Wide Range Bodies or 'big' candles

[brownsfan019 17]

We've discussed WRB's in a couple threads, but since this is something that has grabbed my interest, I was hoping we could discuss it here.

 

I've been watching WRB's or what I 'see' is simply a 'big' candle and from a perspective of exiting a trade, they appear to be good. Now, I may be oversimplifying how they are supposed to be used, but here's what I've noticed and have actually used this past week...

1. My entry and initial stop is the same as it's always been - using VBC's on 'shorter' timeframes. WRB's have NO impact on my trade setup.
   
2. After in a trade, go to a 'longer' VBC chart and use WRB for exit.
   

My version of WRB/Big candle exits is rather simple - when I see a big candle on my bigger VBC chart, I exit at the close of that candle. And I exit the entire position here using a market order.

 

Here's what I have seen - since I use smaller initial stops, by exiting everything on the first big candle I see, I am able to exit trades quicker w/o a threat to my initial stop. In a bigger move I simply look for another trade setup and repeat the process.

 

The other thing I have seen is that I am taking smaller gains more, but that is all the market was willing to 'give' me.... I believe we discussed this in another thread and I may be coming around... :p While getting 15 or 20 pts on the YM is nice, if I am able to get 12 with no problem, it may be best to take it while there. It's frustrating to want 20 and if it goes 18 and then reverses on you, was that 2 ticks worth it? Up until analyzing WRB's though, I did not have a good method for exiting trades.

 

I attached a chart to this purely for illustration purposes. These were NOT actual trades, I just grabbed a YM chart off of quote.com since my TS is shut down for the night. You'll see that exits are not perfect, but I think they are pretty darn good.

 

I'm curious to hear what is working for others who are using WRB's in their trading or at least watching them. Maybe we can even get the WRB guru (NihabaAshi) to share some ideas with us.

 

Here's my biggest question right now - what is the theory behing WRB's and their practical use in trading? I am proving to myself by looking at actual chart setups as to whether I like what I see, but I don't quite have my arms around why these work and why they make for good exits... My idea right now is that a 'bigger' move may be followed by some 'correction' due to the supply/demand imbalance that happened during the WRB - while the WRB is being formed, that would show us that either the bulls or bears took control during that timeframe and sooner or later, they will have to take a breather. That's not to say that the current move will not continue, but some sort of breather and/or correction could happen; which could take a stop that is snug (like mine) out easily.

 

SHORT HAND KEY:

VBC = VOLUME BASED CANDLES (more info here: http://www.traderslaboratory.com/forums/f34/volume-based-candles-how-profit-1414.html)

WRB = WIDE RANGE BODIES (info scattered throughout some threads)

TS = TradeStation

[Anonymous 11]

......My version of WRB/Big candle exits is rather simple - when I see a big candle on my bigger VBC chart, I exit at the close of that candle. And I exit the entire position here using a market order.

 

..........The other thing I have seen is that I am taking smaller gains more, but that is all the market was willing to 'give' me.... I believe we discussed this in another thread and I may be coming around... :p While getting 15 or 20 pts on the YM is nice, if I am able to get 12 with no problem, it may be best to take it while there. It's frustrating to want 20 and if it goes 18 and then reverses on you, was that 2 ticks worth it? Up until analyzing WRB's though, I did not have a good method for exiting trades.

 

BF, have you thought about exiting a portion on the first WRB and then another portion on the next WRB. Mark (NihabaAshi) goes to a higher timeframe after the first WRB. This allows one to get the most out of the trade.

 

Currently, I am not moving up a timeframe but still look to scale out in thirds. That would mean 3 profit targets.

 

I take a portion off as soon as the bar becomes a WRB. As I become more skillful, I know I can wait a bit get a feel for the PRICE ACTION of the bar itself.

 

As far as what is going on during a WRB or what we can take away from them, I will defer to the master................

[TheBramble 10]

Apologies if I’m stumbling into an area that’s been discussed in greater detail in other threads, but personally I’d be really wary of attempting to interpret a single candlestick. Effective candlestick analysis requires the context in which it has developed for any reasonable assessment to be made. There’s also the vital issue of volume. Candles or bars, volume is key to unlocking the probabilities of development.

