[VSA] Volume Spread Analysis

[tech/a]

!. Background Weakness, up bars on Low vol - No demand
(After a very high volume wide range bar)
Up bars on low volume---No demand

2. Background Strength, Down bars on Low Vol - testing for supply
(Altered to--Background strength---up bars on low volume AFTER a very high volume wide range down bar,no supply)

Subtle but in context.

[Anonymous]

Nice. Thank you very much.

Note that we do see an up bar on low volume that is a test.

[TinGull]

Ok...awesome. Thanks tech/a. Now, let's get back to what started this entire new discussion...

	Quote:
	That, to me, is a test. Now, if there are up bars on lower volume, that's saying that if you did get long that test bar, you better think about getting out because there's obviously no demand after the test bar.

Indeed, with the chart you posted of a low volume up bar after a test I would tighten up my stop. That, to me, is starting to show weakness and I wouldn't want to get caught on the wrong side, so tightening up the stop would be warranted. You stated that you disagreed with me about that statement I made, and I just wanted to clarify that I'm not incorrect in making that assessment.

In the commentary on your screenshot it states, just as I stated, that low volume up bars indicate withdrawal from the market at higher prices. Again, just want to go back to your original disagreement to make it clear about what I had said just in case there were any discrepancies regarding my statement.

Maybe my view of VSA is looser than some, for me, it works. That first chart I posted did, in fact, show a low volume UP bar and per my statement I would've tightened up my stop to the low of the previous bar, and then in fact the market turned back over for much more downside attack.

[tawe trader]

	Quote:
	Firstly("JJ") why wouldn't the trade be managed using VSA rather than a trailing stop (It may not have been you that mentioned this).

I'd like to say that recently I've had more success using VSA to get me out of a trade than using a trailing stop.

i.e. If I take a LONG entry on 5 min charts and the mkt goes up, I drop down to a 3 min chart and look out for a wide spread up-bar on VERY high volume during a rally. If after seeing this, I wait for the next 3 min bar to form and if it is of smaller range and on less volume than the previous bar - I get out of the trade and bank my gains.

Over the last couple of months I have found this way of exiting a trade has given me more pts than using a trailing stop.

I did go through a period of getting out too quickly, I was wary of seeing any up-bar on increasing volume, but know I know this is still demand coming in. It's the ULTRA high (relative) volume you need to look out for.

Regards Darren

[tech/a]

Darren.
I'm sure you'll agree that its extremes which create opportunity.
While the crowd is madly buying on what "appears" to be massive strength
(Wide range enormous volume) we are preparing for opportunity.

VSA throws conventional Strength and Weakness theory on its head.

The market will be the ultimate judge of our analysis.
Our application and management of that analysis will be the ultimate judge of our profitability.

[Anonymous]

Quick post.

For those interested, I just received and viewed Gavin's Chart of the Week. He said the price on all CD programs (BOOT CAMP) are going up $100.00 in two days (November 10,2007). While the boot camp would still be worth the price, if you are thinking about it, maybe you should act now.

The software is going up too, but we know that it is not necessary.

[Anonymous]

DON'T GET CAUGHT IN THE FOLLY

We can spend much time trying to figure out what a particular bar is or is not. There is a reason to do so and it is important. However, when we look at the chart, we need to understand what has come before. I have shown a duel screen method and talked about "looking left to trade right", this concept remains even when looking at a single chart. We want to look left. That is, what is in the background?

Check out the chart below.

There is a logical progression on this chart that I would like to point out. First we see a High volume down bar that closes in the middle to upper portion of its range with the next bar up. Clearly, there is Demand on this bar. If the high volume represented selling, then the next bar should not be up. This up bar turns out to be a WRB.

We know that WRBs mean possible changes/shifts in the supply and demand dynamic. Something is changing here.

Now price starts to rise and we see a No Demand. No demand means that there is no Professional interest in higher prices at the time. But why? If they are not interested in higher prices, must price be going lower? Well, price does fall a bit. Now the LOGICAL thing to do is to test for supply under the market. If there was supply this would confirm the reason for the No Demand we saw earlier. THIS IS KEY: A REPEATABLE PATTERN MAY BE HERE-NO DEMAND FOLLOWED CLOSELY BY A VALID TEST. THIS WOULD MEAN STRENGTH. We do indeed see this pattern. With the strength we have seen in the background and now a valid Test following a No Demand bar, we have some assurance that the path of least resistance is up.

Let's think about the WRB for one second again. By definition a WRB represents a possible change/shift in the supply and demand dynamic. Logically, therefore, a valid Test should appear within this range. So too would the significant No Demand or No Supply bar. But again, understanding where we have come from (left) is vital to understanding where we are (now) and to where we may go (right).

So the folly: looking at any one bar in isolation. VSA unfolds and flows like a river not a single drop of water.

[TinGull]

Absolutely...context is everything!

[bertg]

Hi, all,

I am on page 88 of the e-book, so not quite half way. On this page the below appears:

-------------
• High volume shows that selling has swamped any demand and tends to appear at the beginning of any distribution phase.
• Low volume shows that no demand is present, and tends to appear at the end of a distribution phase.
-------------

On the second bullet, should that say "at the end of an accumulation phase?"

Thanks to all for this thread. I always look forward to new posts and soon I will hopefully be able to contribute or at least interact more.

Regards,
Bert

[tech/a]

By the look of it its around tea time over there.
Its Friday morning 10.20 at the hub of efficiency---my desk.

Bert

	Quote:
	• High volume shows that selling has swamped any demand and tends to appear at the beginning of any distribution phase. • Low volume shows that no demand is present, and tends to appear at the end of a distribution phase.

I think the charts I posted shows a great example of this.
The FIRST up bar shown on very high volume and wide range correlates with bullet point one.
The next few bars complete the distribution phase in this timeframe and is typified by the low volume no demand bars.

Distribution occurs at the tops of moves and accumulation at the bottoms.
The same applies at this end but should be read as the opposite.

EG
.High volume shows that buying has swamped any selling and tends to appear at the beginning of an accumulation phase.
.Low volume shows that there is no selling present and tends to appear at the end of an accumulation phase.

Twists the normal mindset doesnt it!