[VSA] Volume Spread Analysis

[BlowFish]

	Quote:	PivotProfiler
	As for the bootcamp, see above. Todd, one of the world's recognized leaders in VSA and Tom Williams, the creator of VSA, made the bootcamp. Could there be a better source to gleam some nuances? It brings some of the concepts of the book to life.

Well I guess I am sold then I am also considering Joel's course. One of the reasons for my reticence is that my 'technical' skills are more than adequate to extract money from the markets. My problems are clearly 'emotional/psych'. In the past I have buried myself in bettering my technicals and deceived myself that I am trying to improve my trading.

I guess its like the CEO of a business putting all its resources into R&D when they need to improve there operations.

Could you expand a little where the boot camp goes that the book dosen't?

Cheers,
Nick.

[flatwallet]

Pivot...You Tina and Soul need to come out with a boot camp of your own. However, please do not price it at $500

Have any of you seen the boot camp videos and do you see it being worth while. It been a tough process for me to chage from current thinking to VSA thinking. I have incorporated the high volume and looking for stocks at the bottom of trends. However, the no demand, test and few other concepts elude me in real world practice. When I read the book, a light bulb constantly flashes over my head but once I put the book down, I feel the room getting darker and I start feeling lost. Are there any sources that don't rquire big bucks to start learning this stuff in more detail.

Thanks

[Anonymous]

	Quote:	flatwallet
	..... It been a tough process for me to chage from current thinking to VSA thinking. I have incorporated the high volume and looking for stocks at the bottom of trends. However, the no demand, test and few other concepts elude me in real world practice....

Hi Flatwallet. Thanks for the kind words. Keep reading the book.

I just wanted to show something that might help.

Originally, I was going to post this pic in the WRB thread and make the following point.

Not all WRBs are created equal. While there may be many factors in what constitutes a significant WRB, the three main are:

* Size in relation to other WRBs
* Amount of volume
* If the WRB is the result of some news related event

NihabaAshi is the true WRB expert and may be able to enlighten us as to some of the more reasons that determine a WRB's significant.

As I know you are looking at VSA, don't let what I just said about WRBs confuse you. There are three factors that constitute significant bars in VSA as well:

* Size in relation to other wide spread bars
* Amount of volume
* If the wide spread bar is the result of some news related event

Now in the chart below we see numerous WRBs or wide to Ultra wide spread bars. However, they are all not equal.

Let's just focus on the very first one on the left hand side of the chart. We see an Ultra Wide Spread bar with Ultra High Volume that closes up from the previous bar. VSA teaches us that markets do not like Ultra Wide Spread or Wide Spread bars on high or Ultra high volume. Because they could hide selling (supply) within them. Although some times they are indeed strength. Which by the way, much time is spent on in the bootcamp. Because many people after hearing weakness (supply) comes in on up bars automatically assume all up bars are weak.

We know this bar had some selling (supply) once we see that the next bar is down. If all that volume was buying (demand) then the next bar could not be down.

What we often see next, if the market is strong, is either a No Supply or Test for supply bar. Here we see a test. This is a low volume test. Note that volume is less than the previous two bars. Note that the test makes a lower low than the previous bar and closes on its high. It hard for me to separate some things, so I must point out that this test bar is in body of the WRB. But from a pure VSA point, note that the test is within the range of the Ultra Wide Spread bar. SIMPLY, A LOW VOLUME SIGNAL WITHIN THE RANGE OF A PRVIOUSLY HIGH VOLUME BAR.

Many concepts in VSA are logical. Here we see some supply enter the market. The next thing we see is a test of supply. The Professional want to take prices up, but are making sure that the supply is out of the market. If there were sellers underneath, then there would be more volume. And if a large amount of supply had entered (more than the demand present) then price would go down on more volume.

The key(s) here are that the 'test' comes immediately after we see supply enter the market showing us market strength. Or, simply put, location and background information. An aggressive trader might enter once the test is "proven" on the next bar that closes higher than the close of the test. Shown here. The reason for the question mark is that not everyone would enter at this point. Some use multiple timeframes, some use price action patterns, and some even use indicators ( ).

To be sure, the market did indeed move up and a quick profit could have been made. In fact, one could still be long as of this pic and in profit using only one timeframe and that repeatable and reliable pattern.

