[VSA] Volume Spread Analysis

[torero]

I thought that might be affected but had to ask. I'm still learning trying to learn VSA little by little. I think I have a pretty good idea but need more real time observation to get things rolling. Very excited to see how this fits into what I have already learned and use!

[Soultrader]

	Quote:	PivotProfiler
	Hope you don't mind, TinGull but used your chat to show something. Just a couple of things to look for. One note on stopping volume. Tom Williams, the father of VSA, would enter on the close of that bar. TG, however would not place a sign of strength until the next bar closes and is an up close. (2 bar pattern). Getting in at the very bottom or top is not the most important thing. Here the best entry is after the test. Why? Because we have seen the strength come in on the stopping volume. Then we see a No Supply indication followed by a test for supply. The Smart Money wants to make sure that there are no sellers out there to impede the mark up phase. That is why they test the market. Of course, the mark aggressive you are as a trader the earlier you would enter. But you should be looking for the bar after the volume spike (stopping volume) to confirm before entry.

Hi PivotProfiler,

Thank you for your inputs. Very much appreciated. Regarding the chart you posted,



One thing I have trouble understanding is the no buying pressure bars. I totally understand the climatic sell bar.. I was able to determine that because of the lack of supply at the next bar and less volume at the new lows on the 30min timeframe. Also the markets were one-timing down until after that climatic sell bar in which price was able to overtake the high of the previous 30min bar.

Now, after the stopping volume we encounter a few narrow range bars. I was trying to determine the direction of the market. Because I felt the market has found support my bias was to the upside. However, when analyzying price bar and volume (VSA) I had trouble deciding which direction. Volume was drying up clearly and the long candle wicks indicated supply. From the chart above, you indicated a up bar with no buying pressure then an immediate narrow range bar with no supply. So basically within two bars market action has gone from negative to positive? I find this behavior extremely tricky as it forces us to change our bias immediately. How did you interpret the third narrow range bar as test for supply? Thank you.

[Anonymous]

	Quote:	torero
	Pivot, thanks for contributing to this thread, I find this method extremely useful and fascinating. I've been trying to learn the relationship between the price and volume in groups but never seen a bar by bar analysis until now. One question about your analysis from the previous chart, I noticed that there was a stopping volume brown bar before the true bottom. Can you tell me why this was a false bottom or at least explain action between the previous pivot low to the bottom bar. I wanted to ask you if using tick charts work in VSA or not. Thanks.

Good eye. As you know there is a thing called momentum. Sometimes price continues moving the way it was despite the force in the opposite direction.

After seeing a wide range bar with ultra high volume, you want to start looking for No Demand, No Supply , Tests, and Up Thrusts.

[Anonymous]

Soultrader,

The No Buying pressure is a bar that closes up from the previous bar and closes on its high but has volume less than the previous two bars (and ideally volume less than average).

Although price is moving up, the Smart Money is not involved in the push. Remember, 85% of the volume histogram represents Professional Money. So no buying pressure is coming form the pros.

The next bar is down. But here too we see a lack of Smart Money activity. Thus when we say, No Supply, we mean no supply (selling) from the Professional Money.

What is happening is this: the market is moving up, but the Pros are not yet fully interested. Why? After such a move down they want to make sure there are no more sellers left in the way of an up move. As they wait to see what happens the market moves up but then stops. The next bar is down on even less volume. The Pros did not step in and start selling (no supply).

Just to be sure there are no sellers, the Smart Money now Tests the market on the next bar. They take it even lower and find no sellers (volume is low) and thus take price back up to close on or near the high.

Once we see the Stopping Volume we should begin to look for a No Supply or Test bar. When we see the No Demand, we do not automatically look to go short. So our bias isn't changed. We see strength in the form of the Stopping volume and are looking to go long. The No Demand helps set up the subsequent No Supply and test formation.

