Wide Range Bodies or 'big' candles

[sds 10]

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.

 

Thanks for your explanation, brownsfan019.

 

This post has definitely given me a direction to start thinking.

 

To be honest, it has really given me start.

 

btw, I love your emphasise on the simplicity in the trading.

 

sds.

[sds 10]

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.

 

Great post pivot, very educative.

brownsfan019 and yours post really gave me direction.

 

This thread is really helping me to understand the dynamics of the market.

[sds 10]

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.

 

Hello PivotProfiler,

 

You had already given some great examples, e.g.

http://www.traderslaboratory.com/forums/34/vsa-volume-spread-analysis-1369-7.html

 

Could you post some examples of your analysis of WRB, VSA in the TREND.

 

sds.

[brownsfan019 17]

Per NihabaAshi's request, I will include a few screenshots for review of WRB's.

 

Chart #1: YM 450 VBC Chart with Visual WRB's highlighted

 

In this chart, if you are short heading into the down move and subsequent WRB's (highlighted in white), I think exiting at the 2nd and/or 3rd WRB is a great exit. I would have even considered the first one, but as I mentioned in another thread, I am not interested in WRB's that occur shortly after entry. Taking a YM trade for +3 or +4 is not going to cut it for me. So, once the position reaches at least +5 (on the YM) then I will consider a WRB for exit purposes.

[brownsfan019 17]

Chart #2: YM 450 VBC Chart with Visual WRB's highlighted

 

This chart is a little more 'interesting'... If short into the first down move on the left, I see one possible WRB for exit purposes. It's not the low of the move, but still a good exit (for me). Then we get a push move up in the middle of the chart, and two possible visual WRB's. For me, to go against the downtrend may be more aggressive, but still a nice little long trade with WRB's. Lastly, if short (from initial short or a new one) we have a couple WRB's appear.

[brownsfan019 17]

Chart #3: YM 450 VBC Chart with Visual WRB's highlighted

 

I like this example - we have a nice down move on the left and if short, 3 possible exits with WRB's. The first one would probably not pass my 'is this into profit enough' test, but the 2nd and/or 3rd would for sure.

 

Now the key for me is this - let's say you were sitting on a fixed profit target that was not quite reached. What do you do? Sit and wait thru all that chop and see what happens or bail on the trade? That's what I always struggled with. As you can see, using the visual WRB's, the 2nd and/or 3rd WRB are great exits in my opinion b/c:

1) You get out during the momentum and the move, so you are not waiting around (and can then look for other trades, call it a day, etc.).

2) If using a trail stop, I would have inevitably been taken out during the chop, if using a set target it would not have been hit & then retraced and/or get to watch the chop for hours to see what happens...

[brownsfan019 17]

Chart #4: EC 450 VBC Chart with Visual WRB's highlighted

 

Here's an EC chart with Visual WRB's in white. To me, the WRB's were excellent for exit point(s) if long into that move. As you can see, price popped and then retraced back to the starting point.

[Anonymous 11]

Nice charts. Glad to see that it is working for you. Are you able to get more profit per trade than with a fixed target?

 

Now..........if we can just get those MA's off your chart. LOL

[wrbtrader 10]

Hi brownsfan019,

 

Thanks for posting the annotated chart with the WRB exits on your VBC charts.

 

Also, I'm curious just like PivotProfiler to know if WRB exits has been more profitable and/or less stressful trading in comparison to using fixed profit targets ???

 

Mark

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

[TheBramble 10]

but as I mentioned in another thread, I am not interested in WRB's that occur shortly after entry. Taking a YM trade for +3 or +4 is not going to cut it for me. So, once the position reaches at least +5 (on the YM) then I will consider a WRB for exit purposes.

BrownsFan, I'm not too sure what your exit strategy is so it's difficult for me to understand how you're applying it. Could you codify it in a little more detail?

 

My problem is understanding why if you're using WRB as a proxy for allowing the market to 'tell you' when it's time to come out, why the relative recency of your entry has anything to do with it. Either it's an exit or its not, surely? I guess what I'm saying is whatever your decision process is to place the trade in the first place, it has nothing to do with the immediate or subsequent market action. You could (in fact will over a large number of trades), enter right on the place you'd rather be getting out, so ignoring your exit setup just becasue you've only just gone in seems like it could lead to counterproductive results on occasion.

 

And I'm sure I'm misunderstanding you when you say about not being willing to let go until you've reached a minimum price objective (albeit only 5 ticks). You mention previously that you use very tight stops (as do I), so how far would you allow the trade to go against you before acknowledging you're not even going to get your minimum 5?