 

In relation to this specific WRB being discussed, all we are looking at is price action over one period in which the balance of commitment has shifted from one end of the spectrum to the other – for that period. If the move is in favour of your existing trade, I presume you wouldn’t be still using it as an exit indicator? And if the bar is moving against you, providing it hasn’t hit your protective/trailing/initial stop, why would you want to take it as a valid exit criteria?

 

You will often get corrections against your prevailing trade direction that will move 50-63% against the previous high/low. Whether this occurs as one WRB or over a number of consecutive periods is largely irrelevant all other things considered (volume pattern etc.). WRB as more likely to take the steam out of the subsequent few periods price action than it is to herald a reversal.

 

You comment that you’re getting smaller profits using this method which is understandable, you’re not letting them run. If by using this method you’re also getting fewer losing trades then I suspect it may be an issue with the underlying system itself rather than this bolt-on exit criteria.

[Soultrader 12]

Interesting thread. I use WRB's as an exit especially if it occurs near a pivot. Sometimes full and at sometimes half my position depending on the current market environment. I personally like to wait until the close of the WRB and then stare at tape to see sellers. Profit taking will occur regardless but what I am trying to spot on tape is the additional shorts that may come in to reverse price. If not, the markets usually form a doji... may retrace a little and then take off again.

 

The reason why I like WBR is because of my entry. I like to enter in narrow range bars. Not necessarily the first one in the move but I enter based on price levels and to minimize my risk I focus hard on entries. (thought I find exits harder) WBR to me means that those buying it are chasing the markets. The late comers are extremely frustrated to watch price move without them that they rush in to buy. Now, knowing that 5% make money trading futures... my take is that the 5% are the ones that bought/sold in the previous narrow range bars. The WBR offers a good exit signal to sell into strength. I rely heavily on the tape to cut my last portion loose or hold. Something which is impossible for me to explain in words...

 

I am not candlestick expert so would love to hear from more experienced candle traders.

[wrbtrader 10]

Hi All,

 

I just want to post some commentary about WRB Analysis before this thread gets to far or before its misinterpreted.

 

First of all, its something I developed while in High School (1980) when I did work (hand drawn charts of daily and weekly price action) for friends of the family that were floor traders at the exchange.

 

It involves many things that's nothing anybody has heard about but it does make sense of all these things when they work together:

 

* Support/Resistance Zones

* Shifts in Supply/Demand

* Trading GAPs

* Changes in Volatility

 

Many other things from entry to exit including Profit Targets.

 

Simply, there's no reinvention of the wheel here...just something that puts the puzzle together into something that's understandable.

 

WRB Analysis (primary) has absolutely nothing to do with Japanese Candlestick Analysis (secondary).

 

As mentioned many times by me at another forum in a thread called Trading Hammers (revisited)...don't use Japanese Candlestick patterns or anything else (including WRBs) without understanding the price action in context.

 

Therefore, TheBramble comments are dead on and should be apply to Japanese Candlesticks, WRBs or anything else involving technical analysis.

 

Effective candlestick analysis requires the context in which it has developed for any reasonable assessment to be made. There’s also the vital issue of volume. Candles or bars, volume is key to unlocking the probabilities of development.

 

(Note: Volatility is arguably a better replacement of volume and resolves some of the problems asssociated with volume analysis).

 

With that said and moving into using WRBs as an exit strategy.

 

PivotProfiler mentioned something that needs more clarification.

 

I scale out of my trades while other times I exit my entire position at the same time (no scaling) for whatever reason.

 

The only time I use a higher time frame after the first WRB for scaling out is if the entry signal (pattern signal) occurred as either a trend continuation signal or occurred as part of a market seasonal tendency (cycle).

 

Simply, most of the time I use the same entry signal interval as my exit signal interval (example - I went Long via a pattern signal on the 3min chart...I exit via WRBs on the 3min chart).

 

Thus, the price action involved with your entry signal has impact on how you manage your exits.

 

This reason alone is why two traders using different entry method but using WRBs to exit...will exit at different WRBs.

 

Therefore, the price action involved with a WRB has impact on how you manage the exit in the WRB.

 

Further, traders using different strategies may exit a WRB different.

 

For example...

 

* You can exit a WRB upon the close of the interval.

