[VSA] Volume Spread Analysis

[Soultrader]

Thank you for the great explanation PivotProfiler. Taking a look at the chart, is it possible for VSA to detect whether we will have a V bottom or a W (second test) or even a third test of the low? While W and third tests offer excellent risk:reward, I personally have trouble taking a trade on V reversals. Which is why I usually wait until price breaks a pivot point for any longs. Any input would be appreciated. Thank you.

[Anonymous]

	Quote:	Horus
	For those you that have the VSA software, have you looked at these arrows printed on chart in realtime? Last time I look at this software all the arrows changed position so it looks great after the fact but in realtime you will get a quick wake up call followed by empty trading account! I would be interested to see and almost guarantee this is still the case, all their arrows change position after the fact. but I can tell you now when something looks so good (roy kellys pivot trader is in this category) you have to questions it twice.

I am not a fan of the software but will defend some of it here.

First, some of the "signs" do change. If the "sign" was a light green triangle, it may change to a dark green rectangle a few bars later. This happens because the software has determined that the amount of demand is greater than originally calculated. I went to many webinars before I saw this happen in realtime. Admittedly, I was a bit confused by this.

So, the darker signs which signal heavy supply or demand will tend to be "optimally positioned" on the chart. NOTE THIS DOES NOT CHANGE WHAT THE BAR ACTUALLY REPRESENTS, ONLY THE SOFTWARE INTERPETATION. That is , this is a software "selling ploy" and not a VSA weakness.

One must understand the signs themselves.

Take a look at the chart above. I have shown where we had stopping volume/climatic action. Now, in TG, the sign will not show up until the bar AFTER the bar with the arrow. Why? Because we need to see what happens on that volume to make a determination of its meaning. Tom Williams, the father of VSA, would enter on the close of the bar with the arrows, but most others (like Todd K. or Sabastian Mamby) would wait for the close of the next bar as confirmation.

This is not unlike many candle patterns that need certain price action before and after a particular candle. So the sign ends up being placed underneath the stopping volume bar, the low, and it looks really good. HOWEVER, IT IS NO A BUY SIGNAL TO BEGIN WITH. PEOPLE WHO USE INDICATORS WRONGLY ASSUME THEY SEE INDICATORS ON TG. IT MAY LOOK LIKE BUY AND SELL SIGNALS TO THE INDICATOR CROWD BUT IT IS NOT.

If you look at the previous chart, look at the No Demand. Those who understand VSA will know at the close of that bar that it is NO DEMAND. TG, however, will not place a sign on that bar unless the next bar closes down. SO THE SIGN COMES LATER THAN THE ACTUAL UNDERSTANDING OF WHAT IS HAPPENING. Now that makes it look "spot on" to the uninformed , but that does not change the power of the method.

As far as signs changing positions on the chart, I can not comment on that. It is not a good thing to be sure. This should not be happening and may be a glitch in the program version you looked at.

[notouch]

	Quote:	PivotProfiler
	The last two arrows point to Stopping Volume/climatic action. Wide spread bar with Ultra High volume that closes in the upper portion of it range and lower than the previous day. BUT THE NEXT BAR IS UP. If all that volume represented selling, then the next bar could not be down. Moreover, if all that volume was selling, then the close should be on the low of the bar, not in the upper portion.

There appeared to be climatic selling on high volume followed by an up bar before the one you have highlighted - the 8:30 bar. With hindsight it's easy to see that this was not a great buying opportunity but in real time how would VSA have kept you out of that trade?

[Anonymous]

	Quote:	sds
	I am not able to understand one thing. Consider the right hand side of the dotted vertical line. There is move down till 1420. But if instead of a move down, had there been a move up then I would have said there is no supply, at the dotted line. Things happened in the past could easily be analysed and concluded. But I am not able to apply logic on the current scenario. Perhaps PivotProfiler can throw light on this. sds.

Hi. There are TWO failed test prior to the No Demand sign. This means the Smart Money was testing for supply AND FINDING IT. If there is indeed supply in the market, price should move down.

Now we need to keep the background in mind. We have seen supply come into the market. We have seen an Up Thrust. These are signs of weakness in the market. Then we get two failed tests, more signs of weakness. And finally, we have the No Demand bar just prior to the fall.

[Anonymous]

	Quote:	notouch
	There appeared to be climatic selling on high volume followed by an up bar before the one you have highlighted - the 8:30 bar. With hindsight it's easy to see that this was not a great buying opportunity but in real time how would VSA have kept you out of that trade?

Personally, VSA is my primary method and Japanese candlestick patterns are my secondary method. VSA is used to understand the context of the candlestick pattern-the actual buy/sell set up.

