[VSA] Volume Spread Analysis Part I

[MC 10]

I get duped from time to time on a small spread on low volume when it's just a breather or test and I think it's no demand.

 

Do yall have any tips for helping me to be more clear on what's just a pullback or "test" as we call it in VSA? I get the concept of no supply and no demand but have trouble being accurate since big volume on a narrow spread usually shows shares handed off to the herd BUT low volume narrow spreads could be just a test OR no professional support.

 

Thanks

[Tasuki 10]

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!

 

 

jj, if YOUR Tradestation didn't have that high volume bar and MINE did, that must mean that you live on the east coast (or the east coast of Canada?), because Tradestation uses different servers for the two sides of the country. If that's true, then it would confirm that one of these volume bars must be wrong, and since Sebastian had the low volume bar, I'm guessing that our western servers were the ones that were wrong for some reason. If you can post a Tradestation chart with that same region of the day (or send it to me in a private message) I'll confront Tradestation about fixing the problem. For everyone's sake who trades VSA, the data providers need to know about this (otherwise, they won't know there's a problem that needs to be fixed).

 

As a more general message to VSA traders, it is in your own self-interest to take the time to report bad data to your data provider.:helloooo:

[jjthetrader 10]

jj, if YOUR Tradestation didn't have that high volume bar and MINE did, that must mean that you live on the east coast (or the east coast of Canada?), because Tradestation uses different servers for the two sides of the country. If that's true, then it would confirm that one of these volume bars must be wrong, and since Sebastian had the low volume bar, I'm guessing that our western servers were the ones that were wrong for some reason. If you can post a Tradestation chart with that same region of the day (or send it to me in a private message) I'll confront Tradestation about fixing the problem. For everyone's sake who trades VSA, the data providers need to know about this (otherwise, they won't know there's a problem that needs to be fixed).

 

I'll post instead of private message so that others can compare as well. I think it's an important VSA component, proper data.

 

I am on the east coast of Canada, you're right about that.

 

Both esignal and Tradestation show approx 25000 contracts on that bar. Your chart looks like it's close to 50000!

 

The pic with TradeGuider is eSignal and you'll recognise TS.

[jjthetrader 10]

I get duped from time to time on a small spread on low volume when it's just a breather or test and I think it's no demand.

 

Do yall have any tips for helping me to be more clear on what's just a pullback or "test" as we call it in VSA? I get the concept of no supply and no demand but have trouble being accurate since big volume on a narrow spread usually shows shares handed off to the herd BUT low volume narrow spreads could be just a test OR no professional support.

 

Thanks

 

I asked this exact same question on the page before this one with a chart example.

What I've discovered by looking into the phenomena is that if there is weakness (supply) on the run up before it "pulls back" then those no supply bars are polar bears in hawaii, they don't belong.

 

In my example, which I'll post again here to make it easy for you, you see ultra high volume on an upbar then an upthrust following it with the following bar closing below the upthrust. This is weakness and thus those "no supply" bars are in a sense no demand from the big boys.

 

Does that make sense? I was dumbfounded when I saw it taking place as well.

Check out my second example. We have a rally on steady increasing volume, no big spikes. This is strength or demand.Then we get a sweet pullback on low vol thus no supply. So it's the background that determine's what the bar you're looking at means.

 

 

Does that help?

[MC 10]

I asked this exact same question on the page before this one with a chart example.

What I've discovered by looking into the phenomena is that if there is weakness (supply) on the run up before it "pulls back" then those no supply bars are polar bears in hawaii, they don't belong.

 

In my example, which I'll post again here to make it easy for you, you see ultra high volume on an upbar then an upthrust following it with the following bar closing below the upthrust. This is weakness and thus those "no supply" bars are in a sense no demand from the big boys.

 

Does that make sense? I was dumbfounded when I saw it taking place as well.

Check out my second example. We have a rally on steady increasing volume, no big spikes. This is strength or demand.Then we get a sweet pullback on low vol thus no supply. So it's the background that determine's what the bar you're looking at means.

 

 

Does that help?

 

Great, that makes sense. Thanks for the insight.

[BlowFish 10]

I asked this exact same question on the page before this one with a chart example.

