discovers where the orders are.

[tradproj 10]

Hi

If anyone is willing to sell a used "Professional Chart Reading Boot Camp" CD please email me.

 

tradproj@gmail.com

[Anonymous 11]

WoW. Going thru forum withdrawal. Never again Soul!!! LOL.

 

Just a quick pic of an interesting, yet oft repeated pattern. Check out the chart below. Notice the Squat that appears on the chart. We have a narrow range bar with volume higher than the previous bar and volume that is high. But look at the volume on the very next bar. It drops off considerable on a down bar that closes near its high, in other words, a Test. Thus the Supply that entered on the previous bar (the Squat) most of been absorbed. This is thus a bullish sign. Also note that the Test is within the body of a WRB formed by the Effort to Fall Candle.

 

Let's back up to this candle for a second. We see a large dark WRB on higher volume that represents an Effort to Fall. But the next candle is up. We are seeing no result from high volume on this candle. Once the market move up and closes higher than the high of the Effort candle, we have no result from an Effort to Fall. Which is of course, a bullish sign.

 

Price falls down the next two bars however. Still on this fall we see a candle with volume less than the previous two bars , closing on its low and closing lower than the previous candle: No Supply. Look to the right to the Test candle. Notice that this Test does not get as low as the low of the No Supply candle. Hard to believe that that is just happenstance.

Edited March 29, 2008 by mister ed
Add back chart

[sleepy v2 10]

Long vs Short

 

In theory VSA applies equally to going Long or Short. Just wondering if those who have been using VSA for a while have found that is in fact the case or if they actually do things different (consciously or sub-consciously) when going SHORT.

 

sleepy

[tawe trader 10]

Hey it's nice to have this thread back online.........I have missed my VSA fix !

Check out the chart below. Notice the Squat that appears on the chart. We have a narrow range bar with volume higher than the previous bar and volume that is high

 

PP - you have confused me now (not hard I know) with your 'squat'. In my eyes it isn't a narrow range bar or am I reading in wrong ?

 

If I was looking at the EUR/USD chart as a bar chart I wouldn't class it as a narrow range bar but do you because it is a candlestick with a narrow spread between open and the close ?

 

Am I correct in assuming the Tom Williams determines the range/spread as the distance from the bar's high to low ?

 

Cheers Darren