* You can exit a interval as soon as it becomes a WRB even though there's still time remaining in the interval.

* You can exit at WRBs that cross over a s/r level.

* You can exit at WRBs that form within s/r zones (there's a difference between levels and zones).

* You can exit WRBs to only breakout out of congestion.

 

Thus, before analyzing someone's use of a WRB as an exit method...

 

You must understand their entry method into the trade and this will prevent getting tunnel vision about the WRB.

 

Therefore, to properly use WRBs is to have a relationship with the Entry Method and the WRB.

 

Another way to look at it...the WRB is not an exit signal. The exit signal is the price action itself while the WRB is a big alert to check and see if this is the price action you like to exit within (ex. exiting WRBs that appear at s/r levels).

 

WRBs are like warning signs that something is about to happen (continuation of the trend or reversal of the trend) as in a big shift in supply/demand.

 

WRBs should be telling you its time to make a decision...to exit your position or to stay in your position.

 

Therefore, don't make the mistake of viewing WRBs exclusively as an exit signal or that the move is going to reverse against you.

 

To do such is to say that your ignoring the price action in which the WRB is forming within (tunnel vision).

 

As noted by brownsfan019 when learning about WRB's...

 

My version of WRB/Big candle exits is rather simple.

 

This is true about anything when you first began learning something in which you don't know exactly how to apply it or still exploring the basic concepts about it.

 

In other words, my WRB Analysis today is far more advance than the simple WRB Analysis I was using in the 80's.

 

Mark

(a.k.a. NihabaAshi) Japanese Candlestick term

[notouch 10]

I find WRBs are great entry points if it hits support/resistance on high volume then reverses. I wouldn't necessarily enter a position on the close of the bar but may wait for a little pullback before entering. Often they're caused by a knee jerk reaction to some news release (e.g. today's Existing Home Sales) or stops being triggered.

[brownsfan019 17]

Good discussion guys, thanks for the comments.

 

Pivot - I have looked at exiting on a WRB based on my initial entry and VBC being used, but the problem I have found there is that since I am trading on a 'smaller' VBC, a WRB can appear rather quickly on this type of 'timeframe'. Which often causes a very quick exit. I bumped it to a higher VBC to stay in the trade longer. I've thought about multiple exits on multiple timeframes, but to be honest - that's a lot of charts to examine when trading 3-4 markets at the same time. I'm not willing to miss an NQ setup b/c I was starting at 3 different YM timeframes. The other thing I am noticing Pivot is that for me at least, the first WRB that shows is a pretty reliable exit level. What I mean is that since my stops are 'snug' there is a possibility that after I enter a trade and see a WRB form, price can retrace close to or at my stop level. Now, if my stops were larger I could possibly stomach that retrace (like the example you posted in another thread), but most often than not, my stop may be taken out. By exiting on the first WRB I see on a higher VBC chart, I'm not getting shaken out on my smaller VBC chart and still catching a good part of the move that is currently in front of me.

 

Bramble - we've discussed candlestick trading in other threads. I understand how effective candlestick analysis is done as I've been trading candlesticks for years. Your comment - "You comment that you’re getting smaller profits using this method which is understandable, you’re not letting them run. If by using this method you’re also getting fewer losing trades then I suspect it may be an issue with the underlying system itself rather than this bolt-on exit criteria." First, I am comfortable with my entry method, so there is no 'issue' with the underlying system. Second, if I am getting fewer losing trades by trading this way, how is that a problem? By exiting on WRB's in the very simple fashion I have looked at, the vast majority of my trades are profitable and even when a stop out is taken, my stops are usually not more than 7-9 ticks on the YM.

 

Mark - as always your posts are very welcomed here! I have no problem admitting that WRB's are new to me and I am learning here as well!

 

With all that being said guys, I like to keep things simple. I've expressed that a number of times here. I have always wanted to perfect my exits even better than what I was doing, and right now, it looks like WRB's can work for me. More analysis needs done, but I at least wanted to get a discussion going on the topic.