What I've discovered by looking into the phenomena is that if there is weakness (supply) on the run up before it "pulls back" then those no supply bars are polar bears in hawaii, they don't belong.

 

 

The weakness in the immediate background of yesterday was clear enough but still not terribly weak. Certainly not the climactic action I like to see to know things are primed. In addition the "no supply" (not) looks like it was right at an up sloping trend channel. I would have spotted it real time but probably favoured long (despite the small amount of weakness) depending on longer context. The very next bar proved that wrong so no great problem.

 

This was a great example I thought as it was quite subtle and not as obvious as a polar bear in Hawaii:)

 

Cheers.

[bertg 10]

Folks,

 

I started a thread with questions that I would really like VSA-ers to answer. Please forgive for plugging that thread here, but if you're like me, this VSA thread is pretty much all I look at here at TL.

 

http://www.traderslaboratory.com/forums/3/specialists-and-eminis-3040-post26935.html

 

Thank you,

Bert

[mister ed 10]

...but if you're like me, this VSA thread is pretty much all I look at here at TL.

 

What?!!! You are missing out on HEAPS of good stuff - check out this BEST OF TL thread as a starting point.

[tawe trader 10]

How'd it go on the FTSE? Are you back in the "black" after the bank announcement day now?

 

Yes I have made up the loss, a couple of trades on the Dow and S&P last week helped. Thanks for asking JJ.

 

-------------------------------------------------------------------

 

Here's a FTSE trade I've carried out this morning. I have gone up a timeframe due to something Sebastian said about mkt noise. I think the 10min/15 min timeframe may suit my trading style better due to the fact I prefer wider stops.

 

This morning's 10 min FTSE Future chart is attached and I went long for a change !!!

 

The FTSE was down big time this morning, due to Fridays poor session in the US and US futures were down this morning.

 

Reasons for long trade - I was looking for a quick bounce of a possible 10 to 20 pts.

 

1. In the background (not shown) on the hourly chart there is support around the 6300 level.

2. 9am (green arrow) - ultra high volume down bar closing on S2 (at 6295)

3. The next bar at 9.10am makes a lower low but closes up and the close is higher than previous down bar with less volume (blue arrow) has the major supply dried up for the time being ?

 

So now I assumed there was a fair amount of buying in the 9am large spread down bar plus we have hourly chart support together with S2 support. I was looking to go long once the high of the 9.10 bar was taken out (marked with a yellow dotted line).

 

The high was passed and I went long in the FTSE cash mkt. As I was going against the downtrend I got out on the bar marked with the red arrow and I managed a 21 pt gain.

 

This is more of a high risk long entry. I could have waited to see if there was a low volume test later on before going long but I think if you are not too greedy there are a few pts to be made on one of these bounce's.

FTSE Fut_Mon 17th Dec - Long S2.doc

[Anonymous 11]

Jaybird,

Yes and no.

 

Strength comes in on down bars and weakness comes in on up bars. You correctly picked up that the bar had demand (strength) despite the lower close. However, the fact that the volume is greater than the previous two bars matters little. That is to say, with a No Demand bar volume less than the previous two bars is part of the definition. That is not the case when defining high volume. Of course we do look at volume relatively but every volume bar that is greater than the previous two isn't automatically high volume.

 

I would still like to see either a Test or No Supply bar after. Or I would like some sort of strength on another timeframe.

 

Having said that if this was an known news release like the up jobs report, you could simply wait to see if the next bar was up.

 

With respect to wether the data is correct, it doesn't matter in that you have trade what you see.....

[jjthetrader 10]

Yes I have made up the loss, a couple of trades on the Dow and S&P last week helped. Thanks for asking JJ.

 

-------------------------------------------------------------------

 

Here's a FTSE trade I've carried out this morning. I have gone up a timeframe due to something Sebastian said about mkt noise. I think the 10min/15 min timeframe may suit my trading style better due to the fact I prefer wider stops.

