[VSA] Volume Spread Analysis Part II

[rednite]

Newbie to VSA and have a question. I would like to know if VSA would be applicable for buying and selling in the intermediate and long terms for a market. Does it apply to day bars as well? It seems all I have seen so far is 5 minutes or maybe some hour bars in all the examples although I also read it does apply for all time frames. Please confirm and comment. Thank

[mister ed]

	Quote:	rednite
	Newbie to VSA and have a question. I would like to know if VSA would be applicable for buying and selling in the intermediate and long terms for a market. Does it apply to day bars as well? It seems all I have seen so far is 5 minutes or maybe some hour bars in all the examples although I also read it does apply for all time frames. Please confirm and comment. Thank

Hello rednite and welcome. The answer is yes, the analysis can be applied at various 'scales', including the daily chart. There is a brief analysis of a stock on a daily time-frame at this thread, for example.

[shall861]

hello, i was wondering if there is anything for overnight euro session trading similar to the $tick. i use it constantly during the day as a guide for us markets but of course $tick on any chart only displays 9:30 to 4:15 data. Is there a similar instrument for euro session, maybe to help guide me with pound futures at night????????????????

[CandleWhisperer]

First, as one who really wanted this thread to get back to VSA, that did not mean get rid of DB. His take on Wyckoff should be welcomed here. Tom studied Wyckoff, Tom Studied Ney, We study Tom. By the transitive property we study Wyckoff.

Now one more thing about 1 minute charts. Tom, Gavin, Todd, and maybe even Sebastian say don't trade off the 1 minute because there is too much noise. However, Tom ultimately says a trader should trade his own personality. If one's personality is suited for the 1 minute, then trade it.

Again, what many fail to understand is that price is continuous. It flows. We, as humans, are temporal so we think in terms of time. That is why the close is so important to us. It is a momentary picture of where prices is on a continuum that is agreed upon by all. Of course the same is true for the high, low, and open. Price itself, however, is fluid. It ebbs and flows unencumbered by arbitrary measures of time.

Time is important in VSA mainly because we need to compare volume. We need to make distinctions in the amount of volume/activity in the market. This can be done on a 15 minute chart OR a 30 second chart.

Lastly we need to remember that markets are fractal. A 30 minute chart looks like an 8 minute chart, looks like a 3 minute chart. Higher timeframes tend to lead and dominate the smaller ones. Hence when we want to look at trends it is a good idea to step back. The operative words being step back. DB is advocating stepping closer to price to see price. Most step back to see trend. But trend is a derivative of price flow.

Gavin trades the 3 minute e-mini. Are the traders on this thread trying to say that a 3 minute chart must have 3 xs less noise, or be 3xs inherently more tradable? In other words, what makes a 3 minute chart okay and a 1 minute not. What about the 2 minute? The answer, which brings us back to where this post started, is personality of the trader. And that has nothing to do with what is or is not VSA.

[CandleWhisperer]

Okay, it's time we have a VSA chart. I don't care if this is after the fact or not.

There are 2 charts below. The first chart has some interesting things that set up what comes on the second chart. This was not a trade made but an interesting learning opportunity none the less.

A: Large dark WRB on high volume. Down bars on high volume usually mean selling. But look at the next bar, it is up. if all the volume was selling this next bar could not be up. Demand therefore must of entered. Note that the next bar is not labeled. Check out the volume. Less than the previous two bars. With an equal close and not making a higher high, this does not represent a good place to go long. And if one was looking to go short, this is not good example of no demand. Again because the close is equal and the high is equal. Most importantly, because we have just seen strength in the form of the WRB.

B: Now we see a wide spread candle that closes down from the previous bar, but closes above the middle of its range on high volume. Note how price moved down and hit the Support/Resistance line formed by the WRB and then moved up. There is price rejection in this Long Shadow. So we ask what has price done on the volume? Well it closed down but in the upper portions of its range. More demand must of entered on the bar. Simply, this bar is strength.

C: First entry signal. Close on the high on a bar with volume less than the previous two bars and a narrow range into previously high volume territory. This is a test. We are within the range of the large WRB and testing in a logical place. Right after the influx of demand as shown by the long shadow/close in the upper range.

D: Another dark WRB on high volume. Yet the volume is not as high as the first one. Again, the very next bar is up. Demand must of entered on the WRB for the next bar to be up.

E: No supply. Check out the range of this bar and the volume. The BBs definitely were not involved in this bar. This is a down bar, and VSA teaches that strength comes in on down bars. As a bonus, we have moved back into the S/R zone. Note that we are above the midpoint of the body of the WRB. Support within support.

F: Either of these two bars have volume less than the previous two bars and are no supply. See how they are being supported a the low of the white WRB.

3 or 4 possible places to take advantage of a change in supply/demand. See chart 2 for what happened next.

[Ricks Inn]

	Quote:	CandleWhisperer
	3 or 4 possible places to take advantage of a change in supply/demand. See chart 2 for what happened next.

CW - I'm not much of a candle guy, but chart 2 has all them thar "higher-low after higher-lows" that Sebastian talks about as well. Yes it's all rear-view mirror stuff -- that doesn't make it wrong. Maybe better called "necessary but not sufficient".

[zeon]

	Quote:	CandleWhisperer
	A: Large dark WRB on high volume. Down bars on high volume usually mean selling. But look at the next bar, it is up. if all the volume was selling this next bar could not be up. Demand therefore must of entered.

CW, nice analysis since price goes eventually in the right direction, but for the same setup I could find numerous posts where price eventually continues on the way down. You're stating 'demand must have entered'. But if I'd count the times I'd seen an up-bar on low volume after a WRB down bar on high volume... This happens all the time, perhaps scalpers are trying to pick some points going against the trend there. And if you want to call it demand, for sure. It doesn't mean that price will reverse because there is demand. Usually this 'demand' leads to a temporary change in the buying and selling flow. But I can't imagine anyone wanting to go long there, unless he's talking a gamble. Sorry, just my 2c

I can put up some charts if you like.

[Eiger]

	Quote:	CandleWhisperer
	Okay, it's time we have a VSA chart. I don't care if this is after the fact or not.

Yes! This is what i thought/hoped this thread was all about

Great analysis, CW.

I think the bar immediately after A is also pretty important. It is an up bar, and as CW said, it indicates there must have been buying on A. Look closely at the volume on this bar. It is ultra high and nearly the same as A. If that was selling, we would have had another bar like A. Tom Williams refers to this is "bag holding." It means the herd is in panic and is unloading (whatever this market is?), and like the postman with his bag open, the professional $ is taking all offers. One other clue to this bar is that the low doesn't dip much below bar A - big $ is eagerly buying.

Thanks for the post, CW.

Eiger

[Eiger]

	Quote:	shall861
	hello, i was wondering if there is anything for overnight euro session trading similar to the $tick. i use it constantly during the day as a guide for us markets but of course $tick on any chart only displays 9:30 to 4:15 data. Is there a similar instrument for euro session, maybe to help guide me with pound futures at night????????????????

Not that I know of. The NYSE Tick is a running calculation of NYSE stocks trading up or down from their last trade. It only calculates during the RTH when the NYSE is open. There is also one for the Naz and Dow (TIKI), but again, only when the exchanges are open.

[Eiger]

	Quote:	zeon
	CW, nice analysis since price goes eventually in the right direction, but for the same setup I could find numerous posts where price eventually continues on the way down ... I can put up some charts if you like.

Yes, put some up. We can all learn from them.

One thing I am not too swift on is failed tests. If someone sees one, please post it. I'd like to learn more about it.

Eiger