[VSA] Volume Spread Analysis

[MC]

	Quote:	jperl
	Until there is some consensus here about how to determine DEMAND/SUPPLY volume, then anything else we have to say about VSA will remain confusing.

I'd love to have/gain that edge your looking for, to know what the volume truly was comprised of. I'm tuned into this thread anyhow but this discussion just got that much more intriguing.

I think the point of VSA though is through the plain jane volume and the candle's spread you can try to gauge effort vs. results. That combined with the concept that swamping volume on any extreme is usually the start of a trend reversal and to watch for the test of extremes with lower interest to confirm. I know I'm barely scratching the surface and want to keep learning more about No supply and No demand bars etc...

I'm a rookie and no pro so this is merely my understanding of VSA.
Keep posting the charts guys, I'm learning from you all.

[mister ed]

	Quote:	BlowFish
	Now I'm not saying these tools aren't useful but you have to be careful how you interpret the info. Cheers.

Great post BlowFish. Now, let’s get some friendly debate going.

I would start by suggesting that a discussion about the bid/ask volume (definitions to follow) should be on a new thread. While we are discussing it here in the context of VSA, it is a separate concept – by all means marry the two together, but getting to a point where we can do so, and debating it on this thread, is going to frustrate those that want to concentrate on VSA.

Blowfish, if I can refer to your numbered points.
1. No issues here … Real time open interest – yes please!
2. No issues here. Those confused about definitions, BF has defined it perfectly – A trader who hits the bid, that’s an “aggressive� sell, a “seller� if you like, or “sell volume�. A trader who hits the ask, that’s an “aggressive� buy, a “buyer�, or “buy volume�.
3. I have an issue with smart = big. Observation of the big-lot trades that go through suggests to me that the big lot traders are not necessarily “smart�. It is logical that smart = big, but in my experience, not all big = smart. This may be an issue with how the data is presented, and I would love input on this. I am only speaking of the ES, my current understanding is that a 100 lot buy (i.e. a buyer who hits the ask for 100) is reported as a 100 lot buy even if he buys from a split of sellers, say a 5, 10, 15, 10, 30, 20, 10). Another point is the software exists to allow trade size to be split, so instead of executing one lot of 200 near-simultaneous execution of 4 lots of 50 (for arguments sake) can be done instead. My broker even offers a humble trader like me an “iceberg� facility to split up my limit orders.

Now, onto your conjecture BF – where you say, and I quote “This doesn’t jive well with the whole market delta volume@ask thing. Well not in the way its often presented i.e red 'selling' green 'buying'.� I fully agree – the marketing of it is far too simplistic, just because there is a truckload of deals at the ask, i.e. lot of aggressive buying, the price may not necessarily rise if the buying is running into a large limit order. This is a “failure� of the marketing of the concept, but is a feature of the information – big aggressive buying that cannot achieve a price advance is good information in itself. Indeed, in VSA a narrow range up bar on very high volume after an up swing in price illustrates this concept perfectly.

Also, BF “The Smart money does not often need to buy/sell aggressively except perhaps to kick start a move� – excellent point, and something I watch for.

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Jperl – in response to your post. This whole up-tick/down-tic versus volume at bid and volume at offer is not a debate I am fully cognizant with. The definitions I use are above, these are the definitions used in the Market Delta software, and In IR/T. I can’t speak for other packages.

To reiterate:
There is a Bid.
There is an Ask.

A deal struck at the bid price is an “aggressive� sell. Shorthand – a “sell�, what you would class as a “SUPPLY� trade.
A deal struck at the ask price is an “aggressive� buy. Shorthand – a “buy� – what you would class as a “DEMAND� trade.

Let’s say there is a sequence thus:
1. Bid = 25
2. Ask = 50
3. Trade at 50 for 75 lots. (This is an aggressive buy – reported as a buy)
4. Bid is now 50
5. Ask = 75
6. Trade at 50 for 30 lots. (This is an aggressive sell – reported as a sell).

Now, my understanding of what you are saying jperl is that the second deal you would class as a “buy�, or a DEMAND trade because the previous deal was at the ask and was a DEMAND trade. I disagree with your definition here, a hit at the ask is a demand trade, a hit at the bid is a supply trade, regardless of what the previous trade was.

Happily, my definitions coincide with the definitions used in the software I use (otherwise I wouldn’t use it).


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If I can go back a little. Tasuki has argued that there is no “hidden� selling or buying using the volume at bid and ask concept. I fully agree – the numbers are there in black and white (or red and green), the volume of aggressive buys, aggressive sells, and by implication the volume of “passive� buys and sells.

The motivations of the participants, or whether or not they are "smart money", are/is not laid out by these figures, that is for us to speculate on, but their actions clearly are.