 

I should also mention that I am not trying to hit home runs here. I would love to hit singles and doubles all day. My goal in capturing a move is 30% - 50% of that move. Let me define that - I'm not talking about the entire move all day (partly b/c I only trade till Noon or so), but from my entry to the very low/high of that 'move' I would like to capture 30% - 50% of that. If that 'move' is 20 ticks, I'd like to take out 6-10. That's how I view my exits - what % of the move did I capture? And I think that's why WRB's may work for me. On higher VBC charts, WRB's happen to appear at the low or top of a move (or pretty close). That's all I'm going for each trade - I'm not looking to take one trade and ride it all day. I'd rather take multiple trades whether that is in the same direction all day or opposite directions all day.

[brownsfan019 17]

Question for Mark, Pivot and others using WRB's - how do you define what a WRB is? I've read a few things the last few days and some say purely a visual thing and others have a defined formula.

[TheBramble 10]

Question for Mark, Pivot and others using WRB's - how do you define what a WRB is? I've read a few things the last few days and some say purely a visual thing and others have a defined formula.

One of those things that's going to be different strokes for different folks, but where the Open-Close range is no less than say 95% of the High-Low range. That would do it for me.

 

({[(H-L) - ABS(O-C)] / (H-L)}*100) <= (100-95) {or whatever your preferred percentage is}.

[TheBramble 10]

Bramble - Your comment - "You comment that you’re getting smaller profits using this method which is understandable, you’re not letting them run. If by using this method you’re also getting fewer losing trades then I suspect it may be an issue with the underlying system itself rather than this bolt-on exit criteria." First, I am comfortable with my entry method, so there is no 'issue' with the underlying system. Second, if I am getting fewer losing trades by trading this way, how is that a problem? By exiting on WRB's in the very simple fashion I have looked at, the vast majority of my trades are profitable and even when a stop out is taken, my stops are usually not more than 7-9 ticks on the YM.

'Issue' was a bad choice of word, my apologies. You mentioned lower profits per trade when adding the WRB as an exit criteria and I obviously saw a connection between the two events.

 

Nothing at all wrong with fewer losing trades. Gets my vote every time. But if fewer losing trades do not compensate for the lower profits on winning trades (i.e if your W:L improves but your P:L decreases) then there would have been no point adding in the exit criteria. From what you're saying this isn't the case at all and your overall profitability on this system has increased. Which is great.

 

I think that was the point I managed so badly not to make the first time, And probably this time as well...

 

You're certainly keeping very tight stops which is absolutely one of my never-break rules. It's tough to go out of business when you're keeping costs low.

 

Good Trading.

[Neal 10]

Pivot, is there any parallel with WRB concepts and VSA patterns? For instance, VSA states that after a period of consolidation, pros may wish to 'Push Up Through Supply' on a high volume, wide range up bar that closes on its high. This would constitute a WRB. This quick move keeps some of the old longs from selling (anticipating more profit), triggers buy stops on those with shorts positions, pulls in the breakout traders to participate in the up move, and encourages the participation of the anxious trader who feels he is missing the move. One would need to watch the following price action to determine if the strength continues based on continued up bars, or weak, low volume down bars. Also, this pattern on a 5-minute chart could always be a VSA 'Up-Thrust' on a 10- or 15-minute bar based on the following price action, which would be a sign of potential weakness.

[Anonymous 11]

Hello guys and gals,

 

Here is a picture from another forum of a chart I asked NihabaAshi about. He graciously placed some comments on the chart. Take a look at it to see SOME of what is involved in WRB and Long Shadow analysis.

 

The technical definition of a WRB would be the largest body (open to close) of the last 3 intervals. The number 3, however, is not important. One could use any number as long as they stay consistent.

 

While WRB's can be used for exits (incorporated into an exit strategy), they should not be solely used in that manner.

 

Many things can be seen from WRB's:

 

* shifts in supply/demand

* volatility

* support/resistance zones

* volume proxy

 

Note how all of these things should be in consideration when looking to either exit a position or move a stop.

 

Conversely, note how all of these things should be in consideration when looking to enter a position.

 

With that said, I have never been a believe in one bar/candle analysis in lieu of the BIGGER PICTURE.

[brownsfan019 17]

Good posts guys!

 

As always, how a trader implements a strategy is up to that trader. I like what I am seeing with WRB's in my 'simple' form.

 

More testing required...

