[VSA] Volume Spread Analysis Part I

[sheptrader 11]

well here it is, plus 2 other trades i did this morning

all of price and volume.

 

it works and will keep on working

 

 

sheptrader

[monad 10]

  sheptrader said:

well here it is, plus 2 other trades i did this morning

all of price and volume.

it works and will keep on working

sheptrader

 

 

Good trading, any particular reason for the short bias through the session,

there is an uptrend from 15hrs to 16.30hrs, was it difficult to read price/vol during that period , if so why?

[sheptrader 11]

i was away from computer at that time, i did miss a good long trade at 11:06 but i am happy with what i got ( so Far)

[jjthetrader 10]

  sheptrader said:

well here it is, plus 2 other trades i did this morning all of price and volume.

it works and will keep on working

 

sheptrader

 

Thanks for sharing Shep, do you have a blow by blow as to what price/volume principles got you in?

If you have time we wouldn't mind seeing what was going on in your decision process.

Thanks

[BlowFish 10]

  Adamned said:

Hands down this is the best thread on the net. I would like to thank all the regular contributors for their inputs. I strongly believe in the concept of VSA and I think its one of the best approaches to the market.

 

Lately I have been doing much more testing than normal on the data generated by stock index futures. I have come up with an interesting finding that has deep implications for my VSA analysis. I have come to this conclusion a 34 minute bar can be decisively different than a 30 minute bar. If this can happen on a 30m to 34m comparison it can happen on any time frame. Then I took it a step further and tested starting at 10m all the way up 60m bars. Meaning more specifically I tested a 11m bar, 12m,13m, 14m, 15m, all the way up to 60m bar. This has opened a can of worms for me. Certain bar patterns can occur in odd numbers for example a 53m chart. For practical reasons its not possible the keep tabs on 50 different charts. My question is this. Since a big part of VSA judges the close of the bar in relation to the high for an up bar or low for a down bar. For example say a up 30m bar that closes well off its high must of had selling inside it. But what if the 34m bar some how closes right near its high. This causes me great confusion.

 

One idea is to not use time based charts but transaction volume based charts (tick charts). But the same problem can take place there as well 500 tick compared to 550 tick could be quite different. My question to all you VSA experts is what did the creator of VSA have to say about this phenomenon? Thanks for the help.

 

Thats a great question and I see there have already been some great replies. Really there are three variables in the equation, price time and volume. (We could add tick volume as a proxy for volume but lets keep it simple). To draw a traditional chart with bars or candles we keep one of those constant, usually it is time. The value of that constant is arbitrary whether it is 5 minutes, 500 contracts or 5 point range. What you pick here is hugely important, there are a couple of threads here at TL on the subject. By changing the bar size you are changing your 'sampling rate' by doing this you are changing the main parameters of the moves you are trying to catch. As Charlie Drummond used to say the daily bar tends to be longer than the hourly after all.

 

Anyway back to your observation, PP answers quite nicely about things being relative and that's what we are looking for, changes in relationship to what has been. What must happen for a top to be put in? price must stop making new highs. If you see "climactic volume" but "lack of progress in price" what can you say? (The "s indicate a degree of fuzziness). Really its not about patterns (I'd also argue neither are candles, just to provoke Brownsfan of course :boxing:) its about underlying shifts in "sentiment" that those patterns can highlight. If you strip away all the fluff its about price moving up and down and how easily it is doing that. e.g all of the topping patterns involve price not going up any more or going up very 'poorly', how can it be any different?

 

The charts are a map not the terrain, if you want to get 3 blocks use a different map than for interstate. If you use a 1:50000 or 1:49000 it will still get you where you want to go provided you have a map that shows the detail you need for what you want.

 

Finally and most important I think its good to question ever little nuance. Some people can trade on faith to a lesser or greater degree, I can not either. For me I can not build a belief system for myself unless I deconstruct stuff. Core concepts have to reflect 'reality' for me. Without solid beliefs you are not going to do do well. Be careful though over researching can be an indication of looking for certainty (or the holy grail if you like). Remember we are looking for stuff that works out on balance not every time.

 

Cheers.

[itai007 10]

How do I see the pictures in this thread ?

for some reasone I see an x where you probably posted a picture

[BlowFish 10]

  jjthetrader said:

I have a question about relational instruments and volume.

