[VSA] Volume Spread Analysis Part II

[Eiger]

	Quote:	zeon
	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.

I use MetaStock with an e-Signal data feed. I use MetaStock primarilly because I use a couple of indicators that were built on this platform, plus it is easy to transfer data from text and excel files in and out of MetaStock. A lot of MetaStock people also use AmiBroker, which is a (much) less expensive option, and they seem to really like it. The TradeGuider software looks interesting, but I have never used it. There is a lot of charting software out there -- all seem to have both pros and cons. Applying Wyckoff and VSA doesn't require indicators. So, unless you wanted to go with TradeGuider, you probably don't need much more than a basic package.

The e-Signal data feed comes with charting software, which I also use and is OK. The charting software is certainly adequate for Wyckoff and VSA applications. On commodities (including index futures), however, they have an odd convention of being one day behind in the volume, so it is always off by a bar. This only occurs on the daily chart, not the intraday. But it still can be vexing at times, so i am not sure I could recommend e-Signal whole-heartedly. (I always think about Tom Williams's comments in his book about how the exchanges really don't want us to have the volume data because it is so important. They continue to lag the data and vendors like e-Signal continue to support this.) The stock data is good, though. TradeGuider says they are coming out with a less expensive data feed that will run on MetaStock, so I am waiting to see what they develop.

Maybe someone here knows of an alternate data feed that will also run on MetaStock? I do know about Rueters, but I don't know of any others. In any event, I'd be interested if someone knows of another data provider.

I'll respond to the first part separately.

I hope this is helpful,
Eiger

[habi]

	Quote:	DbPhoenix
	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.

Already all the free available education recourses from TG was very helpfull for me. I think it's more, than just interpreting single bars. I get a much better understanding of volume and price action, then I had before, but I know, that I have to learn more. Where you see the main differences between Wyckoff and Williams?

It seems, that there are several resources available based on Wyckoff. If I interpret some statements correct , then some people see e.g. SMI or TG as an ajusted Wyckoff version to todays market relations, but you and BB seems to have another view. Can you give me some educational resources (books, courses ...) which you think teach the original Wyckoff material?

[Eiger]

	Quote:	zeon
	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.

It seems like nearly every post I have made recently draws a response about time frame. Some seem to want to argue about time frame and promote their position on it. There is a vigorous advocacy of the 1-minute bars. Apparently so vigorous that you doubt your own wisdom. That is not a good thing for a trader. The time frame you choose to trade from is your decision, no one else’s. Please understand that I don’t really care what you choose. I have nothing invested, nor do I want to invest in whatever time frame you choose (sounds silly to even say that, doesn't it?). What I mean to say is that it is your choice, and it is a personal choice based on a variety of factors that are strictly personal to you. Don’t let others (including me) unduly influence you.

I found from my own experience that the small time frame is not helpful to my trading. As I said earlier, we have more of a tendency to “see” something that isn’t there on small time frames. Because the time frame is small, if what you see is a misperception, it will quickly disappear and cost you money. You run the real risk of getting whipsawed a lot. Sebastian Manby says he uses a 15-min chart to help reduce the whipsaws. The other major problem with the small time frame is you miss a lot of what is there. Again, Sebastian Manby said earlier that you don’t get meaningful VSA indications like no demand on a 1-minute time frame. So, if you are interested in developing proficiency in VSA, well, I would think about what he is saying. He is a master.

We were discussing absorption, which was missed on the small time frame chart. When Wyckoff discussed absorption, he did it with a DAILY chart. He analyzed the NY Times Average from late 1930 to late 1931, and it is a brilliant analysis full of chart reading techniques. But he did not use a 1-minute chart, and to my knowledge never used a 1-min chart.

Ask yourself whether or not the advocates of the small time frame talked about absorption. Nope. Totally missed it. In fact, if you look at the blog, there was discussion about where to take a short position during this time! Same with the Spring on March 19. The blog took a short position in the midst of strength, yet later said that from a Wyckoff view, traders would have gone long on that day. Why go short, then? Because of the fundamental problem with the small time frame – you have a very strong tendency to miss the forest while hugging the trees.

