[VSA] Volume Spread Analysis

[torero]

Back to bidness. I got a view of the ER2 and YM weekly chart here and the last few bars showing interesting volume. PP or anyone want to take a try at this one. My interpretation is that the volume is drying on the bulls and more on the bears. My take that is if the next WRB with high volume, it's confirming in the downtrend?

[port80]

I have nearly finished reading master the markets and I'm very intrigued. Here is a stock I was hoping folks could comment on. I am very new to this so please forgive my ignorance.

KNDL is a stock that showed up on my float analysis. It has a float of about 12 mil. It has had some interesting activity that I was hoping I could get some help with.

For the last few days it has been trading in a channel and yesterday as it approached a trend line there occurred what I thought was a failed test. But today I can see that the trend line was broken with sideways activity. So I could definitely use some help on interpreting this chart.

I have to say that after reading this book it's like somebody open the blinds in a dark room and let the light in. I don't think I'll ever trade the same way again.

The first chart is a 3 month daily chart with my interpretations (probably wrong). The second chart is a 10 min chart where the short term trading channel was broken. It's hard for me to tell whether accumulation or distribution is going on. Something definitely seems to be happening.

Thanks, Alan

[Anonymous]

Port80, welcome to the thread and the forum.

I have attached a copy of the bar chart with some comments.

Basically, you seem to have a good grasp on VSA. I am a student myself so I could be wrong with what I see.

The first thing to note is the wide spread ultra high volume bar. You labeled it stopping volume. I think it is either stopping volume or a volume climax. More important than the name, however, is the fact that a change in the supply/demand dynamic happened on that bar. The bar is wide with ultra high volume, closed lower than the previous bar, and closed near the high of its range. CLEARLY THERE WAS BUYING (DEMAND) ON THIS BAR. This created a gap which was filled.

I veer off the VSA path a bit to mention that this is a Wide Range Body. Note where the open is (not looked at in VSA, but so telling). Ironically, I think this is an advanced VSA concept despite that they do not look at the open. In other words, if they did look at it, they would logically come to the conclusion WRB analysis comes to. Not to get too far into this, but what I like to see is a set-up (entry signal) happen within the range of the body or the total range of the bar of this ultra wide spread bar. I believe Todd, and Tom would agree with the total range aspect and thus it is more advanced VSA, and not talked about in public forums(webinars) by Todd.

At any rate, we then get a No Supply bar. The bar closes near its low, has a narrow range as compared to the previous bar, closes lower than the previous bar and has volume less than the previous two bars.

You are correct about the test. That is indeed a test of supply that closes in the middle of its range, makes a lower low than previous bar, closes lower than the previous bar. Volume is higher than the previous bar but relatively low.

The bar you labeled as No Supply is incorrect. The volume is not less than the previous two bars. However, the next bar is No Demand. Note that we are at the bottom of the support/resistance zone via the body of that large candle. With a No Demand indication, the Professional Money has to re-test for supply underneath. We thus get another test bar. Here what is of note is the fact that volume here is less than the volume on the first test. This is a sign of market strength.

Note the shaded area. There is something going on here that is beyond the scope of this thread. Suffice to say, there is reason to expect price to move back into this area. But even without that concept, one would be looking for a move back to "test" the close of that large Ultra Wide Spread bar.

How and where you actually enter the market is another question altogether............... That is, it is a personal decision. But the pattern of a No Supply followed by a test, followed by a No Demand, followed by another test on less volume than the first test and with a low less than the first test, is a repeatable pattern.

[Anonymous]

Sorry. That chart does not have the shaded area. This one does.

[port80]

Thanks for the insight. Got a lot to learn. Missed the demand day. Don't know much about WRB's. But I'll look into them. I'm actually most interested in the latest 10 minute chart. Something is definitely happening. A shake out possibly?? I'm not worried about making any trades at the moment. I just think this is a great stock to learn something about VSA partly because of the low float. Thanks so much for your help.

[Anonymous]

What did they know, and when did they know it? OR the importance of Volume.

Here is a chart of some of today's price action in the Euro.

What is telling here is the actions of Professional Money PRIOR to the news release. We can see when they begin to position themselves and on what side through the use of VSA.

Almost an hour beforehand, we see an Ultra Wide Spread Bar with Ultra High Volume, that closes down from the previous bar and closes in the middle of its range. This bar represents a transfer of ownership. That is, the Professionals are buying from the retail traders. Why would they be buying prior to a usually volatile news release ? Seems like a risky thing to do. Could they already have an idea of what it will say?

