[VSA] Volume Spread Analysis Part II

[zdo]

Thanks Db.

Any observations on this from the VSAers - Do you find Volume patterns at SR’s near ‘central tendency’ (POC, etc, not nec MA mean) different than Volume patterns are at extreme SR’s (tails, spikes, etc.)?

	Quote:	DbPhoenix
	Patterns aren't so much the issue as what it is that traders are trying to do at each of these levels. The "pattern" at extremes tends to be a lot of trading activity (volume) spread out over a wide range of price in a very narrow window of time. This creates a lack of support at any given price level during that move. Thus those who for example buy on such an upmove will be the first to bail when things start to go wrong (the weak hands). This is what is meant by "sell strength", when what is meant is more along the lines of "sell apparent strength". If one has a lot of shares to buy or sell, however, he is more likely to find the opportunity to do so at a price that is beneficial to him if he trades where everybody else is trading, i.e., at the point or level or zone where the greatest number of trades are taking place. If one can get past the jargon and catch phrases and buzz words, this is what is at the core of any approach that trades via price action, whether the volume is expressed, as for example in stocks, or implied, as for example in forex.

[jjthetrader]

	Quote:	zdo
	Thanks Db. Any observations on this from the VSAers - Do you find Volume patterns at SR’s near ‘central tendency’ (POC, etc, not nec MA mean) different than Volume patterns are at extreme SR’s (tails, spikes, etc.)?

I don't find them any different at extreme levels. If they're going to happen they're going to look the same where ever you are. It's just way easier to take the trade when you're at S&R.

[zeon]

	Quote:	DbPhoenix
	If you're having trouble recognizing selling climaxes and retests in RT, first make sure that you've located S&R correctly. Then watch the TICK or TICKQ. Today, for example, the TICKQ was -648 at the "selling climax" and only -156 at the "retest". Seeing this divergence between two different measures of selling pressure may give you the confidence you need to take the trade.

I'm not that familiar with TICK or TRIN, but I believe understand what they represent (advance & decline issues right?). Unfortunately there's no such equivalent for the S&P, only for NYSE and NASD. Any idea why this is?

[erierambler]

	Quote:	zeon
	I'm not that familiar with TICK or TRIN, but I believe understand what they represent (advance & decline issues right?). Unfortunately there's no such equivalent for the S&P, only for NYSE and NASD. Any idea why this is?

You'll find the $TICK , will work for the S&P , and the NYSE is like a barometer for the S&P.
erie

[Eiger]

	Quote:	zeon
	I'm not that familiar with TICK or TRIN, but I believe understand what they represent (advance & decline issues right?). Unfortunately there's no such equivalent for the S&P, only for NYSE and NASD. Any idea why this is?

Ticks are the net number of shares on the NYSE trading on the up-tick or down-tick (i.e., trading at a higher price than the immediate last price or at a lower price than the immediate last price). They can be helpful. The S&Ps have most of the biggestest, most important stocks of the NYSE - sort of a sample of the NYSE, so Ticks are fine to use with the S&Ps. It is the only other indicator I use when trading the ES.

You can use the Ticks kind of like an oscillator. Usually, when the market hits an extreme of buying or selling, the ticks will show an extreme. Typically, these are in the +1,000 to -1,000 range, but it all depends on the day. At the Selling Climax at noon today, Ticks hit -1229. That was pretty extreme, given that they didn't crack below -1,000 throughout the morning downtrend until the climax.

They can be useful for timing an entry, too -- sometimes showing an extreme reading (like that buying climax yesterday during the noon hour) and sometimes giving a divergence. For an example of divergence, look at the last swing high on the attached chart before the Selling Climax. It is not labled, but if you look closely, you will see that price rose higher at the top of the rally; Ticks did not, and that action resulted inan upthrust. Plot them on the same chart as price and volume and you will begin to see the possibilities.

Here is a 3-minute chart of the ES with Ticks at the Selling Climax and Spring today. Note how ticks showed an extreme on the Selling Climax (the market was one-sided). On the Spring (L), ticks were considerably above the climax lows (K), indicating a lack of selling pressure. The same indication was seen in the volume.

