[VSA] Volume Spread Analysis Part II

[mike_ITL]

Hi guys,

can I ask for a comment about the attached chart ?

I list here below my notes, but don't know if these can be considered correct.

A - wide range high volume bar; next bar is a doji ... hidden selling in A ?

B - test of supply in a rising market: no supply found

C - no demand bar

D - seems like a little upthrust ith higher volume here, with the next bar closing in the lower half portion of its range with low volume.

Shouldn't this be a sign that there is no demand in the market ?

Kind regards,

Mike

[tawe trader]

	Quote:
	A - wide range high volume bar; next bar is a doji ... hidden selling in A ?

Hello Mike,

I would look at the bar you marked A as being bullish and not bearish.

Tom Williams would see this action as an indication of strength, pushing up through resistance (to the left). This is effort and demand to go up and normally it will be followed by a rest. Look for signs of strength (no supply / test) to confirm and then go long.

Hope this helps
Tawe

[mike_ITL]

Thank you so much Tawe!

I have some difficulties in widening my view also to background, as I tend to concentrate onlu on the last few bars.

Really like a lot this thread, please keep it up!

Have a great day,

Mike

[Eiger]

Over the weekend, I was reminded of a wonderful quote out of Wyckoff's (aka Rollo Tape) great little book, Studies in Tape Reading: "The study of responses ... is an almost unerring guide to the technical position of the market." This is such a great concept to keep in mind. A look at the hourly chart of the ES from the Spring in mid-March shows this pretty well. After the shakeout at A, reactions were orderly (B & C), or they held gains very well (D & E), refusing to budge lower. The last two reactions in particular indicated higher prices as the market absorbed the overhanging supply from the August 2007 low and the top of the recent trading range before breaking out of that range.

Here's a fun excercise. Take a look at the second chart. There is no date or other identifying data on this chart. You can see the rising wedge formation comining into resistance. This pattern predicts a big break down, right? Some were saying the same thing about this current market, in fact more than once Now look at the third chart posted to see the result of that wedge.

The heart of technical analysis lies in that simple quote of Wyckoff's, I think. Patterns and chart formations certainly catch the eye, but often they are just eye candy. Like Wyckoff, VSA is also highly concerned with responses. When we see a Sign of Weakness develop, for example, we want to see it tested with the No Demand principle before trading it. The No Demand shows us that there is no response to the upside, and gives a green light. There are lots of other areas in VSA where the idea of responses applies.

I was glad to be reminded of this quote. I put it up on my monitor to remind me of its value, least I forget it

Eiger

[Eiger]

	Quote:	mike_ITL
	Thank you so much Tawe! I have some difficulties in widening my view also to background, as I tend to concentrate onlu on the last few bars.

Hi Mike,

Great question and a great response from Tawe.

I sometimes do the same thing (forget to widen the view). We can get so excited at seeing an indication, we just want to jump in

One thing that helped me with this, was to make a simple rule before taking a trade. When I saw what I thought was a set-up, instead of jumping right in I told myself to Stop, Look left (and also to the higher time frame), and then Decide. (Stop, Look, Decide). It sounds corny, but making this into a little rule helped me quite a bit. In a fairly short period of time, I basically trained myself to follow this little procedure every time before taking a trade.

You see atheletes do this all the time. A tenise player will adjust the strings after a point or bounce the ball a few times before the serve. These little rituals aren't just strange quirks. They are done purposefully as a quick way to help them focus and prepare to play the next point. We can do the same thing in trading with little cues like Stop, Look, Decide.

Eiger

[mike_ITL]

Hi Eiger,

that's exactly what I was thinking when this pattern happened: "I'm not going to miss this one: I have to take position". Obviously I took the wrong one.

I find your suggestion wise: I will incorporate this rule into my trading plan ... it may make me lose some tick because of the delay in entering position, however I'll hopefully be positioned better!

As for the routine, I like to have a checklist: it helps me stay focused and makes me feel like I've done preliminary work and I'm in the position of searching opportunities in the market.

Kind regards,

Mike

[Sledge]

	Quote:	mike_ITL
	Thank you so much Tawe! I have some difficulties in widening my view also to background, as I tend to concentrate onlu on the last few bars. Really like a lot this thread, please keep it up! Have a great day, Mike

Mike-
Try this- it helped me a ton:
Zoom Out the chart (i.e. if you are looking at 50 bars- look at 200)
AND
Look at a longer timeframe! Try a 4 hour or daily view to get a full view of the trading horizon.

