[VSA] Volume Spread Analysis Part II

[mister ed]

The new thread is located in the Trading Psychology section of the board, titled Practical Trading Psychology.
The thread is located at:
http://www.traderslaboratory.com/for...logy-3901.html

Thanks very much for the insights Eiger and to all the contributors to this new topic - nice one!

[winnie]

Dear Mister Ed,
Thank for your reply. I don't know how to insert an image. Take yesterday ES 15 minutes chart as an example. My support zone is 1407-1410. When market test 1409, the down volume decline and then a up bar formed. I enter the trade at a retest with down bar with low volume. Then market go up with higher volume. However, suddenly market drop down and hit my stop point with big volume. After killing my stop , it go up again !
I know there is no holy Gail, but just want to share the idea. Hope anyone can post a 15 minutes chart of ES

[mister ed]

Hi Winnie - Here is the 15-minute chart (ignore the red horizontal lines they are not relevant to your question).

You certainly picked the support zone and entry with style! What price did you enter at, where did you place your stop, and why? What were your ideas on where to take profit? Sorry for all the questions.





p.s. Torero has posted instructions on how to upload an image into a post.

[winnie]

Dear Sir,
I enter at the Red Candle ,which is 3 bar left to the low. I enter because I see the volume is low when compare with the previous up bar. I think the selling pressure is not strong. Thus I enter at the close of the bar, and put my stop at the low of the day. My profit target is using "Market On Close " order as I think I should catch the day low. Then next 2 bar move up with increasing volume and suddenly the red bar hit my stop and then move up !
Thanks for your kind help

[winnie]

My 15 minutes chart

[mister ed]

Thanks Winnie, good chart - what charting package is that?

I will give you my opinion, but let me say first there are plenty reading this thread who are much better at analysis than me, so don't take what I say as the only view, hopefully you will get more responses than just me. My ideas are not going to be strict VSA either.

After your entry you say you placed your stop at the day's low. I think (again, only my opinion FWIW) placing the stop a little below the day's low is probably a better idea. The day's low (so far) has already shown to have buyers (its the low...) so I would probably expect buying again there if the price dips. (Please note, placing a stop below the day's low in an example such as yours is no guarantee - there will be plenty of examples of a dip below the lows before a bounce - but not in this example).

As the price moved in your favour you can use VSA/Wyckoff to monitor the position, and/or candlesticks and so on. This is all in hindsight of course, and real-time its faster and more challenging; the bar I marked with an arrow is showing a test into the congestion area on the left (also marked with an arrow), A test lower from here should not be a big surprise. On the 15-min candle chart I put up earlier the test (I call the upper shadow of the candle the test) is probably a bit easier to see on the candlestick chart.

From an ongoing trade management perspective the stop could be brought closer if you think a move down would not surprise, and, if triggered and you were still bullish the position re-entered at a lower price with the stop re-instated at the initial level. This is just a trade management idea, nothing more. I am all for aggressive management of stops, it may not suit you. And, as I said, benefit of hindsight here.

I know you seem to trading from the 15-min chart but it could be worth bringing up a lower time-frame bar, this may provide a better glimpse into the movements, but I don't know your trading style/goals. I trade a much quicker bar in the ES than 15-minute, but I have a different style/goals to you. A point and figure chart may be of assistance, such a chart does not rely on breaking the price movements up into particular, arbitrary time periods, but instead draws chart movement according to where the buying overcomes selling and selling overcomes buying.

This is a bit of a rambling answer, hope it helps and other responses follow.

[winnie]

Thank you for your kind advice. It is very useful. The chart is come from Interactive Brokers which is free.
Thanks again

[winnie]

Dear mister ed,
If you buy near the low of my chart , how would you management your position by using wyckoff method in your time frame. I wonder wyckoff method could only be use in long term trading ? Could it be use in day trading ? any suggestion

Thank you for your time
Winnie

[mister ed]

Hi Winnie - I think your questions are ones only you can answer once you learn the Wyckoff approach. Have you checked out the new Wyckoff forum on TL - its still relatively new but being added to every day and will be of great assistance to you in learning Wyckoff.

[Eiger]

	Quote:	winnie
	My 15 minutes chart

That was a good VSA trade that just didn't pan out. I was following the same trade on the 10-min chart. At A, there was good stopping volume over three bars. Note how the lows refused to go lower - a shortening of the thrusts on increased volume ("bag holding"). A nice, low volume Test on higher lows was what you entered on. Nothing wrong with that. It was a good trade that just didn't pan out because of the shake out/test of lows that caught your stop.

Usually, even with good stopping volume like that, the market will not immediately go higher after trending down (though sometimes it does) without a larger test of the lows to make sure supply has been fully cleaned out. So, you can exit the trade at the first resistance, bring your stop to break even as soon as you can, trail stops under the lows, or put in a wider initial stop.

Eiger