[VSA] Volume Spread Analysis

[tech/a]

PP
Excellent points re Effort/Result and will become important going forward.

How does everyone view the Extreme Volume bar back before this 3 bar cluster.
Do you think it has significance and if so how so?

So to re cap we would buy on a good breakout above the past 3 bars,with volume---any exceptions to that?

	Quote:
	This would be Demand entering the market.

Even though the buyers couldnt close the bar over 50% of its range?

[Anonymous]

Here you go:




Price may move back into the area of this Ultra High Volume and Test or show No Supply.

[Nick Radge]

Here is another example. We have an impulse aligning with old support and volume starting to expand. I call these volume 'bubbles' against more formal interpretations but they are essentially stopping volume. I'd be expected a test of that support on low volume to complete wave-v then a 3-wave counter trend advance against the backdrop of this positive volume.

[tech/a]

OK.

The very next bar----WOW!

This bar then would confirm the statement made here?

	Quote:
	Based on what TG said, we could see a Test (confirmed) then prices start falling down. Once we would get a close below the low of the test bar, we would have No Result from a Test. This is weakness. The more likely situation, however, is that a confirmed Test would signal a move higher.

So this would be seen as BUYING VOLUME and the test then is confirmed?



Just to get my head around your thinking/interpretation.
We have a confirmed test and can expect higher prices?

[TinGull]

What I would expect now (since I'm not a breakout trader) is to watch for price to test that breakout area. Once I see a test bar at the breakout price, then I'd enter a long at the close of that bar.

[tech/a]

TG

Initially you said.

	Quote:
	Would I on a break above the highs of those 3 bars, sure. It's obviously showing that the old support is now resistance, so if there can be a break of that, then I'd be looking long on a test of that broken resistance.

Now you need to see a test of this bar, I'm intersted in why?
So if price just continued up then you'd not be on the trade?
Price has now moved a great deal from the initial "Setup" or Test bar.
Isnt the risk if trading long on this setup becoming too great?

I maybe wrong but Id have thought your buy (given the above in quotes) would have been the break with a stop below the second bar.

TG What "sort" of trader are you?

How do you incorporate VSA into your trading?

[TinGull]

	Quote:	tech/a
	TG Initially you said. Now you need to see a test of this bar, I'm intersted in why? So if price just continued up then you'd not be on the trade? Price has now moved a great deal from the initial "Setup" or Test bar. Isnt the risk if trading long on this setup becoming too great? I maybe wrong but Id have thought your buy (given the above in quotes) would have been the break with a stop below the second bar. TG What "sort" of trader are you? How do you incorporate VSA into your trading?

You would be wrong in making that assumption. The second sentence in the quote you put of mine in the post was

"It's obviously showing that the old support is now resistance, so if there can be a break of that, then I'd be looking long on a test of that broken resistance"

I reiterated that statement by saying I wanted a test of old resistance to know a long should be taken. If the test never appeared and price shot higher, absolutely I'd have been out of luck with that trade. no big deal since there's plenty of fish in the sea.

As for what sort of trader I am...I'm a cautious one. How do I incorporate VSA in my trading? Exactly how I just said I would trade that chart. When there's resistance and price breaks it, I wait for a test of that old resistance to make sure the pattern isn't a failure. If it is a failure, I'll play that failure for sure since those are my favorite plays. If support is broken, then I'll play a short on a No Demand bar as it retraces to the previously broken support.

While price has now moved away from the initial test bar, that test occurred under a resistance point. I never go long right under resistance, nor would I ever advocate that someone do that.

[tech/a]

Thanks for that clarification.
Pity there aren't more people joining in the discussion with opinion.

You wouldn't be a Market Profile trader would you?
From your avatar.

[TinGull]

Yea, but it is saturday. I know I wish I could stay away from the computer on weekends, but alas...she sings her musings and I must come hither...


I sure am a MP trader

[mister ed]

	Quote:	tech/a
	Pity there aren't more people joining in the discussion with opinion.

Geez tech, I can't even keep up with this thread, it is moving so fast.

OK, so a contribution, this will be more along the lines of execution/trade location comment - from your questions put to Tin I suppose the implication is you would have been buying earlier, would you have bought on the breakout or even before then? (Do questions count as contributions?)

When you use Elliot in combination with VSA does the Elliot analysis give you more "confidence" (for want of a better word) to buy this VSA set-up on the break above the high (approx the 82 cent level), or even earlier?

The big advantage of an earlier entry, and not just the obvious one that you buy at a cheaper price and therefore make more money, but in the big picture, across numerous trades, doing so consistently is going to skew the risk down (your stop is closer if the set-up doesn't play out) and you skew the return up (you've got a lower entry price, so assuming the exit price would be the same irrespective of your entry price there is a greater profit). So from a risk/reward perspective the earlier/lower the entry the better. Also, from a momentum perspective, an entry before the break, or as it is occurring, gives you the benefit of that burst of momentum working in your favour. If the burst is enough to cause you to raise your stop loss, even better again.

I suppose this is also where your question "what sort of trader are you?" comes into play.

If you are playing this set-up for a short-term swing in price, say you are looking for 5 to 10 cents profit, or whatever, then entering a cent or two earlier will again make a big difference, and again not just on this trade, but done consistently over numerous trades - better risk/return ratio.

On the other hand if you are playing for a longer-term move, say 50 cents on this 80 cent share, or again whatever, then a 1 or 2 cent difference in the entry price may not be judged as important, it being judged better to see a re-test of the breakout before committing to a longer-term hold? Then again (this is where I need a third hand) an earlier entry even with longer-term holds in mind will give you the benefit of that initial momentum burst (if it comes) and the opportunity to raise the stop loss - on the numbers with holding the position for a longer term move the benefits to the risk return equation could be even greater than with short-term holds.

This is not VSA, sorry, but is related to the combination of VSA with Elliot and the potential benefits of an earlier/cheaper entry from a risk/reward perspective.