[VSA] Volume Spread Analysis

[jjthetrader]

PP, you marked the bar pointed out in the attached chart as 'no demand'. Technically it's volume is less than the previous two but it's still pretty high, relatively speaking. Could that still be considered no demand then?
This may be acceptable volume in FX to define a no demand, I am relatively new with currencies so I was hoping you could confirm this level of volume is ok to go short on.
thanks.

[Adamned]

Hands down this is the best thread on the net. I would like to thank all the regular contributors for their inputs. I strongly believe in the concept of VSA and I think its one of the best approaches to the market.

Lately I have been doing much more testing than normal on the data generated by stock index futures. I have come up with an interesting finding that has deep implications for my VSA analysis. I have come to this conclusion a 34 minute bar can be decisively different than a 30 minute bar. If this can happen on a 30m to 34m comparison it can happen on any time frame. Then I took it a step further and tested starting at 10m all the way up 60m bars. Meaning more specifically I tested a 11m bar, 12m,13m, 14m, 15m, all the way up to 60m bar. This has opened a can of worms for me. Certain bar patterns can occur in odd numbers for example a 53m chart. For practical reasons its not possible the keep tabs on 50 different charts. My question is this. Since a big part of VSA judges the close of the bar in relation to the high for an up bar or low for a down bar. For example say a up 30m bar that closes well off its high must of had selling inside it. But what if the 34m bar some how closes right near its high. This causes me great confusion.

One idea is to not use time based charts but transaction volume based charts (tick charts). But the same problem can take place there as well 500 tick compared to 550 tick could be quite different. My question to all you VSA experts is what did the creator of VSA have to say about this phenomenon? Thanks for the help.

[Piggyback_Trader]

	Quote:	Adamned
	Hands down this is the best thread on the net. I would like to thank all the regular contributors for their inputs. I strongly believe in the concept of VSA and I think its one of the best approaches to the market. Lately I have been doing much more testing than normal on the data generated by stock index futures. I have come up with an interesting finding that has deep implications for my VSA analysis. I have come to this conclusion a 34 minute bar can be decisively different than a 30 minute bar. If this can happen on a 30m to 34m comparison it can happen on any time frame. Then I took it a step further and tested starting at 10m all the way up 60m bars. Meaning more specifically I tested a 11m bar, 12m,13m, 14m, 15m, all the way up to 60m bar. This has opened a can of worms for me. Certain bar patterns can occur in odd numbers for example a 53m chart. For practical reasons its not possible the keep tabs on 50 different charts. My question is this. Since a big part of VSA judges the close of the bar in relation to the high for an up bar or low for a down bar. For example say a up 30m bar that closes well off its high must of had selling inside it. But what if the 34m bar some how closes right near its high. This causes me great confusion. One idea is to not use time based charts but transaction volume based charts (tick charts). But the same problem can take place there as well 500 tick compared to 550 tick could be quite different. My question to all you VSA experts is what did the creator of VSA have to say about this phenomenon? Thanks for the help.

vsa works on all time frames and in all markets. had the same question as you posed above, albeit not as well thought out.

the answer for was simple, pick one time frame and trade it. for me it's a 3 minute chart, it fits both my profit objective, one point for x number of contracts, and schedule, only have 1 hour in the morning to trade.

if one can watch the screen all day, then perhaps a larger time frame works, one can start with say one or two contracts and go for more points.

what really fixed my head and thus trading was the course i took with joel pozen, he's the real deal.

good luck!

[Anonymous]

	Quote:	jjthetrader
	PP, you marked the bar pointed out in the attached chart as 'no demand'. Technically it's volume is less than the previous two but it's still pretty high, relatively speaking. Could that still be considered no demand then? This may be acceptable volume in FX to define a no demand, I am relatively new with currencies so I was hoping you could confirm this level of volume is ok to go short on. thanks.

To answer your question, VSA looks at volume in two ways: relatively and absolutely.

The technical definition of No Demand would include volume less than the previous two volume bars. Therefore, even if the volume is (absolutely) high, it can still be low if it is less than the previous two. There are times when a volume bar is the highest volume bar that can be seen on the chart, and this would imply high to ultra high volume on a relative basis.

Although I use the term absolute, VSA doesn't actually care about the exact number. In other words, you are correct that that volume bar is high in absolute terms (whatever the actual number is). In fact, had that bar been a Test, we would say the Test failed due to high volume. Even though the volume would still be less than the previous two.