Here's a pretty good article on trading the S&Ps with Ticks: http://www.lbrgroup.com/images/terry_april_2002_AT.pdf

Eiger

[mister ed]

	Quote:	Eiger
	This was a Spring of a Selling Climax. The exact entry was on the close of the 12:55 bar on the 5-min chart at 1287.50. Risk was modest. Reward was very good. Springs are an excellent, high probability trade. Every one that sets up properly is a no-brainer. There are diffierent variations and they are thoroghly discussed in Unit 3 of the Wyckoff Course. You need to look at volume. This is the main indicator, along with the spread and close of the price bar. You have a Selling Climax in the immediate backround, and the market responded to the climax with a vigorous rally. Wyckoff said explicitly, once you see a Selling Climax, the market is now assumed to be bullish. The reaction back down to the SC area was on generally narrow spreads and receding volume, confirming that supply is now gone from the market. The penetration was minimal and the close on the Spring bar and the bar after couldn't stay under the SC. Also, as you noticed (but not necessary to see this as a choice Spring set-up) there was non-confirmation with the Naz for lower prices. You can't ask for a much more perfect set-up. There was also a Spring at 10:50 this AM. This failed. Here's a very good excercise: find as many differences between these two springs as you can. Once you have a sense of what you are you are looking for in these two springs, look for other springs on other days (there are plenty of them). Put each one you find into one of two catagories: Springs that Succeed and Springs that Fail. Do this with as many springs as you can find and you will soon own this trade. And, forget about candlesticks with this trade; they are immaterial and a distraction. Eiger

Outstanding post thanks Eiger ... For ease of matching your post up with the chart I have attached a 5-minute chart here with the two times of springs marked with boxes.



To convert the times on the horizontal axis to EDST, add 9.

[Eiger]

	Quote:	mister ed
	Outstanding post thanks Eiger ... For ease of matching your post up with the chart I have attached a 5-minute chart here with the two times of springs marked with boxes. To convert the times on the horizontal axis to EDST, add 9.

Those are them (not sure about that grammar, but those are the two areas of the springs)

If any one wants to post what they see as the differences, we could have a discussion about a valuable trade set-up that comes up often in all markets and all time frames. This is one of my key trades. It is Wyckoff based (actually, I don't believe that Wyckoff had ever wrote about springs, though he did discuss shake outs, which are a bit different. I believe that the spring concept was developed by Bob Evans, a successor to Wyckoff). There are times not to take these trades, but when the background conditions are right as was the case today, they are excellent trades.

Eiger

[mister ed]

	Quote:	Eiger
	If any one wants to post what they see as the differences, we could have a discussion about a valuable trade set-up that comes up often in all markets and all time frames. Eiger

Good idea Eiger,

One difference I noted was the price move down to the first low of the springs (i.e. the price low to the left of each blue box) is further in the 2nd example than the first.

I have noticed on my chart I have blanked out the prices , I don't know how I did that (just talent I guess) ... but makes it a bit difficult sorry. Anyway, on the first example I see the price fall about 8 points, in the second example price fell around 10 points From the high between the 2 lows of the spring the price fell about 6 points in the first example, 7.5 odd in the second.

From a volume perspective, the difference in the volume activity at the two lows of each spring is greater in the second example than the first - more noticeable reduction in volume in the 2nd leg down of the 2nd example. Also, the volume on the bar off the 2nd low of each example is quite diffierent - in the first example the volume on the bar following the low is about average, while in the 2nd example the volume for the bar off the second low is huge - urgency here.

[Eiger]

Here's a chart of the daily British pound (March contract) through today. E-Signal plays with the volume, so it is off by one bar (annoying, and it always makes the work difficult).

Anyway, this is an interesting chart. First, does this remind you of today in the ES? There is a Selling Climax, rally, then not one, but two tests. The second test is a Spring. A Spring often puts the market "on the springboard," as Wyckoff used to say. And, this market was no exception. A quick and vigorous rally off the Spring led to a Jump Across the Creek and an uptrend. Note the absorption that occured at each resistance area. This is a classic chart.

So, two good examples of how Springs work in two different markets and time frames. It is one of my favorite trades.

Eiger

[Bearbull]

	Quote:	DbPhoenix
	Patterns aren't so much the issue as what it is that traders are trying to do at each of these levels. The "pattern" at extremes tends to be a lot of trading activity (volume) spread out over a wide range of price in a very narrow window of time. This creates a lack of support at any given price level during that move. Thus those who for example buy on such an upmove will be the first to bail when things start to go wrong (the weak hands). This is what is meant by "sell strength", when what is meant is more along the lines of "sell apparent strength". If one has a lot of shares to buy or sell, however, he is more likely to find the opportunity to do so at a price that is beneficial to him if he trades where everybody else is trading, i.e., at the point or level or zone where the greatest number of trades are taking place. If one can get past the jargon and catch phrases and buzz words, this is what is at the core of any approach that trades via price action, whether the volume is expressed, as for example in stocks, or implied, as for example in forex.

This is a crucial concept DB, would it possible for you to dig up a pattern on your own chart to illustrate ' realise you trade NASDAQ but that should not be a problem to elucidate the concept.