[VSA] Volume Spread Analysis Part I

[Anonymous 11]

........Tradeguider says it has over 400 signals, but they seem to come down to a common few, really:

1) tests (successful and unsuccessful)

2) shakeouts

3) no demand

4) stopping volume

5) pushing through supply

6) upthrust

7) selling/buying climax

8) climactic action

9) support/weakness coming in

10) trap up/down move

11) no result after strong effort

12) selling/buying pressure

13) bottom reversal

14) end of a rising market

 

I do not have Tradeguider, nor do I recommend it. Everything can be learned in the book and the bootcamp. And TG will no longer support the growth of those who do not buy the software. In other words, all they care about is selling software. THEY ARE NOT CHAMPIONS OF VSA. They are no different than eACSTrend or any other product huckster out there.

 

To be sure , the method is valid but the method is being lost in a desire to market a partial black box software package. Sorry, just had to vent. As of last weekend, TG will no longer be doing customer only learning sessions for customers who do not own the software. So, they will take your $100.00 (book) or your $500.00 (bootcamp) but then they want nothing to do with helping you grow your VSA knowledge.

 

As far as the 400 indicators go, this is a little misleading on their part. What they do is have, for example, 10 different dialog boxes associated with No Demand. That is, 1 of 10 different boxes can come up with a No Demand signal. The differences are very subtle and understanding that the signal is No Demand is actually all that is needed. However, the software reads nuances in the price action to determine which of the various No Demand signs is displayed.

 

To be sure, there is nothing wrong with that. However to say that one cannot learn VSA on his own because of the number of indicators involved is a little felonious. As you have shown, it breaks down to far fewer than they would have you believe.

 

P.S. Again forgive me for venting. I feel betrayed by the new TG focus and tell Gavin and Todd this all the time. If they are not willing to be champions of VSA first, then I will be.

[Anonymous 11]

.......In my experience, Tradeguider (and the rest of you who have posted charts here) are missing half the volume information. For my money, I really need to see upvolume vs downvolume. With Tradestation, you can easily put those two on one subgraph. I've got mine set up with thin green line for upvolume, to which I overlay a big fat red bar for downvolume. The amount of added information you get this way is amazing.

 

Be careful of this. Take a look at the chart from my prior post. That large down bar on heavy volume would be associated with Selling , or negative, volume by traditional volume indicators.

 

But we know that there is BUYING in there. Strength comes in on weakness (down bars) and Weakness comes in on strength (up bars). Just step back and look at what price did after that large volume spike. The overall drift of prices changed to the upside. Clearly, there must of been some buying in that bar therefore.

 

Now if you are referring to bid/ask or volume on all stocks on an up tick or such, that is not necessary. Think about this, If all stock of the ES are ticking up on heavy volume, who is on the other side doing the selling?

 

Selling climaxes will have heavy "selling volume", but it is the hidden Professional demand (buying) that puts the floor in the market.

[Tasuki 10]

Sorry, PP, did I sound like I was a shill for Tradeguider? Didn't mean to if I did. I'm not sure if they really will drop the book buyers from their customer seminars. You may know more than me, but I've heard several of Todd's webinars, and he's started off every one of them threatening to dump the book and bootcamp buyers. So far, it's just been alot of hot air. We'll see.

 

I posted my initial comments in the hope that we could maybe look at the VSA somewhat systematically, analyzing which signals work best, and in which contexts ("backgrounds").

 

I'm new to Traders Lab, so I'm not sure I'll get this posting right, but I'm going to try to post a chart I prepared during my free Tradeguider trial which shows a basic test followed by a shakeout. This is a pattern that seemed to work well.

[Tasuki 10]

Hmm, something wrong, my chart didn't post.

[Anonymous 11]

Hi Tasuki. I was not directing my comments at you. Sorry if you felt that I did. I just know that Todd and Gavin read my posts and I was talking to them.