 

We all agree that the ES is the big brother of the mini futures contracts right?

The other index futures tend to follow the S&P right?

 

Ok now, lets say we're trading the Nasdaq mini (NQ). Will we be given the clues in the NQ's volume about what direction it's going to take even if it's being led along by the S&P? Or will we need to look at the ES direction and volume to determine the directin of the NQ? You see what I'm saying?

Are any of the indexes independant aside from the big brother?

I've noticed the Dow and Nasdaq mini's tend to be delayed reactions to the ES. And the volume on the YM and NQ don't speak nearly as loudly as to what is going on in terms of supply and demand as the ES does.

 

Anyone with experience in this matter?

 

I really don't think the S&P consistently leads, it would be far to easy to make money if it did (even if only by split seconds). I know many who argue the YM tends to lead for a variety of reasons (easier to buy/sell a basket of 30 stocks than 500 being one). Sometimes Europe leads sometimes not. Its such a tangled web with powerful computers running sophisticated algorithms to arbitrage things out in a nanosecond.

 

Some things that I have noticed, thinner markets tend to overshoot then counter correct. When all the traded volume was done on the big S&P it behaved like the elephant the ES like the flies. Also Smaller tick sizes tend to produce more and faster movement (seems to me). I am currently reading Amazon.com: Trading and Exchanges: Market Microstructure for Practitioners: Books: Larry Harris excellent book btw, I am sure it is something that is covered in depth.

 

Cheers.

[jjthetrader 10]

  BlowFish said:

I really don't think the S&P consistently leads, it would be far to easy to make money if it did

Cheers.

 

Thanks for the insight BlowFish. I observed the NQ yesterday while trading the ES and noticed that the NQ was a couple steps ahead of the ES so yes my theory wasn't that sound:-)

 

To the Joel Pozen students, is there a price/volume benefit to trading the ER2 that you guys are trading? Is that what Joel taught you on? Is it 'easier' to read or something or just a personal preference?

[Soultrader 12]

Interesting price action on premarket ES. See chart below:

 

[Gordon G. 10]

Good afternoon,

 

can anyone of the experts comment the 10' chart available ?

 

It's a 10' chart of the mini dow 5$ ... I highlighted the bars that are with the trend and that have less volume than the 2 previous bars.

 

Today I'm really lost.

 

Thank you guys !

[tawe trader 10]

Hello Gordon

 

I am not quite sure of your question but I did notice an interesting finish to the days action.

 

Not long before closing (times are UK based) the was a very high volume down bar, very near to the days low (marked with green arrows). I have also attached a 10min YM chart.

 

Could there be hidden buying in that bar by the so called 'smart money'

 

 

# Pls ignore the blue lines on the chart, I forgot about my crosshairs when I took a screen snapshot.

.

Edited February 5, 2008 by tawe trader
update

[sheptrader 11]

Hi Gordon G, remember weakness apppears on up bars not down bars, you have marked all down bars with volume less than previous two not up bars.

 

 

 

so simply put,.

down trend looking to go short look for weakness in up bars

up trend looking to go long look for strength in down bars

 

regards

 

sheptrader

[mister ed 10]

  itai007 said:

How do I see the pictures in this thread ?

for some reasone I see an x where you probably posted a picture

 

Hello 007

 

Are you still having a problem? Try refreshing, rebooting, check you haven't got a block on pictures in your browser?

[Gordon G. 10]

Goodmorning,

 

thanks for your replies, tawe and shep.

 

Tawe: great, when I saw it developing in real time I thought the same thing, but as I do not trade night session, I finally did not pay much attention to it.

 

Shep: I did read Williams book many times now, not counting the VSA threads on this and on other forums, but I keep doing the same mistake.

I posted a chart following your indications. At point A and B demand seems to be present but

supply kept pushing the market down with less volume.

 

I was so out of synch that I kept thinking it was only short covering or buying all day long.

 

Have a great day.

[sheptrader 11]

Gordon, First thing (A) down trend would need confirmation to go long which you do not get on next bar, it close down , yes, it closes of the lows but if that up bar was buying the next bar should not be down, so it must have had selling within it, then on the third bar it close way below the low of A, this is still in a down trend.

 

and again on (b) its an up bar on high volume but the next bar closes lower than prior low, no way am i looking to go long, i would need to see some confirmation that the down trend was over.

