[VSA] Volume Spread Analysis

[BlowFish]

I just got master the markets and read it this weekend. I have the original Williams 'paper' book too and prefer the new version. Clearer and less errata, the original had several charts mis labeled and 'supply' where it should have read 'demand' etc. In some ways that was good as it really made you study the charts to see what on earth he was talking about.

I think there is maybe too much information rather than not enough! In odd places things can become a wee bit confused.

I would look at the main principles and then study hundreds (actually probably thousands) of charts until you really 'get it'. Most of what you need in MM.

Another thing, it helped me to think less about predicting what was going to happen and just concentrate on what was happening now. For example you may get a down move ending in a high volume wide(ish) bar that closes high. Price should go up right? Actually all we can say is they have stopped going down (for now). Often it'll drift sideways to up and then crash on down with a wider higher volume bar. A classic 'stair' down. By focusing on the now you can get better at identifying a small correction over a bounce over entering congestion (accumulation/distribution).


Cheers.

[Anonymous]

	Quote:	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.

I wanted to redress this nice post. I have taken another screen shot that is more up to date. Admittedly, this is after the fact as well as hard right edge analysis.

First, Todd Kreuger still sees weakness in the market and is calling for prices to fall this week. Note that the last black double arrow points to Friday’s action. This bar is a NO DEMAND bar: it closes up from previous bar, closes in its middle and has volume less than the previous two bars.

I will begin at the beginning.

The first thing we see is a wide spread down bar on ultra high volume. This bar is also a WRB. WRB analysis tells us that changes/shifts in supply/demand occur in bars such as these. From a VSA perspective, we have a large range bar that closes down from the previous bar, but closes off its low with ultra high volume. THERE MUST BE DEMAND (BUYING) IN THIS BAR. If this bar was weak, then the close should be on the low.

The next bar is key. This bar closes up. Truly if the previous bar was selling, then this bar should NOT be up. However, we need to take a look at this up bar. Note that the volume is even higher than the previous bar, but the range is narrow. Something is keeping the range down: Supply (Selling Pressure).

The next bar is a High Volume Test. It closes on or near its high, makes a lower low and closes below the previous bar. Again the volume here is high for a test. Which is why the next bar is down and what we actually have is a FAILED TEST.

Now jump to the next bar with the double arrow. This bar closes lower than the previous bar, closes on or near its lows and has volume less than the previous two bars. THIS IS NO SUPPLY.

We do indeed move up a bit from this point. Price moves up and then comes back down. At this point, our secondary method (Japanese Candlestick patterns) is traversing into a valid bullish white hammer pattern.

Note the Hammer. THIS IS ANOTHER TEST. The bar makes a lower low, closes on or near its high and closes up with high volume. If the volume was ultra high, we might call this a SHAKE OUT and see strength, but as a high volume test we see weakness. The Professional Money is testing for sellers and they are finding some. In other words, there is supply underneath this market. Still, price moves up.

We do expect a move back into the WRB support/resistance zone. The reason is beyond the scope of this thread.

Which brings up back to the NO DEMAND sign on Friday. If you use the WRB's as profit target signals there was two so far. It may be time to move the stop just below the last WRB.

[newsfx]

Disregard first arrow. Is the second arrow on daily chart a test bar?
What is the main factor that you can consider particular bar a test bar?

On the 30 min chart this long bar looks to me like a pushing through supply. Am i correct?

Please share your view.

Greetings

[BlowFish]

Great analysis PP looks right on the money to me. Failed tests are interesting, I personally dont find them too reliable.

Thurs and Fri are interesting narrowing range and somewhat reduced volume. (daily indexes and there futures seem to not have the huge volume swings that you see intraday and on stocks). Looks like the bulls are losing interest (no demand). Europe has just opened more or less at the same level. It will be interesting to see where she goes from here. Of course we may test supply higher or they may re establish control or or or but what is going on now is pretty clear to me (PP has hit the nail on the head).

Oh btw PP you mentioned one more 'clue' that was not in your post, mind if I ask what? You aren't a closet indicator user

Have a great week every one.

Cheers.

[Anonymous]

	Quote:	BlowFish
	Oh btw PP you mentioned one more 'clue' that was not in your post, mind if I ask what? You aren't a closet indicator user

NO WAY. Bite your tongue. The concept is not mine to give. NihabaAshi did hint at it in his post about WRBs:

	Quote:	NihabaAshi
	It involves many things that's nothing anybody has heard about but it does make sense of all these things when they work together: * Support/Resistance Zones * Shifts in Supply/Demand * Trading GAPs * Changes in Volatility Mark (a.k.a. NihabaAshi) Japanese Candlestick term

It is also beyond this thread as this thread is more about VSA than WRBs.