[Anonymous 11]

WRB's are good for exits, but they provide so much more.

 

The old trader’s adage says, "Gaps are filled".

 

Check out the chart below. I want to save the bulk of the analysis for the VSA thread, but note the Long Shadows and Dojis that occur inside the range of the WRB.

 

The double arrow on the right points to a bar that closes on its high with volume less than the previous two bars. THIS IS A TEST and the signal to go long on the close of this bar.

[brownsfan019 17]

Hi brownsfan019,

 

Thanks for posting the annotated chart with the WRB exits on your VBC charts.

 

Also, I'm curious just like PivotProfiler to know if WRB exits has been more profitable and/or less stressful trading in comparison to using fixed profit targets ???

 

Mark

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

 

Mark - using WRB's is much less stressful and here's why - When I see one (once my minimum profit level is reached), I'm out. No 2nd guessing, wondering what to do or worse - watch a trade come w/in ticks of a profit level and then reverse.

 

I attached an example on the EC that just took place.

 

Note: That EC Trade with WRB just happened to call the high of the day so far as of 8:22am EST. If I had a fixed target, it would not have been reached and I would have been stopped out for a loss...

[brownsfan019 17]

BrownsFan, I'm not too sure what your exit strategy is so it's difficult for me to understand how you're applying it. Could you codify it in a little more detail?

 

My problem is understanding why if you're using WRB as a proxy for allowing the market to 'tell you' when it's time to come out, why the relative recency of your entry has anything to do with it. Either it's an exit or its not, surely? I guess what I'm saying is whatever your decision process is to place the trade in the first place, it has nothing to do with the immediate or subsequent market action. You could (in fact will over a large number of trades), enter right on the place you'd rather be getting out, so ignoring your exit setup just becasue you've only just gone in seems like it could lead to counterproductive results on occasion.

 

And I'm sure I'm misunderstanding you when you say about not being willing to let go until you've reached a minimum price objective (albeit only 5 ticks). You mention previously that you use very tight stops (as do I), so how far would you allow the trade to go against you before acknowledging you're not even going to get your minimum 5?

 

Bramble - first, make sure you've read the entire thread that I started here, not just looking at the charts. A lot is explained before the posted charts.

 

The exit strategy on Visual WRB's on a VBC Chart is simple - after the trade moves +X points in my favor, when a WRB appears, I flatten my position on the close of the WRB. So, when looking at the charts I've posted, anything highlighed in white is a possible exit point. My exact entry points are not annotated on purpose as that is not the purpose of this thread nor am I here to disclose every little way that I trade. My trading system is pretty much scattered on this forum is anyone wants to look close enough for it. Fair warning though - it's much simpler than most people 'want' trading to be.

 

As for why my entry is relevant is b/c I am not willing to risk 5 ticks to make 3. I'm just not going to do that. I must make at least what I am risking. I've also noted in my brief Visual WRB analysis on VBC Charts that it's not uncommon to see at least 2 WRB's in what I consider a 'move'. Therefore, if the first WRB appears shortly after I enter, I'm not interested in that one. Since I've seen that on VBC Charts that I can expect multiple WRB's usually in a trade setup, I am simply waiting for the 2nd to appear after my minimum profit level has been reached. With that being said, my minimim profit level is not huge or outrageous. I'm simply looking to cover at least the amount of risk in the trade.

 

As for the trade mgmt part - again, it's rather simple - either I will get a Visual WRB after my minimum profit level is reached or I will probably be stopped out for a loss. Since my losses are 3-6 ticks, I'm not concerned with those. What I am concerned with is getting out after a nice volume push and then looking to re-enter a trade.

[Anonymous 11]

BF;

 

I saw this pic in the volume gradient thread and thought of you. First note that the chart comes from Robert. Also note that this is a Constant Volume chart.

 

What I find interesting is the use of volume to color the bars based on the amount of up volume or down volume.

 

Now I know you exit at the close of the bar on a WRB.

 

Here I have shown a hypothetical trade. The entry is in yellow.

 

Suppose you entered here. Usually you would be looking to exit at the first WRB. However, here you would not. Why? Because you can see that the candle is DARK green. Which means an increase in UP volume. In other words, upside pressure is increasing. Thus you could stay with the position.

 

Next we move to the second WRB. Here the candle is a light green. This represents a decrease in the up volume vs. the average up volume for x periods. Here, you would want to exit as upside pressure is decreasing.

