[VSA] Volume Spread Analysis

[BlowFish]

I have to say I'm pretty sloppy on nomenclature. The sentiment behind the pattern is what's important (as I am sure we'd all agree). EDIT: Having said that common terms of reference are important for discussion purpases.

Actually I have a 'rigid' definition but frequently use a lose definition. The second marked candle would be the one most likely to fail my more rigid definition. Reason being a test has to test something. Its when price moves into an area of previous strong supply/deamand and gets rejected preferably with much lighter volume i.e. that supply/demand no longer exists at that level. Looking closely at the second candle it is quite interesting it appears to be testing the gap from a couple of days before.

Another random thought - actually programming a set of VSA indicators forces the mind to make rigid (and arbitrary decisions) I think with tests I went close top 1/3 of the bar...too lazy to look. It may have been open and close above 1/2.

Last random thought (for now) At is most general it boils down to trying to track supply & demand using volume (or lack of it) and price movement (or lack of it). Effort vs Result.

Cheers.

[jjthetrader]

	Quote:	TinGull
	I would still consider that to be a "test" simply because the length of that bottom wick relative to the top. I have a hard time taking hard and fast rules about lots of things because things need to be given some wiggle room. The most important thing in that first test was the real lack of volume. My entry would've been at the close of that first test.

That's a good point you make. Wether it's called this or that doesn't matter, what matters is the strength seen in the bar.
Good post.

[ranj]

	Quote:	BlowFish
	Reason being a test has to test something. Its when price moves into an area of previous strong supply/deamand and gets rejected preferably with much lighter volume i.e. that supply/demand no longer exists at that level. Looking closely at the second candle it is quite interesting it appears to be testing the gap from a couple of days before. Cheers.

agreed it is "testing" the gap.

It is testing if the rapid shift in supply and demand (defined by the gap) is still present. Conceptually very similar to the MP concept of rapid price rejection in the area of single prints or invisible prints (gaps).

[Anonymous]

	Quote:	jjthetrader
	Hey TinGull, I think your first test closes a bit too far from the high to be a test but it is a sign of strength because it's a down bar closing in the middle. Your second test is indeed a test with a close just off the high. And you'll notice the bar following that is up closing on it's high which makes that 2 bar combination a shake-out. At what point would you take a position?

While there is no point in getting bogged down in nomenclature, JJ is correct.

Ideal Test: closes down from previous bar, closes on its high and has volume less then the previous two bars. The low of this bar, should ideally be into previous High volume territory.

I would simply call the first one No Supply and the second one a test as price is just off the high. But what is of most import is that both candles show strength (lack of weakness) in the market.

[TinGull]

Welcome back PP

[Anonymous]

	Quote:	TinGull
	Welcome back PP

Thanks. I have been lurking and feeling good to see the brillant work being done by yourself and others. We have something special here guys and gals. Thank you all.

[TinGull]

Awww shucks....thanks

[TinGull]

Is this a little closer to what you'd want to see? I realize it's not right at the highs of the bar for a close, but in the upper third anyhow. It comes down to test the high of that SUPER high volume up bar.

[jjthetrader]

It doesn't look like a test to me closing in the middle with the next bar down on increasing volume. It could well be a test though.
The bullish bar to me is the high volume bar you are referencing. A high volume down bar closing on the high. Nice!

[jjthetrader]

Here's a more recent Test.