[Anonymous 11]

Pivot, is there any parallel with WRB concepts and VSA patterns? For instance, VSA states that after a period of consolidation, pros may wish to 'Push Up Through Supply' on a high volume, wide range up bar that closes on its high. This would constitute a WRB. This quick move keeps some of the old longs from selling (anticipating more profit), triggers buy stops on those with shorts positions, pulls in the breakout traders to participate in the up move, and encourages the participation of the anxious trader who feels he is missing the move. One would need to watch the following price action to determine if the strength continues based on continued up bars, or weak, low volume down bars. Also, this pattern on a 5-minute chart could always be a VSA 'Up-Thrust' on a 10- or 15-minute bar based on the following price action, which would be a sign of potential weakness.

 

Yes and No.

 

VSA teaches that markets do not like wide spread up bars on high or ultra high volume. Wide spread means high to low. A WRB is from open to close. Thus if the open=low and close=high, then yes, but not necessarily so. Of course the open could not equal the low and the close could not equal the high and it would still be BOTH a wide spread bar and a WRB.

 

Note this is why one would also want to think in terms of Long Shadows.

 

As far as what is underneath the bar/candle itself, yes they are vary similar.

 

Underneath the widespread bar we have:

 

* shifts in supply/demand

* volatility

* support/resistance zones-Tradeguider does not speak about this in their public forums. Yet it is inherent in the concept. If Professional Money comes in on a wide spread ultra high volume bar, that bar is naturally a support or resistance zone. If they were buying, it only makes sense that they would not want to see price fall below that bar (resistance). If they were selling, it makes sense that they would not want to see price raise above the high of the bar (support).

 

In terms of "pushing thru supply", yes usually those bar would be WRB's. VSA's story is different. For VSA, the pros are pushing thru the area to keep people from selling, more so than keep new longs out.

 

WRB analysis would focus on the SHIFT/CHANGE of supply/demand dynamic without the focus on the Professional Money Manipulation. At least that is my understanding up to this point.

 

simply, WRB's represent among other things changes in the supply/demand dynamic. If the bar is wide spread on high or ultra high volume, that change in the supply/demand dynamic would also be noted by the VSA user. Not every WRB will be a wide spread bar. Every wide spread bar will, however, at least be a Long Shadow and thus still notable via both analysis camps.

[Anonymous 11]

Here's a combination chart.

 

Notice that VSA could be used to get the same information that WRB analysis is saying on the left side of the chart.

 

We see a wide spread bar on Ultra High Volume that closes off of its lows. For VSA, strength comes in on weakness. The next bar is key, it closes equal to the previous bar and closes in its middle and again has Ultra High Volume, this is climatic action/stopping volume.

 

In short, Professional Money is buying.

 

Now shift to the right side of the chart. The white hammer line is a VSA 'test' bar. It makes a lower low than the previous bar, closes on its high and closes equal to the previous bar. However, the volume is very high for a test. High Volume on a test means to expect price to come back down into that area. Price does indeed move back down after the short up burst that could be traded.

 

Form a WRB angle, we have the large WRB that creates the support/resistance zone where the bullish white hammer pattern is formed. We first see a shift in supply and demand then a bullish candle pattern.

[walterw 10]

Pivot : since studing volume here at TL, most probably I believe that this last post of yours are the most nice, easy and reliable pattern.... a WRB followed by a Big Doji on volume surge.... can I know whats that chart timescale ? cheers Walter.

[brownsfan019 17]

Nice chart Pivot!

 

Question - when do you know when to go with the trend and when to go against it? So far, it seems like the majority of charts posted have all been counter-trend trades.

[Anonymous 11]

Nice chart Pivot!

 

Question - when do you know when to go with the trend and when to go against it? So far, it seems like the majority of charts posted have all been counter-trend trades.

 

Great question BF.

 

I cannot say much from the WRB perspective, as I am just beginning to learn it. However, we do see the large support/resistance zone on the left. Also note that there is a White WRB just prior to the formation of the bullish white hammer pattern. These would place the trade in the sub-group reversal meaning we are looking for the up move to be MORE than a counter-trend trade.

 

From the VSA perspective the situation is similar but with one more key piece of information. First, we see prices falling and then we get the large volume down bar with the wide spread. This is demand entering the market. The next bar is also ultra wide with a wide spread that closes in the middle. This is stopping volume.