 

We see the same thing with the last two WRBs. One is able to stay in the trade a bit longer while feeling confident that the volume pressure is on his side. Just one chart example to be sure. But it looked like it could be up your alley.

[brownsfan019 17]

Pivot - very interesting indeed. Do you know how to set the coloring on the candles based on the volume? I may have to contact Robert or find it in the forum somewhere.

 

Thank you for sharing!!

[Anonymous 11]

I have stated elsewhere that things that are true tend to correlate from one method to the other.

 

WRB analysis and VSA are two such methods that correlate very well together.

 

The fundamental principle of WRB analysis is that WRBs represent CHANGES/SHIFTS in Supply or Demand.

 

Now, when these WRBs are accompanied with high or Ultra high volume (VSA terms) the stories coincide. Demand (buying by the Smart Money) comes in on down bars. The wider the bar, the heavier the volume, the more likely that there is professional activity in the bar.

 

85% of a volume histogram is Professional Money.

 

Note after the WRB we get climatic action/stopping volume. The market does not just head straight up, but the direction is sideways. If there was more selling on the high volume down bars then price should NOT be moving sideways. Clearly, there must of be a small change/shift in the supply/demand dynamic on these two bars.

 

[brownsfan019 17]

Pivot - what market is that a chart of? Just curious.

[Anonymous 11]

Here is view from a 30 minute timeframe chart.

 

Again we see the WRB representing a change/shift in supply/demand.

 

While no trade was signaled on the 5 min, on the 30 we do have a valid bullish white hammer pattern.......

 

Sometimes you're the dog and sometimes you're the hydrant

 

The valid pattern did not work out and a contingency plan trigger might of caused a reversal to the short side. This too would not work out. Contingency plans are beyond the scope of this thread, but the advanced WRB users among you will note that there is another WRB involved.

 

I say might because I am still learning this myself.

[brownsfan019 17]

Pivot - your chart brings up an excellent visual of why I believe VBC's are sometimes a better way to set up your chart. I labeled your chart with 3 main zones to trade. Where would you rather be trading?

 

Zone 1 = moderate movement, possible trade setups, but nothing 'big'.

 

Zone 2 = I want to be trading during that huge down move. When moves like that happen, I need to be in the trades, not watching a massive amount of money exchange hands.

 

Zone 3 = ugly.

 

I realize this is the WRB thread, but it's a great example of how changing the way your chart is displayed can make a huge difference. This is a perfect example of why I no longer use time based charts. Huge massive candles do nothing for me, esp in candlestick analysis.

[Anonymous 11]

BF,

 

It turns out I was mistaken and that is NOT a valid hammer pattern.

 

However, something very important can still be learned:

 

WRB is where changes in supply/demand occur. Demand did indeed come in on that bar. It was not enough to send prices shooting up, but it did move price sideways.

 

WRBs are also highly correlated with VOLUME. Hence, constant volume candles do not show the true supply/demand dynamic going on in the bar. More over, a bar like this would not be present.

 

So the essential information about the changing supply/demand dynamic is NOT SEEN. To be sure that candle may be traded on a Constant volume chart, but can you see the forest in spite of the trees?

 

Simply, changes in supply/demand and volatility are seen via WRBs. Holding volume constant mutes this information to some extent. Avoiding long shadows and large candles takes away the meaning of long shadows and wide range bodies. That is, something is changing.

 

Also note that time is a factor. Currencies trade 24 hours a day, but trades should not be made at any time. The WRB comes later in the NY session. It comes at 1400 hrs New York time. Not a good time to be entering trades. The area you mark as 3, therefore is also during the natural slow period that should not be traded. Simply understanding time, would tell one this. No need to fewer candles to know it is not ideal trading conditions.

 

How do you handle Candle blending and unblending with constant volume candles?

[Anonymous 11]

Brownsfan;

 

Also take note of the price action in box 1. Notice that we have three large white candles (open<close). Then we have a dark (close<open) WRB that

 

* engulf the most recent white candle

 

* has a body greater than all three prior white candles.

 

I suspect that Mark would trade this type of price action. Hence it is possible to be short prior to the large dark WRB that follows at 1400.

 

Even if it is not a valid set up, I am sure he would say that this action sets the stage for the large WRB. In other words, one needs these large candles to set up the even larger candle that follows. The supply/demand dynamic begins in box one and culminates in box 2. Constant volume candles mute the range disparity and thus belie the underlying shifts going on.

 

This is part of the "why" price does what it does.