Therein lies the key: when looking at No Demand/No Supply the relative nature of volume is of most import. When looking at Test, both relative and absolute levels need to be taken into account. Also keep in mind the basic bullish/bearish volume tenets.

* Bullish volume is increasing volume on Up closes.
* Bullish volume is decreasing volume on Down closes.
* Bearish volume is increasing volume on Down closes.
* Bearish volume is decreasing volume on Up closes.

[jjthetrader]

	Quote:	PivotProfiler
	Therein lies the key: when looking at No Demand/No Supply the relative nature of volume is of most import. When looking at Test, both relative and absolute levels need to be taken into account. Also keep in mind the basic bullish/bearish volume tenets. * Bullish volume is increasing volume on Up closes. * Bullish volume is decreasing volume on Down closes. * Bearish volume is increasing volume on Down closes. * Bearish volume is decreasing volume on Up closes.

Thank you for your response. It makes sense for no demand that if volume is less than the previous two then there's obviously less demand on this bar than two bars ago no matter what the actual number is.
I appreciate your time.

[mister ed]

	Quote:	jjthetrader
	Mr.Ed, if someone has never had a look at Wycoff before what material would you guider them to get started with?

Hi JJ - There is not an abundance of good Wyckoff material on the net, only a few sites.

There is the Yahoo group run by Gassah (who contributes to this board and this thread), this is at:
http://finance.groups.yahoo.com/group/Wyckoff-SMI/

There is a broker site with material, at:
http://www.ltg-trading.com/site%20map.htm
with archives at
http://www.ltg-trading.com/archives.htm

Gassah put me onto this info at:
http://siliconinvestor.advfn.com/sub...ubjectid=54872

I learnt a lot on Wyckoff from a poster on other forums, goes by the name of 'motorway' on Australian Stock Forums and The Chartist forums. While the specifics and charts of what he talks about refer to Australian equities, most of the posts are more to do with principles, which are of course applicable to any liquid, exchange-trade instrument.
If you search for his name on
http://www.aussiestockforums.com/
and
http://www.thechartist.com.au/forum/ubbthreads.php
you will get great info.

Motorway put me onto this website, which introduces Wyckoff really well, in a straightforward manner:
http://www.stockmarket-operator.com/
Really good as introductory material.

Nearly forget, there are many articles around by Hank Pruden, do a search for his name and there are quite a few pieces. He has written a book recently, which I haven't read yet, and runs a course in San Francisco.
Also, articles around by Coppola and Forte. (Sorry I don't have links, but they are easy to find).



OK, paid resources are even fewer.

There are books by Richard Wyckoff himself, check them out at Amazon or wherever. There is his 'Day Traders Bible' which can be found as a free download around the place too.

There is a book by Jack Hutson: Charting the Stockmarket, The Wyckoff Method. I found it a difficult read, probably because I thought it was an introductory text, or beginners text. It is much more than that and as your knowledge grows of Wyckoff it pays re- and re-reading, there is a lot in it. This book is really cheap, its $14.95 at Amazon and its value is much much more than the better marketed technical analysis books out there.

Then finally there is the Wyckoff course run by the Stock Market Institute, at:
http://wyckoffstockmarketinstitute.com/

There are free resources on this site at
http://wyckoffstockmarketinstitute.com/corner.htm
The article at
http://wyckoffstockmarketinstitute.com/goal_article.htm
is great introductory material.

Thats it - if you find other resources, post them up!

[mister ed]

	Quote:	Adamned
	I have come to this conclusion a 34 minute bar can be decisively different than a 30 minute bar. If this can happen on a 30m to 34m comparison it can happen on any time frame. My question to all you VSA experts is what did the creator of VSA have to say about this phenomenon? Thanks for the help.

I cant speak for the experts, but I can understand where you are coming from with this query. My post here is not meant to be a definitive answer, but as a start for more input on the challenge you raise.

A bar/candle chart like you describe is taking the data from a specific time period, so by then sampling a different time period the information is going to be different.

I am not really sure if Wyckoff ever addressed this problem specifically, when he created this form of analysis there were no computer generated charts, if you wanted intra-day charts you kept them by hand. So this problem is a problem we have created for ourselves!

