[VSA] Volume Spread Analysis Part II

[jjthetrader]

	Quote:	firewalker
	I'm not sure it is per definition riskier. It depends on how you define 'risk'. What if the test you observed happened on a 1 hour bar. Are you going to wait for the next bar to close? If so, you might enter when price has already made it's turn and presuming you want to put your stop below the low of the test, that might been a hell of a lot more risk as opposed to entering on the test itself and having a very tight stop. I'm not criticizing your or someone else's approach. I'm just saying the 'risk' is determined not only by the probability of your trade, but also by the stop size and the position size you are trading. Each trader must find out what style suits him best, and whether he likes to wait for more confirmation (hence sacrificing the best entry) or enter aggressively with a tight stop, but -perhaps- a higher chance of getting stopped out.

I was just speaking from my experience. Too many times the trade didn't pan out if I didn't wait. If you're a 1hr bar trader then yes you wait one more hour. The reason it's riskier to jump in without confirmation is because you're not even looking at a valid signal so you're basically jumping in on a bar that looks like a test bar should but may not be at all. THe next bar could easily break the tests low and would prove it's not a test.
So yes, if you are a gambler then by all means don't wait.
It's always riskier to jump in early because you don't have probabilities on your side. Risk isn't totally determined by money management.

[firewalker]

	Quote:	jjthetrader
	I was just speaking from my experience. Too many times the trade didn't pan out if I didn't wait. If you're a 1hr bar trader then yes you wait one more hour. The reason it's riskier to jump in without confirmation is because you're not even looking at a valid signal so you're basically jumping in on a bar that looks like a test bar should but may not be at all. THe next bar could easily break the tests low and would prove it's not a test. So yes, if you are a gambler then by all means don't wait. It's always riskier to jump in early because you don't have probabilities on your side. Risk isn't totally determined by money management.

Your last sentence is correct. Apart from that, there is no gamble at all in taking an early entry. Have a look at Sledge's post here (posts #46 with the chart and #54 with the entry details). He explains a very early and aggressive (but spot on) entry. There was a test later on, where I went long, so I waited for confirmation. Each to their own, one must trade whatever style or strategy he feels fit. But I doubt the smart money are going to wait one hour to get a trade on if they see the signal is there...

[jjthetrader]

	Quote:	firewalker
	Your last sentence is correct. Apart from that, there is no gamble at all in taking an early entry. Have a look at Sledge's post here (posts #46 with the chart and #54 with the entry details). He explains a very early and aggressive (but spot on) entry. There was a test later on, where I went long, so I waited for confirmation. Each to their own, one must trade whatever style or strategy he feels fit. But I doubt the smart money are going to wait one hour to get a trade on if they see the signal is there...

First of all I'm not going to assume I should get in early on a trade just because it worked once for Sledge.

Second, the smart money doesn't wait for signals, they create the signals. The second bar, the confirmation, is them locking you out. That is the VSA way to trade.

The original question was about VSA. I was answering that. I wasn't answering how to gamble your money away. That's a different thread.

[Sledge]

	Quote:	firewalker
	Your last sentence is correct. Apart from that, there is no gamble at all in taking an early entry. Have a look at Sledge's post here (posts #46 with the chart and #54 with the entry details). He explains a very early and aggressive (but spot on) entry. There was a test later on, where I went long, so I waited for confirmation. Each to their own, one must trade whatever style or strategy he feels fit. But I doubt the smart money are going to wait one hour to get a trade on if they see the signal is there...

Firewalker-
Ok here I can speak from a very strong perspective. JJ and I know each other pretty well, and please know this: I have learned A LOT about VSA and patience from JJ. I give him a TON of credit for the guidance he has taught me and lessons he has taught me as well. I would not be the trader I am today without his friendship and help.

With that being said, I am a more "aggressive" trader than JJ- this is by his own words. JJ is an outstanding trader who makes money daily and rarely loses. His style is to be a bit more conservative than myself. We both make money, but we have different trading styles.

Also note that he is actually able to be in front of his platform during his trading hours, he is much more nimble and able to squeeze out pips or reverse his position in a heartbeat if he sees something that warrants him to do so. I on the other hand am working towards that- I trade on a longer timeframe because my present circumstance demands it.

On that call I was correct, but knowing JJ, he would have still taken that trade, but gotten in a little later than I- because he would want to increase his probabiltiy of a successful trade- and as you know- that is what it is all about. When JJ pulls the trigger, his analysis is solid, he knows the probability is even higher for success than mine. Maybe he grabs 10 less pips on it- but his probability is higher. Also factor in that with me, I may have made that call, rode the up move and by the time I got back to my platform if it didn't hit my T/P target- I may actually gotten to it on the pullback and made LESS than JJ on the same trade (because he spotted the exhaustion and closed out)

So to nutshell all this rambling. JJ is a highly skilled VSA trader, with a more conservative approach. He puts money in the bank on a daily basis. His style may be a bit less aggressive than mine personally, but that does not mean that just because he doesn't trade like me, that I can't learn from the trading smarts he has been so willing to share and help me further my own VSA education

Sledge

[firewalker]

	Quote:	jjthetrader
	First of all I'm not going to assume I should get in early on a trade just because it worked once for Sledge. Second, the smart money doesn't wait for signals, they create the signals. The second bar, the confirmation, is them locking you out. That is the VSA way to trade. The original question was about VSA. I was answering that. I wasn't answering how to gamble your money away. That's a different thread.

