[VSA] Volume Spread Analysis Part II

[Kiwi]

	Quote:	Eiger
	Boy, do I ever agree with this. I have to remind myself when trading not to try to predict the market. It really limits me. I consciously try to use "anticipate." When I see, for example, a sign of weakness, I then anticipate no demand. If that occurs, I then anticipate an upthrust. If that occurs, I can take the trade. Thinking this way helps me be more patient -- something I am always working on. I remember reading from Mike Douglas that in the markets, "anything can happen." Sometimes, it seems, that anything does happen. When I am predicting, I start to narrow my mind and filter out contradictory information. I am not open to what the market is telling me. The "anything can happen" seems to occur more frequently when I am predicting, because I'm not in tune with the market. I can't tell you how many times I have taken a short, the market goes down a bit, and then paints a low volume, narrow range bar with a decent close. Because I was predicting, I ignored this signal that the market was likely going to attempt a rally. When I am trading well and anticipating, I can "see" the market better and I am out of the short on the next open. This was such a problem for me for so long, I started keeping a journal just on this. I called it, "The Predictor Speaks," and recorded every time I did this. Slowly, I began to realize that predicting the market was feeding my ego. Every time I predicted and the market did as I predicted (mind you, I was never in those trades!) I felt self-satisfied. In reality, was fooling myself that I really "knew" the market and "understood" it. I came to learn that for me, prediction = ego, and getting my ego involved is a stupid way to trade. I found that predicting limits my trading. I don't see alternatives, I have more losses, and I miss opportunities. Thanks for that post: Anticipating is such a better mindset. Eiger

A good response Eiger.

I have often argued that trading is always about predicting because we are making a statistically based prediction. For example, I am entering because their is a 68% chance that price will reach my target before retracing to my stop when this pattern occurs in this situation. I've found the "you do not predict" school to be frustrating because they mean one thing when they use the word predict and I mean another thing.

Here you clearly identify prediction in an almost Buddhist sense.

Buddhist's don't have a problem with wanting something ... their problem is with the attachment to that wanting. That's the source of the unsatisfactoriness/unhappiness. Similarly there isn't a problem with predicting that there is a 68% chance of X if Y ... but the problem is the attachment to a statistical prediction. So you use the word anticipate to describe a prediction without attachment to the outcome.

So it seems that by saying "I anticipate" instead of "I predict" one can avoid the attachment, the ego issues, and the difficulty in then simply following your process and the market without distortion.

[zeon]

Hi everybody. I've been an old ET member, but somebody told me there's a lot of VSA talk going on here lately. I took the time to digest the latest 100 posts or so and have some questions. I've read the Tom Williams books but they seem somewhat different than what is being told here. In 'undeclared secrets of the stock market' there is a lot of focus on single bars and this always gets me on the wrong side of the market when trading for real.

It's easy to say that this or that bar is "no demand" or a "test" in hindsight. But when the market is open there can be conflicting signals and I don't yet completely understand how a trader can identify the right spikes in volume as demand/supply/etc, especially on such a low timeframe as the 1-min charts that have been posted here.

I hope people don't mind me asking, but several things are unclear... Thanks to everybody for providing such a decent thread, I really hope to make 'the next step' in my trading here. I'm sorry if this goes back a bit, there sure is a lot posting going on here and I prefer to read everything first and then launch a number of questions. Most of this is directed at dbphoenix. However, I decided not to post this to his blog as mister_ed said we could ask anything we wanted and some of my questions are directed at other people, but it made sense to bundle them together.

	Quote:	DbPhoenix
	Note that the selling climax does not exactly jump out at you. If you didn't have support drawn at 1765, you might not even notice it. But there or nearby is the place to enter, if you're going to enter at all.

In you chart from post #138, could you not draw resistance at 1778? It looks like there was a slight volume spike around 13:09 immediately followed by a downbar, isn't this a rejection? It looks like price found resistance on the previous day there too. And it is around that 'special' 1780 level that you've talked about too...

	Quote:	DbPhoenix
	Beginning at the end of the day on the 21st, then tested twice on the 25th. It didn't seem to be more than minor support for pre-planning, but price didn't think of it as minor when it was reached for the second time that day. That entire zone from 1760 to 1770 established on the 19th and 20th offered potential support, of course, but 1765 became a kind of fine-tuning.

But how do you know if support from a previous day or week will still be important? If you look at a chart and you can point out where support is, do you take note of that level? I mean the next day it might be breached and so you think it's incorrect. But the day after that it may be tested. Is support from two weeks ago as important as from two days ago? I find it hard to reconciliate all these different support levels from various days and various different timeframes... It looks like support (or resistance) is all over the place all of the time

	Quote:	DbPhoenix
	I hesitate even to bring up S/R since the behavioral dynamic driving price here may not even lend itself to trading ranges, or at least not the pretty kind one finds in futures.

So are you saying that FX moves are less "clean" than those in futures? May I ask if there is any reason in particular you are trading the Nasdaq? Over at ET a lot of people are trading the S&P. Do you think the Nasdaq is less choppier?

	Quote:	DbPhoenix
	I'm not ignoring you. I have a very difficult time dealing with all the layers and layers of overcomplication and nonsense jargon that have been laid over what are essentially basic and really very simple concepts. Wyckoff founded the SMI in Phoenix? Wyckoff died in 1934.