Now VSA tells us that if this is the case, we would expect that if they are BUYING now, they will be SELLING into the release itself for profit taking. Especially If the news spurs the retail traders into entering the market on the long side. However, if the retail trader is believes the news to be bearish, they (Smart Money) would be BUYING more. That is, if the retail traders are getting short, who are they selling to? So we should see both Professional selling and buying. We don't expect then to get net short in other words.

Check out the large dark hammer as the news is released. There was some profit taking on that bar. But the bar has ultra High volume, closes on its low with the next bar up. Some buying must of taken place as well. More exactly, they took profits and then began buying as the retail traders (weak hands) rushed in on the short side. We always want to consider "who is on the other side" with VSA. Usually, its the Smart Money and that is not good. I should say, without VSA it's usually the Smart Money and that is not good.

Note that price did begin to fall for a few bars. But then we get a dark hammer line. The Long Shadow of the hammer line happens, not so coincidently, to trade into the region of the First candle mentioned where the transfer of ownership begun. The Smart Money is becoming aggressive on the demand side. They are locking in the weak holders (retail shorts) as they know price is going HIGER NOT LOWER. The down move and the dark hammer itself may have even pushed some weak longs out.

If you look at a chart beyond the time shown here, you will see the strong up move that ensues.

1. The Smart Money began getting long (long) prior to the News.
2. Some used the event to take a bit of profit.
3. Most got even more long (demand).
4. Once the weak holders where short, price found support in a such a way as to knock out weak longs and lock in weak shorts.
5. what can not be seen in this picture, is a large inverted white hammer that represents the last effort for the weak shorts to get out at break even if the bought on the news release itself.

When we use VSA we get a 3 dimensional picture: volume, range and price. Ignoring one of them (like volume or keeping volume constant) is like cutting off one leg of a tripod...............

[Anonymous]

If there has been a theme to my posts recently, it is summed up in the word: CONTEXT.

I am learning to use candlestick patterns as a secondary method. By that I mean, entry set-up signals.

VSA and WRB & Long Shadow analysis are the primary methods and are used to understand the contextual backdrop thru which a candlestick pattern trade can be taken.

Take a look at the chart below.

We see a WRB on Ultra High Volume. VSA tells us that markets do not like Wide Spread up bars on Ultra High Volume. Because there could be hidden selling in the bar.

Now check out the very next bar. This bar has almost as much volume as the WRB, in fact it has 3 ticks less. BUT the range is much more narrow and the bar closes in the middle of its range. This is a transfer of ownership bar. The Smart Money is dumping supply into the market. As retail traders rush in to get long, the Smart Money is all too happy to sell to them. Like I said, we need to always be aware of who is on the other side of the trade.

While this bar is up, on high volume it is not "up volume". Most volume indicators and volume analysis would assume it is positive. But we know better than that.

A few bars later, we see a narrow bar that close up from the previous bar and closes in the upper portion of its range, but on volume less than the previous two bars. This is No Demand. Professionals are not interested in higher prices at this time.

At this point we have context. Supply has entered the market. Note that price overall begins to move sideways.

There are some who would go short after the No Demand with the background selling that can be seen. This is a personal choice. For me, all that the context says is, "now is not the time to be going long". I need to see some candle pattern, preferably within the range of the WRB, to get me short. (if you look at a chart from today, you will see that price plummeted after the jobs report). But my point is this, the context, or story, at this time says more about NOT going long than simply get short.

A Tradeguider "sign of weakness" might appear on the transfer of ownership bar. It would therefore look like the top was called and thus possibly sold. This is the error that most indicator only traders who look at TG make.

[domanaperth]

Hello everyone

This is not a reply to any particular post but is posted with a view to seeking advice on VSA and in particular to the TradeGuider bootcamp course with William's book.

Has anyone purchased the bootcamp course? What are your views on the course?

What would be a good starting point - buy the book first [to get the basics] and then the course or just get the course [assuming that the course will have a large coverage of the topics in the book] and then if necessary the book just to complete the whole picture.

I have no prior experience/knowledge of VSA per se other than having watched Galvin's introductory demo to members of TL and from what I have read in the posts in this forum.

Any comments much appreciated.

[Anonymous]

I always say start with the book first and then get the bootcamp. Of course it they come packaged together that would be the best.

What you really need to know is how YOU learn best. If you learn better reading about a concept, then Cleary start with the book. If you learn better in a more lecture type setting then you would want to start with the bootcamp.

* Remember, the book needs to be continuously read. One read will not be enough. *

[Anonymous]

Hello VSAers;

By now most if not all have seen the Cramer video. But if you go to youtube.com and type Market Manipulation in the search box, a few videos down from the Cramer one is a video by Tom Williams himself.