[Anonymous]

NewsFX,

I see you are running the KPcurrency system.

What I don't see is the bar you asking about. The bar with the text underneath looks like a SHAKE OUT or a test bar.

If you are asking about the bar with the arrow a 3 bars earlier, yes that looks like a test. Tests come in many forms. The Ideal test would have a narrow range, volume less than the previous two bars, close lower than the previous bar and close on its high. So while that bar is not ideal, it is a test nevertheless.

[Soultrader]

Here is an interesting chart from todays session. Notice new lows with lower volume. Hopefully some of you YM traders were able to capture the reversal movement.

[Anonymous]

Gaps are filled.

Interesting early morning action in the Euro.

Check out the chart below.

First we see a dark WRB followed by a GAP in price. Note the first candle with a double arrow. Notice that the volume is ultra high and the bar closes lower than the previous bar and off of its low. VSA teaches that this is a bar that may have buying within it. Now the next bar is key. It turns out to be a WRB, but the fact that the bar is up means the prior bar MUST of had some buying contained within it.

Now we move to the white WRB itself. Note that this bar creates a zone or range where we get a change in the supply/demand dynamic. We also know that the market does not like wide spread up bars on ultra high volume because of the possibility of hidden selling. In this case, however, the volume actually fell from the previous bar and is not ultra high.

We move to the next candle with a double arrow below. This is a doji that closes equal to the previous bar and in the upper portion of its range. Volume on this bar is Ultra high. There is SUPPLY in the market at this stage. Price moves down from here.

Next candle, closes in the upper portion of its range and higher than its open. Volume again is extreme. Here we have Demand showing itself. In other words, Demand is swamping Supply on this bar. SOMETHING HAS CHANGED. Notice that the next bar closes in its middle, has an equal close and volume drops off.

The Last bar closes on its high on volume that is less than the previous two bars. Although it does not make a lower low, this is a 'test' bar. The Smart Money is testing for supply and finds none. Now price is poised to go up and fill that gap.

[sds]

	Quote:	PivotProfiler
	We move to the next candle with a double arrow below. This is a doji that closes equal to the previous bar and in the upper portion of its range. Volume on this bar is Ultra high. There is SUPPLY in the market at this stage. Price moves down from here.

Hello PP,

Nice post and analysis.
But I did not understand, the statement which I have marked in the Bold.

Could you explain, how did you arrive at this point that there is supply in the market?

sds.

[sds]

	Quote:	PivotProfiler
	Gaps are filled. Interesting early morning action in the Euro. Check out the chart below. First we see a dark WRB followed by a GAP in price. Note the first candle with a double arrow. Notice that the volume is ultra high and the bar closes lower than the previous bar and off of its low. VSA teaches that this is a bar that may have buying within it. Now the next bar is key. It turns out to be a WRB, but the fact that the bar is up means the prior bar MUST of had some buying contained within it. Now we move to the white WRB itself. Note that this bar creates a zone or range where we get a change in the supply/demand dynamic. We also know that the market does not like wide spread up bars on ultra high volume because of the possibility of hidden selling. In this case, however, the volume actually fell from the previous bar and is not ultra high. We move to the next candle with a double arrow below. This is a doji that closes equal to the previous bar and in the upper portion of its range. Volume on this bar is Ultra high. There is SUPPLY in the market at this stage. Price moves down from here. Next candle, closes in the upper portion of its range and higher than its open. Volume again is extreme. Here we have Demand showing itself. In other words, Demand is swamping Supply on this bar. SOMETHING HAS CHANGED. Notice that the next bar closes in its middle, has an equal close and volume drops off. The Last bar closes on its high on volume that is less than the previous two bars. Although it does not make a lower low, this is a 'test' bar. The Smart Money is testing for supply and finds none. Now price is poised to go up and fill that gap.

Hello PP,

As I said earlier, I am quite new and learning price action.

Could you commnet on my take on the chart you had posted.

Can I say that within the range of white WRB, there is demand and also there is
a selling pressure. If the demand had not there we would have got close at the
lower end of the candle.

At the later stage the white candle (which you have marked with double arrow)
might be indicating change in buying/selling pressure.

sds.