 

With the close in the middle of the range on a bar with ultra high volume, we should see this bar as a transfer of ownership from strong hands to weak hands. So if the strong hands are buying the likely direction of the trend should be up. In other words, at this point we would be looking at a Reversal and not a counter trend trade.

 

Now the added piece of information comes on the hammer line. In VSA terms this is a high volume 'test' bar. With that amount of volume on a test bar, we would actually be expecting prices to come back DOWN and re-test that area. Therefore, if the market moves up , we do expect a possible move back down. This could be a counter trend trade therefore, depending on how far the market moves up.

 

But we do see lots of strength in the background (wide spread down bar and the doji bar), so it appears to be an up-trend trade where we may need to look out for some type of move back to re-test the high volume area.

 

So depending on one's perspective and trading style, this IS a trend trade (reversal). The more conservative VSAer might actually wait for the re-test of the supply or a no supply signal which means NOT trading what turns out to be a counter trend trade.

 

The WRB(primary) and candlestick (secondary) trader could take the trade as a reversal signal-not counter trend. AND be nimble enough to take the inverted dark hammer signal that shows up at the top of the counter trend move.

[Anonymous 11]

Pivot : since studing volume here at TL, most probably I believe that this last post of yours are the most nice, easy and reliable pattern.... a WRB followed by a Big Doji on volume surge.... can I know whats that chart timescale ? cheers Walter.

 

Thanks. It's a 5 min spot Euro chart.

[brownsfan019 17]

Pivot - you'll have to keep us updated on this looks on the spot FX markets. I do not trade spot FX, but curious to know how you do there with these methods.

[sds 10]

BF, have you thought about exiting a portion on the first WRB and then another portion on the next WRB. Mark (NihabaAshi) goes to a higher timeframe after the first WRB. This allows one to get the most out of the trade.

 

Currently, I am not moving up a timeframe but still look to scale out in thirds. That would mean 3 profit targets.

 

I take a portion off as soon as the bar becomes a WRB. As I become more skillful, I know I can wait a bit get a feel for the PRICE ACTION of the bar itself.

 

As far as what is going on during a WRB or what we can take away from them, I will defer to the master................

 

Hello,

 

You guys are very experienced. Could you please help me in understanding the basic concepts.

 

Price:

 

Everywhere I read "Price Action". "Price Action in S/R zone". etc

What does exactly it mean? Could anyone exaplain me with example?

 

Supply/Demand:

 

When I see a S/R zone being penetrated with high volume (not ultra high), then how to judge whether it is really a demand coming or supply coming?

 

sds.

[walterw 10]

sds : this is a nice and simple article on S&R Support and Resistance - StockCharts.com price action itself is the analisis of "pivots" (higher highs, higher lows, lower highs, lower lows, etc ) on the other side we are adding volume analisis this are two nice articles : Pring Research - Technical Analysis, Educational CDs, Financial Newsletters and Charting Tools PRING.COM - The site for the savvy technician. and candlesticks patterns... here is a simple introduction Chart Analysis - StockCharts.com we are combining all together, some nice S&R levels we look at are vah, val and poc wich are Market Profile levels from previous session... there is a lot here on TL, posts and videos.... take your time and enjoy the journey of learning this powerfull concepts... hope helps cheers Walter.

[brownsfan019 17]

Price:

Everywhere I read "Price Action". "Price Action in S/R zone". etc

What does exactly it mean? Could anyone exaplain me with example?

Supply/Demand:

When I see a S/R zone being penetrated with high volume (not ultra high), then how to judge whether it is really a demand coming or supply coming?

sds.

 

sds - I attempted to write a response earlier and got an IE error and off it went... that is frustrating. I'll try to retype it again here...

 

You will probably get a few responses, so make sure to read each one and you can see what you like.

 

PRICE ACTION: For me, price 'action' simply refers to the amount of trading activity or lack thereof. The more 'action' the more movements we usually see. There's action going on all day, but some are more active than others.

