[VSA] Volume Spread Analysis Part II

[Eiger]

	Quote:	jjthetrader
	So glad to see this thread is back to VSA. Nice work guys. Great contribution Eiger. This is the type of thing I like to see.

Thanks, JJ. Yes, let's focus on VSA Actually, I am hoping some of you will find things missed or errors in my VSA analysis. I really hope you do, as there is no better way to learn.

[jjthetrader]

	Quote:	Eiger
	Thanks, JJ. Yes, let's focus on VSA Actually, I am hoping some of you will find things missed or errors in my VSA analysis. I really hope you do, as there is no better way to learn.

Well in that case, you're reading everything wrong! Just kidding

These first few bars that you labeled 'no demand' which were later discounted are something that in real time you might just label as 'potential no demand'. I remember Sebastian saying you could drain your brokerage account very fast if you don't wait for confirmation. A bar doesn't actually become no demand until you get that second bar closeing but I know you know that. The tradeguider software won't paint until the confirmation bar either.

I don't see anything wrong with you labels though. That first bar you pointed out that appears to have supply on it was basically that, a bar with supply on it. Tom says things like an upthrust isn't an upthrust unless there's weakness in the background so in this instance a bit of supply was hit but with no weakness in the background it's not enough to do much.

I like your post because then I go over it myself to see if I see anything different and it helps me learn to.
Cheers

[jjthetrader]

	Quote:	Sledge
	OK VSA'ers. I'm stumped in this one. It was a wacky and weird day for the GBP/USD with almost a zero sum game today. Ugly bars abound and no "fluid" movement. Any thoughts on these bars/charts? One is an hourly chart. The other is a daily so that you can get a "feel" for the current state of the market! Thanks! Sledge Attachment 5602 Attachment 5603

Hey Sledge,

Beautiful top reversal on the daily. It was textbook with the second bar closing below the low of the upbar. I bet you were short there.

Not quite sure what you're looking for? I know you know what you're looking at here so I won't go into it too much.

On the hourly chart you have massive volume coming in on that downbar and it closes above the middle with the next bar up. That next bar up also closes above the high volume bars high.
I see you have a line drawn up there around the upthrust area. So obviously we have a bit of supply which forms the thrust. But it doesn't continue down that far after the thrust because there is still strength in the background.
FX is not really my thing and I know that timing has something to do with what bar occurs in what trading session so someone in tune with this market, like yourself, would be able to give more weight to the VSA signals.

cheers bro

[Sledge]

Thanks JJ-
My mind must be clouded by the flu. Yep I was lucky enough to see that beautiful top reversal last week and ride that baby down.

Now the big ugly bar on the hourly chart you see the market drop but then closes in the middle, so their must have been buying on that bar, and as the afternoon pans out you see the market rise, although the volume has trailed off considerably even since I posted these charts.

Looks as if overall we are at the end of "Stage 1" and all parties are jockying for their positions. Some are buying on the low hoping for a rally, some are gathering on the high for the downward drop. It may take a few more days for all of this to pan out with more sideways movement before we get to proceed with "Stage 2"

Thank you for your insight!
Sledge

[Eiger]

	Quote:	jjthetrader
	Well in that case, you're reading everything wrong! Just kidding These first few bars that you labeled 'no demand' which were later discounted are something that in real time you might just label as 'potential no demand'. I remember Sebastian saying you could drain your brokerage account very fast if you don't wait for confirmation. A bar doesn't actually become no demand until you get that second bar closeing but I know you know that. The tradeguider software won't paint until the confirmation bar either. I don't see anything wrong with you labels though. That first bar you pointed out that appears to have supply on it was basically that, a bar with supply on it. Tom says things like an upthrust isn't an upthrust unless there's weakness in the background so in this instance a bit of supply was hit but with no weakness in the background it's not enough to do much. I like your post because then I go over it myself to see if I see anything different and it helps me learn to. Cheers

Thanks, JJ. I actually didn't know that no demand requires a second bar for confirmation - thanks for that. I did understand that an upthrust is more of a secondary signal and that weakness has to be alive in the background. Since I prefer to short, I have to keep myself in check on those bars I registered for the TG symposium (London webcast), and hope that Sebastian will go over confirmation, when to pull the trigger, and the other fine points of VSA trading.

Thanks for the review, I really appreciate it.