 

Last weekend Todd finally admitted that Gavin is more of an indicator trader. This is something he would not admit prior to then. Yes it is true that Gavin is less experienced in VSA. So why does HE do all the public events and Todd do only the events for software customers?

 

I was shocked when Todd showed up at the event held here by TL. That was great. Check out the comments and you will see that others noticed the difference in abilities between Gavin and Todd. Its just a shame that they no longer want to help educate ALL CUSTOMERS.

 

Anyway, I do not want to TG bash. I believe in VSA and want to both share and learn from others. We can figure this out, with or without them.

[torero 10]

Amen to that PP! I know that there are some legit businesses out there but seems each trader has to find his own way to gain knowledge and experience. Post well said.

[Tasuki 10]

Hopefully, attached should be an example of "no demand" (at least as I understand the term)

[sds 10]

Hopefully, attached should be an example of "no demand" (at least as I understand the term)

 

I am not able to understand one thing.

 

Consider the right hand side of the dotted vertical line. There is move down till 1420.

But if instead of a move down, had there been a move up then I would have said there is no supply, at the dotted line.

 

Things happened in the past could easily be analysed and concluded. But I am not able to apply logic on the current scenario.

Perhaps PivotProfiler can throw light on this.

 

sds.

[Horus 10]

For those you that have the VSA software, have you looked at these arrows printed on chart in realtime?

 

Last time I look at this software all the arrows changed position so it looks great after the fact but in realtime you will get a quick wake up call followed by empty trading account!

 

I would be interested to see and almost guarantee this is still the case, all their arrows change position after the fact. but I can tell you now when something looks so good (roy kellys pivot trader is in this category) you have to questions it twice.

[walterw 10]

Horus: I did try Tradeguider and Roy Kelly many years ago when I was on the pursuit of making myself a technicall aproach , and I can testify unfortunatly that this softwares change signals of place after the fact.... lol , that was my experience...

[Horus 10]

WalterW, thats exactly what happened to me, its funny cause you dont even notice it until its running in realtime. When i first got a hold of VSA and Roy Kellys rubbish I was in shock after I placed my first trade! I placed the trade and 5min later the arrow changed! I thought I was seeing things or going crazy! LOL

 

Basically the fact that the signal positions change make VSA and the concept behind it worthless. TradeGuider Systems chart signals changing means that the concept is fit to data after the fact. I spoke to Tom Williams

a few years back, he even admitted he was not happy with the way the software promoters presented the concepts. Same for Roy Kellys indicators.

Both VSA and Roy Kellys tradestation code are available on the old omega forums. But dont waste your time.

[sds 10]

WalterW, thats exactly what happened to me, its funny cause you dont even notice it until its running in realtime. When i first got a hold of VSA and Roy Kellys rubbish I was in shock after I placed my first trade! I placed the trade and 5min later the arrow changed! I thought I was seeing things or going crazy! LOL

 

Basically the fact that the signal positions change make VSA and the concept behind it worthless. TradeGuider Systems chart signals changing means that the concept is fit to data after the fact. I spoke to Tom Williams

a few years back, he even admitted he was not happy with the way the software promoters presented the concepts. Same for Roy Kellys indicators.

Both VSA and Roy Kellys tradestation code are available on the old omega forums. But dont waste your time.

 

Hello Horus,

 

I have not read any material on VSA. My knowledge of it is limited to what is present in this forum.

 

Could you read my earlier post on this forum. When I try to apply concept to what has happenned in the past, its okay. What about the present tense? It is very difficult to apply logical. Could you comment on this?

 

sds.

[notouch 10]

I see the point. With hindsight it's easy to look at Friday's price action and think that VSA would have got you into a perfect trade but in real time you would have been stopped out several times on the way down. E.g. on a 5 minute chart you would have gone long at 1140 EST only to see YM go down another 80 points.

