[VSA] Volume Spread Analysis Part II

[DbPhoenix]

	Quote:	brownsfan019
	Ok, I have to ask (time to stir the pot) - as a lurker of this thread and reading some great things (esp DB) I have one question to ask... Is anyone here actually using this in real-time and making money? I see a lot of 'after the fact' analysis, which is fine for learning, but I'm really curious if anyone outside of DB can do this when it counts - real-time and real money... Just curious, not meant to piss anyone off.

Actually, there's no "evidence" that I'm doing it either. Unless one hires a mentor who will sit with him day after day and show him how to trade one on one and stay with him until he has demonstrated that he can do it on his own, then there's really no other way to learn it than through the principles demonstrated through hindsight analysis.

Hindsight analysis is great for learning principles. That's pretty much what books are all about, whether the subject is trading or something else. And hindsight analysis is fine for backtesting, either manual or computerized.

But at some point, one has to test forward, one has to implement these principles in some sort of trading, preferably simtrading first, then real trading. He then learns whether the principles are theoretically true but practically -- at least for him -- crap. And if no one can demonstrate that these principles are in fact useful and useable, then he can assume that the "principles" are crap in the absolute.

So when someone can do nothing more than tell you what you should have done, you have every reason to be skeptical, just as when someone is vague and general and tapdances a lot. It has to make sense. It has to be logical. If it isn't, and it doesn't, then avoid resorting to faith, keep your wallet in your pocket, and continue searching.

[rodney]

	Quote:
	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. If one can't read the signals, it's most likely because he's trained himself to focus on bars rather than on price movement

Hi Db
I have quoted above from 2 different posts you have made - and could have picked a couple more. There is something you are saying that I would like to focus on - if you are willing to elaborate.


First, in what specific ways are you " monitoring traders' behavior when those keys levels are approached." ?

Second, if I hear you correctly, you choose again and again to focus on market flow, and not dwell on a particular bar interval or bar close. That makes sense.

If I interpret VSA correctly and can oversimplify VSA, then "market flow" is composed of a balanced interpretation of what is happening in the background as compared to what is happening as the current bar forms.

Can you elaborate some more on how you read "market flow" as price approaches support and resistance?

	Quote:
	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.

I don't want to over complicate this. On the other hand, I don't want to miss what you are saying.

As you approach a "decision point," is there some over-riding anchor point from which you are interpreting this constant flow of new price information?

When you say to yourself, - based on this new flow of information - my earlier expectation is not developing. Or when you say to yourself, my earlier expectation is developing. What are the decision-time "signs of flow" that you are looking at ? Are there specific signs that must be in place?

Is your "decision time" interpretation of flow any different than the classic VSA signals - such as volume, range, close, prior swing highs, etc that are discussed so much on this board?

Picking up on on one of Eiger's recent posts, our brains [ emotions ] are "hard wired" and vulnerable to odd behavior at "decision time" - and especially vulnerable when facing a constant assault of new information.

Rodney

[DbPhoenix]

	Quote:	rodney
	First, in what specific ways are you " monitoring traders' behavior when those keys levels are approached." ? Second, if I hear you correctly, you choose again and again to focus on market flow, and not dwell on a particular bar interval or bar close. That makes sense. If I interpret VSA correctly and can oversimplify VSA, then "market flow" is composed of a balanced interpretation of what is happening in the background as compared to what is happening as the current bar forms. Can you elaborate some more on how you read "market flow" as price approaches support and resistance?

The whole VSA thing has become much too complicated what with TG and SMI and so forth, so I'll just set all that off to the side and leave it to someone else to sort out.

People hate it when I suggest they go read something, but for five days I posted my prep and my post-analysis to my Blog. Perhaps all of that will help you. Otherwise, I determine potential S&R beforehand, then I watch how traders behave when those levels are approached. Is price driven down rapidly to support where it then makes a single print and bounces violently? Does it glide in to support and bounce gently along? Does it hammer away at it again and again as if trying to break through a door? And what's the TICKQ doing all this time? What's going on with volume? Is there a classic decline on the retest, if any? Do buyers pile in as expected, or do we begin a search for a new equilibrium (or "value") level? And sometimes, nobody shows his hand, and the only thing to do is wait until somebody does, then look for an opportunity to enter, usually that first pause after the excitement begins (which one will likely miss if he's looking at a too-large bar interval).

	Quote:
	I don't want to over complicate this. On the other hand, I don't want to miss what you are saying. As you approach a "decision point," is there some over-riding anchor point from which you are interpreting this constant flow of new price information? When you say to yourself, - based on this new flow of information - my earlier expectation is not developing. Or when you say to yourself, my earlier expectation is developing. What are the decision-time "signs of flow" that you are looking at ? Are there specific signs that must be in place? Is your "decision time" interpretation of flow any different than the classic VSA signals - such as volume, range, close, prior swing highs, etc that are discussed so much on this board?

I probably don't understand what you're asking since I can't think of anything to add to what I said above. If support is not found where I expected it to be found, then I wait for the market to tell me where it is. But rarely is it in a much different place than I thought it would be.

As for the "classic VSA signals", assuming you mean VSA rather than TG-VSA, whatever has to do with a bar is not all that important to me, much less where it closes. Once one gets into all that, he may as well trade candle patterns and save everybody a lot of time. Nor do I buy into the conspiracy-manipulation attitude. That can easily put one into a self-defeating mindset in which every aggressive move may be a trap of some sort, and by the time he figures it out, the opportunity is past.

