[VSA] Volume Spread Analysis

[Anonymous]

	Quote:	BlowFish
	That's a comprehensive over view of no demand PP :-)........Intresting what you have to say about looking at the next bar PP. Often it will be flat or no demand or no supply. Another thing that often hapens if the pause is longer is you will get tests in both directions. cheers.

As I have said, this is a fuzzy area and can turn many people off.

It is my understanding that TG paints the No Demand Sign after the bar after the actual No Demand bar. The sign is simply placed back one bar.

My software will immediately place the No Demand sign if the open of the next bar is lower than the No Demand bar and the bar has not made a higher high. If, however, the bar trades such that the last price is above or equal to the close of the No Demand bar, the sign will disappear. It then re-appears if the bar moves lower. Once a higher high is made, it is gone forever.

But we need to remember what Todd says, "It is not about signs on bars, but rather reading the chart". Once you see an up-bar with a narrow range, closing in the middle, and volume less than the previous two bars, you know you have the technical definition of No Demand. Sign or no sign. That is why Joel Pozen simply places the sign at the close of the bar in question.

I think the confirmation is good however, and in practical use one should be doing both.

Here is an example of a perfect situation to illustrate what I mean.

* At 1000 est. You see a narrow range bar with a middle close on volume less than the previous two bars on the 5 min chart.

* At the same time, you see a narrow range bar that closes in the middle with volume less than the previous two bars on the 15 min chart.

* One could wait for the 5 min to confirm the No Demand bar, by the next bar closing lower and NOT making a higher high.

This would only take you to 1005. The 15 still needs 10 minutes to confirm. But if there is weakness in the background (high volume bars closing up with the next bar down, for example) you have all the evidence you need to take a short on the 5. So one timeframe you are using chart reading skill alone and on the other you are still using chart reading skills but you have also added the confidence that comes from a sign (which is based on a confirmation bar, and therefore not part of the actual definition).

For those who have the book, you also have access to some customer only webinars. There is one with this type of theme in it. In it, they use a daily chart. As it is a daily chart there is not a sign on the bar at the start of the next day, but they point out it is a narrow range bar with volume less than the previous two bars and closing in the middle. This creates the bias for the next day's trading. If this next day meets certain requirements, then the sign will appear at the end of this next day. Now, to some this looks like it is after the fact. But those are the ones that are looking for buy/sell signals and do not want to actually learn how to trade...........

[steveshutts]

Forgive me if this sounds a dumb question, i have not read through all this thread but this subject interests me as a firm believer of studying price action. Can this be applied to spot fx trading, given that we have no way of measuring true volume?

[cooter]

If you use the "Search this Thread" box at the top of the page, and enter in "Forex", you'll see several posts in this thread that address this question already.

Might be a good starting point to answer your question.

Just an FYI...

[Tasuki]

See attached chart, which is my original 15 minute ES (permalink #252) annoted first by PP (magenta arrows, permalink #257)) and now by me (points A, B and C). The problem I see with both points A and B is that, while they may fit the classical definition of "no demand", the fact is, demand came in with these bars. Ergo, I would like to propose that we (somehow) come up with a new definition of "no demand" that would exclude these false readings which often come in after a selling climax, as Blowfish described (permalink #259). This new definition, however it is forged, should, I suggest, also INCLUDE at least some of the bars highlighted by my cyan downarrows, because they did seem to represent a loss of demand. Perhaps a simple addition to the standard criteria of "no demand" would be sufficient--they must appear after a buying climax, not a selling climax. Perhaps that's too obvious to mention? Perhaps there should be some either/or provision, such that a widespread bar must close near the low, while a bar that closes above its midpoint must be on lower volume and perhaps also close below the close of the previous bar in order to qualify as representing "no demand". I'm looking at my second and third downarrows (from the left side)--the second one has a narrow spread but it closes above its midpoint, yet it also closes below the close of the previous bar. Maybe that should qualify as "no demand"? The third bar is a real doozy--it closes on its low and it closes below the close of the previous bar, but it has a wide spread. Maybe that wide spread can be forgiven (not disqualify it from being "no demand") because of its other two points in its favor?
Just some ideas to chew over.

[milliard]

steveshutts:

Unless you're observing the Futures contract, I wouldn't waste your time if I were you.

Volume info is at best spurious & most certainly unreliable, no matter what's bandied about from the tick volume crowd.