[walterw 10]

Horus : Volume analisis is another thing.... vsa tried to put in a can a very sofisticated concept wich is, (from my perspective) very dificult to program on a software.... the volume concepts, by them selfs are worth taking into acct... now they are much previous to the existence of vsa... you can go back to wickoff who actually was a tape trader... and a candle chart plus volume histograms its enough... cheers Walter.

[Anonymous 11]

Hopefully, attached should be an example of "no demand" (at least as I understand the term)

 

I have attached the chart with a few arrows.

 

First, let's start at the left side. The first bar with the double arrow points to a bar where SUPPLY entered the market. The bar is wide, closes up from the previous bar, closes near the low of its range, and has ultra high volume.

 

If this bar was buying, then why did it close near its low? Many people will see up volume and up close and think demand. VSA, however, tells us that Weakness comes in on strength and strength comes in on weakness.

 

Next skip to the next double arrow. Here we have an UP THRUST. This bar makes a higher high, closes higher than the previous bar, closes in the middle of its range and has high volume. The Professional Money is trying to get traders to go Long, when the next likely direction is down. They are trying to trick the retail trader into a bad position. So an UP THRUST is a sign of weakness.

 

Now we come to the bar in question. We have a narrow range bar that closes up from the previous bar, closes in the middle of its range and has volume less than the previous two bars. YES, THIS IS NO DEMAND. If the Smart Money was interested in higher prices, then the volume should not be so small. The narrow range also tells us that the Smart Money is not interested in higher prices. They keep the range narrow because they know the market is weak. The retail trader thinks he is getting a good fill, and then the floor drops out..........

 

The last two arrows point to Stopping Volume/climatic action. Wide spread bar with Ultra High volume that closes in the upper portion of it range and lower than the previous day. BUT THE NEXT BAR IS UP. If all that volume represented selling, then the next bar could not be down. Moreover, if all that volume was selling, then the close should be on the low of the bar, not in the upper portion.

 

On an aside, without seeing the open of the bars, It looks like we have a valid white hammer pattern setting up there. Or at least a Long Shadow that we need to take a closer look at. WRB analysis also tells us about the change/shift in supply that is happening at this key bar.

Edited March 29, 2008 by mister ed
Add back chart

[Soultrader 12]

Thank you for the great explanation PivotProfiler. Taking a look at the chart, is it possible for VSA to detect whether we will have a V bottom or a W (second test) or even a third test of the low? While W and third tests offer excellent risk:reward, I personally have trouble taking a trade on V reversals. Which is why I usually wait until price breaks a pivot point for any longs. Any input would be appreciated. Thank you.

[Anonymous 11]

For those you that have the VSA software, have you looked at these arrows printed on chart in realtime?

 

Last time I look at this software all the arrows changed position so it looks great after the fact but in realtime you will get a quick wake up call followed by empty trading account!

 

I would be interested to see and almost guarantee this is still the case, all their arrows change position after the fact. but I can tell you now when something looks so good (roy kellys pivot trader is in this category) you have to questions it twice.

 

 

I am not a fan of the software but will defend some of it here.

 

First, some of the "signs" do change. If the "sign" was a light green triangle, it may change to a dark green rectangle a few bars later. This happens because the software has determined that the amount of demand is greater than originally calculated. I went to many webinars before I saw this happen in realtime. Admittedly, I was a bit confused by this.

 

So, the darker signs which signal heavy supply or demand will tend to be "optimally positioned" on the chart. NOTE THIS DOES NOT CHANGE WHAT THE BAR ACTUALLY REPRESENTS, ONLY THE SOFTWARE INTERPETATION. That is , this is a software "selling ploy" and not a VSA weakness.

 

One must understand the signs themselves.

 

Take a look at the chart above. I have shown where we had stopping volume/climatic action. Now, in TG, the sign will not show up until the bar AFTER the bar with the arrow. Why? Because we need to see what happens on that volume to make a determination of its meaning. Tom Williams, the father of VSA, would enter on the close of the bar with the arrows, but most others (like Todd K. or Sabastian Mamby) would wait for the close of the next bar as confirmation.