Buying pressure and selling pressure -- or demand and supply, if you will -- are continuous. The balance between them is dynamic and never-ending. One can partition all of this into bars and try to determine where the imbalances between buying pressure and selling pressure lie within a particular bar, or even a series of bars, but so what? What is important is the flow, the waves of buying and selling pressure, the waves of rising and falling support and resistance. I could try to copy out some of what Wyckoff says about all of this from his tape reading course, but really the best way to understand it is to create a chart with no more than a 1m interval and just watch it as it moves back and forth between support and resistance. And by "just watch it", I mean just that. Don't worry about what you're going to do about whatever it is you're looking at. Don't worry about where you'd enter or where you'd exit or how much money you'd make or whether you'd have been right or wrong to do whatever. Just watch. Like fish in an aquarium. If that seems only slightly less exciting than watching concrete harden, then collect the data and replay it later at five or ten times normal speed. You can do an entire day in little more than half an hour.

None of which may have anything to do with "classic VSA", of course, but I didn't want to ignore your question. On the other hand, if one wants to understand the "background" and whether it signals strength or weakness, I can't think of a better way of doing it. And it won't cost you anything.

And one more thing. Learning while doing if "doing" means doing with real money is not an absolute good. If you don't have a consistently profitable strategy and you're not limiting yourself to the setups within that strategy, then you're not trading, you're gambling, and the longer you "work" this way, the longer it will take. If you don't have all of this yet, then stop. Put your money back in your pants and learn your business. There's plenty of time. The market will be there long after you're dead.

[rodney]

Thanks Db
You answered extremely well.

[zeon]

	Quote:	DbPhoenix
	...but really the best way to understand it is to create a chart with no more than a 1m interval and just watch it as it moves back and forth between support and resistance. And by "just watch it", I mean just that. Don't worry about what you're going to do about whatever it is you're looking at.

As the topic of discussion in the last couple of posts has shifted a bit, I feel it's appropriate to ask a relevant question here.

Db, I've taken your suggestion for using tick charts and looked at price the last couple of days with Sierra Charts. You said I'd be "perpetually perplexed" if I kept focusing on bars instead of price flow. I've tried doing this now but at at 5 second or 1 minute chart I've found it incredible hard to notice anything that jumps out from the rest.

I've payed close attention to see where price reacts and I've written down when high volume suddenly comes in and price seems to hit something and suddenly reverses, like a hot stove where you put your hand on. But a lot of these times, I was wrong and the 'reversal' only happened for a couple of minutes. I've found it very difficult to analyze which volume peaks are important and which ones not, despite focusing only on those that are in the vicinity of important S/R levels.

If I compare to my 5-minute bar interval, I usually have a couple of volume peaks that are clearly distinguishable from the rest. But on a 1-min bar interval, there are loads and if I were to trade off those, I'd be getting a lot of false signals...

[Bearbull]

	Quote:	brownsfan019
	Ok, I have to ask (time to stir the pot) - as a lurker of this thread and reading some great things (esp DB) I have one question to ask... Is anyone here actually using this in real-time and making money? I see a lot of 'after the fact' analysis, which is fine for learning, but I'm really curious if anyone outside of DB can do this when it counts - real-time and real money... Just curious, not meant to piss anyone off.

Good question, having posed that myself, in the final analysis it is irrelevant for even if 50 folks typed in yes, how can it be verified.
However it is highly relevant if a vendor is attempting to extract money from you by teaching market secrets that only he or she is able to read in realtime.
As for these discussions on Wyckoff /VSA all that is required is to gather the info., analyse , gather what is pertinent to your trading and check the validity of the setups in realtime on your own charts, if not discard them, move on, no harm done except some ego clashes which happens in any job.

[Bearbull]

	Quote:	rodney
	Hi Db I have quoted above from 2 different posts you have made - and could have picked a couple more. Picking up on on one of Eiger's recent posts, our brains [ emotions ] are "hard wired" and vulnerable to odd behavior at "decision time" - and especially vulnerable when facing a constant assault of new information. Rodney

Rodney,
those are great questions for Db with equally logical response which is worth taking note of as it is based on pure Wyckoff training, not the one via SMI Wyckoff.

As for the humanity being "hard-wired" and all that , what bearing has that got with what the market is trying to tell you. That is why Mark Douglas has highlighted these issues regarding personal bais, attitudes in "Trading in the Zone", IMO the only book one would ever need on trading psychology, how the trading environment is unqiue, based solely on uncertainty and probabilities, unlike any other profession on earth. and that it is imperative to train and learn to read the information that the market is giving out moment to moment on a continuous tick basis(there are no open, high, low , closes in this flow) via buying and selling pressure.

[Eiger]

	Quote:	Bearbull
	As for the humanity being "hard-wired" and all that , what bearing has that got with what the market is trying to tell you ...

Nothing. But, it can help you become aware of your response to market action and then make changes where needed. One of the reasons we have such a difficult time holding on to winners (which seems so simple) is because of the way we think. Our minds get in the way of what we need to do as traders. Most all of us need to work on the mental side of trading (and then there is the emotional side ... ). The Mark Douglas book is a good place to start and has a lot to offer.

Eiger