[VSA] Volume Spread Analysis Part I

[TinGull 10]

 

Chart of Gold this morning. Interesting stuff.

[rayl54292 10]

Hello,

 

First off, thank you to all, great, informative thread, really good stuff.

 

Here's a recent IPO I've been tracking, INFN.

 

Text book bottoming signals.

 

Feedback is apprecaited, new at VSA.

 

R

[rayl54292 10]

Hello,

 

First off, thank you to all, great, informative thread, really good stuff.

 

Here's a recent IPO I've been tracking, INFN.

 

Text book bottoming signals.

 

Feedback is apprecaited, new at VSA.

 

R

 

can't seem to get files uploaded, bummer. file too large. link to instructions on uploading?

[TinGull 10]

http://www.traderslaboratory.com/forums/f30/how-to-post-a-chart-properly-805.html

[Anonymous 11]

Great stuff TG. Thank you and please keep it up.

 

Just wanted to add a few things. First, you are correct in you analysis. Here are a few things I would mention.

 

The first double arrow points to a wide spread bar with ultra high volume, closing up with the next bar down. Supply entered on this bar. This bar is also a WRB.

 

Two bars later we have an up candle on volume less than the previous two bars. This is No Demand. You called it an upside test, which is NOT an incorrect way of thinking about it.

 

Great observation about the next bar. The engulfing factor here is certainly telling.

 

I also have shown another area to enter or add on back within the Opening range (I assume the lines are opening range lines, if not, it does not matter.) Here we have an Effort to fall candle. Volume is high and the candle is wide spread creating a WRB. Price move up and we see a No Demand candle two bars later at the upper pivot line. note that this line comes at the mid-point of the body of the WRB. Hence the No Demand finds resistance at the mid-point of the body of the WRB.

 

For me, this is a slightly better entry point. Because the No Demand is completely within the body of the WRB and things are happening "where we would expect to see them". That is, at a known support/resistance area. If you use these type of things, they can help focus your attention. Of course, the S/R zones set up by the candles themselves are in many ways more telling.

 

again, nice stuff here. Hope you jump aboard and made a nice profit. To repeat an important idea, on the first example, while the No Demand is not completely within the body of the WRB, the engulfing candle could be enough off-set that issue. That is, some understanding of candle sticks can tilt marginal situations.

Edited March 29, 2008 by mister ed
Add back chart

[TinGull 10]

Thanks a bunch Pivot. Really appreciate your analysis always I've never traded gold before, but am thinking about jumping aboard tomorrow cause the volatility Im seeing there is much better than the indices right now. I'll post up a chart this evening with a trade I was in on the ES.

[TinGull 10]

I'll do it now I guess. Funny how volume and price can tell you things BEFORE the news actually hits the wire, eh? This giant move up this afternoon was on a potential stake in Bear Stearns that Warren Buffet has been talking about today. I was long before that happened, but clumsiness on my execution platform made me click my stop to the current market action and got out with a teeeeeeny profit.

 

 

That large hammer/spinning top on very strong volume was my cue to look for longs. Obviously some demand looking at the bar itself, but when the next bar closed UP, I knew things were a go.

[TinGull 10]

A video on today's ES action through my foggy VSA lens...input is always appreciated! You should have QuickTime plugin installed to view this. It's a .mov

 

http://www.tingull.com/trading_vids/ES_VSA_092607.mov

[rayl54292 10]

Okay.

 

INFN, IPO I've been tracking.

 

From left to right.

 

1. Effort to rise.

2. High vol test.

3. Down bars with lower vol and smaller spreads.

4. Low vol test into are of previous hi vol test.

 

Supply seems exhausted, prices could rise.

 

Long at $19 or so.

 

R

[rayl54292 10]

http://www.traderslaboratory.com/forums/f30/how-to-post-a-chart-properly-805.html

 

THXS! got it done

[ranj 10]

TG,

 

great video.

Do you mind going over where you would put your stops in terms of VSA, for each of the possible trades in your video.

 

Thanks

Rajiv

[TinGull 10]

Sure, my stops are beneath what you would logically think as pivot lows/highs. So the first stop would be beneath that hammer, maybe 2 ticks or so. If I get stopped and it turns out it just wanted to spike me out, it only takes a commission to get back in.

 

As for the rest, I use the last area of S/R that's shown on the chart as my pivot for a stop. If you want something more written out as far as prices and such for stops, let me know.

[TinGull 10]

Also wanted to point out how we can SEE that VSA is working via Volume Breakdown on InvestorRT. Note how price is heading down on decent volume while we're seeing a decrease in the net selling...this means that more buying is happening here and then we're awfully close to net 0 when that HUGE volume down bar comes into the market. Via VSA we know that this could have some hidden demand in the bar, and adding the VB indicator confirms that for us.