Once you witness Ultra Wide or Wide Spread bars on High or Ultra High Volume, you want to then start looking for bars with low volume. This is where you find no supply, no demand, and some test bars. Sometimes there will be high volume tests or Upthrusts on high volume. An Upthrust is kind of like a high volume test but showing weakness rather than strength. That is, a high volume test will close on or near its high and an Upthrust closes on or near its low. Ideally a high volume test will make a lower low while the Upthrust will make a higher high.

There is a lot more here, but it is enough to say that every No Supply or No Selling Pressure sign in this pic is within the range of a significant Wide or Ultra Wide Spread bar. More precisely, within the body of a significant WRB.

[flatwallet]

Well I understand it a lot more clearly now. Thank you for that.

[mroalan]

yes excellent stuff pivot, i also find the WRBS easy enough to understand its the follow through that takes time,but like all things just keep looking and your charts which i have printed out and added my notes,or as the case, "your notes".as for $500 that would look remarkedly cheap from where i,m sat! and as you can see this thread is hit a lot,if i knew where you lived i,d come round and sit outside your door untill you let me in. only joking.

[Anonymous]

Narrow Spreads & High Volume (Squat):

" This is very simple to see. The public and others have rushed into the market, buying before they miss further price rises. The Professional Money has taken the opportunity to sell to them. This action will be reflected on your chart as a narrow spread with high volume on an up-day. If the bar closes on the high, this is an even weaker signal.........." Tom Williams, Master the Markets, P. 77.

Just wanted to show something a bit different.

A few caveats:

* As previously mentioned, Not a good idea to enter trades after 1300 and certainly not after 1400.

* The above is even more so the case on a Friday.

What I wanted to show here was the narrow range bar on high to Ultra high volume. Of course, this is the type of bar where WRB & Long Shadow Analysis skips over. VSA, however, does not.

Again, the over-arching concept remains the same. We would be looking to see some type of entry signal within the body of a significant WRB or Long Shadow. What happens here is after an effort to rise we see a No Demand bar. This bar closes on its high and has volume less than the previous two bars. The very next bar has a narrow range, closes on its high and has greater volume than the previous bar. THIS IS A SQUAT. The above quote tells us the importance of the close on the high with this type of narrow range high volume bar: Weakness.

So if we step back, we have just seen a No Demand bar. Which tells us the Smart Money is not yet interested in higher prices. The next bar we see has a compressed range on higher volume that closes on its high and closes equal to the previous bar.

"..So by simple observation of the spread of the bar, we can read the sentiment of the market-makers, the opinion of those who can see both sides of the market.", Master the Markets, P.28.

Some may note the No Demand signal a few bars earlier. This would be a good place to short if we were not in a naturally low volume period. More over, the reason this short could be considered is because of the Ultra High Volume seen as an effort to rise. Then the following No Demand/Squat sequence. Simply, volume as a whole increased during this time so while the time of day remains a reason not to enter, the lack of volume doesn't.

What is important here though is the idea of the narrow range bar (narrower than the previous bar) on high volume, which is higher than the previous bar. In other words, the squat; Bill Williams' term, not VSA's term.

[BlowFish]

Hi PP a Couple of observtions. There is a nice failed test on the bar before the one you have marked selling pressure.

I am a bit of a WRB sceptic (though understand why they 'work'). Maybe thats more apropriate in another thread. Anyway for me the key area is the area that was tested by the two dojis and failed (at the start of the chart). Price has now returned there to see if there is any demand. In my book WRB's are often the result of price being driven through areas of S/R (supply/demand). Theres a subtle difernece there though the results are often the same. identifying the underlying S/R area often gives a more focused range.

I was interested in the squat. In a 'pure Williams' respect, he wants to see climatic (ultra high) volume on narrow spread. He also stipulates it should be in new territory i.e. no resistance to the left. This makes them pretty rare. You obviously use a more liberal definition? I do also but still like to see a bit more volume than that.

Incidentaly I was thinking of starting another thread that dealt with VSA 'definitions' e.g. what constitutes 'ultra high volume' when is a test likely to be a failed test etc. Wonder if you might participate? I know you view things as much art as science but its good to have consistant definitions (especialy if starting out). On a similar subject how do you set your yellow lines? Do you prefer them to the bands that TG use? (I suggested those to Roy many moons ago). These would be good discussions for a definitions thread if here is not apropriate

Cheers.

Cheers.
Nick

[Anonymous]

	Quote:	BlowFish
	.... There is a nice failed test on the bar before the one you have marked selling pressure.

Very nice. I did not mention this bar. If you notice this is a LONG SHADOW with Ultra High Volume. Just re-read any post and you will see that Long Shadows are important also. So we actually have the set-up occurring in the shadow of a significant Long Shadow as well as a WRB.