 

 

Awesome Tawe, I was beginning to think your order execution software didn't have capacity to execute long trades;)

 

Good trade, thanks for sharing. I think you're smart to not be greedy. Tom said in the Bootcamp that if weakness appears on the 15min chart you can expect weakness for at least 15min. This is a good reason to get out on the second bar as you did because as you can see your follow through volume wan't that great on the bounce.

Congrats!

[jaybird 10]

thanks pivot

[tawe trader 10]

Here's a before and after 10 min chart of yesterday's Mini-Dow.

 

In the first chart the mkt dropped pretty much from the open at 2.30pm UK time. From 4.40pm onwards there were wide-spread downbars on increasing volume finishing on a possible selling climax bar on very high volume at 5pm.

 

From what we have learn from VSA - strength comes in (hidden) on downbars.

 

I looked to go long once the yellow dotted line was broken with a stop under the lowest bar.

 

The next chart is over 3 hours later. As you can see the mkt went sideways for a while before breaking above the selling climax bar and from this dotted line to upper dotted line there was at least 100 pts available if using wide trailing stops. Using this entry set-up it would have got you into the long trade a lot earlier than the trendline break.

 

.

YM 10min Mini-Dow_Tues 18th Dec #1.doc

YM 10min Mini-Dow_Tues 18th Dec #2.doc

[jjthetrader 10]

Here's a before and after 10 min chart of yesterday's Mini-Dow.

 

In the first chart the mkt dropped pretty much from the open at 2.30pm UK time. From 4.40pm onwards there were wide-spread downbars on increasing volume finishing on a possible selling climax bar on very high volume at 5pm.

 

From what we have learn from VSA - strength comes in (hidden) on downbars.

 

I looked to go long once the yellow dotted line was broken with a stop under the lowest bar.

 

The next chart is over 3 hours later. As you can see the mkt went sideways for a while before breaking above the selling climax bar and from this dotted line to upper dotted line there was at least 100 pts available if using wide trailing stops. Using this entry set-up it would have got you into the long trade a lot earlier than the trendline break.

 

.

 

The nice thing about Tawe's lessons is that they are real time, not hindsight. He read it in realtime and emailed me just after the climactic action saying look to go long. Great trading man!

 

This is what I like to see on the forum, how VSA translates into trading with entries and exits from someone who couldn't see what the next bar was going to say.

The other nice thing is that Tawe shares his losing trades which help us not make the same mistakes.

 

Reading VSA seems to be the easy part, making the trade is the more difficult half of the equation. Even Tom Williams admits that trading is not easy.

Thanks Tawe, you make it easier.

[That One Guy 10]

Good job on that trade tawe. I was watching the 30 min chart and went long around that area. I closed my position for 89 tick gain.

[tawe trader 10]

Thanks chaps.......sometimes the easy part is getting in. Good trade Jwhite.

 

I find the hardest part is giving the trade room and letting it 'run' when your actually in it.

 

Time to sit on your hands and do nothing, a bit like what Jesse Livermore has said.

 

Patience is bloody hard - but perhaps that is where the secret lies !

 

.

[MC 10]

Good job on that trade tawe. I was watching the 30 min chart and went long around that area. I closed my position for 89 tick gain.

 

I was going to edit your post to reflect that it was a paper trade but that's your call, some get angry when paper trades are represented as live.

 

I used to post paper trades on a few sites and despite a few posts back where I clearly said I'm on paper, that was overlooked and I was bashed like I was a liar.

 

I know that you aren't trying to dupe anybody and you realize paper trading isn't the same as live from chatting with you in TL chat.

 

I'll be in chat in a lil bit and we can get some more VSA practice in.

[monad 10]

Reading VSA seems to be the easy part, making the trade is the more difficult half of the equation. Even Tom Williams admits that trading is not easy.

Thanks Tawe, you make it easier.

 

Correction jjthetrader, Reading VSA is not easy in realtime either i.e as a signal to go long or short, It is only easy to read them and justify them once next few bars are in view and even then you end up with a successful test or a failed test Nice fancy term , failed test but did you know that at the time:crap:

 

Could it be that it is the application of VSA, bid/ask, up/down vol etc in realtime trading be the reason for the paucity/reluctance to post realtime trades It was the same on T2W and Elitetrader.

[Anonymous 11]

Short trade signal in murky market.