You are putting words in my mouth... I never said you should assume anything from someone else based on one example. I'm saying there are other people out there who trade (not 'gamble') more aggressive entries and do perfectly fine. When the huge volume comes in, stopping volume if you wish to call it so, thàt is the signal of the smart money. Not the next bar closing up or down. There is imo no reason to wait for a bar to close, because bars or candles are only a representation of price. I'm not arguing which is the better way to trade, in fact, I said "each to their own" and I appreciate both views. I even gave the example myself when I pointed out, in that particular trade chart from Sledge, that I took a more conservative entry, waiting for confirmation later. But I disagree that method A is better than method B or that method A leans closer to gambling than trading.

	Quote:	Sledge
	Firewalker- With that being said, I am a more "aggressive" trader than JJ- this is by his own words. JJ is an outstanding trader who makes money daily and rarely loses. His style is to be a bit more conservative than myself. We both make money, but we have different trading styles.

Sledge, I was merely using your chart as an example. I didn't mean to attack JJ, VSA, or anybody or anything else. I even stressed that both options are perfectly valid for me. Don't know where all the hostility suddenly comes from

	Quote:	Sledge
	On that call I was correct, but knowing JJ, he would have still taken that trade, but gotten in a little later than I- because he would want to increase his probabiltiy of a successful trade- and as you know- that is what it is all about.

For sure, did I say that getting in later was bad? I said that getting in later usually requires a wider stop, thus more risk. But if that makes the odds higher, than the risk is probably warranted. Either way, that's all for the individual trader to find out and determine what suits him or her best.

	Quote:	Sledge
	So to nutshell all this rambling. JJ is a highly skilled VSA trader, with a more conservative approach. He puts money in the bank on a daily basis. His style may be a bit less aggressive than mine personally, but that does not mean that just because he doesn't trade like me, that I can't learn from the trading smarts he has been so willing to share and help me further my own VSA education

I didn't say he wasn't and I don't think I showed anybody any disrespect. If I did, I apologize. Your trade, that we discussed in the other thread, was for me a perfectly valid setup. How you approach it, where exactly you enter and place your stop is down to the individual trader to determine what works for him. But the chart I posted was a one minute candlestick chart. I don't think you said anything about waiting for the next bar to close to enter. And that, in the end, was all I was trying to point out to JJ.

[Sledge]

Firewalker-
I'm sorry, It was not my intent to sound hostile. I did not mean to come across that way- its so damn hard to try and make points without voice inflection to have someone be able to hear them as they sound in my head.

I'm defending JJ, but I'm not trying to sound harsh towards you. I apologize if it came across that way.

I respect JJ and his trading- but I sure as heck can't be upset with you or your trading style as it sounds as if it is a reflection of my own
Sledge

[Eiger]

	Quote:	tawe trader
	... Just to clarify things (if not for myself then for other novice VSA'ers), am I correct in assuming that a 'bullish' test is only seen as a positive test (ie signal to go long) AFTER the next bar closes up ? Regards Tawe

Hi Tawe,

That's generally true. We do want to see confirmation following the Test with an upbar (but not a No Demand bar). I will usually take a trade on the close of the test bar (assuming my other trade criteria are met), but will look to bail if the market does not act right.

[Eiger]

	Quote:	firewalker
	...What if the test you observed happened on a 1 hour bar. Are you going to wait for the next bar to close? ...

I find it very helpful to watch higher time frames during the trading day, even though my trades are taken mostly off the 5 & 3-min charts. If I saw a Test on the 30 or 60-min chart, for example, and there were other indications of higher time frame strength in the backrgound, it would give me more confidence to take a long trade on the 5-min chart (say a Test in a Rising Market) and then trail the stop and play for a larger gain than if I were trading solely off the lower time frame. Usually, if i am trading off the lower time frame, I will play to the next level of resistance. If there were good indications on the 60-min chart, though, I would generally be encouraged to hold at least part of the position on a trailing stop.

Just some thoughts ...

Eiger

[Turning Point]

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[biegea]

Hi, I was wondering if anyone could give me an interpretation on RSX. Until Tues, 7/1, this chart sill looked like it was merely undergoing a reasonable pullback. On Tuesday, we gapped down, albeit on low volume. This told me that while we have clearly broken support, we have not done so on heavy volume, and this could mean that the selling was approaching a possible end.

Today (Wed, 7/2) is where it got particularly interesting. The daily chart looks dreadfully bearish with a wrb red candle closing on lows on heavy volume. Most smaller time periods support this view. However, if you go to the 5-min, you can see that heavy trading all happened at one time, and it was on a WRB up, going into HOD. The ensuing decline was on nothing compared to the buying on that one 5-min bar.

How is one to interpret this -- when the larger timeframes all look ugly but the volume on the smaller timeframe shows that the heavy volume was not in the direction of what the larger timeframes seem to imply?

Thanks in advance for your thoughts.
biegea