 

path of least resistance was down all day.

[Gordon G. 10]

Thank you so much for your view, Shep: I like your way of analyzing market's behaviour!

 

Also, bar following B nearly creates a bearish engulfing.

 

Cheers

[Brun 10]

Hi,

 

This is a great thread. Can someone with VSA experiences clarify the characteristics of “no demand” bar? I read this thread and the books…unclear about the positioning of the close within the “no demand” bar.

 

Thanks,

 

Brun

[Anonymous 11]

  Brun said:

Hi,

 

This is a great thread. Can someone with VSA experiences clarify the characteristics of “no demand” bar? I read this thread and the books…unclear about the positioning of the close within the “no demand” bar.

 

Thanks,

 

Brun

 

Welcome.

 

There is more than one definition for No Demand.

 

In the book the base definition is given as a narrow spread bar closing up with volume less than the previous two bars.

 

The Trade guider definition, also in the book, is a narrow spread bar closing up on volume less than the previous two bars AND closing on the middle or low of its range.

 

Joel Pozen would define a No Demand as simply any bar closing up with volume less than the previous two bars. Or a bar closing equal, on volume less than the previous two bars with the previous bar higher than the bar two bars ago.

 

Still others would include any buying bar (a bar with a higher high, but not a lower low than the previous bar) that has a narrower range and with volume less than the previous two bars is No Demand. If it closes either up from or equal to the previous bar.

 

The underlying element is volume less than the previous two bars on equal or up closes. Note if the close is down and the we have a buying bar with the close on the low, the we have a hidden Upthrust in the form of No Demand.

 

Sorry, I don't think I have really answered your question. I guess the reason is, the question you should be asking yourself is "How am I comfortable defining No Demand within the context of market behavior and amidst the various possible elements set forth?".

 

 

I have added this beautiful pic from Monday. Note the two No Demands on the right of the Dotted line. The first one obviously closes on its high and has a smaller range than the previous bar. Plus it has volume less than the previous two bars and is a buying bar.

 

The second one has a greater range than the previous bar and closes near its low. It has volume less than the previous two bars. It is a buying bar (positional relationship), but the low closes signals no real buying going on. This is a Hidden UpThrust in the form of No Demand. TG software would NOT pick up either of these.

[Seb Manby 11]

Hi PivotProfiler;

 

For 'No demand' to be correct, you have to have weakness in the background, if you get a sign of strength followed by no demand, then it means that the smart money are not interested in higher prices at that time, and you should be careful if going in, the other thing I find is that most of you seem to view the VSA indicators in isolation, instead of putting them all together to create a complete picture, you have to view the indicators in the same way as a musician, ie read the script and put it all together as the time unfolds.

 

Hope this post was helpful.

 

Regards S

[monad 10]

  Seb Manby said:

Hi PivotProfiler;

 

For 'No demand' to be correct, you have to have weakness in the background, if you get a sign of strength followed by no demand, then it means that the smart money are not interested in higher prices at that time, and you should be careful if going in, the other thing I find is that most of you seem to view the VSA indicators in isolation, instead of putting them all together to create a complete picture, you have to view the indicators in the same way as a musician, ie read the script and put it all together as the time unfolds.

 

Hope this post was helpful.

 

Regards S

 

Sebastian,

It would be extremely helpful if you could post some trades that you have actually taken on the forex or index futures to demonstrate the VSA indicators and how they are productive when considered within the context of recent price action and also what was your thinking process for your entry and exit.

[sheptrader 11]

3 for 3 this morning, keeps on working.

[sheptrader 11]

another 2 trades

 

thats me done for day

6 trades 5 winners

 

 

see all later

[jjthetrader 10]

  sheptrader said:

another 2 trades

thats me done for day

6 trades 5 winners

see all later

 

Good work Shep. You deserve the rest of the day off:)

 

Only a 1 pnt stop eh? Is that enough these days?

 

What platform are you using to execute there?

[sheptrader 11]

depends on your entry! seems to work for me

[jjthetrader 10]

  sheptrader said:

depends on your entry! seems to work for me

 

Well you seem to do quite well with it so it must be alright. I'm not too familiar with the ER2 anyway so maybe it's enough there.

Good work and thanks for sharing.