 

This is not unlike many candle patterns that need certain price action before and after a particular candle. So the sign ends up being placed underneath the stopping volume bar, the low, and it looks really good. HOWEVER, IT IS NO A BUY SIGNAL TO BEGIN WITH. PEOPLE WHO USE INDICATORS WRONGLY ASSUME THEY SEE INDICATORS ON TG. IT MAY LOOK LIKE BUY AND SELL SIGNALS TO THE INDICATOR CROWD BUT IT IS NOT.

 

If you look at the previous chart, look at the No Demand. Those who understand VSA will know at the close of that bar that it is NO DEMAND. TG, however, will not place a sign on that bar unless the next bar closes down. SO THE SIGN COMES LATER THAN THE ACTUAL UNDERSTANDING OF WHAT IS HAPPENING. Now that makes it look "spot on" to the uninformed , but that does not change the power of the method.

 

As far as signs changing positions on the chart, I can not comment on that. It is not a good thing to be sure. This should not be happening and may be a glitch in the program version you looked at.

[notouch 10]

 

The last two arrows point to Stopping Volume/climatic action. Wide spread bar with Ultra High volume that closes in the upper portion of it range and lower than the previous day. BUT THE NEXT BAR IS UP. If all that volume represented selling, then the next bar could not be down. Moreover, if all that volume was selling, then the close should be on the low of the bar, not in the upper portion.

 

 

There appeared to be climatic selling on high volume followed by an up bar before the one you have highlighted - the 8:30 bar. With hindsight it's easy to see that this was not a great buying opportunity but in real time how would VSA have kept you out of that trade?

[Anonymous 11]

I am not able to understand one thing.

 

Consider the right hand side of the dotted vertical line. There is move down till 1420.

But if instead of a move down, had there been a move up then I would have said there is no supply, at the dotted line.

 

Things happened in the past could easily be analysed and concluded. But I am not able to apply logic on the current scenario.

Perhaps PivotProfiler can throw light on this.

 

sds.

 

Hi. There are TWO failed test prior to the No Demand sign. This means the Smart Money was testing for supply AND FINDING IT. If there is indeed supply in the market, price should move down.

 

Now we need to keep the background in mind. We have seen supply come into the market. We have seen an Up Thrust. These are signs of weakness in the market. Then we get two failed tests, more signs of weakness. And finally, we have the No Demand bar just prior to the fall.

[Anonymous 11]

There appeared to be climatic selling on high volume followed by an up bar before the one you have highlighted - the 8:30 bar. With hindsight it's easy to see that this was not a great buying opportunity but in real time how would VSA have kept you out of that trade?

 

Personally, VSA is my primary method and Japanese candlestick patterns are my secondary method. VSA is used to understand the context of the candlestick pattern-the actual buy/sell set up.

 

More generally, however, I would say this......

 

Is there a Pivot line, like R1 or Value Area Low, around the various bars indicated? In other words, if two bars seem to be the same, I would tend to take the one that occurs around a known support/resistance area first.

 

Also note that two bars later, we see a narrow bar that closes up from the previous bar, closes in the middle of its range, and has volume less than the previous two bars. This is No Demand. So we see that we are possibly early if we are already long.

 

I would also note that we are looking at only one timeframe. While this is after the fact, it is more likely the case that the second bar (Stopping volume-strength) shows up on MORE THAN ONE TIME FRAME.

 

Simply, one needs to understand where support/resistance areas are, use mutiple timeframes, or have certain entry criteria beyond just one bar on high volume. And in the end, if you were wrong (early), one needs the ability to get out and re-evaluate and then get back in.

 

 

****edit**************

 

I just wanted to add that Demand did indeed enter the market on that bar of which you speak. However it was swamped by supply. Now look closer at the two bars. Where are the repective closes? What are the sizes of the ranges? In short, there is a differnce in the two bars. That not withstanding, where are the support/resistance areas?

