[VSA] Volume Spread Analysis Part II

[BlowFish]

Bearbull lovely chart. Hope you where all over that pull back on diminishing volume it screamed small correction. I am hearing good things about the NAS from a couple of trading buddies. Time for a change maybe, haven't traded it for donkeys years.

[Bearbull]

	Quote:	Gary
	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.

Gary,
I can understand that initial flurry of epiphany after going through a seminar, have been through that phase myself when trying out indicators(CCI, MACD etc), Candlesticks, VSA, the lot, however after a thorough study of the original Wyckoff, the problems were glaringly obvious. At the outset, there is no intention to bash VSA or any other form of technical analysis, this is presented as more in the light of constructive contribution

After significant price movement on a particular time frame, it would be easy to note the various candlestick formations (doji, engulfing bars etc) at the right locations of the turn, similarly with VSA signals of no demand, no supply, upthrusts and so on, simply because they reflect the balance of supply and demand at that moment at that price level and as Tom Williams states if they appear on hindsight charts, they must be there at the hard right edge, and he is absolutely right. However there in lies the main problem, how to recognise them at the right location.
Those who have sound knowledge of both VSA and Wyckoff are trying to point out especially to newcomers to VSA is that the price/vol relationships have more relevance against significant support/resistance zones (price levels) rather than just anywhere on the chart, so instead of mulling and fretting over every bar, it is more productive to focus at these levels for high probability trades. Afterall for every setup that can be identified than has panned out, there is always a similar setup that did not pan out. So once again there is no intention to bash VSA or any other form of analysis.

In this respect, I would urge any newcomers to VSA to really chew over and digest this quote from post 1146, this is pure Wyckoff (always remember VSA is derived from that" : "Wide spread up bars are created by buyers. Whether there are a few buyers pushing price higher or a great many is illustrated by the volume. Either way, this leads us to the second part of the misstatement, which is that the "smart money" [sic] is selling their holdings when "everyone dog piles" into the market. Professionals are in fact selling their holdings as soon as price begins its rise, buying first to move the price, then selling into the rise if buying interest manifests itself.

What pushes price higher is demand, and it doesn't matter by whom or by what the demand is fueled. What is important to the trader is to determine when the demand has permanently (within that timeframe) exhausted itself (and, no, a "no demand" bar is not enough). Otherwise he will find himself consistently trading counter-trend.

will address the issue of downbar on low vol signifying lack of selling in the next threads with some charts

[Bearbull]

Once again have to repeat this: it is crucial , however it is upto the individual to take the message on board or reject it, the choice is yours, if you are making money via what you have managed to learn before, than all the best to you, there is no intention here to change that
"What pushes price higher is demand, and it doesn't matter by whom or by what the demand is fueled. What is important to the trader is to determine when the demand has permanently (within that timeframe) exhausted itself (and, no, a "no demand" bar is not enough). Otherwise he will find himself consistently trading counter-trend.

Back to the business of trading in realtime, am going to post 12 charts, they all have those no demand bars accompanied by downbars on low vol ( no supply, right????), this is what we face in realtime whilst making decisions and if those who trade this no demand bars can detect the real from the fake one, and which one will lead to that coveted price move, than that is great.

Fig. 1 - here is no demand, do we short or wait for confirmation?

Fig. 2. - but now there is a downbar on low vol, no selling pressure, right?

Fig. 3. - oops, this confirms the No Demand, do I short, where is my stop loss point?

[Bearbull]

Fig. 4.. - Assume the short position was taken, do I stay short?

Fig. 5 - No demand, better stay short, if not gone into the trade before, another opportunity to short , this is afterall a second no demand (vol less than previous 2bars).

Fig. 6 - Once again downbar on low vol, no selling pressure, what do I do, ?

[Bearbull]

Fig. 7 - and once again no demand confirmed, another opportunity to short or add more contracts.

Fig. 8 - what the heck, looks like a 2 bar reversal, where is my stop?

Fig. 9 - what happened to the stops?

[Bearbull]

Fig. 10 - Another No Demand

Fig. 11 - Another Down Bar on Low Vol? No supply ??? what to do

Fig. 12 - facing the same situation as Fig 4

Incidentally Gary this is bar by bar as it would unfold in realtime of the chart you posted. If you have mastered this, that hats off to you, but you can appreciate that any newcomers may benefit from such an exercise, wouldn't you say.

[Bearbull]

Gary,

Talking about weakness in the background

Fig 1, would you consider shorting here or going long, after downbars on relatively high vol, supply coming in, right,
No. o.k --- no buying climax you say, market is not weak, fine, lets move on

Fig. 2. what about this, if downbars on low vol mean no supply, then downbar on relatively high vol surely must mean increased selling,
No, once again no WEAKNESS IN THE BACKGROUND, I hear you say

Fig 3. how about this for an outcome

Incidentally this is action on the Russell yesterday.

[winnie]

Dear BearBull,
Thanks. This is what I see in real time. This make me very confuse in how to use VSA in actual trading. I don't know which bar to trust.

[DbPhoenix]

	Quote:	winnie
	Dear BearBull, Thanks. This is what I see in real time. This make me very confuse in how to use VSA in actual trading. I don't know which bar to trust.

Fortunately, you have several choices. This particular site is rich in discussion of trading by price action, particularly VSA, Wyckoff, and Market Profile. Some are more logical than others, some are more internally consistent (not studded with multiple exceptions, like raisins in an oatmeal cookie) than others, but while each of these approaches addresses the subject in a different way, but they are all about judging the balance and imbalance of supply and demand in an auction market.

You must decide what is most in keeping with your view of the market and of market participants. You must also decide whether you want what is essentially a scalping strategy or a trend-following strategy. You appear to be taking your time with this, time to gather the information and think about it. This is relatively rare among new traders and is to be commended.

[Bearbull]

	Quote:	winnie
	Dear BearBull, Thanks. This is what I see in real time. This make me very confuse in how to use VSA in actual trading. I don't know which bar to trust.

As has been stated previously, there are useful concepts and principles in Tom William's book, regarding price/vol relationships, however it is imperative to study Wyckoff material, avoid getting into the quagmire of VSA jargon, professionals, smart money etc and focus on supply/demand at significant price zones i.e support/resistance levels, effort v/s result, effort= vol, price move=result. and that is going to take lot of screen time, to sit and observe selling and buying pressures and waves without thinking too much about what you are going to do or should have done etc that can come later. It is cool to join the bandwagon and harp on about pros, footprints of elephants etc, but we have to keep in mind that "The smart money knows that ordinary traders are getting smart at reading their footprints and they are going to get even smarter to wrong foot those who think they have finally figured it all out by just reading a book on VSA"

Anyway another example of how the market can be misread

Fig. 1, lots of upbars on very high vol, surely a sign of weakness, time to short afterall there is no demand bar with confirmation on the next bar, is it not.
o.k where you would you short, and where is the stop
Fig. 2 Has the stop been hit, what happened to the setup, there was an ideal no demand bar confirmed on the next bar and with weakness in the background.