A final question, I looked at your "recommended literature", but there seems to be nothing relating to Wyckoff about it. I have already read the Day Traders Bible in the past, but to be honest it didn't really help me understand the markets better, there are little charts in it too. So perhaps somebody could point me in the right direction and tell me where to find all these Wyckoff gems?

	Quote:	Tasuki
	This philosophy is diametrically opposed to the philosophy of Market Profile, whose principles rely on the notion of a fair, two-sided auctioning process.

	Quote:	Tasuki
	Soultrader, I guess what I'm objecting to with VSA is the tendency to attribute every little move to the "smart money".

Sorry for my lack of understanding Tasuki, but what do you mean with "the auctioning process"? I thought the "smart" money - or whatever you want to call it - is that part of the market participants that are able to move price. We, all miniature puppets, are unable to do anything than just ride that momentum until it runs out of steam. You've also mentioned the taking out of stops as something that's not manipulated. So are you saying it isn't true that the professionals are able to see where the stops are placed then? I read about these things in several books and one thing always came back: that they can and will take your stop out.

	Quote:	DbPhoenix
	Here's a simple, straightforward example. There are many others in the material in my blog. Support is at 1800. I doubt there's anything new here, whether one follows VSA or Wyckoff or SMI. But when I see the retest of support with far less trading activity, that says to me "We're done". And I know they're not lying because of what happens to price. Effort, result.

It certainly "looks" simple and easy, but one man's exit signal can be another man's entry signal. I mean why did you not go long where you closed out? You said support was at 1800, so would this not be a valid entry then?

Could you also point me towards your homepage? The link provided in your profile doesn't redirect properly.

I'm sorry for this rather longish post If you have some time to reply to all my questions, I'd be very thankful. Thanks in advance for all the insightful posts. Definitely a lot to ponder about.
Zeon.

[DbPhoenix]

Hello, zeon. If it's all the same to you, and since most of your questions are directed toward me, I'd like to move all this over to Sledge's Real Time Price Action thread:

http://www.traderslaboratory.com/for...e-to-3494.html

Even though VSA is rooted in Wyckoff, Williams added his own flourishes. And TradeGuider took it in a direction that to me is misguided. But this just isn't the place to debate that point. If someone wants to learn the TG way, what business is it of mine? And by moving this discussion to the other thread, elements of VSA, MP, Wyckoff and whatever the hell else can all be blended together and simmered to come up with something that may do nicely without necessarily having a name.

[zeon]

	Quote:	DbPhoenix
	Hello, zeon. If it's all the same to you, and since most of your questions are directed toward me, I'd like to move all this over to Sledge's Real Time Price Action thread: http://www.traderslaboratory.com/for...e-to-3494.html Even though VSA is rooted in Wyckoff, Williams added his own flourishes. And TradeGuider took it in a direction that to me is misguided. But this just isn't the place to debate that point. If someone wants to learn the TG way, what business is it of mine? And by moving this discussion to the other thread, elements of VSA, MP, Wyckoff and whatever the hell else can all be blended together and simmered to come up with something that may do nicely without necessarily having a name.

Hello and thank you for the quick reply. For some reason my posts don't come up anymore though: they need to be approved Anyway, if you or someone else knows how to move my post, please do so. I didn't know about the other thread, will have a look now.

As for Tradeguider, I don't know much about that, so my mind probably isn't as polluted yet.

[Eiger]

	Quote:	Kiwi
	A good response Eiger. I have often argued that trading is always about predicting because we are making a statistically based prediction. For example, I am entering because their is a 68% chance that price will reach my target before retracing to my stop when this pattern occurs in this situation. I've found the "you do not predict" school to be frustrating because they mean one thing when they use the word predict and I mean another thing. Here you clearly identify prediction in an almost Buddhist sense. Buddhist's don't have a problem with wanting something ... their problem is with the attachment to that wanting. That's the source of the unsatisfactoriness/unhappiness. Similarly there isn't a problem with predicting that there is a 68% chance of X if Y ... but the problem is the attachment to a statistical prediction. So you use the word anticipate to describe a prediction without attachment to the outcome. So it seems that by saying "I anticipate" instead of "I predict" one can avoid the attachment, the ego issues, and the difficulty in then simply following your process and the market without distortion.

That's excellent, Kiwi. In my book, there is nothing wrong about predicting an outcome based on odds. In fact, if traders thought more in terms of probabilities, they would have better results. And you're right, it's really about not getting attached to an outcome. Well said.

Besides being a trader, I am also a psychologist, so I apply a lot of psychological science to my trading (and I work with a few other traders, as well). There is an awful lot about the markets that you cannot control. VSA and Wyckoff help us to read the markets pretty darn well, but even with these skills, outcomes are never guaranteed. There is only one thing a trader can control, and that's himself or herself. Having a probablistic mindset, remaining unattached to outcomes (which I do via anticipation), and keeping one's mind-in-the-moment to be able to effectively use VSA are some of the psychological keys needed for good trading. These are the things a trader can control, or bring under control with a little effort.

Eiger

[Turning Point]

Those who have Trade Guider, would please us know, what is the latest version?

[Seb Manby]

A very interesting thread this part 2,

You seem to be mixed up in a debate regarding predicting the future? why would anyone try to accomplish such a feat? surely your energy would be better served observing the big boys with deep pockets, ie, demand swamping supply and then 'no supply'. My personal strategy is to wait patiently for the smart money to make their move, then wait until they are done, and then follow the path of least resistance, that is what I do, it works for me and I've posted enough charts around the place in case your interested in looking them up.


Best
Sebastian