[Eiger]

	Quote:	Sledge
	OK VSA'ers. I'm stumped in this one. It was a wacky and weird day for the GBP/USD with almost a zero sum game today. Ugly bars abound and no "fluid" movement. Any thoughts on these bars/charts? One is an hourly chart. The other is a daily so that you can get a "feel" for the current state of the market! Thanks! Sledge Attachment 5602 Attachment 5603

I don't follow this, but did see the well developed Wyckoff/SMI story that was unfolding last week and posted the first chart of the daily GBP. It has come down a little more than the ideal, but still looks constructive.

Looking at your daily chart (second chart), it is sitting right on top of support (S) that is highlighted by the dotted line. Bar A looks to me like a bit of bag holding, as there was still high volume on that bar and the bar was narrow with a good close. I am thinking that this market is coming back to test the pretty high volume in both the support (S) areas - there seemed to be a lot of activity there.

I think B is an important bar. I wouldn't want to see it close below this low. That wouldn't be very constructive. It could dip below this low, however, close back above, and spring the support area. That would be quite positive, assuming volume remains tame. I don't really know this market -- just dabbling here but it looks pretty good.

Eiger

[zeon]

	Quote:	Eiger
	Also, Tom Williams says that increased volume and wide spread as you approach a support line, signals that it will be broken, which eventually happens here.

Eiger, thanks for the interesting analysis!

One paragraph got me thinking though. When price approaches support on increasing volume and wide spread down bars, why doesn't this mean that demand is coming in? After all, professional money stands for high volume right? I'm seen selling climaxes occur on support a lot, and in most of these cases they happened after a couple of WRB formed.

And, I've also found the opposite to be true. When volume is relatively low and price bars are small, the chances seem higher for price to break support.

[Eiger]

	Quote:	zeon
	When price approaches support on increasing volume and wide spread down bars, why doesn't this mean that demand is coming in? After all, professional money stands for high volume right?

Because if you are in an uptrend and price is approaching the Demand (support) Line, you should be seeing a recession of volume and narrowing price spread - this is what is normal in an uptrend. It might be helpful if you think in terms of Effort vs Result. In bullish moves, volume (i.e., effort) expands to the upside and retracts to the downside and you should see price (i.e., result) act accordingly. This means you should see with wider spreads and expanding volume as price advances (indicates demand) and narrowing spreads and lower volume as price reacts (indicates lack of supply). When you see price approach the Demand Line with increasing volume and wider spread, it means supply is swamping demand and the support has very good odds of breaking, as it did yesterday.

Background is critial, too. Yesterday saw a Buying Climax where price was overbought (at J) after more than 3 hours of trending, No Demand (at K) after the climax, and a "mushrooming" or crowning over at the top - all of these indicated the market was likely to react and all preceeded the breaking of the Demand line.

	Quote:	zeon
	I'm seen selling climaxes occur on support a lot, and in most of these cases they happened after a couple of WRB formed.

That seems normal, too. Reactions will often end in a selling climax of some degree of intensity at support, especially support on a higher time frame, which is a good place to look for climactic action. This may seem contradictory with the above, but it is about position in the trend and degree of intensity of the stopping volume. The background and context are vital, and we don't have that information in this discussion, so it seems vague. Post some charts about this and then everyone on this thread can help with some answers and benefit from the analysis.

	Quote:	zeon
	And, I've also found the opposite to be true. When volume is relatively low and price bars are small, the chances seem higher for price to break support

I'd like to see what you are referring to, here, so again, please post some charts. We will all be able to learn that way

Eiger

[Sledge]

	Quote:	Eiger
	I don't follow this, but did see the well developed Wyckoff/SMI story that was unfolding last week and posted the first chart of the daily GBP. It has come down a little more than the ideal, but still looks constructive. Looking at your daily chart (second chart), it is sitting right on top of support (S) that is highlighted by the dotted line. Bar A looks to me like a bit of bag holding, as there was still high volume on that bar and the bar was narrow with a good close. I am thinking that this market is coming back to test the pretty high volume in both the support (S) areas - there seemed to be a lot of activity there. I think B is an important bar. I wouldn't want to see it close below this low. That wouldn't be very constructive. It could dip below this low, however, close back above, and spring the support area. That would be quite positive, assuming volume remains tame. I don't really know this market -- just dabbling here but it looks pretty good. Eiger

Eiger-
Thanks for your analysis on the chart. Here is what I'm thinking, and I could be wrong (that's why were here right?) but I see this current slight upward move as a retrace and it building momentum to be able to gain enough "steam" to slam down and break that resistance line. Currently, my analysis is that this is a pullback and that we are finished with "stage one" of the drop, and when this "pullback" finishes we may proceed downward.

Thoughts?
Sledge