[VSA] Volume Spread Analysis Part II

[zeon]

	Quote:	heretodaygone...
	I'll have to go with (b) but it all comes down to context. Compare your chart to this one : http://www.traderslaboratory.com/for...html#post31133 What is similar and what is different? How do you define supply? demand? fear? greed? If you were long, would you be selling or buying more? If you were short would you be covering,reversing, or adding to your short position? what is value? Don't you hate when others answer questions with more questions. Welcome to trading!

Something's wrong with the link you provided. Could you perhaps let me know which post it is (just the number), that way I can look it up.

All your questions depend on tactics I suppose... and you're right. It does depend on whether you are already in a trade or not. But before going there, I really wanted to know how others viewed the chart with the circled area. Is this a volume dry-up because there's no demand or because there's no supply? I like Bearbull's description of his observations. They are in line what what I observed today, but as always things have to be taken into context.

[CandleWhisperer]

	Quote:	Bearbull
	Price is indeed the Truth, have observed on countless occasions, especially in bull runs, prices crawling up all day long on low vol, previously used to look upon those tiny bars with low vol as no demand especially against some resistance to the left,, short it only to see price sailing past my stops on low vol, then it dawned that low vol is the reflection of paucity of sellers and rising price was that of buying pressure. As you keeping saying volume is not intent.

"...but rest assured this approach has its limitations too, because at times the market will go up on high volume, but can do exactly the same thing on low volume, Prices can go sideways, or even fall off, on exactly the same volume!

Price and volume are intimately linked and the interrelationship is a complex one." Master the Markets, Tom Williams, P 16

"To understand what the volume is saying to you, you have to ask yourself again, 'what has the price done on this volume'?" Master the Markets , Tom Williams, p 18.

[zeon]

	Quote:	CandleWhisperer
	"...but rest assured this approach has its limitations too, because at times the market will go up on high volume, but can do exactly the same thing on low volume, Prices can go sideways, or even fall off, on exactly the same volume! Price and volume are intimately linked and the interrelationship is a complex one." Master the Markets, Tom Williams, P 16 "To understand what the volume is saying to you, you have to ask yourself again, 'what has the price done on this volume'?" Master the Markets , Tom Williams, p 18.

Let me give you a couple scenarios. How would you - in real time - identify each one of them?

(a) price is rising slowly on steady but low volume ('good buying'?)
(b) price is going down and the speed of the fall increases sharply on heavy volume
(c) price is going up sharly, very parabolic rise on huge volume
(d) price is going down slowly, low volume, drifting steadily lower


Questions:

(a) is this move running out of steam or preparing for a jump higher? absence of buying or abscence of selling pressure?

(b) is professional money selling or have the already sold? if they have, what is causing price to fall so quickly? how can 'small money' move price so quickly? so it must be the absence of buying pressure right?

(c) who's participating now? does the heavy volume mean that a lot of buying is required to push prices higher or that there's a lot of participation and willigness to bid higher?

(d) is this pattern setting up for a fall of a cliff? does the lack of volume mean that the downmove has been exhausted and there is no selling left? or does it mean that the big plunge is yet to come?

-

What I'm trying to say is that in either of these cases I'm sure you could find arguments for both sides. Unless you bring important S/R levels into play (thus using context), I fail to see how anybody can make any sense out of this.

[Seb Manby]

	Quote:	CandleWhisperer
	Volume is nothing more than activity to be sure. This is why tick volume is a suitable substitute for actual volume. However, do not confuse the lack of available volume information with the IMPORTANCE of volume information. In fact, the lengths some go to keep volume from the individual trader only goes to show how important it is. With that said, Price action is certainly important. Price/Volume/Volatility they all go together.

I don't know who you are, but I think that of all the people posting to these volume analysis threads, I think you will get there quicker, because you are studying the book and applying the context to your charts, that is how I broke through the fog.
Keep going, you'll get there soon enough.

Well done
S

[Eiger]

	Quote:	zeon
	I'd like to attach a chart from 30 minutes ago. This is the ES and the horizontal lines are where I had drawn my resistance levels. There's a noticeable dry-up in volume after a peak. So is this (a) professional money sold into that peak and is know waiting to short? (b) there's no one around to sell and this can go up because there's no selling pressure. There's not much buying either. These kind of situations always confuse me... if anyone could clear this up - once and for all - I'd be most grateful.

These situations can be confusing. What you are seeing here is aborption. Unfortunately, you can't really see it with the 2-min chart.

