[VSA] Volume Spread Analysis

[tech/a]

Mister ed.

Yes your right on the money with regard to R/R.
Leave a trade to long and R/R becomes a definate issue with regard to timeframes.
All will become clearer with this example as we go along.

I'm actually attempting to answer or more so clarify a few statements made here by others.
As for Elliott yes for me this is the case,better timing means smaller risk,and better R/R over shorter periods which mean more trades which mean better profit.(In my timeframe/s).

But this exercise is based purely around VSA.

So to the next chart.
Is this following bar then showing lack of supply or lack of demand and why?

Is this a test or is the range and volume on the previous bar a sure sign of a new era of fresh buying.
Selling exhausted.
Following this comment on a test

	Quote:
	A failed Test will have high volume. That is why it fails.

[mister ed]

	Quote:	tech/a
	I'm actually attempting to answer or more so clarify a few statements made here by others. But this exercise is based purely around VSA.

Tech, yes sorry sidetracked your post and the thread. OK, to this latest chart.

It is a bit difficult to get a read on the volume, the scale being thoroughly distorted by that massive volume bar. But by looking at the relative volume, while the volume has plummeted it is still healthy looking.
The previous massive volume day I don't think was absorption buying (I think thats the right term) as it really hasn't cleared much supply to the left.
The price is showing a lower high and a low close on the day, there is still selling happening, on still healthy volume. I would say then the latest day is showing a lack of demand.

[tech/a]

Ed

The bar in question is 50 million
The average form the latest high to this bar is 900,000.

[TinGull]

I wouldn't say it's a lack of demand, but looks like it'd just be simple profit taking after a 9% move in the stock in a single day. Since it didn't close on or near it's highs, I wouldn't consider this a "test" either...but since it did come down to the point where I would enter and stopped...I'd be nibbling here for sure. I'd put out a marker lot and enter more if it goes my way on another low volume test.

[tawe trader]

	Quote:
	A failed Test will have high volume. That is why it fails.

Yes, it isn't until you have a understanding of VSA that you see how and why double bottoms occurs.

A successful double bottom is where the mkt has had a successful test ie another low but on lower volume than the first low.

If you have a failed test the mkt has to go back down again for a third time to 'test' for any excessive supply. If there is none, the mkt is 'free' to be taken up and thus you see a Triple bottom (or a low and two more slightly rising lows).

[tawe trader]

Here is something to think about when trading Futures and looking for low volume 'tests'.

The following quote is taken from a very successful FTSE Futures trader.

However, whilst low volumes are essential for test bars in the underlying cash index (showing a lack of supply), futures markets can create similar test bars on higher volume (because traders pile into the future on sight of the cash index test bar), so this is not necessarily a negative indicator.

[mister ed]

	Quote:	tawe trader
	Here is something to think about when trading Futures and looking for low volume 'tests'. The following quote is taken from a very successful FTSE Futures trader. However, whilst low volumes are essential for test bars in the underlying cash index (showing a lack of supply), futures markets can create similar test bars on higher volume (because traders pile into the future on sight of the cash index test bar), so this is not necessarily a negative indicator.

I reckon thats a pretty good observation.

[tech/a]

	Quote:
	However, whilst low volumes are essential for test bars in the underlying cash index (showing a lack of supply), futures markets can create similar test bars on higher volume (because traders pile into the future on sight of the cash index test bar), so this is not necessarily a negative indicator.

Possibly having a blond Seniors moment!
But seeing a test in the cash I cant see how this can be seen as a positive move for the futures (unless of course for the short side).
Why on earth would you go long on a confirmed test showing lack of supply?

[tawe trader]

	Quote:
	Why on earth would you go long on a confirmed test showing lack of supply?

If you are looking to go long you want a lack of supply, otherwise as the mkt rises, supply will come in and possibly swamp the demand which would lead to a premature end to the rally.

[tech/a]

Of course of course!!!!!

That WAS a dyslexia moment.

Thanks back to my bingo game!