 

[Anonymous 11]

TG, You are the man. Very nice.

 

As everyone knows, I have mixed emotions about using indicators. However, this VB seems to be one of the good ones.

 

Volume Spread Analysis can be used in conjunction with various types of indicators. In Todd's article in Stocks and Commodities mag, he states, that indicators are used to tell the "when" of price movement. Whereas VSA tells BOTH the "when and the why" of price movement.

 

In this chart I have added a few things to TG's already spot on analysis.

 

Note that these two trades, as I seem them, do not employ WRBs in the set-up. That is, they key bars, the Test and the No Demand are not completely within the bodies of a WRB. This matters little. What we have is simply another way of trading VSA set-ups. This is what the thread should be about: multiple methods to using VSA to trade successfully.

 

This is not a bad way to trade. TG, I hope you continue to show some of these types of set-ups. (if I could just get you to drop the MAs :o ).

 

P.S. While I know there is a thread on indicators, some more info on the VB would be nice here. Especially from the point of view of VSA. Most volume indicators make assumptions contrary to VSA. This is why they are hard to use in concert. Remember, high volume on up bars in not bullish in and of itself. This, however, is an assumption most volume indicators make. VSA starts from the opposite view: Weakness (bearishness) enters on up bars with high volume.

Edited March 29, 2008 by mister ed
Add back chart

[TinGull 10]

Thanks for the kind words Pivotprofiler. I wish I had something to show with today's action...but its just awful. I'll pull up some other charts and get rid of the MA's for ya

 

Oh...per a request by another member, I'm going to split this thread into another thread since it's long as all heck. Easier to wade through that way.

[TinGull 10]

I wanted to start another thread on VSA per another members request so that the material is a little easier to chew on.

 

I'll post up a chart later on...prolly not of today's action since it's been as boring as anything I've ever seen.

[TinGull 10]

New Discussions to be posted here:

 

http://www.traderslaboratory.com/forums/f34/vsa-volume-spread-analysis-part-ii-2562.html#post20650

[TinGull 10]

Here's a chart of gold from today. Note the HUGE push through the 30min OR low. This alone gets one to think. HUGE range on ULTRA HI volume closing at the lows. Next bar is a lower volume (tho still big compared to the days other bars) doji, then...we get another big range bar on even BIGGER volume...but the VB is showing us that selling is subsiding. Hmmm, interesting isn't it? Price probes the low one more time and then volume drops off a cliff. What happened there? No more sellers.

 

Note that we get a higher volume bar that closes at the lows of the bar and of the session, but can't crack it. When the next bar shows us yet that the lows can't be cracked...it's a good opportunity to put out a marker position long. Then, when we get some obvious signs of accumulation happening via the VB indicator (note the blue divergence line) we could add. There are 3 levels of S/R to watch for any push higher. Right now...only 1 level that could prove to be resistance via a WRB, and then the high of the session.

 

One thing to note on the VB...a blue spike on a down bar is VERY telling...very.

 

[rayl54292 10]

Hello,

 

Thanks again to all the contributors, very good work.

 

Harmonic pattern trader beginning to incorporate VSA, pretty interesting thus far.

 

Daily chart of cotton. Looking to contribute and for feed back.

 

From left:

 

1. effort to fall in the middle of chart, late July - market falls.

 

2. second effort to fall in mid aug, market rises - BTW a harmonic bullish gartley pattern(http://www.harmonictrader.com/price_patternsgartley.htm) formed there as well.

 

3. market fails to fall, result positive action.

 

4. No supply signal in early sept. into former resistance now support of effort to fall bar.

 

5. test back into resistance area of effort to fall bar from late July - strength?

 

6. effort to fall the very next day, followed a few days later by a no supply bar.

 

7. market takes out low of no supply bar today, would this confirm the negative action?

 

8. clue may be that vol is decreasing on recent price push.

 

9. Red lines are resistance on effort to fall bars, green are support.

 

10. FYI. yellow line is the .886 retracement of the July high to the late aug low - the .886 is the final major resistance in taking out new hi/lo in harmonic speak.

 

In VSA theory the market will restest the area of a high volume test - #5 above - so the question is: is #5 a high vol test?

 

My "guess" is yes.

 

3 blue lines overlayed on vol from bottom to top are 30 bar avg and then 2 and 3 Std.

 

Looking to go long on the restest, the test sits in an area of a text book harmonic retracement zone before new high breakout.

 

Feedback, input and brutal honesty are all welcomed.

 

Thanks again, you are all fine contributors and I'm certain fine folks as well.

