[VSA] Volume Spread Analysis Part I

[Wookey 10]

  PivotProfiler said:

As far as mutliple time frames. The best approach may be to find certain support/resistance levels on various higher time frames, but trade off of just one lower time frame chart.

 

Yes, this is exactly as I do, use Drummon's levels from daily and weekly and use MP to see on lower TF's if levels are holding or breaking. But MP doesn't always catch it, but this VSA thing looks like can really help. Eh, If only I could join them in one platform.

[notouch 10]

I mentioned the morning doji star just because it was mentioned by Gavin Holmes (I think) during the seminar. I'm personally sceptical about focusing on bar closes. A 1 minute bar with a low close followed by a 1 minute bar with a high close would just be a single bar with a high close on a 2 minute chart. The rule is "strength appears on down bars" so in that situation the 1 minute chart is showing strength but the 2 minute chart isn't. I think you'd have to look at the market you want to trade and choose the best time frame to fit your trading style and then just stick with it. Looking at several different time frames may just lead to indecision.

 

Wookey, I'd definitely be interested in seeing more of your charts.

[walterw 10]

I "still" dont understand where is the line that divides the interpretation of fading this down bars with volume (showing strength) and having this down bars with volume installing a downtrend like today... in that case they far from showing strength they where preanouncing a big down move... please vsa experts tell me how would we establish the diference.... and where would be the ideal timing to enter either two trades....thanks Walter.

[Wookey 10]

More charts from TradeGuider.

 

Attached:

1. Euro Future Daily

2. Microsoft Daily

3. Mini Dow Jones 180 min

4. Mini Dow Jones 1 min

 

If you have a request for certain symbol and tf just let me know.

[Anonymous 11]

Wookey

 

Could you please put up a 5 min Euro spot chart from Today? I want to try something. Thanks

[Wookey 10]

PivotProfiler,

 

Attached. The last three signals are considered weak, thus additional support is needed. The congestion zone at the top (between 3210-3220) when reduced to 15 min bars, looks for TradeGuider as no demand.

[Anonymous 11]

Thanks very much.

 

I place a small dot on all bars that have volume less than the previous two bars. I also place an diamond on bars with narrow ranges and increased volume.

 

Here is my chart of the same period. Note how the same levels are clearly indicated on the chart. In other words, those that want to program their own versions can do so. Just start to learn the method and go from there.

Edited March 26, 2008 by mister ed
add chart back

[Soultrader 12]

Hello guys,

 

I have a litte trouble understanding volume demand bars after a selloff. I have attached a chart from yesterdays action. The rectangle box shows couple sell volume spikes.

 

My questions is this: How do you watch for demand bars after that spike? In the first rectangle the volume spike is created by a doji. The next price bar closes above the high of the doji... this occurs on lower volume. How do you intrepret this? To me it seems like supply is cut off but price continues to drop.

 

The same thing occurs in the second rectangle box. Volume spike is created on a down bar but the next bar closes above the low of the previous bar.

 

Any advice would be appreciated. Thanks

[notouch 10]

ST, from my limited knowledge I think the key thing is that you're looking for supply to come in at key support levels (if you're buying) and resistance levels (if you're selling). 12190 was a key resistance level (S3 Pivot) and you could have got 50 points from that last trade. On a day like yesterday though you should have been looking for sell signals.

[TinGull 10]

Trade I took today using VSA techniques. Notice when price reached the weekly pivot that we had a wider than average spread and a LOT of volume and then price closed right near the highs of that bar. About 10 seconds before that 5min bar closed I went long at 148 and was out for a 10 point gain (my personal strategy right now...it ended up going for much more I know. baby steps here) but notice how it went on to go 50 points?! insane! This trade I think was perfect in showing VSA. Please correct me if I'm wrong.

[Wookey 10]

Soultrader,

 

See how TradeGuider interpreted yesterday's actions. The first green rectangle is "Strength coming in" signal. The bar has very wide spread, ultra high volume, it closed in the middle part of the bar and made new low. Basicaly, I think, the most nervious sellers started fixing their profits.

 

The next red triangle was identified as "No Demand" signal. The bar has narrow spread and low volume. It signals the end of retracement. You may disregard that signal in ranging market as not really important.

 

The next green rectangle is called "Climactic action". You see it has ultra wide spread and ultra high volime. In fact it's the widest and highest by volume bar of the day. When you see a bar like this you should think if it's a selling or stoping volume. You may anticipate it knowing about strong support at 12190, or wating for the confirmation which happened on the next bar. In Drummond Geometry a bar like that is called an exhaust.

 

The second red triangle is a "No Demand" bar again.