 

Now let's suppose that this is a valid set up. I would be looking to exit on the close of the WRB. Why? Firstly, because of what a WRB means: changes in supply/demand dynamics. Secondly, I exit all trades around 1400-1430 and no later than 1500 except on Fed days.

 

I also do not enter a trade after 1300 except on Fed days.

 

But the key here is that as the NY session comes to a close, we SEE a shift in the underlying buying/selling forces. Of course, Mark uses the WRB as a profit target and would be getting out of at least some of the position on a bar like that. I still like the idea of just trailing the stop. Yet, as a daytrader one has to be out at the end of the day. So there are layers of reasons to get out on this bar. With the most compelling being THE SIZE OF THE BAR ITSELF. Take away the size of the bar and you take away a large portion of the story being told.

[brownsfan019 17]

WRBs are also highly correlated with VOLUME. Hence, constant volume candles do not show the true supply/demand dynamic going on in the bar. More over, a bar like this would not be present.

 

So the essential information about the changing supply/demand dynamic is NOT SEEN. To be sure that candle may be traded on a Constant volume chart, but can you see the forest in spite of the trees?

 

Simply, changes in supply/demand and volatility are seen via WRBs. Holding volume constant mutes this information to some extent. Avoiding long shadows and large candles takes away the meaning of long shadows and wide range bodies. That is, something is changing.

 

How do you handle Candle blending and unblending with constant volume candles?

 

Pivot,

A few items of consideration:

 

1) Regarding VBC charting and WRBs - I would actually argue that WRB's are more of an impact on VBC's vs time based charts. The reason is that in order for a WRB to appear on my charts, there has to be significant volume being pushed in a short period of time (since my VBC settings are lower). So, when I see a WRB appear, that grabs my attention as there is a brief momentary imbalance of buyers and sellers. If I am in a position, I look to exit at the high/low of the WRB. So, before discounting WRB's on VBC charts, think about what is actually going on and what is being displayed on the chart. You want to know when there is a volume push and we know that WRB's are pretty good for planning exits... therefore, when a WRB appears on a chart that is purely based on volume, that requires attention.

 

2) Regarding the chart that you posted, one item stands out that you did not comment on - why would you WANT to wait and watch that WRB form in front of your eyes? You're a smart guy and realize how much $$$$ is exchanging hands there, so why would you purposely opt to not trade during that time? I understand the conundrum though - if using a time based chart, there's nothing you can do but sit and watch. I know, I used to do that. Talk about frustrating. So, to summarize on the chart posted - you would consider trading during the 'ok' Zone 1, watch the big move in Zone 2, and then either trade or bypass Zone 3 due to time. So, what was really accomplished here? 2 out of 3 possible trading zones were passed on and the one that might have provided a trade or two wasn't that great either in my opinion.

 

Before you answer about why waiting b/c the WRB is telling you something, ask yourself if you really enjoy sitting and watching price drop right in front of you and you have to wait for that drop to end before considering an entry... Why does the drop have to end in order for you to consider a trade? Seems odd to think that - I will enter once price stops moving so much.... :rolleyes:

 

3) Regarding candle blending and unblending - I just don't do it. Nison talks about blending in his books and to be honest, I don't see the value. If you need to blend your candles, go to a higher timeframe. If you need to unblend, lower the timeframe. Problem solved as far as I am concerned. Of course, I can post charts where blending worked and charts where waiting for the blend cost you money. For me, keep it simple - no blending/unblending.

 

Please keep in mind that I used to trade off of minute charts exclusively and your chart posted provided a perfect example of why that did not work for me - you get to watch when there is serious action going on and then join the party once things 'settle down'. Well, if you are daytrading and looking for movements, don't you need/want the action? If so, then I would argue that you cannot wait for the action to end, you need to be ready to pounce when it presents itself.

 

Two very different points of view I suppose, but a good discussion.

[Anonymous 11]

BF, I think you misunderstood the post.

 

First let's again say that this is hypothetical. NO POSITION was actually taken in this example.

 

Now, If the large dark WRB that engulf two of the three large white candles AND is larger than all three is a PRICE ACTION signal via Mark's rules, then I would trade it.

 

So I would thus be short in box 1. Note that there are NO WRB profit targets in this box. When box 2 begins, therefore I am ALREADY short. I thus get the advantage of the WRB if you will.

 

And in this case, from a "Big Picture" point of view, the price action that creates the trade set-up is the price action that creates the large dark WRB we see in box 2. This is the key to me. Trading during the formation of the large candle via a constant volume chart is nice. Price is moving and that is when you are in. However, can you see that there is a change/shift in supply and demand if you can not see the WRB?

