[VSA] Volume Spread Analysis Part II

[BlowFish]

There's some pretty astute stuff there or so it seems to me.

[zeon]

	Quote:	Eiger
	Because you are in a downtrend from yesterday afternoon, and the market was weak with supply, an upthrust, and no demand on the 3-min chart. You will think I sound like a broken record, but you must look at higher time frame charts. Again, what you thought you saw on the 3-min chart does not give the full picture of the structure of the market. The attached chart is a 30-min chart which includes overnight data. The red arrow is where you wanted to go long. It is pretty clear we were in a downtrend all night long after putting in a lower high yesterday afternoon. The only relevant support around the open was yesterday's low. The lines drawn on your chart were illusory because of the limitations of the time frame. When I look at support and resistance, I look for the obvious. I don't use Fibonacci numbers, pivots, MP value areas, etc. Some people seem to use these well, but I personally just keep it simple and think about nearby daily highs and lows and the hourly highs and lows, if relevant. If the day before had an especially active area (volume), I will note this too, as it may be tested today or tomorrow (and this is probably like MP). That's about all I do for S&R. I also think about S&R as magnets. Traders will go and test these areas all the time. If I am short and there is an obvious support area nearby (like this AM), I look for a test of that support. The more obvious it is, the more confident I am about the target. If everyone can see it, they will usually go for it. Of course, I will buy support and sell resistance when it is appropriate to do so with confirmation whenever possible. Hope this is helpful Eiger

Yes it's helpful, but two things:

(a) I couldn't call it a selling climax if we weren't in a downtrend, so yes I noticed that, but selling climax & re-tests have to occur in a downtrend by definition.

(b) My line is about the same as yours around 1342. Indeed from yesterday's low, but that's also the high on the 19th. And when price breaks resistance this usually acts as support, so this was another reason for me to consider 1342 important support. I don't see it illusionary because it looks to me as if you've drawn the same line right?

I agree, S/R tend to be magnets. Which I why I take longs off support and shorts of resistance, I don't like trading in mid-air.

But 1342 seems to act as support after the open, price bounces off there. And then later on, I thought I noticed a re-test...

I'm not quite sure how the fact that we've been in a downtrend invalidates the setup though.

[Eiger]

FWIW, maybe this will help clarify.

This is what I do for Support and Resistance. I do the same thing on the daily and weekly charts. I update them every night, and keep the hourly on the screen all the time. It is part of VSA. Tom Williams in his book, the Undeclared Secrets, says us day traders would be well served by paying attention to the daily and weekly charts. Can you see the structure of the market and how the prior resistance at the 1336.50 area has become support and has acted like a magnant for this market today? I don't know if we will actually touch it, since volitility has dropped so low, but we are within a point or so of it. When you start to frame out the market like this, you will begin to see how much we trade around the daily highs and lows, and how the hourly and even weekly S & R become so important.

Eiger

[zeon]

	Quote:	Eiger
	FWIW, maybe this will help clarify. This is what I do for Support and Resistance. I do the same thing on the daily and weekly charts. I update them every night, and keep the hourly on the screen all the time. It is part of VSA. Tom Williams in his book, the Undeclared Secrets, says us day traders would be well served by paying attention to the daily and weekly charts. Can you see the structure of the market and how the prior resistance at the 1336.50 area has become support and has acted like a magnant for this market today? I don't know if we will actually touch it, since volitility has dropped so low, but we are within a point or so of it. When you start to frame out the market like this, you will begin to see how much we trade around the daily highs and lows, and how the hourly and even weekly S & R become so important. Eiger

Thanks, I see you take resistance as the upper line, I tend to define a zone. On your chart, this means I have support around 1358-1360. So at least I got that right then...

[Eiger]

	Quote:	zeon
	So at least I got that right then...

You needn't be hard on yourself. This is a real challenge. As I said earlier, you know more than you may think you do.

A little psychology ...

Unlike most people, when a pro athlete discovers a limitation in her game, she's estatic. Why? Because now she has something concrete to work on to improve her game. Otherwise, she never knows, and never gets better. And she knows the discovery of limitations is more important than virtually anything else she can imagine. Once she identifies a current limitation, she can put together a plan to overcome that limitation. Believe me, if she is a serious athlete, she is out there every single day on whatever field she is playing on with her sincere intention to overcome her limitation, and working very, very hard at it. It takes great effort, but she knows that overcoming her limitation will give her a new asset in her game. This is why discovering her limitations is more vital than anything else. She knows it's the only way to improve her competitiveness and win more events.