[Anonymous]

	Quote:	Tasuki
	See attached chart, which is my original 15 minute ES (permalink #252) annoted first by PP (magenta arrows, permalink #257)) and now by me (points A, B and C). The problem I see with both points A and B is that, while they may fit the classical definition of "no demand", the fact is, demand came in with these bars. Ergo, I would like to propose that we (somehow) come up with a new definition of "no demand" that would exclude these false readings which often come in after a selling climax, as Blowfish described (permalink #259). This new definition, however it is forged, should, I suggest, also INCLUDE at least some of the bars highlighted by my cyan downarrows, because they did seem to represent a loss of demand. Perhaps a simple addition to the standard criteria of "no demand" would be sufficient--they must appear after a buying climax, not a selling climax. Perhaps that's too obvious to mention? Perhaps there should be some either/or provision, such that a widespread bar must close near the low, while a bar that closes above its midpoint must be on lower volume and perhaps also close below the close of the previous bar in order to qualify as representing "no demand". I'm looking at my second and third downarrows (from the left side)--the second one has a narrow spread but it closes above its midpoint, yet it also closes below the close of the previous bar. Maybe that should qualify as "no demand"? The third bar is a real doozy--it closes on its low and it closes below the close of the previous bar, but it has a wide spread. Maybe that wide spread can be forgiven (not disqualify it from being "no demand") because of its other two points in its favor? Just some ideas to chew over.

* Personally, I would never simply short on a sign of No Demand. I look at the background.

* I accept that a nascent trend may have an erroneous No Demand sign.

A couple things:

1. You can add these volume relationships: V=ref(V,-1) and V=ref(V,-2) ; V=ref(V,-1) and V<ref(V,-2); V<ref(V,-1) and V=ref(V,-2)

Again, the idea behind No Demand is volume. Volume is activity and we are looking for little activity (by the professional traders).

Now let's look at the first two bars you have marked that is between points B and C. These bars are closing DOWN.

No Demand needs to close equal to or up. Or, the bar should be a buying bar.
A buying bar is a bar with a higher high and not a lower low than the previous bar. Think about this bar. The non-lower low shows support for prices, while the new high shows that resistance failed to hold. To many traders (retail) this is a sign of upside strength. New high ground from one bar to the next.

But VSA sees WEAKNESS where others see strength. Hence some element of "Upside strength" needs to exist. That usually is a up close. I add the element of a "buying" bar as well.

In addition to background information, I like to see things happen on the next bar. As stated in a prior post, I like the next bar to close lower and for it not to make a higher high. From this way of thinking, only point C is no demand.......

[steveshutts]

	Quote:	milliard
	steveshutts: Unless you're observing the Futures contract, I wouldn't waste your time if I were you. Volume info is at best spurious & most certainly unreliable, no matter what's bandied about from the tick volume crowd.

Thanks Milliard, i assumed as much!!

[BlowFish]

	Quote:	PivotProfiler
	As I have said, this is a fuzzy area and can turn many people off. ___large snip____ Now, to some this looks like it is after the fact. But those are the ones that are looking for buy/sell signals and do not want to actually learn how to trade...........

It is worth mentioning that 'perfection' from a technical point of view just dosen't exist. Seeking it (the Holy Grail) is unlikely to help ones trading. Having said that we can strive towards perfection in how we manage ourselves and our trades but of course that's a completely different matter.

Anyway back to VSA yes there are fuzzy areas and sometimes I have to administer a good slap and question whether this searching for 'perfection' is actually harmful (Grailittis). I'm pretty sure its not and that my understanding of VSA can be improved.

Some things that where 'fuzzy' a couple of years ago are now pretty clear some things are still fuzzy. Actually I think at certain times the market just goes 'neutral' and it is ripe for a test (or will show no demand). Put another way it can still go either way despite strength/weakness showing in the background and then getting no supply/no demand.

I think Its all relative (especially volume) and that there are various 'big guys' at work with various agendas time frames etc. A shame really other wise we would just be able to look for background weakness - up thrust /no demand and short knowing that the trade would be a winner every time :-)

Cheers.

[Anonymous]

	Quote:	walterw
	Shure Pivot... who cares what name we asign to the money... Please answer me this question to this poor left brained man : The core concept of VSA could be volume divergence ? thanks Walter.

Volume Spread Analysis goes far beyond that. Yet divergence does play a role.

First we should define "Bullish and Bearish" volume:

1. Bullish volume is increasing volume on up-moves and decreasing volume on down-moves.

2. Bearish volume is increasing volume on down-moves and decreasing volume on up-moves.

Now we can incorporate the concept of The path of least resistance:

* It takes an increase of buying (demand), on up-days or bars, to force the market up.

* It takes an increase of selling (supply), on down-days or bars , to force the market down.

The appearance of No Demand (low volume) on an up-move, shows little or no buying. Which means, if there is no trading going on in one direction, the path of least resistance is generally in the opposite direction.

The appearance of No Supply (low volume) on a down-move shows little or no selling pressure. Which means, if there is no trading going on in one direction, the path of least resistance is generally in the opposite direction.

[BlowFish]

Walt,

If you wanted a little soundbite to some things up. It is more about effort vs result - though I don't think Williams specifically put it like that ever. There are half a dozen to a dozen 'core principles' most revolve around price moving or not moving with effort (volume) or no effort (little volume).

So a couple of examples. Price advancing on declining volume = weakness (no 'pro' support for the move)
Price declining rapidly (wide bar) on climatic volume but closing up.

VSA is based on Wycoff's ideas regarding acumulation/distribution and volume however it does go a fair way further.

Cheers.