[VSA] Volume Spread Analysis Part II

[Eiger]

Oh well, so much for that trade.

[TinGull]

As many of you know, I don't trade very often anymore, just a few times a week. This trade came up today and I figured I'd take a shot of it for ya.

Note the lower volume on a narrow spread as price reached support. Sellers had dried up there, and I went long some inside that narrow spread bar. Then as price reached resistance, I exited the position. Just a quickie 4 pointer. Damn....quick 4 points. I remember last year when 4 points could take a day.

[Pirate]

	Quote:	CandleWhisperer
	"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.

Tom is an aggressive trader and does not always wait for confirmation but I am sure he will have tight stops.

[CandleWhisperer]

	Quote:	Pirate
	Tom is an aggressive trader and does not always wait for confirmation but I am sure he will have tight stops.

As a matter of fact, I believe I heard Tom say he doesn't use stops. Although if he did say that, he was certainly not recommending the same for the rest of us.

[CandleWhisperer]

	Quote:	BlowFish
	......................Taw e 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...

Nice BlowFish, very perceptive observation. I have noticed recently a fair amount of White WRBs following test bas (candles). And while no price is too high to buy or too low to sell, it does almost feel like one would be chasing to enter at that point. Despite the fact that the WRB closing higher is confirming the test.

This is why I like to emphasize the Supply/Demand Delta (change) zone. To me it is sort of the confirmation before hand. Actually I think that was a pretty darn good trade set-up. I just don't like the fact that it adds fuel to the hater's fire.

[LLL]

Hi Everyone,

I have a beginner's question. Do you consider the following cases as a hidden potential buying bar? When Tom said strength comes from down bars, is it has to be in a down trend?

1. If a stock is in a trading range, one day it has a huge gap down with a very high volume.

2. if a stock is in an up trend, it also has a huge gap down with a very high volume.



Thanks


LLL

[LLL]

I forgot to attach a chart. But here is the example of VIVO 's chart from stock chart website. It has the huge gap down today.

http://stockcharts.com/h-sc/ui


Thanks


LLL

[Sledge]

Ok folks- LIVE TRADE SET-UP:
GBP/USD On the 1 hr charts you see 2 wide spread up bars today- very nice sign of weakness. Before the NY close you saw selling on the "upthrust" bar, you then saw a "test" on the next followed by the next few hours of jockeying.

You then see no demand bars to confirm downside potential (Marked with X's)

I'm setting up for a Short tonight on the GBP, a slug of weakness came
in today and rapidly overbought the market, should be a nice buckle under
the weight of all of that coming in:
Sell Stop at 1.9872
Target-1.9830

The Sell Stop is 10 pips below the low of the last "test" As well as--If it is a true breakout, the 1.9830 with the time lapse will be above the trendline off the down trend we are coming out of so that trendline can act as support now.

See you in the AM!
Sledge

1Hr.jpg

[milliard]

Hey Aaron,

I hope the folks on this here thread don't mistake my comments for bashing this method of analysis. That's not the intention at all. Just coz some choose or prefer not to recognize it doesn't render it ineffective, but I'm not sure I go with your commentary on the fade out of prices into the NY close.

I can understand your work/research of the flows during peak activity, especially as those highlighted bars were actioned on the punch thru layered (short covering & spec buy) stops @ 9815 thru 50.

You're showing a spot graph there yeah? Again, I'm not going to be drawn into the argument bout accurate volume prints on the cash. We have our own views on that debate.

But those itty bitty bars at the end of the run are simply profit take & book encashments. The activity dies as London closes up for the day on the spot. After aggressive shifts like today on the British currency, the foot soldiers will cash out & balance off. Not only is there no demand at that time of day, there's also no supply. Folks have done their business into the London fix & the only ones left wandering aimlessly around the park are either retailers or wounded souls sticking band aids on their bleeding accounts.

They'll now be sniffing next stage stops above 1.9950 with bids building back below your trigger short level.

That's not to say prices won't dip to check the strength of those bids, but your "no demand" bars aren;t really counting for anything. Sure, if those kinda bars are printing during London hours, then fair enough, I guess you could make a case for them.

I've heard that these VSA folks maintain that you can adjudge the analysis on the spot instruments (as well as futures which utilize volume) regardsless of the time of day. Well, I'll tell you now, that's horse shit. And I'll stand face to face with the best of these guys & tell em so.

Be very careful with this vsa stuff on the spot (with no definitive volume print outs), particularly as London shuts it's doors.

I can tell you now for sure, the folks who run this show are either sitting in a club eyeballin pretty girls wrapped around shiny poles or they've banked their booty & adjusted their stops for next day delivery well before NY beds down for the night.

[Anna-Maria]

Oh god almighty. Leave you alone in here for 5 minutes....

Stick the cap back on that bottle of bourbon, pick up that water pale & go mop the corridor upstairs.

Sorry folks, he's in mischievous mood beings it's a Friday.