[VSA] Volume Spread Analysis

[Anonymous]

How much more do you need?

Wow. Here is an example of a great short trade that was signaled in more than one way.

As this thread is VSA, I will not say much about the Low Close Doji pattern, but it too signals a short entry. I would say that the pattern happens where we would want it to be: within the range of a WRB.

Fist let's start with the 15 min. Notice the Effort to fall sign followed by a No Demand. See how the No Demand is within the range of the Effort candle. This is a sign of weakness.

Next, we see a narrow range bar with increased volume: a squat.

At this time we now have seen supply enter the market and some downwards price action that will make us predisposed to be short on the trading chart.

The trading chart.

First Note the large white WRB. This sets-up the support/resistance zone. As I must apparently repeat things, we want to see something happen within the range of this candle.

Price trades higher after that white WRB on high volume, but the range of the bar narrows, so we know that there was some supply (selling) in the high volume WRB.

Now the key bar. A dark WRB (although smaller than the white WRB) appears. WRB: body greater than the three (3) prior intervals. This WRB happens to be "effort to fall". In other words, the Smart Money wants to take prices down.

Note that we then get a No Demand bar within the range of this dark WRB and within the range of the large White WRB. Time to get short. Upside weakness where the market previous showed downside strength.

If you missed that, There is a doji that also happens to be an Upthrust 3 bars later. Get short. Weakness in the background and an UpThrust a classic short signal. Did I mention that the Upthrust is within the body of the WRB? (well, the one's I favor would usually be )

[BlowFish]

I guess it is safe to say there is often more than one agenda going on most times. It is not hard to make an argument that a thin market is easier to mark up/down for whatever reason. The 'smart' money may not actually be 'smart' they may simply be A US company hedging $50 million against European sales. I am talking multinationals and even governments when it comes to forex.

Another type of 'smart' money are the 'insiders' like specialists and market makers. They are likely to play in thinner markets thier only agenda may be to find order flow and exploit it. Incidentally anyone who can read a chart can make a pretty good guess where there are orders likely to be bunched.

Having said that the chart under discussion does look very 'blocky' and thin. It is one I would be wary of trading when a lot of the bars are just a few ticks wide and opening low and closing high or vice versa. It just dosen't have well formed bars.

Like any analysis VSA isn't perfect and I think thats due in part to my original point. Often there are various participants with conflicting agendas. You can often see the fight but sometimes the outcome isn't clear.

As an example differentiating stopping volume in a down leg (that allows the trend to resume) from 'climatic' volume that signify that the trend is over can be subtly hard. I would say actually sometimes it is impossible.

Maybe I'll post some charts - not to try and "catch anyone out" but I know if I can better identify the difference it will improve my trading. Perhaps discussion will allow us all to see things that we did not before.

PP I have to say I am very inclined to look at the currencies despite the fact you use tick volume as a proxy they seem to be a much easier read than the indexes. Now it could be that you have selected 'clean' charts to illustrate a point. I'd be interested in seeing some tougher ones.

Cheers.

[Anonymous]

	Quote:	PivotProfiler
	First: This is not a picture of the futures, but the spot. Second: 1pip = 10 dollars 10=100 5*10=500 (5 contracts) 10*10=1000 (10 contracts) You want more money, trade more contracts. I am not calling you a losing trader, but that is a losing trader's mentality. A trader could be set for life if he could make 10 pips (net) a day every day. Not all trades need to be 150 pips. Greed may be good but it gets traders into trouble. Third: If you believe that an Upthrust is created by professional money, then you can not turn around and say that it is just happenstance. That is, if you believe that bars are manipulated by the smart money when the day session is going, you can not turn around and say just because the day session ended that same bar is somehow not manipulated. Simply, an Upthrust is always an Upthrust. Four: I have stated the time of day to trade many times before. I do not feel the need to post them in every post. Moreover, this is a post about reading the chart.

forgot five:
This is, in my opinion, the only real "leap of faith" required by VSA. VSA states that 80-85% of a volume histogram bar represents Professional Money. Or Professional activity. Hence if 100 contracts are traded, 80-85 are Smart Money (To be sure this is not how that info is to be used). If 1000 contracts traded, 800-850 is Professional money. If 10 then 8-8.5 are professional money. In short, Professional money IS ALWAYS ACTIVE. As long as there is a histogram bar, there is Professional activity present.

Now that does not mean all times are idea for the retail trader or all volume levels are ideal. It does mean they, the smart money, are there none the less.

[mroalan]

again excellent stuff Pivot,i,m papering the walls with your charts so i don,t forget them.

[mroalan]

a couple of questions for you pivot.
1.that squat (hammer to me) does it need to inside the body of the preceding candle and does the colour matter?
2.does the colour of the volume bars matter?
3on the second chart,the candle following the WRB (spinning top)would give the game away,not sure if it was you who said its "change of ownership bar".
5 bit confused about the no demand bar as its not got much of a tail,would not the upthrust bar be more of "no demand"?
thats enough for now,you,ll be pleased to learn i,m getting there,well i thought so!say nothing.