 

PRICE ACTION S/R: This would mean the amount of trading taking place at important levels. Many traders use Support/Resistance Levels, Pivot Levels, etc. to define areas of possible trade setups. Usually these are areas where good 'fights' and price action may occur. Pivot provided a great chart here: http://www.traderslaboratory.com/forums/attachments/34/1137d1174681663-wide-range-bodies-big-candles-2.png You can see that he annotated the first doji on high volume and then a subsequent hammer at the same level on high volume. This would show that the bulls are clearly defending this area and that the bears are not willing to push it down further. So, that would visually tell us that this level is important to many bulls. So many that they are willing to step in to a bear charge and fend them off. This in turn created the double bottom formation that many traders use. If interested in S/R levels, I would recommend reading some books from Steve Nison as he talks about S/R levels in conjuction with candlesticks quite a bit. And Pivot provided a real example here.

 

Speaking more on this topic, I personally use VBC charts - http://www.traderslaboratory.com/forums/f34/volume-based-candles-how-profit-1414.html - in my analysis. I prefer charts like this, some like minute charts with volume broken out as in Pivot's example.

 

JUDGING ACTION AROUND S/R: In Pivot's example, we see a doji and hammer at the same level with high volume. That would be reason enough for me to take the trade. How you filter the action around S/R levels is up to you. Some may add an indicator, some may add market profile, etc. etc.

[Anonymous 11]

 

Price:

 

Everywhere I read "Price Action". "Price Action in S/R zone". etc

What does exactly it mean? Could anyone exaplain me with example?

 

Supply/Demand:

 

When I see a S/R zone being penetrated with high volume (not ultra high), then how to judge whether it is really a demand coming or supply coming?

 

sds.

 

PRICE ACTION:

 

For me, price action is just that-the action of price and the price bars (candles). How wide is the range of the bar? Is price up from the prior interval? Is price making higher highs or Lower Lows? Is the spread of this bar wider than the spread of the previous bar? Is the close on or near the high of the range of the bar? Are we closing higher than the open more than closing lower than the open? These are the types of things that PRICE ACTION encompasses.

 

A much more esoteric understanding of price action involves CANDLE FORMATION. Not candle formations, but the formation of an individual candle line. Does the candle end the period with price on the high, but actual only traded to the high in the last 10 seconds of the 3 minute bar. Did price trade down to the low of the bar and remain there the entire interval? If price immediately trades down to the low (not known till close of period) and stays there, the was more selling pressure than buying pressure (leaving volume aside for the moment). Does price move up and down through out the bar's range and then close in the middle and equal to the open? Well the action shows indecision. Note that this is a Doji, but no knowledge of candlesticks could tell you that the bar is a bar of indecision.

 

These are the elements of PRICE ACTION for me.

 

SUPPLY/DEMAND:

 

1. First my perspective is from VSA

2. Read selling (supply) and buying (demand).

 

Before you do 2, however, it is best to understand supply and demand via the stock market. Supply means the actual stock being placed into the market. Like anything, too much tends to lead to falling prices. Demand means stock being taken out of the market. If there are many people chasing few goods price will tend to rise. That is just basic Econ 101.

 

Now in futures and currencies we can substitute supply with selling and demand with buying. Contracts are created by both a buyer and a seller so there is always a contract created. In stocks the amount of stock is "finite".

 

VSA teaches that strength comes in on down bars and weakness comes in on up bars. Strength is buying (demand) and weakness is selling (supply).

 

One needs to look at where the close is in relation to the size of the spread, the volume on the bar, the close in relation to the prior bar and the close of the next bar. All of these need to be looked at to determine if the high volume is associated with supply or demand.

 

Check out Tradeguider.com if you want to learn more about VSA and the CBOT has a few webinars. Continue to read this thread and others for more understanding.

[sds 10]

sds : this is a nice and simple article on S&R Support and Resistance - StockCharts.com price action itself is the analisis of "pivots" (higher highs, higher lows, lower highs, lower lows, etc ) on the other side we are adding volume analisis this are two nice articles : Pring Research - Technical Analysis, Educational CDs, Financial Newsletters and Charting Tools PRING.COM - The site for the savvy technician. and candlesticks patterns... here is a simple introduction Chart Analysis - StockCharts.com we are combining all together, some nice S&R levels we look at are vah, val and poc wich are Market Profile levels from previous session... there is a lot here on TL, posts and videos.... take your time and enjoy the journey of learning this powerfull concepts... hope helps cheers Walter.

 

Thanks walterw,

 

Especially for the article related to the Volume.

 

sds.