 

Next signal is missed here but you already should see that if you combine two bars in 10 min bar it will be the same signal as the first one.

 

And the last red rectangle is Upthrust. The volume is not so high, spread is wide, high is hihger than previous several bars and the close is in low part of the bar. They describe it as stop hunting desined by market makers to mislead traders.

 

Hope that helps.

[walterw 10]

like it or not Tin... we end up on the same simple corner.... thats a simple hammer with volume surge at support (period).... wanna make it more complicated with vsa etc, etc,etc.... you can make it, but this is the old same good school being thought with some diferent sutil changes.... no new cience here... no new edge... lol... did you notice yesterday how Gavin timed his trades ?.... great contradiction was there... he sayed "weaknes comes on up bars" great input indeed (maybe the only one I did capitalize from yesterday) BUT then his entry was on a swing low of volatility H (old classic past information technical tool, we indicator junkies use) mmmmmm you see... thats a contradiction.... now Tod DID take the trade with the up bar going on.... maybe he has more confidence on what he preaches.... but any way... still the same GOOD old concepts being preached with some variations... I repeat no new cience here... still good cience indeed... Nice trade there Ting.... cheers Walter.

[TinGull 10]

You're right. There is no new science. Is this still an edge? Absolutely! Why? people overlook the simplicities that can be found in simple analysis like this.

[walterw 10]

Oh yes ¡¡ there is an edge on the classic aproach and vsa (included in there )¡¡¡¡ what I mean, there is no edge from VSA to the classic aproach.... same thing, diferent presentation and even probably a more complicated presentation....

[walterw 10]

If you notice Tin you are NOT using VSA software and you are perfectly able to capitalize on the old concepts and vsa concepts all together.... personally your chart is more simple and easy to read than vsa chart...

[walterw 10]

and you got an up delta ¡¡¡¡¡ on that bottom hammer bar.... you should charge 500 bucks for that setup.... my lord

[TinGull 10]

HAHAH! Yea...I agree. Still have some learning to do on things, but it's gettin easier.

[Soultrader 12]

  Wookey said:

Soultrader,

 

See how TradeGuider interpreted yesterday's actions. The first green rectangle is "Strength coming in" signal. The bar has very wide spread, ultra high volume, it closed in the middle part of the bar and made new low. Basicaly, I think, the most nervious sellers started fixing their profits.

 

The next red triangle was identified as "No Demand" signal. The bar has narrow spread and low volume. It signals the end of retracement. You may disregard that signal in ranging market as not really important.

 

The next green rectangle is called "Climactic action". You see it has ultra wide spread and ultra high volime. In fact it's the widest and highest by volume bar of the day. When you see a bar like this you should think if it's a selling or stoping volume. You may anticipate it knowing about strong support at 12190, or wating for the confirmation which happened on the next bar. In Drummond Geometry a bar like that is called an exhaust.

 

The second red triangle is a "No Demand" bar again.

 

Next signal is missed here but you already should see that if you combine two bars in 10 min bar it will be the same signal as the first one.

 

And the last red rectangle is Upthrust. The volume is not so high, spread is wide, high is hihger than previous several bars and the close is in low part of the bar. They describe it as stop hunting desined by market makers to mislead traders.

 

Hope that helps.

 

Thank you very much Wookey. One thing I have trouble understanding is after the strenght bar and climatic action bar price declines. Shouldnt price lift if this bar was really a climatic bar? Or are the big boys trying to push it up again to sell more?

[Anonymous 11]

  walterw said:

like it or not Tin... we end up on the same simple corner.... thats a simple hammer with volume surge at support (period).... wanna make it more complicated with vsa etc, etc,etc.... you can make it, but this is the old same good school being thought with some diferent sutil changes.... no new cience here... no new edge... lol...

 

I have made the case before that things that are true tend to transcend methodologies. That is, for example, an ideal No Demand bar would close in the middle on a lower range and volume less than the previous two bars. From a candle perspective, which is not VSA, if this bar was a Doji then the market is showing indecision.

 

Another example would be what Bill Williams calls a squat. Basically a squat is a bar with a narrow range and higher volume. VSA teaches us to pay attention to a narrow range bar that has higher volume (especially) if it is ultra high and closes in the middle. Essentially, this is just a more specifically defined squat bar.

 

The point, yes many other valid methods will have various underlying concepts in common.

 

As far as being new, Wyckoff was doing this in the 1800's. Which proceeds the time candles were introduced in America.

