[VSA] Volume Spread Analysis Part II

[mister ed]

	Quote:	BlowFish
	Just playing devils advocate but to a trader with a 'monthly' perspective the daily S/R might 'translate into nothing' (or if not nothing, less than they are interested in).

Bingo! ....................

[DbPhoenix]

	Quote:	BlowFish
	Just playing devils advocate but to a trader with a 'monthly' perspective the daily S/R might 'translate into nothing' (or if not nothing, less than they are interested in). Similarly a more hyper active trader (a 'scalper' if you will) might focus on nailing 'hourly' S/R rather than 'daily' S/R. (I appreciate 'hourly', 'monthly' and 'daily' are artificial constructs) There is an important lesson here though (well at least I think so) and that is knowing what your focus is. I fully agree that markets don't trade in nice discrete 5 minute, hourly, daily, weekly, chunks. However, it is convenient when you are trying to decide what size moves you are trying to capture to consider a suitable time frame to focus on. A 50 point ES move will take longer to develop than a 5 point move regardless of the bar size you use to monitor it. Put another way if you want to make roughly 5 points on a trade that will dictate the 'time frame' to focus on, this will tend to suggest suitable charts to use. In this case time frame is not the same as chart time frame it is the scope of the trade. A wise man ( DB someone or other ) once said the chart is just a map not the territory. Having a suitably scaled map for the journey makes navigation easier.

On the other hand, however many points one "wants to make" have nothing to do with the number of points that are available, which is a chief reason why so many traders cut their profits short.

As to artificiality, daily, weekly, monthly are not necessarily artificial since there is in fact a literal close (at least with regard to stocks). Intraday, however, is a different proposition since there is no close during the day (this is what is fundamentally illogical about applying VSA to an intraday timeframe).

In any case, what is support or resistance on a weekly will also show on a daily, as well as intraday, which is a convenient means of determining what is "important" S/R and what is trivial.

[DbPhoenix]

	Quote:	mister ed
	Ya gotta remember those different scales Db - not everyone is going to have the same 'target' as you. Not every chart is going to be useful for the same thing. By all means use the 1 minute (or whatever) to help with entry for 'your' target, but recognise that a small interval is extremely useful for a small target for someone else's trade. In the end, reading price action is just one component of trading. Many novices miss this point. Yes its an important component of trading, but where the rubber hits the road its about risk management and to expect a 'pattern' on the 1 minute to give the same result as a 'pattern' on a larger scale is going to end in disappointment much of the time.

Again, the bar interval has nothing to do with the target. A smaller bar interval enables one to read price action more accurately. That's all. It carries no target baggage unless the trader chooses to hook it up himself.

As to whatever disappointments there may be, these are the result of a lack of skill in interpreting price -- and volume -- action, not of the bar interval one chooses to display twice.

[zeon]

	Quote:	DbPhoenix
	Again, the bar interval has nothing to do with the target. A smaller bar interval enables one to read price action more accurately. That's all. It carries no target baggage unless the trader chooses to hook it up himself.

I take it a smaller bar interval helps you pinpoint entries and exits more precisely? Traders (like myself) that sometimes wait for a bar to close have the disadvantage of never making that perfect entry.

	Quote:	DbPhoenix
	As to whatever disappointments there may be, these are the result of a lack of skill in interpreting price -- and volume -- action, not of the bar interval one chooses to display twice.

Are you saying that - if price does something other than what you'd expect it to do - you've misread the chart? I mean, that's what I want to believe. Others have said that I shouldn't try so hard in getting it right. It's just not possible. Or is it (except for these unanticipated news events which can't be foreseen)?

[dandxg]

Such a interesting debate on S/R! I actually can see both sides and how they make sense. Do I want to hold on and do my best to read price, volume, and order flow and go for what I call the longer dollar? For the "bigger" and possibly "more relevant" S/R area.

Or do I see that we are retesting the low or range after selling a pullback on lower volume and trail stop or just punch out?

I personally feel this is answer that only an individual can answer for himself no one can profess to "know the right answer" as everyone is trading their own money and no one knows where the market will absolutely go. If we did there would be no reason to read the tape right?

It's discussion such a these that remind me trading is much art than science.

[mister ed]

	Quote:	zeon
	Are you saying that - if price does something other than what you'd expect it to do - you've misread the chart?

Zeon, saying that is being incredibly hard on yourself. By all means strive to improve your chart reading and therefore entry decision, but you know that not every trade is going to work out profitably. It is about risk management, strive even harder to get that right and you will be fine.

[DbPhoenix]

	Quote:	zeon
	I take it a smaller bar interval helps you pinpoint entries and exits more precisely? Traders (like myself) that sometimes wait for a bar to close have the disadvantage of never making that perfect entry.

It's not a question of being precise and perfect. It's a matter of locating support and resistance accurately, then monitoring traders' behavior when those levels are approached. If one monitors that behavior in terms of where a bar closes, then he is inserting one or more filters between what is happening and his perception of it.

	Quote:
	Are you saying that - if price does something other than what you'd expect it to do - you've misread the chart? I mean, that's what I want to believe. Others have said that I shouldn't try so hard in getting it right. It's just not possible. Or is it (except for these unanticipated news events which can't be foreseen)?

One determines an expectation according to the information that is available to him at the time he determines the expectation. In the next instant and the following instants, more information becomes available which may, all or in part, change the expectation, all or in part. If one has decided in advance that he will be "wrong" then and for all time if his expectation requires modification, then he will not be available to whatever the market offers. He will instead sit there, immobilized, trying to figure out where he screwed up.

[DbPhoenix]

	Quote:	dandxg
	Such a interesting debate on S/R! I actually can see both sides and how they make sense. Do I want to hold on and do my best to read price, volume, and order flow and go for what I call the longer dollar? For the "bigger" and possibly "more relevant" S/R area. Or do I see that we are retesting the low or range after selling a pullback on lower volume and trail stop or just punch out?

As to the latter, that depends on whether you are exiting based on a predefined reversal signal or you are exiting out of fear that whatever profit you may have may turn into a loss, or you are already in a loss position, or you are trying to make back money that you lost on an earlier trade, or you're tired of a string of losses and want to win for a change, and so on. The market couldn't care less about any of this.

[Bearbull]

	Quote:	DbPhoenix
	Again, the bar interval has nothing to do with the target. A smaller bar interval enables one to read price action more accurately. That's all. It carries no target baggage unless the trader chooses to hook it up himself. As to whatever disappointments there may be, these are the result of a lack of skill in interpreting price -- and volume -- action, not of the bar interval one chooses to display twice.

Some charts to illustrate your point:

1. Basic upthrust : sign of weakness is it not? TG signal afterall, ideal place for short, chart 1

2. Dogs did not bark chart 2, again End of Rising Market on huge vol, bar closing in the middle, supply swamping demand, short again????

3. chart 3, wrong again.

[Eiger]

Quote:

Bearbull