 

I think the overall market here is in a distribution phase, preparing for another "wave" down. The 15 min chart (not shown) certainly looks like price is moving sideways which is the hallmark of a distribution or accumulation period.

 

Some things of note on this chart.

 

1. The No Demand on the left that represented a change in the market.

 

2. We get an Effort to Rise candle, but we do not get any result from it. Note that the very next candle makes a higher high, but closes lower. Then 2 candles later, we get a No Demand which is also a buying bar. Volume is low so this is a weak bar despite making a higher high.

 

3. The No Demand which signals the trade happens to be within the bodies of two WRBs. The most recent dark WRB and the WRB formed by the Effort to Rise candle.

Edited March 29, 2008 by mister ed
Add back chart

[Anonymous 11]

Correction jjthetrader, Reading VSA is not easy in realtime either i.e as a signal to go long or short, It is only easy to read them and justify them once next few bars are in view and even then you end up with a successful test or a failed test Nice fancy term , failed test but did you know that at the time:crap:

 

Could it be that it is the application of VSA, bid/ask, up/down vol etc in realtime trading be the reason for the paucity/reluctance to post realtime trades It was the same on T2W and Elitetrader.

 

Could somebody answer me this? If a trade set-up is occurring in real time, how does one:

 

1. place an order

2. place a stop (always use stops)

3. begin to monitor position

4. take a snap shot (screen shot that shows the trade as the most right bar on the chart)

5. Makes comments on the chart

6. Posts the chart in the thread

 

I am much more concerned with the first three.... Nobody on this thread pays my bills.

[jjthetrader 10]

You don't have to post the trade in real-time just post a trade that took place in real-time. That's what I was refering to. Tawe didn't post in realtime, he posted a realtime trade not in hindsight as what he would have done.

 

Monad, I find reading VSA the easy part. Seeing weakness is easy, where to get in and not have a stop taken out is hard without large stops.

[monad 10]

You hit the nail on the head there JJ, Yes it would be educational if there are posts illustrating what the realtime experience was. PP, Nobody is telling anybody to engage on this thread whilst they are actually trading;) as JJ also stated

Glad to hear you are finding it easy to read VSA in realtime,JJ, yes it is how to trade them entry/exit etc is what most traders have problem with this method.

I suppose if you combine your reading with the traditional candlestick patterns as Brownsfan suggested would help.

 

I still am puzzled by this failed test stuff, what is the use of calling it such when it is only evident after the fact, at the time it looks like a perfectly sound test on low vol in context within previous down bars on high vol. When markets are in strong down trends you see that all the time.

[jumpin 10]

Where is Todd of Tradeguider, and is his Boot Camp software still available somewhere?

[jjthetrader 10]

I suppose if you combine your reading with the traditional candlestick patterns as Brownsfan suggested would help.

 

I still am puzzled by this failed test stuff, what is the use of calling it such when it is only evident after the fact, at the time it looks like a perfectly sound test on low vol in context within previous down bars on high vol. When markets are in strong down trends you see that all the time.

 

Calling the event a failed test is named that because it depicts "negative action". It becomes a bearish sign. If you were bullish seeing a test and were actually in the market this would be a good time to get out or reverse. If you were looking for a long setup then this would indicate to fade it instead.

 

Yes monad it is my entries that make vsa difficult (for me) at times. Translating into trading setups was difficult but Ravin & Tawe have been helping me out and giving me a clearer picture of what trading VSA is.

 

Jumpin: Todd's bootcamp is available at the tradeguider website.

 

PP, everyone appreciates your commentary. Do you only trade forex? What timeframes do you like?

[zdo 20]

Was just re-reading the section in MTMarkets about Trendline clusters. Than, searched on ‘VSA’ ‘trend clusters’ on the TL forum and jjthetrader’s post rating them highly from 10/27/07 was one of only two that came up.

Does anyone know how they are actually calculated?

What kind of constraints / qualifications are placed on historical trendlines etc in order for them to be used in the clusters?

Such as - must a trendline that is used be part of a historical parallel trendline channel or could a standalone trendline just from a set of tops (or bottoms) qualify, etc.? Thanks