I went from a "what does this one bar say" to looking at the whole picture. It literally opened my eyes to more trading opportunity and bigger pip grabbing!

Good Luck!
Aaron

[Sledge]

	Quote:	Sledge
	Charts Mr. Sledge You say: Well of course. I'll make this random and only let you know this is a 1 Hr Chart. You should have enough background information to make decisions. I'll post the "Answer" charts after we get rolling. This has always been a subject that as a VSA fly on the wall, seems to be overlooked or sort of "won't talk about" Which is fine- that is why all of you are here and may have insight of your own- with your own trading style, and Money Management. Here are a few charts to get your juices flowing- Take the charts and save them- mark them up, this is your "live edge" of the chart- so what would you do with it?: Sledge

Ok well, I didn't get the number of responses I had hoped for from post 1188, but I want to post the "answers" for anyone who may come upon this at a later date. Here are the charts that have the "answers" to where to place your Entry.
Aaron

entry1.jpg

entry1_result.jpg

entry2.jpg

entry2_result.jpg

[Eiger]

	Quote:	mike_ITL
	Hi Eiger, that's exactly what I was thinking when this pattern happened: "I'm not going to miss this one: I have to take position". Obviously I took the wrong one. I find your suggestion wise: I will incorporate this rule into my trading plan ... Mike

Actually, you are the wise one. Most traders spend most of their time and effort studying charts and trying to improve their technical skills. That's a good thing. But, few spend much time and effort working on themselves. That's not such a good thing.

I say you are wise because you have identified a limitation, figured out how to adjust for it, and then you put it into your plan. You will only improve as a trader by doing this.

What you are doing is a simple, but highly effective way to improve. Here is a little more to consider. First, write stuff down. Keep a journal and write things that are meaningful. Don't just complain, (e.g., "Agh! Another losing trade; I'll never get this."); that kind of writing is rather useless. Be specific about your trading behavior, and include thoughts and feelings. Then, after a while, look for patterns that have a negative impact on your trading, like jumping in because of impatience. This is a "current limitation." Be excited! You've now found something you can work on to get better (how else are you going to improve?). Next, devise a workable plan to neutralize the limitation or even turn it into a strength. Put this into your trading plan and then track your progress on it. Write about it in your journal, and make any adjustments that might be needed.

This is the bare bones of how to use your journal and trading plan to help yourself improve. You have to be your own coach in a lot of ways. That means you have to be able to step back and observe (think witness) your own behaviour. Hard to do, but the journaling can really help.

OK, enough trading psychology. This is, after all, the VSA thread

Hope this is helpful,

Eiger

[Sledge]

	Quote:	Eiger
	What you are doing is a simple, but highly effective way to improve. Here is a little more to consider. First, write stuff down. Keep a journal and write things that are meaningful. Don't just complain, (e.g., "Agh! Another losing trade; I'll never get this."); that kind of writing is rather useless. Be specific about your trading behavior, and include thoughts and feelings. Then, after a while, look for patterns that have a negative impact on your trading, like jumping in because of impatience. This is a "current limitation." Be excited! You've now found something you can work on to get better (how else are you going to improve?). Next, devise a workable plan to neutralize the limitation or even turn it into a strength. Put this into your trading plan and then track your progress on it. Write about it in your journal, and make any adjustments that might be needed. This is the bare bones of how to use your journal and trading plan to help yourself improve. You have to be your own coach in a lot of ways. That means you have to be able to step back and observe (think witness) your own behaviour. Hard to do, but the journaling can really help.

Eiger-
This is great advice for ANYONE reading. Some people think "A Journal?- isn't that like High School?" Well let me tell you. I have kept a trade journal from day 1 and it is a wonderful thing to have. I not only place my trades in it, my targets, my reasons for taking the trade and why I exited.
BUT
I also brainstorm ideas in it. I test trading theories, put down a frustration or two, backtest, and backtesting results on theories. I was reading through it about a month ago and said on a few items "HA I can't believe I tried THAT!" I also go back and look at my "frustrations" and make updated notes on them in the margin. Thankfully, I have been able to update them 100% of the time with "Overcame as of X date" or "Have made great strides on accomplishing this- still working on it."

I suggest to anyone who trades to know WHY they are in a trade, learn from their mistakes- believe me I have printouts of days I got murdered. I printed the chart- asked questions here in this forum, and won't make them again!

Enough rambling from me!
Aaron