[VSA] Volume Spread Analysis

[RAVIN]

	Quote:	WHY?
	Ravin, could you please post the same chart as a bar chart with open and close on it and of course the volume. Thanks

Sure, also pasted a 30min for you ranj, wonder if that provides more context for your trade management. There is a specific reason I did not mention the market. These were realtime trades and lessons learnt, the intent was to share that.

Tingull, it is not important to know what happens next, nobody knows that with certainty but ofcourse we enter the market, in this case short with the expectation that price would go lower, otherwise what is the point. Now why is that, because we have observed these setups before and the ensuing price movement or have tested them prior to trading with real money.
You were right to go short, afterall there are all the signs in the background of weakness, the white bozo with vol indicating selling pressure, then a massive dragonfly right at R2 (price rejection) following by a black bozo, effort to drive down prices etc, finally an upthrust, ideal setup, there was no choice but to go short if you were trading this timeframe and based on the information available at the time, not HSA (Hind Sight Analysis ) but pure VSA (Volume Spread Analysis)
Now you have a 30min chart, any change in your strategy?

[RAVIN]

	Quote:	mr.marcus
	...heres an extended chart of expectation for the posted chart....it is not possible to project beyond this point with the given information. To add,i tried to amend my previous message as i didnt want it to be taken too harshly,so attempted to remove the comments on VSA but alas admin rules state it is not possible.Also pretty poor grammar. Anyways, happy trading Mark J

Mark,

VSA is being used just as any other TA price based Maths calculations, as an INDICATOR , not as a forecasting crystal ball, it adds another dimension to the market analysis and provides invaluable info. on emergence of buying or selling pressure against a background of strength or weakness, that is it, nothing less , nothing more. It can create that extra edge but does not call every setup and its outcome with certainty, probabiity always reigns supreme. Infact it is so flexible that it seamlessly blends with other TA methods of Support/resistance, Trendlines, MA, Oscillators etc.

Back to the chart in question, I do not recall asking for forecasts of the next 8hrs, just the details of the trade in the moment, its management etc with the info. available in front of you on that 5min chart, yet you have forecast and chart out what is likely to happen for the rest of the day, a second rise upto 8130-8140 , then a massive fall and all this you have managed to glean from the info. infront of you.
Please kindly explain your logic, how did you arrive at those exact figures????

[WHY?]

Well from what I understand about VSA (and I am in the learning stage.. at the begining) it appears to me the market here is weak according to VSA. We have distribution in the background. A couple of upthrusts. A narrowing of the range. It is like the market is stuck in distribution with not much distribution taking place at the moment. However, it is possible that the distribution at this level has already taken place and it is now consolidating before moving up again. The next bar or two might tell the story. If I were trading this I would not go neither long nor short at this point in the game but I would wait for more info. To use another of Toms concept; If a market is showing signs of weakness but instead goes up then that is a sign of strenght. To sum up, I would wait and see if the present weakness is confirmed. If the market should go down and doesn't go down then I would take a long position but only after confirming this fact. If it does break south over the next 1 to 3 bars then I would short.

Sounds like double talk here but this one is hard to call. I simply could not take a position based on the info I have in this chart. I would need more confirmation at this point. The narrow range won't keep going on. It must open up sooner or later and most probably, sooner. It remains to be seen if that will be down or up. If down then that would confirm it for me depending also on the close and volume of that down bar. If up then I would be looking to go long depending again on the close and vol of the up bar.

[RAVIN]

Very sound analysis WHY?
Those bars look small on 5min timeframe compared to the previous bozo etc, however we have to remember that these bars be it 30minm 5min, 2min are merely slices of a continuous stream of ticks of an ongoing auction., so size is relative,

If you take the same setup, backtest it and keep track of it in future plus the time of the day, when the market is moved down or up quite significantly, plus the confirmation bars after the signal , all add up to a low risk opportunity. Waiting for more confirmation and then entering would be chasing the market and would be arbitrary and inconsitent with any strategy that was developed around such setup. Pulling the trigger on the signal and trigger bar which closed below the signal bar was right if that is your setup and strategy. Majority of the time this setup and the rules of the strategy yield far more profit than the losses incurred when the trade does not pan out
It was an Opportunity because market had shown considerable weakness in the background which was not going to just disappear.
Low Risk because the stop was placed over 5bars back around 8106, (8pts max which is $250, my risk limit)
You are spot on regarding Tom's take on any signs of strength appearing subsequent to the weakness that would signal a rapid rise.