[Horus 10]

To all readers of this thread. I do not question the value of volume and range analysis. I am sure there is a lot of value and you can find an edge within these studies.

 

TradeGuider on the other hand is NOT volume spread analysis. I know this company from the day they started. It used to be sold under the site http://www.tradetowin.com.

 

Here is the original software site back in 1998: Check it out.

 

http://web.archive.org/web/19981212033547/http://www.tradetowin.com/

 

Here is how it works:

 

TradeGuider is a collection of about 40 volume and range patterns for buys and sells signals, shown on the chart with arrows, rectangles etc. And that all it is, just pattern recognition. I also think they have some kind of highest high and lowest low functions built in to this analysis. For example, current bar is lowest low for min 5 bars and range and volume are X, then we have a "potential" buy or sell.

 

Now when a bar meets one of these pattern definitions, then an arrows or rectangle shows up on screen.

 

Here is the trick:

 

Imagine last Friday we had an arrow to buy, then Monday, if the market goes lower, this arrow WILL disappear. If Monday meet one of these pattern definition again, another arrow will show up!! If Monday dosent meet the definitions and market goes up on Tuesday, an arrow will show up on Tuesday below Monday!!!!

 

So in history it looks like the software picked the perfect low! Same logic applies to highs.

 

And here you have the ingredients for "snake oil" software. Simple, backed by some fancy name, site and marketing.

 

Oh and occasionally you WILL catch an odd high or low so no change is needed in the location of the arrow.

 

This is not VOLUME or SPREAD analysis. Period. There is no buy or selling pressure involved here at all...

 

Now you can called it Volume Spread Analysis by TradeGuider or as Roy Kelly calls it "The Trading Method That Can Make You Rich" - Floor Traders Tools.

 

Roy Kelly - TradeStation

 

See the perfect top and bottom picker. Its the same concept as TradeGuider. They change after the fact.

 

I call this "Back Trade Analsyis".

 

For the good folks of this forum and the new traders, stick to creating your own method, it takes time, it takes discipline and lot of determination. There are a lot of great free resources, this forum being one of the best ones I have seen. There are a few legitimate tools but very few and none perfect. Always do your home work before you pay.

 

[notouch 10]

PivotProfiler, I think the multiple time frame approach is key. If you relied on VSA using only the 5 minute charts they you would get squashed on a regular basis. The bar I referred to was a bounce off of the daily pivot I believe whereas the one you highlight was a bounce off of R1. Obviously with hindsight we can see that R1 held but the pivot didn't. In real time that would have been a lot more tricky if you had been using only the 5 minute charts. A problem I see is that there will almost always be high volume supply followed by a bounce near a pivot (assuming you're looking for longs). Wouldn't just placing a limit order at pivot levels be a better strategy? The trouble with multiple time frames and waiting for bars to close is that you'll be late for many moves.

[Anonymous 11]

Again, I do not recommend the software nor do I like it.

 

Just get your facts correct.

 

Tom Williams first wrote the book called "The Divine Secrets of the Stock Market". TG bought the rights and changed the name.

 

Tom's first software was called Wyckoff VSA, the precursor to Tradeguider.

 

These are the facts and are not hidden by them. The book , "Master the Markets" has images from the origianl software with Wyckoff VSA clearly labled.

 

There are 400 signs and none are buy nor sell indicators.

[Anonymous 11]

HORUS;

 

If you have a problem with TG, I can give you Todd's or Gavin's home number so you can take it up with them.

 

As for this thread we do not need it.

 

Since you know soooo much about what does not work, why not start a thread about what DOES work?

[Horus 10]

I dont use TG and dont recommend it either.

 

What docent work is just as important what does work. I think its fair to say that its important to hear about both sides of every approach. This is an open forum.