[notouch]

PivotProfiler, by your post it's obvious you failed to understand my post and also fail to understand the market you trade. When I said "10 pips is nothing" I wasn't talking about the value of 10 pips on your trading account. I meant it was nothing in relation to EUR/USD's average daily range. I assumed it was a futures chart because "Euro FX" is the name usually given to the CME's futures contract. OK, you say it's the spot contract so now explain what the volume in your chart actually represents. It moves between 1.000 and 30.000. Volume is not available in the spot market so where are you getting those numbers from? The thing that is really ridiculous is your belief that "Professional Money" is behind every little 10 pip move in EUR/USD. Who exactly are these mysterious "Professional Money" people manipulating every little move in this market? In spot forex the majority of volume could better be described as "Real Money" i.e. commercial interests that actually need to exchange money for business reasons. Only a tiny percentage is speculative. At that time of day there is no speculative "Professional Money" involved in EUR/USD. The volume is mostly created by banks calmly filling orders by Japanese exporters. The EUR/USD move would have been created by investment banks arbing the EUR/JPY, USD/JPY cross rates.

[cooter]

	Quote:	notouch
	Volume is not available in the spot market so where are you getting those numbers from? The thing that is really ridiculous is your belief that "Professional Money" is behind every little 10 pip move in EUR/USD. Who exactly are these mysterious "Professional Money" people manipulating every little move in this market? In spot forex the majority of volume could better be described as "Real Money" i.e. commercial interests that actually need to exchange money for business reasons. Only a tiny percentage is speculative. At that time of day there is no speculative "Professional Money" involved in EUR/USD. The volume is mostly created by banks calmly filling orders by Japanese exporters. The EUR/USD move would have been created by investment banks arbing the EUR/JPY, USD/JPY cross rates.

Don't get your knickers in a knot, notouch. It's just tick volume from the member banks represented in Spot Forex, that's all.

http://www.tradeguider.com/fx_factsheet.htm

Whether "institutional money = professional money" is another debate altogether.

[notouch]

:p I don't wear knickers cooter, do you?

I'm aware that bad approximations of fx volume are available but that doesn't answer any of my questions which I'll leave to PivotProfiler who I'm sure can answer for himself.

[Anonymous]

	Quote:	mroalan
	1.that squat (hammer to me) does it need to inside the body of the preceding candle and does the colour matter?

No. There are may way for it to appear. Ideally, you would like for it to be a bar that makes a higher high but not a lower low. Some call this a buying bar. The opposite would be a selling bar. There are some posts on this. If you need more just ask.

	Quote:	mroalan
	2.does the colour of the volume bars matter?

Blue bars mean higher volume than previous bar. Red means less than or equal to previous volume bar.

	Quote:	mroalan
	3on the second chart,the candle following the WRB (spinning top)would give the game away,not sure if it was you who said its "change of ownership bar". 5 bit confused about the no demand bar as its not got much of a tail,would not the upthrust bar be more of "no demand"? thats enough for now,you,ll be pleased to learn i,m getting there,well i thought so!say nothing.

Can't make out questions 3 or 4. As for 5, UpThrusts come in two forms: 1. higher volume "upthrusts" and 2. Lower volume "No Demand".

The key is that price trades up and then closes on or near the low of the candle. Also No Demand does not need a tail at all. Note that the range is less than the previous bar. The volume is less than the 2 previous volume bars and while the close is equal, a higher high was made. Also note that the next bar was down and did not make a higher high.

The base definition for No Demand is a bar that has a narrower range than the previous bar, closes equal to up and has volume less than the previous 2 bars.

[Anonymous]

Primary methods:

1. Volume Spread Analysis

2. WRB & Long Shadow Analysis


We trade right by first looking left.

First we look at the higher time frame. Markets are fractal and the higher frame dominates the lower one.

The 15 min chart . As previously stated, the start of the day should be at 0200 New York time according to Mark Fisher. This is when London trading begins.

Notice that we see a squat. A narrow range candle (narrower than previous candle) with volume greater than the previous bar. Supply is entering on this candle. At 0400 hrs we get a No Demand sign. At this point we have seen a squat and a dark inverted hammer with a Long Shadow. Supply is entering and volume is less on up candles.

At 0430 we see another No Demand sign. It is a good guess that there are no buyers in the market. If Professional money is not buying (supporting) then the path of least resistance is down.

Jump over to the 5 min.

The fist significant candle is the Effort to Fall candle just after the No Demand candle. Note that we see a test candle after this WRB, which is also an effort to fall candle. While the volume on the test is low, we have not seen strength on the 15. No reason to be looking to go long.

The next candle is up on Ultra High Volume. Markets do not like up bars on high to ultra high volume. Indeed, supply entered the market on this bar. But we now have our WRB that creates a Support/Resistance zone. This is where we would like to see an entry signal. Preferably a low volume signal where there was once high volume. Or a high volume (squat) or UpThrust.

AT 0435 we see a narrow range bar that closes up on volume less than the previous two bars. This is No Demand. We have seen Weakness on the 15 min chart and now we are getting No Demand on the 5 min. Even though there is no "vsa indicator" we are reading the candles and see our entry.

We note that this No Demand is both within the body of the large white WRB and within the body of the Effort to Fall candle. If the Smart money was trying to push prices down around this area (range), then it is a good sign (of weakness) to see little volume on a candle in the opposite direction within that range.

Hope this helps.