For your benefit here is a 30min chart as well, wonder if that provides more context for your decision

[RAVIN]

WHY?

Here are 2min charts

[WHY?]

	Quote:
	For your benefit here is a 30min chart as well, wonder if that provides more context for your decision

The 30 minute chart indicates weakness. No demand. Next to last bar.

[WHY?]

	Quote:	RAVIN
	WHY? Here are 2min charts

Where is the 2 minute chart?

[WHY?]

	Quote:	WHY?
	I may be stepping out on a limb here and it might break off and I crash to the ground BUT I'm am willing to say that the next bar will show price will go up, or at worst track sideways. My reasoning. It tested the gap to the left. then closed in middle all on relative high volume. The first part of the session no doubt brought selling on but by the close demand came in. That is why the close was off the low. Is this good VSA principles or have I missed the boat altogether???? Comments please. Thanks!

I made the above quote. Here on this chart is what happened. How does the market appear now after this last bar. What is it telling us for the next session?

This last bar is an up bar, closed high, below average range, low to average volume. What does that mean? Be glad for some input. It doesn't matter of we are wrong or right lets just try to figure it out. What is the market saying to us?

[Tasuki]

Well, the last time I tried this approach I got some very savvy responses, so let me try ringing the same bell. I've been stuggling with VSA for a while now, and I seem to find lots of exceptions to the rules, places where VSA doesn't seem to work. Usually, it's my lack of understanding that's to blame, but I keep probing until I really understand how to apply VSA.

Attached is a daily chart of the Dow. The first thing you'll notice is that I've gone back to candlesticks, abandoning 'traditional' (ala Tom Williams) HLC bars. I do agree with previous posters (esp. PP) that the candlesticks provide another level of information that is valuable for VSA.

The text in the chart gives the layout of my dilemna. After reading a series of posts a few pages back on this thread, I've been hunting for high volume + small range days as well as high range + low volume days, and the chart shows one of the former type.

On the surface, it appears to be a perfect example of the professionals selling to the giddy public, but here's the fly in the ointment---it doesn't meet ALL of Tom's requirements for market top. Quoting from p. 76 of Master the Markets, "So, the essential ingredients for this bearish indication are: an up-day on high volume with a narrow spread, into new high ground." Each element is essential for an accurate signal."

So, the fly is the 'new high ground'. On p. 75, Tom says that you can have "nothing higher on your chart to the left". As you can see from the chart, there IS something slightly higher to the left, from about July 16-23, or thereabouts. So, the question I'm asking myself (and all of you) is--why don't the higher prices in July act as resistance, and why doesn't the distribution that comes after them provide even more fuel for the bearish case at the bar in question? As most of you know, Tom's book, and Todd Krueger's work, are chock full of examples of the vital importance of looking at the "playing field" and if you see distribution to the left, then you've got a more bearish picture when you come back up to that resistance zone.

If you add up all the VSA signals, it looks to me as if this should have been a pretty clear bearish signal. Did VSA just fail us, or am I missing something crucial?

[WHY?]

	Quote:
	Attached is a daily chart of the Dow. The first thing you'll notice is that I've gone back to candlesticks, abandoning 'traditional' (ala Tom Williams) HLC bars. I do agree with previous posters (esp. PP) that the candlesticks provide another level of information that is valuable for VSA.

Could you post the same chart with bar charts. Thanks.

Also whichbar is your note refering to that indicated bearish? I didnt see an arrow to any particular bar.