I've attached a 5-min chart of the past few days. The area you outlined is boxed in blue. It actually was a little larger than what you have drawn, and the 5-min chart shows this more clearly. The absorption area is highlighted by the green box.

VSA teaches that previous resistance areas and areas of active trading will still have locked in traders - traders with poor postions under pressure looking to get out at break even. Sometimes, big money will rocket price through these areas via wide spreads or gaps. Other times, they will absorb the offerings.

Yesterday was a trend day down. As a general rule in the S&Ps, the afternoon high (red circle) of any trend day down will be resistance the next day if price comes back into that area. We saw that today at about 11:30, though price did not (and this was a clue that the opposition formed by the resistance would be broken) react very far.

On the FOMC day, there was also a fair amount of trading activity in this same area, both before and after the announcement (red oval).

The dashed line highlights the area, and if you go back a little farther, you will see that price traded in this general area on previous days.

As price came back up into this area again, whatever was offered by traders was absorbed by the CM or big money.

How to tell it is absorption? Resistance on the left side of the chart needs to be there. You noticed the declining volume. That is one good clue. You also see rising supports or higher lows as the absorption area progresses. A third clue is that price holds it gains well. Price was holding well (on top of the support of the 11:30 highs), and did not have much of a reaction. Anytime price did dip within that range, it did not draw out any supply (increased volume), so no one was interested in taking price lower. Sometimes, you will see a slight increase in volume at the very end of the absorption area. This didn't happen today, but when that does happen, it usually occurs on the last few bars and those bars typically close mid-range or higher and their lows are almost always higher.

At the very end of this absorption range, there was a little shake-out, seen by a wider spread down bar with almost no appreciable increase in volume. It was then followed by a nice reversal bar that indicated absorption was completed.

Sometimes you will see absorption before breaking out of a Supply Line. There is always some form of resistance.

I hope this is helpful.

Eiger

[heretodaygone...]

	Quote:	zeon
	Something's wrong with the link you provided. Could you perhaps let me know which post it is (just the number), that way I can look it up. All your questions depend on tactics I suppose... and you're right. It does depend on whether you are already in a trade or not. But before going there, I really wanted to know how others viewed the chart with the circled area. Is this a volume dry-up because there's no demand or because there's no supply? I like Bearbull's description of his observations. They are in line what what I observed today, but as always things have to be taken into context.

lack of supply in an up move and lack of supply in a down imo, are two totally different context's., thus the link to post 209 of this thread.

[DbPhoenix]

	Quote:	Eiger
	These situations can be confusing. What you are seeing here is aborption. Unfortunately, you can't really see it with the 2-min chart.

Of course one can. Just zoom out.

[zeon]

	Quote:	Eiger
	I hope this is helpful. Eiger

Thanks, this has been most helpful. Only thing that has got me thinking now is your remark about the 5-minute chart. I've been used to trading off 5-minutes but now I'm going down to 2 or even 1-min bar charts because of the comments from dbphoenix.

Another question, excuse me if I missed this, but what's your chart provider? It's nice to have a continuous flow expanding over several days.

[Bearbull]

	Quote:	Seb Manby
	I don't know who you are, but I think that of all the people posting to these volume analysis threads, I think you will get there quicker, because you are studying the book and applying the context to your charts, that is how I broke through the fog. Keep going, you'll get there soon enough. Well done S

Then the obvious question is why is that after 7-10yrs of VSA being around, that vast majority are still engulfed in the fog, afterall you folks at TG are not exactly rocket scientists that you are in possession of such abstruse and esoteric knowledge that it cannot be explained and illustrated via charts, realtime trades etc in clear, concise, uncomplicated and logical manner rather than getting folks hooked onto expensive software and seminars and forever going around in circles with so many cutesy terms absent in the original Wyckoff's course from which VSA has been derived in the first place although never been acknowledged.

[DbPhoenix]

	Quote:	Bearbull
	the original Wyckoff's course from which VSA has been derived in the first place

While this may be true in a general sense, it is not true when one gets down to specifics. There are important differences between Wyckoff and Williams, though there may be fewer differences between SMI and Williams (which makes sense given that Williams took the SMI course). And the differences between Wyckoff and Williams are important enough to make them practically distinct.

Therefore, anyone who reads Undeclared Secrets or any of the material put out by TG should not assume that it all comes from Wyckoff. Only in the most very general way does any of it come from there.