I don't think there is any one theoretically correct answer. I suppose you could say do some back- and forward-testing and find the time frame that gives the best results. I have a problem with back-testing and optimising ... I think it can be best summed up in what someone has said to me, and I paraphrase, the smart money will hide in different timeframes, and will always be shifting.

I think the answers are more practical.

First, find a timeframe for the bars/candles that makes sense for you (as you say, you can also use tick charts - and there are other bases for bar/candle divisions too). This is not just what you are 'comfortable' with, it must fit with what it is you are trying to achieve and how you wish to trade. A day trader is probably not going to find a daily HLC useful by itself. An investor is not likely to find a 3-minute candle useful. Also, if you are trading for, say, 10 points swings in the ES you are most likely going to use a different bar/candle frame than someone trading for say 5 point swings, or someone trading for 5 tics.

Use more than one period - a lot of traders use a very short-term, a medium term, and a long term chart, periodically switching between them throughout the session. Which 3 periods are best? See previous paragraph!

Some suggest scaling up the periods by a factor of 3 or 4. So, use a 5 min, 15 minute, and 45 minute, and so on.

Also, there are point and figure charts, which don't create new bars due to the passing of some specified period of time, or number of ticks, etc. they respond only to changing buy and sell dynamics. This is not the place to go into figure charts, but they can be either an alternative or an adjunct to bar/candle charts.

Hope this helps, or at least, doesn't hinder!

[Anonymous]

	Quote:	Adamned
	Hands down this is the best thread on the net. I would like to thank all the regular contributors for their inputs. I strongly believe in the concept of VSA and I think its one of the best approaches to the market. Lately I have been doing much more testing than normal on the data generated by stock index futures. I have come up with an interesting finding that has deep implications for my VSA analysis. I have come to this conclusion a 34 minute bar can be decisively different than a 30 minute bar. If this can happen on a 30m to 34m comparison it can happen on any time frame. Then I took it a step further and tested starting at 10m all the way up 60m bars. Meaning more specifically I tested a 11m bar, 12m,13m, 14m, 15m, all the way up to 60m bar. This has opened a can of worms for me. Certain bar patterns can occur in odd numbers for example a 53m chart. For practical reasons its not possible the keep tabs on 50 different charts. My question is this. Since a big part of VSA judges the close of the bar in relation to the high for an up bar or low for a down bar. For example say a up 30m bar that closes well off its high must of had selling inside it. But what if the 34m bar some how closes right near its high. This causes me great confusion. One idea is to not use time based charts but transaction volume based charts (tick charts). But the same problem can take place there as well 500 tick compared to 550 tick could be quite different. My question to all you VSA experts is what did the creator of VSA have to say about this phenomenon? Thanks for the help.

LOL. Not exactly a new revelation.

ACT AS IF.

Of course, as you add time to bar you change the way it looks. The close on a 15 minute bar will not necessarily be the same as the close on an 18 minute bar: there's three more minutes of price action in it.

The first thing I would say, is you have to trade what you see. If you use 16 minute bars than you base your trades off of what is there. You can not be asking yourself what does this look like on a 19 minute chart? Now, you can use multiple timeframes but make better trades but that is not the same as questioning THE timeframe you use.

There is a particular Price Action trader who advocates using three timeframes to follow the BBs (Big Boys): 8,13,21. These are not traditional timeframes. They are Fib numbers, and they are not default timeframes on most software packages. He believes in them and thus uses them. So the point is, find the timeframe or frames that suit your needs and beliefs.

One of the tenets of VSA is that there are professional at work in the markets and they are on VARIOUS timeframes. We can argue how many are trading off a 16 minute chart because that is a harmonic number related to an octave of music (Murrey Math) versus a 15 minute chart. But the real question is are you, the one who's money is being put at risk, comfortable trading on a 16 minute knowing that less traditional times don't change the story, but do make it fuzzy?

Now, as much as I love elements of Murrey Math and Fibonacci, I have a hard time believing that the Smart Money is using a 19 minute (cycle of time number & Murrey's universal number rounded down) timeframe as opposed to a 15 minute chart. But if I wanted to use a 19 minute, I would simply ACT AS IF (they did).

[EyeQue]

Hi mister ed,

Hank Pruden Website is http://www.hankpruden.com/index.html

EyeQue

[mister ed]

Hi EyeQue

Thanks for the Pruden link.

Here are the links to the articles by Forte and Coppola.