	Quote:	BlowFish
	I am a bit of a WRB sceptic (though understand why they 'work'). Maybe thats more apropriate in another thread. Anyway for me the key area is the area that was tested by the two dojis and failed (at the start of the chart). Price has now returned there to see if there is any demand. In my book WRB's are often the result of price being driven through areas of S/R (supply/demand). Theres a subtle difernece there though the results are often the same. identifying the underlying S/R area often gives a more focused range.

First, see the WRB thread. WRB represent possible changes or shifts in supply and Demand. Your observation about them only underscores my point. In my opinion, there is no more focused area than a WRB. WRBs are market generated and therefore superior to a lot of other ways to generate S/R areas.

	Quote:	BlowFish
	I was interested in the squat. In a 'pure Williams' respect, he wants to see climatic (ultra high) volume on narrow spread. He also stipulates it should be in new territory i.e. no resistance to the left. This makes them pretty rare. You obviously use a more liberal definition? I do also but still like to see a bit more volume than that.

Technically, you are correct. If the squat appears in new high territory it is a "end of a rising market" signal. Yet any narrow range bar with volume greater than the previous bar still may have some significance, especially if it occurs in the body of a WRB.

The point is that the range of the bar is being kept small even as volume increases. If the Smart Money was interested in higher prices then the spread would NOT be narrow. The narrow range gives us insight into the actual perception of value by the market makers.

My definition is based on Bill Williams' short-hand definition: narrower range than the previous bar with higher volume. But I add that the volume should be greater than average (preferably, high or Ultra high). And in this case, we have a close at the high.

But a squat should not be taken in isolation. The background is important.

	Quote:	BlowFish
	Incidentaly I was thinking of starting another thread that dealt with VSA 'definitions' e.g. what constitutes 'ultra high volume' when is a test likely to be a failed test etc. Wonder if you might participate? I know you view things as much art as science but its good to have consistant definitions (especialy if starting out). On a similar subject how do you set your yellow lines? Do you prefer them to the bands that TG use? (I suggested those to Roy many moons ago). These would be good discussions for a definitions thread if here is not apropriate

I would place a 30 period simple moving average over volume. From that point one could place a 2 standard deviations average of that 30 period average on the chart. If volume is higher than 2 deviations, then it would be considered high. 3 standard deviation would be Ultra high. This is more along the lines of what is used by TG. However, one can just "eyeball" volume.

The yellow lines are more to "add" a bit of color than anything else.

Thank you so much for the post, please continue to post your thoughts. A few chart examples would also be nice.

[Gordon G.]

Hi PivotProfiler,

you have a PM

Best regards

[Anonymous]

Hello Ev1;

A while ago I stated that one of the ideas weaved throughout my posts was context. There is another concept that is also in many posts. This idea is VERY important. In fact, in my opinion, this idea is the key VSA concept.

The concept: Best entry/signals tend to be low volume signals that occur within the range of a previously high volume bar.

First, it should be noted that the attached chart was taken as the market was in a normally low volume period: the Sunday night opening period. It should also be noted that I have shown some Result on the chart and that means that the candles discussed do not appear to have the amount of volume they actually have. What that means is After the appearance of these candles with high and Ultra high volume, more candles were created with even higher volume. This gives the impression that the candles discussed have less volume. But keep in mind, we look at volume both relatively (relation to the previous bar or bars) and absolutely (actual size of the bar in question).

That said, let's see what we have here. Note that the very first candle highlighted is an inverted white candle with Ultra High Volume. This gives us a Long Shadow. Long Shadows signal changes or shifts in supply and demand and so too does Ultra High Volume. After the supply enters the market there is a No Supply sign a few candles later. Despite the supply that came in, the Professional Money is not yet interested in lower prices. Price thus moves back up where we see a narrow range bar with higher volume than the previous candle. This candle also is a Doji. Note that the close of the Doji is within the range of the Long Shadow. It closes at the high of the Long Shadow. But before we get to that point, we see a white WRB created with High to Ultra High volume.

Now here is the key. We see a No Demand candle, which happens to be a Doji, created within the range of the large dark WRB. But notice that this low volume signal has traversed back into the shadow of the Long Shadow inverted white hammer line and the white WRB. So we are seeing low volume in previously high volume area. If any of that volume represented buying that buying pressure is no longer present.

Simply, looking at where the volume was once high and now seeing little volume is a clue that the supply/demand dynamics have certainly changed.