[VSA] Volume Spread Analysis Part II

[DbPhoenix]

	Quote:	winnie
	Hi DbPhoenix Your post is to the point ! The point is how do we know the up Bar with strong volume is trend continue or a trap ? I agree that we cannot counter the trend every time you see a big volume and a big range bar. I agree that a "no demand bar is not enough" otherwise we will always counter the trend .However ,What is the obvious signal to confirm it is a trick ?

Depends on where and why the bar occurs, i.e., the context, or "background". If, for example, you have a fairly lengthy accumulative base with the appropriate volume pattern, buying at a breakout of such a base -- assuming that you've correctly identified it as such a base -- is a high-probability trade. If you can't tolerate any retracement or pullback whatsoever, then you have to be prepared to (a) buy before the breakout so that those who are buying the breakout will propel you to at least a breakeven level or (b) sell when price begins to move against you, then prepare to buy again if and when the retracement has completed itself (there is always the possibility that the "breakout" is in fact a "thrust", and that price needs to spend more time in the base).

Since Master the Markets has its roots in Wyckoff, there is quite a bit of valuable information there. Unfortunately, there is also quite a bit that is misleading as a result of the effort to make it "easy". Separating the wheat from the chaff can be done by the trader, but I recommend that you not put any money on the line until you've finished doing so.

[winnie]

Dear Gary,
I am new to this VSA concept. However, I do not understand that how a big range bar with strong volume can be create by 'no demand '. This make me a little bit confused. As Tom Williams always said that big volume and big range bar is not good for the trend to continue.
Thanks for your kind help.

[Bearbull]

Winnie, the following charts illustrates this:
Fig 1. big up bar following congestion on very high vol. , then market drifts upwards on decreasing vol -- does this mean prof. are not interested in higher prices. Then prices come down a bit, followed by an upbar on very low vol: "No Demand" right, infact prices go down to confirm that.........

WRONG:

Fig.2, market was able to rise on low vol after retracement, why? no offerings, hence less resistance, the smart money realised this , then immediately tested the market, whilst those who were focussing on the No Demand, would have gone short as the markdown confirmed the No Demand, well look what happens next. Markets can keep going up as long as there is demand, volume aspect matters at relevant s/r levels.

Lesson: learn to read supply and demand against relevant support/resistance levels rather than obessing over every bar/vol and dwelling on which pros. or smart money is buying or selling, especially when you are starting out, otherwise you will be going in circles

[DbPhoenix]

	Quote:	Gary
	I don't know what you mean by "VSA Central," but there is no misstatement. In fact, from the VSA perspective, wide spread up bar are not "created by buyers." Wide spread up bars create buyers. VSA is concerned with looking at the spread and volume to discern the professional interest in the market. What pushes prices higher does, in fact matter to VSA. Prices can be pushed high on strong demand or on no demand, and there is a vast difference. I don't know who you are or what method you trade, but here is a piece of advice: Make sure you know your facts before speaking, and check your arrogance at the door.

VSA Central = TradeGuider.

Again, while the "VSA perspective" may be that wide spread bars are not created by buyers, one can see that this perspective is incorrect after some reflection. You're not going to have any bar at all without buyers. And whether price moves higher or not depends entirely on demand. Without demand, it won't move at all.

If you want to review the past posts I've made to this thread, just do a search. I've made these particular posts in order to address winnie, not to reopen the debate.

[Eiger]

Well, well, well. A little positive activity on this thread and look who shows up to start criticising VSA and those who trade it. How many times have we seen this scenario before? Tiresome, isn't it? Its not even constuctive; its just another attempt to derail the thread and gain attention. You know, it would be laughable if this obvious attention-seeking behavior wasn't so sad.

There is a whole thread set up specifically to criticise VSA and TG. How is it that we haven't seen one post by you on that thread? I think it odd that a person who falls all over himself to criticise VSA on this thread doesn't take the opportunity to do so there. I guess you must just have another agenda. BTW, I really like all those shorts you've been recommending and especially all that hindsight analysis. Keep up the good work!

[Gary]

	Quote:	winnie
	Dear Gary, I am new to this VSA concept. However, I do not understand that how a big range bar with strong volume can be create by 'no demand '. This make me a little bit confused. As Tom Williams always said that big volume and big range bar is not good for the trend to continue. Thanks for your kind help.

Hi Winnie,
A no demand would be a narrow range up bar (ideally) on low volume that you see after weakness (selling) has appeared. Price does rise on no demand, despite what DDPheonix is saying. The chart is an example of no demand that was a good entry for the sell off this afternoon in ES. It is a 5 minute chart. There was weakness that came in (Ws) and the market rounded over. It failed going higher and made a lower high. Right after that is the no demand where I put the cursor on.

BearBull,
The examples you gave have no weakness in the background. The light volume down move said it would go up, not down. So those examples don't give a true picture.

[firewalker]

Interesting situation on the daily chart... speaking in VSA terms I believe this would be called an upthrust.

[DbPhoenix]

Winnie, if it makes sense to you that the price of something can rise if there's no demand for it, VSA may be just right for you. Otherwise.....

[Eiger]

Of course price can rise on no demand. It does it all the time and it is quite logical. Playing with semantics does not make it different.

Take the attached chart as example. Prices rise all afternoon. Note that the volume is generally expanding with the increasing prices. Demand is pushing prices higher. It then rests a bit, and then rises again. Price then reacts (note the increased volume on the reaction). But then price starts to rise again. Is there demand for higher prices? No. Look at the spreads and look at the volume. As price rises to 1, volume retreats. The same thing occurs on bar 2, volume retreats and also the spread narrows. This is quite different than the rally on the previous afternoon where demand was evident. Price has risen on 1 & 2, but it does so on No Demand. This is why even though it goes a tick or two higher on 3, it quickly falls. There was No Demand at that level for higher prices.

You see this all the time in the markets and with weakness in the background, an excellent place to take a short. Word games won't change this characterisitc of the market.

Eiger

[winnie]

Dear All of you ,
Thanks for all your kind help. VSA is a very new thinking to me. I need to gain more experience and more study on it. Anyway all of your advise is very useful and make thing more clear !
Best Wishes for profitable trading !