[Soultrader]

Thank you for clearing it up. My understanding of professional operators with deep pockets is becomng alot better now. I feel like stops do not exist for them which has recently changed my trading style in using wider stops for larger profits using a slightly higher timeframe. It's a complete seesaw game for these operators and a fascinating game they play.

[TinGull]

Perfect today. Note the HUGE action happening here in the circled bar right at VAH...you can also see a diverging delta, showing selling waning, and then BAM!!! You could also notice the increasing volume coming into that VAH. While this may lead some to think that we will go lower...VSA makes you wait for confirmation

Good thing...that abnormally large volume spike with closing price in the middle of the bar is showing you right there that professional activity has come into the market.

How cool.

[Anonymous]

	Quote:	TinGull
	Perfect today. Note the HUGE action happening here in the circled bar right at VAH...you can also see a diverging delta, showing selling waning, and then BAM!!! You could also notice the increasing volume coming into that VAH. While this may lead some to think that we will go lower...VSA makes you wait for confirmation Good thing...that abnormally large volume spike with closing price in the middle of the bar is showing you right there that professional activity has come into the market. How cool.

Nice observations.

A wide spread down bar (close lower then previous bar) that has ultra high volume and closes in the middle of its range is a telltale sign of a transfer of ownership.

The fact that this is happening at the VAH is of no real surprise either. These areas tend to be where Professional Money will show itself. That is why Gavin talked about the importance of (1) volume (2) support/resistance.

For me, what is more important than how one arrives at the support/resistance area, is that one PAYS ATTENTION TO PRICE at these areas. That is, going long as price trades down to these levels makes little sense no matter how "proven" the support area may be. Paying closer attention to what price is doing at this time, however, does make sense.

Support/Resistance areas can not always hold. Otherwise there would be no such thing as a trend. Hence what we really want is to force the Professional Money to show itself in these "expected" areas. Their intentions-to go thru or to respect the area(s) can be seen on the chart.

[Vercingetorix]

Excellent thread, very interesting. I recently read Tom Williams' book (the older edition not master the markets).

I was wondering what you thought about the stock indexes. Looking at the dow I would think that there is background strength, but still a lot of supply. Now bear with me, the concepts of VSA are new to me so this might be totally off, but here is what I see:

1st arrow) We had that down day on a wide spread and high volume the day before. This bar is an up bar on even higher volume. Does this indicate 'hidden' buying on the wide spread down day?

2nd arrow) We make new lows but close near the highs. Is this a stop bar or a test bar? The volume is still high so if it is a test bar does this indicate there is still supply?

3rd arrow and 4rth arrows) These bars look like no demand which would make sense if professionals want more stock at lower prices.

5th arrow) Is this a stop bar, test bar, or down thrust bar? either way I take it to be bullish since we closed on the highs (and found support @ 200 ema). Since we took out the lows from the previous move down it looks like a giant stop run on the daily time frame.

I'm probably off on my analysis, but it looks like all the market needs is a shakeout move and then it should rally. I would be very interested in your guys comments.

[Anonymous]

If you go to Tradeguider.com and view the most recent chart of the week............... you will find Todd is in complete agreement with you. He too sees all the supply in the market and says price needs to come back down and test the lows. Very Nice analysis.

I also see a valid bullish white hammer pattern currently. The key will be once price reaches the mid-point of that WRB (ultra wide spread candle with ultra high volume).

[newsfx]

It is amazing that somebody can read the charts like Todd Krueger. I have read Master the Markets but the information there is very limited. I would like to expand my knowledge about VSA.

Can you guys recommend anything regarding VSA? There is a Boot Camp on tradeguider.com but I am looking for something less expensive. Unless this CD`s are really worth its price. Did anybody purchased them and would like to share some opinions?

This thread and others regarding volume are great. Please post charts and explanation. I would love to do this but my knowledge about VSA is still very limited. I hope that after a while I will be able to share my view on the market.

Greetings