 

Which brings us to point two. WRBs show changes in the supply/demand dynamics. As of this post the EURO is UP .0046 pips. If you were watching the charts yesterday, you could SEE the shift in the supply/demand dynamics that results in price moving up today. Go back to the first chart, the 5 min. Notice that price went sideways on the appearance of the WRB and ultra high volume. The first clue to today's price action came yesterday. And it came via a WRB.

 

Now, if that price action does not constitute a trade set-up for Mark, then what? Well, yes, one does not trade the WRB, but one SEES the overall context of supply/demand and can look to get long with understanding of the broader context of the market.

 

If that had been a valid hammer pattern, then you would have a trade with contextual background of changing supply/demand dynamics. With price and volume leading the way, that trade would make more sense and possibly be safer.

 

So it is not just trading a hammer line because a hammer appears. It involves price action and (for me, volume action) that create the Prism thru which the hammer line is viewed as it traverses into a hammer pattern.

 

Simply, there is a story behind the trade. It is not just about movement. It includes Imbalances in supply and demand, price action, volume and to a lesser extent news releases. While the WRB trade may be missed, what is gained is a trade taken in the context of an overall market understanding. Rather than a simple candle here or there.

 

Having said all that, I do like the idea of trading when the chart is moving faster. But I think that has more to do with wanting instant gratification than anything else. I am trying to be comfortable being in the market, which is probably more so the case than the instant gratification to tell the truth. That is, not being comfortable in the market causing one to want to be in and out quickly.

[brownsfan019 17]

Pivot - I see your points.

 

I suppose I am the same as well - I want a profit and want it quickly. Patience isn't always my strongest point, which is why I think exiting on WRB's works for me. There's no random price target sitting out there and no *hoping* that that target is hit at some point in the day. With WRB's as the exits in conjunction with my setups, it's been a good mix so far. Sometimes the WRB's happen to be dead on for the ideal exit at that point in time for me. Other times they may be a bit early, but still a good exit for me. Since my stops are small to begin with, I can't afford to sit for hours to see if a big move is coming later. Simply, I will look for my trades and take them and hopefully if/when the big move comes, I am already in the trade.

[Anonymous 11]

BF;

 

When I first read your posts about CV candles, I was under the impression that one reason you (and others) liked them over time based candles was because CV mute most WRBs and Long Shadow candle lines. I see that I may have been mistaken.

 

Without neither WRBs or Long Shadows nor Changing volume, it would seem hard to detect changes in the supply/demand dynamic.

 

You are a successful trader and many would do well to follow your steed. As a trader I know it is about the making the trade for you. That is, the buying and selling. However, my personality, and the fact that I am learning a new method means that I find myself looking at WHY at trade is made rather than simply when or how.

 

The chart below seems to give so much information about the underlying dynamics of the market.

 

We see a WRB on Ultra High Volume. The first clue that something is changing in the market. The next bar is ultra wide spread on ultra high volume. Even more volume than the previous bar. Note that this bar closes in the upper range and creates a Long Shadow. Clearly, this bar had demand (buying) within it. This fact is Hidden to those who only see a down bar on "heavy selling (volume)".

 

Now can these two bars be seen on a chart that keeps volume constant? Check out the test bar. Volume is less than the previous two bars. What goes beyond VSA is the fact that this low volume test appears in the Long Shadow of the Ultra High Volume bar. Simply, that is more than just a Doji. But I don't know if I could know that without volume.

 

So here we can see a WHY we would want to be long. Of course a long may lead to a loss, but that matters little. What matters is that there has been a shift in the supply/demand dynamics as shown thru the WRB and the Long Shadow candle (which of course, was a WRB during the interval). There has also been a test for supply back into the area of the Long Shadow. Prior to the test, we had a bar that closed on its high with volume less than the previous two bar, this is No Buying Pressure. Hence price falls down and the Smart Money tests for supply.

 

Markets do not like wide spread up bars on high or ultra high volume. The reason being there could be "hidden" selling in the bar. However, there are times when the Smart Money is willing to absorb the selling from the weak hands. This is called absorption volume/ pushing thru supply. Here again we see a WRB. This time it is not so much a change in supply/demand but a willingness for the Professionals to buy at higher prices. If they are willing to buy at higher prices, they must expect even higher prices.

 

I'm not trying to change your mind here. Just wondering if the essential shifts in supply/demand can be seen when volume changes are taken out of the equation and large candles or Long Shadows are muted.

 

This is a 5 min chart. Would love to see this as a constant volume chart if you have it.