[VSA] Volume Spread Analysis Part II

[CandleWhisperer]

	Quote:	gassah
	You demonstrated discipline and taking a small loss. Probably more important than showing a big winner, IMO.

Thanks.

This part is after the fact, but look at the volume on the test bar a few bars later. That's really low volume. This brings up a question for the thread. How many wait for confirmation on no demands and test and the such?

I have looked at the code on the other thread and it uses confirmation. Based on that, the candle marked no demand would not qualify because the next candle doesn't close lower. The test would qualify.

***edit***

Just wanted to add to the question. In the book, Tom says one should be going long on down bars and short on up bars. This would mean NOT waiting for confirmation. As a down bar (test) is only confirmed by an up bar (higher close). And in the situation of no demand the next bar would close down. So confirmation means doing the opposite of what Tom talks about. TG doesn't place signs without confirmation however.

[BlowFish]

	Quote:	CandleWhisperer
	Well, that sucked.

I like looking at trades that didn't work out, often much more enlightening. Of course its easy to look back to try to find some piece of evidence to support the other side but to be honest, if I had not been round earlier, I'd have probably been all over it too. Seems to me that there where clear signs of weakness in the background and a push down to 70 or even 60 was quite plausible.

Just out of interest which pair was it? I am starting to take a bit more interest in the currencies though its pretty casual right now. I guess that's obvious (that its casual) or I would know what it is by where its trading! I'm just interested to see how it behaved later.

[BlowFish]

	Quote:	CandleWhisperer
	Thanks. Just wanted to add to the question. In the book, Tom says one should be going long on down bars and short on up bars. This would mean NOT waiting for confirmation. As a down bar (test) is only confirmed by an up bar (higher close). And in the situation of no demand the next bar would close down. So confirmation means doing the opposite of what Tom talks about. TG doesn't place signs without confirmation however.

Are you sure about that? I know he says that strength appears on down bars and weakness on upbars, but I don't recall him talking about taking entries on them? Of course just because I dont recall dosen't mean he didn't say it I do find my memory is really not as sharp as it used to be! I wish he'd written a chapter or two on trading (as opposed to analysis). Though many might disagree, I am of the opinion that there is much to be learnt from how others manage there trades and why.

[tawe trader]

	Quote:
	This part is after the fact, but look at the volume on the test bar a few bars later. That's really low volume. This brings up a question for the thread. How many wait for confirmation on no demands and test and the such? I have looked at the code on the other thread and it uses confirmation. Based on that, the candle marked no demand would not qualify because the next candle doesn't close lower. The test would qualify.

CW,

Thanks for posting your charts, it really is the trades that fail, that we learn the most from.

I have found some notes I took after watching TW commenting on a Gold video back in Jan.

In this example, after a down move on increasing volume, Gold goes on to make a lower volume test. The next bar is UP and Tom said the 'test is successful' and it is safe to go long.

We can flip this over for shorts. After seeing a no demand, we need to see the next bar close down (which confirms weakness) before going short.

On page 33 of MTM Tom says 'we need confirmation before shorting the market following an sign of no demand'.

At the end of the day, it is going to come down to the personality of the trader and/or what they have 'read' in the mkt background. Is the trader conservative and needs to see no demand's / no supply's / test's confirmed, or is the trader going to make a higher risk and potentially higher reward trade, by not waiting and entering before confirmation ?

Tawe

[CandleWhisperer]

	Quote:	BlowFish
	Are you sure about that? I know he says that strength appears on down bars and weakness on upbars, but I don't recall him talking about taking entries on them? Of course just because I dont recall dosen't mean he didn't say it I do find my memory is really not as sharp as it used to be! I wish he'd written a chapter or two on trading (as opposed to analysis). Though many might disagree, I am of the opinion that there is much to be learnt from how others manage there trades and why.

"When you do decide to short the market, do so only on an up-day if possible (see no demand, up-thrusts, ultra-high volume up bar with the next bar level or down), and only if there are signs of weakness in the background, such as lower tops, a downtrend, high volume on up-days (bars) with no corresponding up-move" Tom Williams, Master the Markets, P. 108.