 

R

[TinGull 10]

 

The last trade ended up going for 60 points, too...I didn't have time to sit and manage it though. But, VSA came to save the day once again!

[VictorH 10]

Hello rayl54292,

 

This is my first post on this forum.

I was interested in the chart in your last post [3] and your comment about “input and brutal honestyâ€Â

 

This is my analysis of VSA in terms of looking at Volume and Standard Deviation levels.

 

The use of the Normal Standard Distribution curve can result in Negative Value Levels ( ie. for the Lower Standard Deviation levels ).

 

Volume can only be a Positive Value, hence I use a LOG Normal Distribution of Volume to assess the Standard Deviation levels. This gives levels which are always Positive. The following Amibroker Code shows what I am referring to.

I believe TG uses this approach also. Is this what you do also ?

 

All feedback on this line of thinking is most welcome.

 

Regards,

V

 

LBP = Param("Look Back", 30, 0, 100,1 );

Mean = MA(ln(V),LBP);
StD = StDev(ln(V),LBP);

xp3 = exp(mean + 3*std);
xp2 = exp(mean + 2*std);
xp1 = exp(mean + 1*std);
xm  = exp(mean);
xn1 = exp(mean - 1*std);
xn2 = exp(mean - 2*std);

Plot(xp3,"",  1,1|4096);
Plot(xp2,"",  1,1|4096);
Plot(xp1,"",  1,1|4096);
Plot(xm, "", 29,1|4096);
Plot(xn1,"",  1,1|4096);
Plot(xn2,"",  1,1|4096);

Clr = IIf(V>Ref(V,-1),29,32);
Plot(V,"",Clr,6);

[RAVIN 10]

 

The last trade ended up going for 60 points, too...I didn't have time to sit and manage it though. But, VSA came to save the day once again!

 

DAX Trading was exciting too. CLASSIC ENTRY ON THE CURSOR, LOW VOL TEST, PURE VSA. Exited rather early at S1, expecting it to act as resistance, however there was an opportunity to jump aboard again, but was ruminating over how did I miss that 100pt drop:)

 

Looking at your YM chart and the second trade, there was a similar opportunity to go long on the classic down bar test on low vol.

[RAVIN 10]

Correction TG,

 

After your 1st trade (which was stopped out), there was a classic test on low vol, ideal signal to go long as per VSA

[rayl54292 10]

Hello rayl54292,

 

This is my first post on this forum.

I was interested in the chart in your last post [3] and your comment about “input and brutal honestyâ€Â

 

This is my analysis of VSA in terms of looking at Volume and Standard Deviation levels.

 

The use of the Normal Standard Distribution curve can result in Negative Value Levels ( ie. for the Lower Standard Deviation levels ).

 

Volume can only be a Positive Value, hence I use a LOG Normal Distribution of Volume to assess the Standard Deviation levels. This gives levels which are always Positive. The following Amibroker Code shows what I am referring to.

I believe TG uses this approach also. Is this what you do also ?

 

All feedback on this line of thinking is most welcome.

 

Regards,

V

 

LBP = Param("Look Back", 30, 0, 100,1 );

Mean = MA(ln(V),LBP);
StD = StDev(ln(V),LBP);

xp3 = exp(mean + 3*std);
xp2 = exp(mean + 2*std);
xp1 = exp(mean + 1*std);
xm  = exp(mean);
xn1 = exp(mean - 1*std);
xn2 = exp(mean - 2*std);

Plot(xp3,"",  1,1|4096);
Plot(xp2,"",  1,1|4096);
Plot(xp1,"",  1,1|4096);
Plot(xm, "", 29,1|4096);
Plot(xn1,"",  1,1|4096);
Plot(xn2,"",  1,1|4096);

Clr = IIf(V>Ref(V,-1),29,32);
Plot(V,"",Clr,6);

 

Victor H,

 

Fished the Std info from a PivotProfiler post http://www.traderslaboratory.com/forums/10015-post143.html :

 

"We also look at the individual volume histogram by itself. Here we are looking at actual size (amount does not matter). A 30 period moving average can be used to determine if volume is greater than average or less than average. If you put a 2.0 standard deviation of that 30 average on the chart as well, then you could call all volume histogram bars greater than that line high. You could also place a 3.0 standard deviation of the average on the chart and call all volume histogram bars greater than that Ultra High Volume. This is basically what TG does."

 

tradestation code:

 

var: avg(0), sDev(0);

 

avg=average(v,30);

sDev=standardDev(v,30,1);

 

plot1(avg+3*sDev,"+3");

plot2(avg+2*sDev,"+2");

 

Not a programer, got code from tradestation fourm.

 

R

[VictorH 10]

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