[BlowFish]

Quite agree that 'delta' type stuff is probably better in a separate thread to the VSA stuff. Bed time here I'll go through your post a bit more carefully tomorrow.

Cheers.

[jperl]

	Quote:	mister ed
	Great post BlowFish. Now, let’s get some friendly debate going. I would start by suggesting that a discussion about the bid/ask volume (definitions to follow) should be on a new thread. While we are discussing it here in the context of VSA, it is a separate concept – by all means marry the two together, but getting to a point where we can do so, and debating it on this thread, is going to frustrate those that want to concentrate on VSA.

Yes I agree. I've started a new thread entitled "What is DEMAND/SUPPLY volume"

	Quote:	mister ed
	Jperl – in response to your post. This whole up-tick/down-tic versus volume at bid and volume at offer is not a debate I am fully cognizant with. The definitions I use are above, these are the definitions used in the Market Delta software, and In IR/T. I can’t speak for other packages. To reiterate: There is a Bid. There is an Ask. A deal struck at the bid price is an “aggressive� sell. Shorthand – a “sell�, what you would class as a “SUPPLY� trade. A deal struck at the ask price is an “aggressive� buy. Shorthand – a “buy� – what you would class as a “DEMAND� trade. Let’s say there is a sequence thus: 1. Bid = 25 2. Ask = 50 3. Trade at 50 for 75 lots. (This is an aggressive buy – reported as a buy) 4. Bid is now 50 5. Ask = 75 6. Trade at 50 for 30 lots. (This is an aggressive sell – reported as a sell). Now, my understanding of what you are saying jperl is that the second deal you would class as a “buy�, or a DEMAND trade because the previous deal was at the ask and was a DEMAND trade. I disagree with your definition here, a hit at the ask is a demand trade, a hit at the bid is a supply trade, regardless of what the previous trade was.

Well your example is somewhat incomplete. Both Trade 3 and Trade 6 was at 50 (the same price). So in my terms, you would need to know what price the previous trade occurred. If it occurred say at 25, then both trades 3 and 6 would be DEMAND trades whereas if the last trade was at 75, then trades 3 and 6 would be SUPPLY trades. It matters not what the bid/ask prices happen to be, only what the time and sales price/volume shows.

[Tasuki]

	Quote:	Primavera
	Tasuki May I ask who your data provider is ? Mine is currently IB and I don't know if they provide this kind of breakdown in their API. I have seen it on T&S but wasn't aware that this kind of data could be exported. Primavera

Hi Springtime, I use Tradestation as my data provider. The one big advantage with TS is that you don't have to "export" anything--Tradestation the charting package is also Tradestation the data provider. One of the huge drawbacks of IB is that you have to export data from them to a charting package, and all SORTS of stuff gets lost in the mix. I know lots of people do it, especially with eSignal, but I've found exporting to be a total drag. For example, I recently tried the charting platform Neoticker for a month, and exported data from eSignal. For some of my charts, the exporting process took 45 minutes for the chart to refresh. Yeesh. Gimme Tradestation any day.

[Tasuki]

	Quote:	jjthetrader
	Do you have a link to the TS indicator you're speaking about? I'd like to check it out.

jj, The indicators I'm using are just "standard issue" volume up and volume down indicators from Tradestation. Absolutely nothing special at all. I presume every charting package has them. You use TG, right? Don't they have volume up and volume down? They HAVE to, they're all about volume, it's their big thing, right?

[Tasuki]

	Quote:	Blu-Ray
	Here you go JJ: http://www.traderslaboratory.com/for...ator-1153.html Cheers Blu-Ray

Actually, Blu-Ray, that's not what I was talking about. I did describe in some detail what I do on previous posts--I just take volume up and put it on top of (in the same subgraph with) volume down. The volume down I make fat and red and the volume up I make skinny and green. For my eyes, this combo works MUCH better than volume delta.

[mister ed]

	Quote:	Tasuki
	jj, The indicators I'm using are just "standard issue" volume up and volume down indicators from Tradestation. Absolutely nothing special at all. I presume every charting package has them. You use TG, right? Don't they have volume up and volume down? They HAVE to, they're all about volume, it's their big thing, right?

TradeGuider does not have volume up / volume down.

[Tasuki]

	Quote:	Blu-Ray
	Tasuki I'm actually going to disagree here, I use the tick delta indicator and have done since it's introduction to this site. I do find it very useful, but it can contain hidden volume as you describe, for example: In an upbar where there were more buyers than seller's per the tick delta indicator, what's not to say the smart money were just loading up the ask with limit orders and the " late to the party" traders were snapping them up at market. Thus giving an impression that there was more buyers than sellers. Cheers Blu-Ray ps. if you change your chart to a 1440 min