[VSA] Volume Spread Analysis

[Tasuki]

OK, folks I'm back. Not sure if I should post here or that other forum. I'll start here. I like the name "Traders Lab" better.
See attached chart. I see this type of bar all the time and it doesn't seem to fit any of the standard VSA definitions of weakness because it isn't, after all, a weak-looking bar--spread's not too wide, volume's not too high or low, doesn't close on its lows. It's the PERFECT fake-out bar. The one constant is that the bar pretty much always (well, usually, well, frequently) appears as price is nudging up against some sort of resistance, and the bar is designed to suck in the gullible. There probably is what VSA folks would call "weakness in the background" but I'm not clear on how you determine that (maybe a topic for another post).
So my question is, whaddya call this bar? Is there a name for it in traditional VSA?

[Tasuki]

Here's another example, this time from a weakly (sic) chart. You see, this pattern is no respecter of timeframes--you find it all over the place.

So, two questions:
1) Like last post, is there a name for this thieving deceiver in VSA?
2) See attachment--how do you determine what "weakness in the background is?" Would the price action in June constitute such weakness?

[Anonymous]

Nice posts with some good insights. I believe that TG would call these bars (1) Hidden UpThrusts or (2) UpThrusts over two bars.

You are correct about the intent of the bar: trick the herd into a long position just as the market is about to head down.

I hope we can get a response from someone that knows for sure. Something of note: in both cases, when you look at the close of the next bar, it is in the middle of the range of the first bar. Which is why I think it may be a two-bar type sign of weakness.

Background strength/weakness is nothing more than that: what has already occurred up to that point. Supply that enters on a wide spread up bar on ultra high volume does not "disappear" in just three bars. The supply remains a factor for some time to come. Obviously, the more supply, the longer it would effect future prices. Or, the more demand needed in a shorter timeframe.

In essence, just as we are products of choices made yesterday, five months ago, 10 years ago, the market today is the product of both prior Smart Money action as well as present Smart Money action.

[shreem]

Nice Post PivotProfiler! Looking at both charts of Tasuki, it have pick my curiosity and I remembered something looking like this in one of their explicative chart in the book.

They call this kind of bar a "No Progress on High Volume" and they were saying this kind of remark:

"If a market is moving upwards on wide spreads, accompagnied with high volume and no progress is seen on the next day, this shows the volume contains more selling than buying" (Master the Market, P. 154).

So, if I see it correctly, this kind of bar which is a wide spread bar closing on its higher portion with high volume but not ultra high and no follow through with the next bar going down with a close lower than the previous bar, it looks definitely bearish and could be implying that there was selling involved in this bar.

As the bar close near its high, I do certainely agree with you Tasuki and PivotProfiler that this bar is an intent by the "smart money" to catch late long as they want to find buyers to unload part of their position.

So, dear Tasuki and Dear PivotProfiler, nice finding and nice explanation.

P.S. With this kind of bar and especially if the next bar is down, we can conclude that the "smart money" knows already in advance that they are not any more interested for the time being in higher price but want to find a way to unload part of their position.

Anyway, this is just my little interpretation and I am still learning so I can be wrong.

Sincerly

shreem

[JustMega]

Before reading PPs post I was thinking somewhat along the same lines, 2 bar weakness. I looked at a 15min chart of the 5min chart from post #291 and it resembles an upthrust(sort of). If you look at previous bars they failed at 1486 closing mid bar. Plus, the overall trend is down and volume had dried up on the reaction(bounce).

I'd think that PP would have a more concrete answer but it looks like he is letting others take a poke at it. Thanks by the way. I'm still a beginner at VSA so thanks for allowing me my 2 cents.

[Tasuki]

Putative plan of action:
1) you keep the background weakness in mind--I guess we don't know exactly how much supply is present, but we can maybe guess that there is at least some supply left over from previous displays of weakness.
2) when you see a seemingly strong bar showing up at some obvious resistance level, you stick your front paws under your buttocks until you see how the NEXT bar turns out.
Sounds like a plan?

[Anonymous]

	Quote:	Tasuki
	..................2) when you see a seemingly strong bar showing up at some obvious resistance level, you stick your front paws under your buttocks until you see how the NEXT bar turns out. Sounds like a plan?

Underneath your cynicism is real truth.

First, there is no real reason to be looking to go long on the appearance of the bar itself.

Second, there are certain things to look for as price moves towards trend lines/resistance and support lines/previous market tops.

For example, the spread usually widens and the volume increases PRIOR to reaching the level when the market is going to penetrate that level.

[Anonymous]

ON GAPS

The old adage is that "Gaps are filled". Here is an example of a Gap play on the open of the day.

The market opens up with a gap to the downside. The first bar we see is a dark WRB. (Note: while it is beyond the scope of this post, this dark WRB actually forms another larger "gap" and is thus even more reason to be thinking that price should move higher in order to fill the gap.) Things start to get interesting when we see the first labeled No Supply bar. The appearance of this bar itself is something to note, but there is another No Supply bar a few bars prior, and price continues down.

What makes this one of note is that a previously mentioned pattern occurs. That is, one to three bars later, we see an Effort to Rise bar. We have now seen low volume on a down bar followed by an Effort to Rise. Is the path of least resistance changing?

The volume on the next bar increases and the range narrows. This is a Squat. Supply is entering the market. Again, we see another pattern show itself as the very next bar after the Squat is a No Supply bar. The low volume tells us that Demand must of been swamping Supply on the previous bar (Squat). Now we have are signal. We have a low volume sign within the range of a high(er) volume bar (the Effort bar), which is also a WRB.

Things are fine until we get to the No Demand bar. Note that the market does not completely fill the gap at this point. But now we have something happening within the range of the Support/Resistance Zone created by the Gap. On the next bar we see a No Supply bar. Time to move stop to just below this bar.

This is an example of playing the gap to fill. We were always looking to go long. It thus becomes a matter of "how and when do we get long" not "if" we get long. We did not try to get in on the bottom, but top and bottom pickers become cotton pickers.

[Soultrader]

Hello Pivot Profiler,

I just wanted to say thank you for introducing VSA to the forums. It was a serious eye wakening experience for me, similar to the moment I learned market profile and learned tape reading. It has helped me tremendously in my trading and have been studying volume (per bar volume especially) ever since you recommended Master The Markets.

I dont necessarily follow VSA by the book but the method and techniques used to study volume has been a life changing experience for me. :bow down:

[Anonymous]

Thank You.

Thank You for providing me, and everyone else, a safe place to explore new ideas, share thoughts, and interact with others on the trader's journey. This is truly an community worth belonging to. I feel honored to be a part of it.

But enough of this mutual admiration society .......... let's get back to learning to surrender to the market.

The market is full of abundance
The market will provide