 

  walterw said:

did you notice yesterday how Gavin timed his trades ?.... great contradiction was there... he sayed "weaknes comes on up bars" great input indeed (maybe the only one I did capitalize from yesterday) BUT then his entry was on a swing low of volatility H (old classic past information technical tool, we indicator junkies use) mmmmmm you see... thats a contradiction.... now Tod DID take the trade with the up bar going on.... maybe he has more confidence on what he preaches.... but any way... still the same GOOD old concepts being preached with some variations... I repeat no new cience here... still good cience indeed... Nice trade there Ting.... cheers Walter.

 

Yes. Todd is the true expert not Gavin. I hate watching the webinars with Gavin because he does basically use an indicator based system. The very thing we abhor!!!!!!! He needs to take the "h stops" off the chart and focus on price and volume. Gavin is also too dependant on the TG signs rather than what the bar itself has to say. He does believe in Volume Spread Analysis and thus makes an okay salesman, but is not he is be no means the ultimate chart reader.

[TinGull 10]

And I think the biggest thing that I took off that webinar yesterday...and I'm sure most people already do this but I didn't...was using VSA on a larger time frame to determine short term bias. Today the first 30 minute bar was a long legged doji. Not taking the open into account...we had a fairly wide range (definitely wider than premarket) with big volume (very big in comparison to the past few days' first 30 minute bar) and closed in the lower half of the spread.

 

I assume this would shout out to have a short term bearish bias. What they did was say...filter out any trades against your bias. WOW! Like a miracle to my ears right there. I hadn't ever done that. Just taken what looked good at the moment. Then today around 12:45 we had a MAJOR reversal. HUGE volume on a down bar with positive delta...thats something to take note of for sure. Bias switched to long at that point.

 

That was a big thing for me to learn. Very big thing...

[Anonymous 11]

  Soultrader said:

Hello guys,

 

I have a litte trouble understanding volume demand bars after a selloff. I have attached a chart from yesterdays action. The rectangle box shows couple sell volume spikes.

 

My questions is this: How do you watch for demand bars after that spike? In the first rectangle the volume spike is created by a doji. The next price bar closes above the high of the doji... this occurs on lower volume. How do you intrepret this? To me it seems like supply is cut off but price continues to drop.

 

The same thing occurs in the second rectangle box. Volume spike is created on a down bar but the next bar closes above the low of the previous bar.

 

Any advice would be appreciated. Thanks

 

Soul,

 

A couple things to think about. First at the time of the volume spike what was the trend? This is very important. If the trend was up then what we would be looking for is different than if the trend was down.

 

Next, are we around a known support/resistance area. These areas are usually respected by Smart Money. If we are and the trend is down, then we would expect to see demand enter the market, but not necessarily a change in trend.

 

After the large volume spike that closes on or near its high, we know that there must of been some Professional buying going on. Price does indeed move up. But as the trend is down we might expect to see a narrow range bar with volume less than the previous two that closes up from the previous bar, with the next bar down-No Demand.

 

Once you see the spike bar, You begin to look for either No Demand , No Supply, Tests , or Up Thrusts.

[TinGull 10]

I love this...learning more stuff every 10 minutes!! HAHA!! Like light bulbs all over the place (compact fluorescents of course).

 

So...as you were saying...in the down trend with a spike in volume followed by some demand but nothing trend changing would be shown as smaller, narrow range bars. Such as those circled here. This of course is remaining in tact with the overall trend, just letting you know this where the good bounce is to get in.

 

How awesome....I love it!

[Anonymous 11]

Hope you don't mind, TinGull but used your chat to show something. Just a couple of things to look for.

 

One note on stopping volume. Tom Williams, the father of VSA, would enter on the close of that bar. TG, however would not place a sign of strength until the next bar closes and is an up close. (2 bar pattern).

 

Getting in at the very bottom or top is not the most important thing. Here the best entry is after the test. Why? Because we have seen the strength come in on the stopping volume. Then we see a No Supply indication followed by a test for supply.

 

The Smart Money wants to make sure that there are no sellers out there to impede the mark up phase. That is why they test the market. Of course, the mark aggressive you are as a trader the earlier you would enter. But you should be looking for the bar after the volume spike (stopping volume) to confirm before entry.

Edited March 26, 2008 by mister ed
add back deleted chart

[torero 10]

Pivot, thanks for contributing to this thread, I find this method extremely useful and fascinating. I've been trying to learn the relationship between the price and volume in groups but never seen a bar by bar analysis until now.

 

One question about your analysis from the previous chart, I noticed that there was a stopping volume brown bar before the true bottom. Can you tell me why this was a false bottom or at least explain action between the previous pivot low to the bottom bar.

 

I wanted to ask you if using tick charts work in VSA or not. Thanks.

 

[TinGull 10]

Torero asked the same Q I was going to ask. And T...tick charts are harder to see the differences in volume because they're masked by bars being determined by trades instead of time.