So Tom is going short on the no demand bar itself. That is, with no confirmation bar. Of course the opposite would be true for long. Also I should note that he is talking about the ideal bar type as we know there are tests that close up and up-thrusts that close down, for example.

[BlowFish]

Thanks for digging that out CW. I don't have my copy where I am living currently. Sounds like time for another re-read with a view to uncovering other titbits about taking trades.

Tawe really I don't think it wise to wait for confirmation, the no demand is usually very narrow, very low volume (by definition) quite often an inside bar (not VSA I Know). The next bar is often a 'thrust' as it breaks out. i.e it is wide it opens one end closes the other. Actually seems that a fair few of the WRB type guys are looking to exit right around there. If you wait for that bar you are going to get poorer trade location. Watching live on 'smallish' intraday timeframes you can see volume dry right up and price just hang there before it cracks. Each to there own of course.

CW did you see my question about what instrument that was?

[tawe trader]

	Quote:
	Tawe really I don't think it wise to wait for confirmation, the no demand is usually very narrow, very low volume (by definition) quite often an inside bar (not VSA I Know). The next bar is often a 'thrust' as it breaks out. i.e it is wide it opens one end closes the other. Actually seems that a fair few of the more WRB type guys are looking to exit right around there. If you wait for that bar you are going to get poorer trade location. Watching live on 'smallish' intraday timeframes you can see volume dry right up and price just hang there before it cracks. Each to there own of course.

Blowfish,

I partly agree with you, I tend to enter after seeing a no demand and don't usually wait for the next bar to form and confirm. It depends on each traders own personal preferences for entry, if they are conservative or not, doesn't it ?

In this instance, if CW had waited (I know it's easy with hindsight) for confirmation (which never came) he wouldn't have gone short and had a losing trade.

	Quote:
	CW did you see my question about what instrument that was?

If you look on the chart I think it's EUR/USD.

Tawe

[Sledge]

	Quote:	mister ed
	Sledge is probably the best to ask about how he deals with the change in FX volume characteristics from the Asian session into the European and then London open. And nothing wrong with VSA controversy if the point is to further our understanding and learning, which yours is dandxg.

Dan and Ed-
Although their is some disagreement, I use what I call the "lull time" That period between 4:00 EST and around 1:00 AM EST as a marker for future price activity. Yes the volume is very low, and it must be taken into account that their is less activity, but the market does not just "stop" at that time. My "Lull Time" analysis has gotten pretty good at confirming the next set-up.

Perfect Example was last night on the Cable. You saw the market ride down all day in the NY session after a London Bull push. When the dust settled, you saw yourself in new low ground, followed by two very nice tests (you could tell their was buying on both bars- I think this was around 7:00 and 8:00. I placed my Long and put a 54 pip target. I woke this morning to a very nice closed out trade.

It actually pummled the 54 pips and pushed over 100 last night before the retreat. But hey- I made 54 pips while I slept!

I firmly believe that this "lull time" is not a time to "write off" it is a time to pay particular attention. As Tom Williams says- Market Makers will use Low Volume time to accumulate or distribute.

My .02
Sledge

[habi]

I'm just rereading some parts of MTM and found an interesting statement:

The market is an on-going story, unfolding bar by bar. The art of reading the market is to take an overall view, not to concentrate on individual bars. For example, once a market has finished distributing, the ‘smart money’ will want to trap you into thinking that the market is going up. So, near the end of a distribution phase you may, but not always, see either an up-thrust (see later) or low volume up-bars. Both of these observations mean little on their own. However, because there is weakness in the background, these signs now become very significant signs of weakness, and the perfect place to take a short position.

This means, we need first signs of weakness/strenght and then focus more on single bars like up-thursts, no demands ...

[Eiger]

Here's a live trade that corresponds to something I am working on in myself to improve. I sold ES short at 1350.75 on what I perceived to be stopping volume/climactic action at significant resistance (higher time frame horizontal and supply line resistance). What I am working on to improve is holding trades longer than 2-3 points. But, i am also a pretty conservative trader. So, I covered 1/2 the short position at 1348.75, and locked in a profit. I brought my stop down so that even if stopped out on the second 1/2, I will cover my costs of the trade. So, I am trying to hold a short position on a free trade, so to speak, to see what the market might give me. We shall see.