[VSA] Volume Spread Analysis

[BlowFish]

	Quote:	gassah
	The market doesn't always know which way it wants to go. nic

Worth repeating and remembering. There are many participants some 'smart' some not so 'smart' all have different agendas and different time horizons. Sometimes they are not active sometimes they are.

For example think about what a test is. The market is marked down to discover if there are still sellers at a lower level. If there are then we see a failed test. The market is there to facilitate trade it will move around until it discovers where the orders are.

[tradproj]

Hi
If anyone is willing to sell a used "Professional Chart Reading Boot Camp" CD please email me.

tradproj@gmail.com

[Anonymous]

WoW. Going thru forum withdrawal. Never again Soul!!! LOL.

Just a quick pic of an interesting, yet oft repeated pattern. Check out the chart below. Notice the Squat that appears on the chart. We have a narrow range bar with volume higher than the previous bar and volume that is high. But look at the volume on the very next bar. It drops off considerable on a down bar that closes near its high, in other words, a Test. Thus the Supply that entered on the previous bar (the Squat) most of been absorbed. This is thus a bullish sign. Also note that the Test is within the body of a WRB formed by the Effort to Fall Candle.

Let's back up to this candle for a second. We see a large dark WRB on higher volume that represents an Effort to Fall. But the next candle is up. We are seeing no result from high volume on this candle. Once the market move up and closes higher than the high of the Effort candle, we have no result from an Effort to Fall. Which is of course, a bullish sign.

Price falls down the next two bars however. Still on this fall we see a candle with volume less than the previous two bars , closing on its low and closing lower than the previous candle: No Supply. Look to the right to the Test candle. Notice that this Test does not get as low as the low of the No Supply candle. Hard to believe that that is just happenstance.

[sleepy v2]

Long vs Short

In theory VSA applies equally to going Long or Short. Just wondering if those who have been using VSA for a while have found that is in fact the case or if they actually do things different (consciously or sub-consciously) when going SHORT.

sleepy

[tawe trader]

Hey it's nice to have this thread back online.........I have missed my VSA fix !

	Quote:
	Check out the chart below. Notice the Squat that appears on the chart. We have a narrow range bar with volume higher than the previous bar and volume that is high

PP - you have confused me now (not hard I know) with your 'squat'. In my eyes it isn't a narrow range bar or am I reading in wrong ?

If I was looking at the EUR/USD chart as a bar chart I wouldn't class it as a narrow range bar but do you because it is a candlestick with a narrow spread between open and the close ?

Am I correct in assuming the Tom Williams determines the range/spread as the distance from the bar's high to low ?

Cheers Darren

[Anonymous]

Tawe

Maybe I should of been more exact. It is a candle/bar that is narrower than the previous candle/bar. You are correct that it is not a narrow range bar as defined by an overall measure of bar/candle ranges.

Range/Spread means high to low. The only exception is WRB which is Wide Range Body and refers to the distance between the open and the close.

[tawe trader]

PP - thanks for the clarification.

[Anonymous]

Taken it up a notch.

A: Down bar on high volume with a close in the upper portion of range; Demand enters. This is confirmed with the next bar up.

B: WRB/Effort to Rise. Up bar with high volume and increasing range. Markets typically don't like up bars on high volume as they may contain selling (supply). WRB analysis says that a change in the supply/demand dynamic may be happening.

C: Down bar on high volume. Some supply did enter on previous bar. However, this bar is down on high(er) volume and could be hiding strength. The next bar does indeed close up, so there must be some buying in this down bar.

D: Up bar that closes in the lower portion of its range. Volume is high. Clearly Supply entered on this bar. The move sideways confirms that there was some supply entering on the last few bars. The fact that the market moves sideways and not down is telling of overall strength.

E: Down bar that is also a selling bar (low lower than previous low and high equal to or lesser than previous high). Volume has dried up and is less than the previous two volume levels. This is No Supply. Possible first entry as we now have a low volume sign within the body of a WRB with high volume.

F: D created a top and F is an Effort to Rise thru that top and the resistance level of B. Note volume is not very high and the close is on the high of the bar. This is a time when an up bar is strength not weakness.

G: More supply comes in. We get a very high volume bar that closes equal to the previous bar and closes in the lower portion of its range. While this was a buying bar (higher high than previous bar and higher or equal low than previous low), volume reveals the truth. Supply entered. The next bar is indeed down.

H: This is a Test. Had this been actual selling the volume would be higher. Plus the close would not be on the high of the range. When the next bar closes up and confirms the Test, we again have a low volume sign within the body of WRB. In short, another possible entry point.

I: is No Demand. There is no weakness in the background here. Or at least we see much more strength than weakness. The pros may not be ready to participate on an up move, but they are not selling decisively. Note how the next bar is down but does not trade lower than the low of the Test.

J: Test/Test in a Rising Market. Normally bullish but there is now a Gap on the chart. Gaps are usually filled. Does the Test tell us that this one will not be?

K: Effort to Rise. As previously stated, many times after a low volume sign there will be an Effort bar. This is due to the relationship between volume and volatility. At any rate, the next bar is down and we can see no close higher than this bar. This looks like No Result from an Effort to Rise (Bearish). Evidence that the market wants to at least back fill the gap.

L: Possible Test. The chart was captured before the close of the last bar so it may turn out that this bar is not a Test. If it is, it would make sense that the market is looking for supply as there has not yet been any results from the Effort to Rise and there is a Gap below. One should note that the low of this Possible Test is not lower than the low of the previous Test. This could be a good sign. Any dark WRB closing lower than this Test bar would be a sign of further falling prices....

[tawe trader]

	Quote:
	Now I mainly trade the FTSE 100 Futures contract listed on the Liffe exchange from a 7 minute chart. I follow the cash market closely. Tom Williams states that if you're going to trade futures based on Indexes you must follow what the cash market is doing before jumping into the futures market. The only probelm I have is that Interactive brokers do not provide realtime volume information for the FTSE 100 cash market. How is one to trade intraday using Tom Williams' methods if you do not have access to realtime parent index volume information? Do you simply ignore the cash market all together and use the volume in the futures market as the guide? If so, aren't you trading contrary to what Tom has espoused in his writings on VSA?

Hello lote_tree, if you have read this thread you would see that I also trade the FTSE future and I have managed to bag some pts since I started posting my charts.

Yes, in an ideal world we would like to have cash mkt (live) intraday volume to help us trade but until that is available I believe the futures mkt volume is the next-best-thing. There is EOD volume available for the FTSE cash index.

I have also noticed frequent volume 'spikes' in the FTSE future which is normally followed by a good size move. I can only assume that the in-the-know traders have some advance notice of some important news and then they pile into (or go short) the FTSE future contract.

The main difference between cash and future mkt which has been previously discussed is 'testing' where in the cash mkt it needs to be low to be successful, but if the futures traders see a successful 'cash' test they then pile in, which can lead to a high volume futures test.

As somebody else suggested, (if it can be done) you could add the intraday volume of the FTSE's say 15 largest companies by mkt cap ie BP, Shell, Glaxo, Rio, Bats, Vodafone and the big banks etc.

Just out of interest, why do you use a 7 min timeframe ? I usually have a range of various timeframes open, from 3mins to 60 min.

Darren

[jjthetrader]

In the boot camp Tom says there are situations when a high volume up bar is actually bullish and that he'd explain later. But he never does so what are the situations when a high volume, wide spread, up bar is bullish?