Should the 1-min chart be condemned, then? I don’t think that at all. Sometimes it can be useful. I was confused about price action and a 1-min chart would certainly have been helpful. No doubt about it. If you are trading in and out for small scalps, you probably need a tick chart. But, this is about VSA, not scalping. On balance, I personally have found that it is more a liability than an asset. That was all I said and it sure seemed to rattle the cages, didn’t it?

One more thing raised is the notion that the 1-min chart lets you see the flow of the market. I don’t buy that. You do not need a 1-min chart to read the flow. In fact, Wyckoff developed a wave chart as a way to read the flow of the market. He was very focused on the wave movement of the market and always talked about how the market moves in waves. When the waves start to change in length and time, you can anticipate a change in market direction. You definitely do not need a 1-min to read the waves. Although not strictly VSA, if interested we can talk about this useful aspect of Wyckoff.

Zeon, you may find the 1-min chart suits you well, and that is terrific. If you can trade well with it, then use it. But you need to come to your own conclusion on this. Don’t take what I say or what others say as gospel. It ain’t. Think about this: a little while ago I posted about a potential Spring in the Naz. That was immediately countered with a triangle pattern and an opinion about the downside. Do you remember what you had said? Compare that with where we are now. Go with your own counsel, man. You know more than you may think you do.

Eiger

[DbPhoenix]

Given your references to "the blog", and given that my blog is the one you're referring to, I feel compelled to respond to some of these remarks.

	Quote:	Eiger
	I found from my own experience that the small time frame is not helpful to my trading. As I said earlier, we have more of a tendency to “see” something that isn’t there on small time frames. Because the time frame is small, if what you see is a misperception, it will quickly disappear and cost you money. You run the real risk of getting whipsawed a lot. Sebastian Manby says he uses a 15-min chart to help reduce the whipsaws. The other major problem with the small time frame is you miss a lot of what is there. Again, Sebastian Manby said earlier that you don’t get meaningful VSA indications like no demand on a 1-minute time frame. So, if you are interested in developing proficiency in VSA, well, I would think about what he is saying. He is a master.

What Sebastian does or does not say -- or anyone else, for that matter -- is not particularly relevant to the content of my blog since I make no effort to teach "VSA". It is only logical that one misses what he doesn't see, and one misses a great deal by focusing on summary bars, and the longer the interval of the bar, the more he misses. But, again, whatever bar interval one chooses is entirely up to him.

	Quote:
	We were discussing absorption, which was missed on the small time frame chart. When Wyckoff discussed absorption, he did it with a DAILY chart. He analyzed the NY Times Average from late 1930 to late 1931, and it is a brilliant analysis full of chart reading techniques. But he did not use a 1-minute chart, and to my knowledge never used a 1-min chart. Ask yourself whether or not the advocates of the small time frame talked about absorption. Nope. Totally missed it. In fact, if you look at the blog, there was discussion about where to take a short position during this time!

First, "absorption" was not missed on the "small time frame" (which is distinct from a short bar interval) chart. I'm more interested in addressing what's happening in the chart, not what buzz word to call it. And unless I'm mistaken, you didn't bring it up at all until after the fact. This is of no benefit to anyone having to make a RT decision.

Second, Wyckoff for intraday trading used a tape reading notation system, a form of P&F, the interval being determined by price behavior. He did not use 5m charts or 15m charts or 60m charts. In fact, unless one considers his intraday notation system to be a chart, he did not use intraday charts at all. What he was focused on was buying and selling waves, not bars.

	Quote:
	Same with the Spring on March 19. The blog took a short position in the midst of strength, yet later said that from a Wyckoff view, traders would have gone long on that day. Why go short, then? Because of the fundamental problem with the small time frame – you have a very strong tendency to miss the forest while hugging the trees.

No, because short off an upwave to resistance and long off a downwave off support is the nature of intraday trading, a central tenet of Wyckoff's. As for making the point "later", I said at the time that I was stopping for the day because I had other things to do. I also pointed out in my commentary IN CAPS that the comments made for the period of my absence were hindsight remarks. Your "spring" (not a Wyckoff term) began on the 17th. Of what relevance was it to intraday trading on the 19th?

	Quote:
	Should the 1-min chart be condemned, then? I don’t think that at all. Sometimes it can be useful. I was confused about price action and a 1-min chart would certainly have been helpful. No doubt about it. If you are trading in and out for small scalps, you probably need a tick chart. But, this is about VSA, not scalping. On balance, I personally have found that it is more a liability than an asset. That was all I said and it sure seemed to rattle the cages, didn’t it?