Trading is a performance activity just like sport, it just doesn't include the physical. The more we learn about our limitations and develop a plan backed by sincere intentions, the more we can improve and overcome whatever challenge we face. Never call a limitation a weakness; it isn't. Never view a limitation as a critical comment about yourself; whatever limitation you have in trading has nothing to do with you as a person. Instead, view it with excitement, because now you can do something for yourself and get better .

Ok, back to trading ...

Use the higher time frames to give you a picture of the market in terms of trend, support & resistance. Then confirm your picture with the 30, 10 or 15 and 5 min charts. When something sets up, use the 5 or 3 min to trigger the trade.

Taking a trade because it looks attractive on the 3-min chart when everything else is going in the opposite direction is not generally a good idea. Our first job as traders is to protect our account so we can come back tomorrow and trade. So, look to take trades with the wind at your back; try not to fight the overall trend and tone of the market.

Hope this is helpful

Eiger

[jjthetrader]

	Quote:	zeon
	Thanks, I see you take resistance as the upper line, I tend to define a zone. On your chart, this means I have support around 1358-1360. So at least I got that right then...

Zeon, would you mind posting the chart in here? I think I may have been looking at the wrong one of yours.
I think you may be putting a little too much attention on S&R. But if that's how you like to trade then posting over where DB is answering questions is your best bet.

For me S&R is sort of a side note. I'm aware of it but it's second always to price and volume activity. For example I don't want to jump in long if resistance is only 1 point away whether it looks like it's going to hold or break through. I take trades in the middle of nowhere sometimes because VSA is telling me to. The trade I posted today wasn't on any S&R, just reading price and volume.

[zeon]

	Quote:	jjthetrader
	Zeon, would you mind posting the chart in here? I think I may have been looking at the wrong one of yours. I think you may be putting a little too much attention on S&R. But if that's how you like to trade then posting over where DB is answering questions is your best bet.

No problem, everybody can see my charts I'm just don't know which one you are refering to so I'll post all those I've posted elsewhere today here as well.

	Quote:	jjthetrader
	For me S&R is sort of a side note. I'm aware of it but it's second always to price and volume activity. For example I don't want to jump in long if resistance is only 1 point away whether it looks like it's going to hold or break through. I take trades in the middle of nowhere sometimes because VSA is telling me to. The trade I posted today wasn't on any S&R, just reading price and volume.

Ok, each to their own! Nothing wrong with that, but I prefer taking trades of S/R alone. Anything "in the middle of nowhere" has me spooked... I feel like I'm trading without anything to hang on to. Otoh, perhaps I'm clinging too much to S/R, I am indeed pretty lost without it

Attached charts:
ES_3 = support at 1342 from the previous day and also from overnight around 1344'ish

ES_4 = on the 19th, 1342 proved to be resistance. After we broke higher the next couple of days, we have returned to this area. So it should act as support. (R turning into S and the other way around)

ES_5 = why I see resistance at 1358-1360 (previous days)

ES_6 = my analysis of the selling climax and re-test

Feel free to comment.

[jjthetrader]

Hi Zeon, now that you've posted the chart, did you have a question.
One thing I noticed about the one with the SC is that you drew your Support from the bottom of the body of the candle. If you're looking for VSA setups then you may want to consider the whole bar. This may be out of alignment with candle people, I have no idea, but something to consider.

Eiger and I had support drawn at the same levels purely because these were floor trader pivots.

When trading in the 'middle of nowhere' your support is the background strength. Background strength with a nice test on a subsequent rally is a good place to go long even though it's not on support. In that case your support is lack of selling after a climax.

[zeon]

	Quote:	jjthetrader
	Hi Zeon, now that you've posted the chart, did you have a question. One thing I noticed about the one with the SC is that you drew your Support from the bottom of the body of the candle. If you're looking for VSA setups then you may want to consider the whole bar. This may be out of alignment with candle people, I have no idea, but something to consider.

I'm sorry if this wasn't clear, but the 1342 level comes from the 19th and the previous day low. The fact that the 'selling climax bar' (sorry candle) closes above the line isn't a coincidence for me. It shows that traders are interested in keeping price above this level, hence the buying pressure that comes in. I'm not sure how this relates to VSA but I thought upthrust for example are a typical example of candles that spike outside the range, but close within.

	Quote:	jjthetrader
	Eiger and I had support drawn at the same levels purely because these were floor trader pivots.

Hmm... that must have been very coincidential then? Do you mean the classic pivots levels?

	Quote:	jjthetrader
	When trading in the 'middle of nowhere' your support is the background strength. Background strength with a nice test on a subsequent rally is a good place to go long even though it's not on support. In that case your support is lack of selling after a climax.