More generally, however, I would say this......

Is there a Pivot line, like R1 or Value Area Low, around the various bars indicated? In other words, if two bars seem to be the same, I would tend to take the one that occurs around a known support/resistance area first.

Also note that two bars later, we see a narrow bar that closes up from the previous bar, closes in the middle of its range, and has volume less than the previous two bars. This is No Demand. So we see that we are possibly early if we are already long.

I would also note that we are looking at only one timeframe. While this is after the fact, it is more likely the case that the second bar (Stopping volume-strength) shows up on MORE THAN ONE TIME FRAME.

Simply, one needs to understand where support/resistance areas are, use mutiple timeframes, or have certain entry criteria beyond just one bar on high volume. And in the end, if you were wrong (early), one needs the ability to get out and re-evaluate and then get back in.


****edit**************

I just wanted to add that Demand did indeed enter the market on that bar of which you speak. However it was swamped by supply. Now look closer at the two bars. Where are the repective closes? What are the sizes of the ranges? In short, there is a differnce in the two bars. That not withstanding, where are the support/resistance areas?

[Horus]

To all readers of this thread. I do not question the value of volume and range analysis. I am sure there is a lot of value and you can find an edge within these studies.

TradeGuider on the other hand is NOT volume spread analysis. I know this company from the day they started. It used to be sold under the site www.tradetowin.com.

Here is the original software site back in 1998: Check it out.

http://web.archive.org/web/199812120...radetowin.com/

Here is how it works:

TradeGuider is a collection of about 40 volume and range patterns for buys and sells signals, shown on the chart with arrows, rectangles etc. And that all it is, just pattern recognition. I also think they have some kind of highest high and lowest low functions built in to this analysis. For example, current bar is lowest low for min 5 bars and range and volume are X, then we have a "potential" buy or sell.

Now when a bar meets one of these pattern definitions, then an arrows or rectangle shows up on screen.

Here is the trick:

Imagine last Friday we had an arrow to buy, then Monday, if the market goes lower, this arrow WILL disappear. If Monday meet one of these pattern definition again, another arrow will show up!! If Monday dosent meet the definitions and market goes up on Tuesday, an arrow will show up on Tuesday below Monday!!!!

So in history it looks like the software picked the perfect low! Same logic applies to highs.

And here you have the ingredients for "snake oil" software. Simple, backed by some fancy name, site and marketing.

Oh and occasionally you WILL catch an odd high or low so no change is needed in the location of the arrow.

This is not VOLUME or SPREAD analysis. Period. There is no buy or selling pressure involved here at all...

Now you can called it Volume Spread Analysis by TradeGuider or as Roy Kelly calls it "The Trading Method That Can Make You Rich" - Floor Traders Tools.

Roy Kelly - TradeStation

See the perfect top and bottom picker. Its the same concept as TradeGuider. They change after the fact.

I call this "Back Trade Analsyis".

For the good folks of this forum and the new traders, stick to creating your own method, it takes time, it takes discipline and lot of determination. There are a lot of great free resources, this forum being one of the best ones I have seen. There are a few legitimate tools but very few and none perfect. Always do your home work before you pay.

[notouch]

PivotProfiler, I think the multiple time frame approach is key. If you relied on VSA using only the 5 minute charts they you would get squashed on a regular basis. The bar I referred to was a bounce off of the daily pivot I believe whereas the one you highlight was a bounce off of R1. Obviously with hindsight we can see that R1 held but the pivot didn't. In real time that would have been a lot more tricky if you had been using only the 5 minute charts. A problem I see is that there will almost always be high volume supply followed by a bounce near a pivot (assuming you're looking for longs). Wouldn't just placing a limit order at pivot levels be a better strategy? The trouble with multiple time frames and waiting for bars to close is that you'll be late for many moves.

[Anonymous]

Again, I do not recommend the software nor do I like it.

Just get your facts correct.

Tom Williams first wrote the book called "The Divine Secrets of the Stock Market". TG bought the rights and changed the name.

Tom's first software was called Wyckoff VSA, the precursor to Tradeguider.

These are the facts and are not hidden by them. The book , "Master the Markets" has images from the origianl software with Wyckoff VSA clearly labled.

There are 400 signs and none are buy nor sell indicators.

[Anonymous]

HORUS;

If you have a problem with TG, I can give you Todd's or Gavin's home number so you can take it up with them.

As for this thread we do not need it.

Since you know soooo much about what does not work, why not start a thread about what DOES work?

[Horus]

I dont use TG and dont recommend it either.

What docent work is just as important what does work. I think its fair to say that its important to hear about both sides of every approach. This is an open forum.