You are again confusing a small bar interval with scalping. Again, the small bar interval enables a more precise entry, assuming that one has done his homework with regard to support and resistance, and the position is held until the wave ends, whether that occurs in minutes or in hours.

	Quote:
	One more thing raised is the notion that the 1-min chart lets you see the flow of the market. I don’t buy that. You do not need a 1-min chart to read the flow. In fact, Wyckoff developed a wave chart as a way to read the flow of the market. He was very focused on the wave movement of the market and always talked about how the market moves in waves. When the waves start to change in length and time, you can anticipate a change in market direction. You definitely do not need a 1-min to read the waves. Although not strictly VSA, if interested we can talk about this useful aspect of Wyckoff.

You're once again confusing intraday trading with EOD trading. Wyckoff's intraday trading was via the tape. He read the flow continuously since the flow is itself continuous.

	Quote:
	Think about this: a little while ago I posted about a potential Spring in the Naz. That was immediately countered with a triangle pattern and an opinion about the downside. Do you remember what you had said? Compare that with where we are now.

And you apparently missed the "spring" in both the ES and the NQ that occurred shortly after the open yesterday and which resulted in a 40pt move in the NQ. Though perhaps you posted your notice of it somewhere else.

Clearly you don't understand the point of my blog, which is to call attention to the features of the territory so that whoever is trying to draw an accurate map can do so. It is not to make calls or to tell people where to enter or where to exit or what their targets should be or otherwise teach How I Trade. Most of all, it is not hindsight quarterbacking, telling them what they should have done or ought to have done, what was "classic" or "textbook" or "obvious".

Given my general lack of interest in VSA and your devotion to it, I am sure that those who are equally interested in VSA and in learning how to implement it would greatly appreciate your opening up a blog yourself and explaining to interested traders what is going on in VSA terms throughout the day in real time.

[mister ed]

	Quote:	Eiger
	It seems like nearly every post I have made recently draws a response about time frame. Some seem to want to argue about time frame and promote their position on it. There is a vigorous advocacy of the 1-minute bars. Apparently so vigorous that you doubt your own wisdom. That is not a good thing for a trader. The time frame you choose to trade from is your decision, no one else’s. Please understand that I don’t really care what you choose. I have nothing invested, nor do I want to invest in whatever time frame you choose (sounds silly to even say that, doesn't it?). What I mean to say is that it is your choice, and it is a personal choice based on a variety of factors that are strictly personal to you. Don’t let others (including me) unduly influence you. I found from my own experience that the small time frame is not helpful to my trading. As I said earlier, we have more of a tendency to “see” something that isn’t there on small time frames. Because the time frame is small, if what you see is a misperception, it will quickly disappear and cost you money. You run the real risk of getting whipsawed a lot. Sebastian Manby says he uses a 15-min chart to help reduce the whipsaws. The other major problem with the small time frame is you miss a lot of what is there. Again, Sebastian Manby said earlier that you don’t get meaningful VSA indications like no demand on a 1-minute time frame. So, if you are interested in developing proficiency in VSA, well, I would think about what he is saying. He is a master. We were discussing absorption, which was missed on the small time frame chart. When Wyckoff discussed absorption, he did it with a DAILY chart. He analyzed the NY Times Average from late 1930 to late 1931, and it is a brilliant analysis full of chart reading techniques. But he did not use a 1-minute chart, and to my knowledge never used a 1-min chart. Ask yourself whether or not the advocates of the small time frame talked about absorption. Nope. Totally missed it. In fact, if you look at the blog, there was discussion about where to take a short position during this time! Same with the Spring on March 19. The blog took a short position in the midst of strength, yet later said that from a Wyckoff view, traders would have gone long on that day. Why go short, then? Because of the fundamental problem with the small time frame – you have a very strong tendency to miss the forest while hugging the trees. Should the 1-min chart be condemned, then? I don’t think that at all. Sometimes it can be useful. I was confused about price action and a 1-min chart would certainly have been helpful. No doubt about it. If you are trading in and out for small scalps, you probably need a tick chart. But, this is about VSA, not scalping. On balance, I personally have found that it is more a liability than an asset. That was all I said and it sure seemed to rattle the cages, didn’t it? One more thing raised is the notion that the 1-min chart lets you see the flow of the market. I don’t buy that. You do not need a 1-min chart to read the flow. In fact, Wyckoff developed a wave chart as a way to read the flow of the market. He was very focused on the wave movement of the market and always talked about how the market moves in waves. When the waves start to change in length and time, you can anticipate a change in market direction. You definitely do not need a 1-min to read the waves. Although not strictly VSA, if interested we can talk about this useful aspect of Wyckoff. Zeon, you may find the 1-min chart suits you well, and that is terrific. If you can trade well with it, then use it. But you need to come to your own conclusion on this. Don’t take what I say or what others say as gospel. It ain’t. Think about this: a little while ago I posted about a potential Spring in the Naz. That was immediately countered with a triangle pattern and an opinion about the downside. Do you remember what you had said? Compare that with where we are now. Go with your own counsel, man. You know more than you may think you do. Eiger

Great stuff Eiger - thank-you. While this thread is about VSA, and Wyckoff, and for those interested in it, I particularly like your point about:

	Quote:	Eiger
	Go with your own counsel, man. You know more than you may think you do.

[Sledge]

	Quote:	Eiger
	The time frame you choose to trade from is your decision, no one else’s. What I mean to say is that it is your choice, and it is a personal choice based on a variety of factors that are strictly personal to you. Don’t let others (including me) unduly influence you.

Very true Eiger. After studying VSA and getting some excellent advice from a more veteran VSA trader (Thank you JJ.) I learned to "Zoom Out" from the market. For me I not only moved from being a short timeframe trader to a longer timeframe trader- but also learned to physically ZOOM out the chart. This allows me to see more bars and a bigger picture all the way around.

Some folks like fast action, they like fast trades and scalps. New Traders in any market are geared to "hit homeruns" the first time they step to the plate. To them- looking at a 1 hour chart is like watching paint dry or "no fun- this sucks." My own experience- if you can read charts this from a "Zoomed out" perspective-- the greater your chances of getting more pips, or ticks or whatever. Sounds simplistic- but think about it- when was the last time you made 100 pips on a 1 minute chart? I never did- because I was too close to the market. On a 1 minute chart your human nature is that when you see that first down bar when you are long- you get out. If you are VSA trained you may follow Tom Williams advice and allow yourself 1 down bar and hold that trade with sweat on your brow, and then get out when the second consecutive down bar closes- you'll never snag a 100 pip trade on a 1 minute chart. I'm pretty strong willed and I'll admit to this when I was a pup trader:

I'd be trading on a 1 minute chart. I'd read my chart correctly and get in very near the bottom of the decline and go Long. I am able to snag 15 pips on a 1.00 lot contract. I now have $150 in my account sitting there looking at me as the trade is still open. I see one down bar. I grab my balls and hold on, it loses 2 pips so I'm now looking at $130 in my account. The second down bar now closes and I'm only up 10 pips ($100) and we know the drop is coming. Out of the fear of having a once profitable trade become a break even or a NEGATIVE trade- I'd close out. Why? Because people don't like to lose. So I'd take my $100 bucks and try again later. All the while- this is LONG TERM raging bull trend. If that trade was executed and held- 5 hours later- I would have taken 95 pips on it. So I "settled" for $100 when I eventually could have had $950. This is what the pro's know- it is why they are so very good at what they do-they know the fear is there, they know the mentality of the herd.

TG folks will tell you if you are trading on a 1 minute chart "you're crazy" (too much noise) Sometimes it is fun to grab 10 or 20 pips just for the hell of it, but the long-term winners, the real meat of your income will come from longer timeframe trading. Sometimes you just have to keep banging your head against the 1 Minute wall to have it sink it. Eventually, if people stay in this long enough (or last) they will be longer timeframe traders.

Sledge

[Sledge]

	Quote:	DbPhoenix
	Given my general lack of interest in VSA and your devotion to it, I am sure that those who are equally interested in VSA and in learning how to implement it would greatly appreciate your opening up a blog yourself and explaining to interested traders what is going on in VSA terms throughout the day in real time.

Blog? That is what this THREAD is for! Flame me to the friggin hills f