[VSA] Volume Spread Analysis Part II

[brownsfan019]

	Quote:	Sledge
	Bf- It ALL helps. Luckily for me I started trading with candles and later switched to Bar Charts, so I feel lucky I can look at a Candle Bar and still see a Bar Chart form in my brain. As far as VSA- I see a WSB down, closing on the high with Ultra High Volume-looks like stopping volume to me and a "licking my chops" point of entry to go long! I'd ask you keep posting what you see, this is the second one of these you posted, in as many days, and it just keeps it "top of mind" in my brain (hopefully other posters as well?!) To be able to "See it, know what it means, react" Sledge

Well said Sledge. You hit the nail on the head - WRB analysis and being aware of these can be critical on higher timeframes as we saw this morning.

In my view, a WRB simply shows a TEMPORARY imbalance between the bulls and bears. To have that followed up by a high volume hammer... WOW... can't ask for anything more.

[CandleWhisperer]

	Quote:	brownsfan019
	So is there any actual trading taking place here or just a bunch of observations after the fact? Where are trades actually taking place on your analysis CW? I've laid out where I enter and the potential profit. Even told you when I took +8 and it ran for more. Just curious if there is real trading being done there or just a little after the fact look.

No trade here BF I was just making some observations on a chart posted by Z.

[dandxg]

	Quote:	zeon
	I take it you mean "support" when you said resistance? And no, I didn't exit because the plan is to ride the trade till the next resistance level. Doing anything else would mean I'm just greedy and taking profits quickly. I'm sorry, but I don't know how much worse this can get now.

I tend to agree that if you are plus some points atleast move your stop to B/E. If you aren't going to move your stop to B/E then you have to be able to tape read and read order flow very well. As mentioned an example of this would be see 2 down bars tells you that order flow is changing again, possibly. I haven't looked at your specific example, so pardon me, but you want to increasing volume on candle closing up, but not excessive, and decreasing volume on the down bars. If you are seeing something other than that expect that your long may be drying up. Just some suggestions for you. By no means do I have the grail.

Another suggestion, wait for it to clear that resistance overhead and then buy a pullback on lower volume. You will have missed points, but you want be trying to guess if the trend is going to change. If you attempt to buy that pullback be aware of where the next overhead resistance is to the left of you entry or on the next higher time frame chart you look at. I do think filtering these set ups with NYSE tick or Ticki for Naz would help. Just some food for thought.

[zeon]

	Quote:	brownsfan019
	Just curious if there is real trading being done there or just a little after the fact look.

All of my posts from today were in real time brownsfan. I'm not hoping on much real time comments as other people are probably trading their own stuff. I appreciate anybody who's willing to help me explore this further and help me out in gaining a better understanding, because so far this would be the 14th losing trade in-a-row...

[zeon]

	Quote:	dandxg
	I tend to agree that if you are plus some points atleast move your stop to B/E. If you aren't going to move your stop to B/E then you have to be able to tape read and read order flow very well. As mentioned an example of this would be see 2 down bars tells you that order flow is changing again, possibly. I haven't looked at your specific example, so pardon me, but you want to increasing volume on candle closing up, but not excessive, and decreasing volume on the down bars. If you are seeing something other than that expect that your long may be drying up. Just some suggestions for you. By no means do I have the grail.

Thanks for the suggestions. Moving my stop to breakeven is usually something I do after price has moved closer to my target. However in this case, the 'signal' to move the stop was just missed, if it went a bit higher I'd have move my stop. I definitely use this strategy, because it's very frustrating once you see a profitable trade turn into a loser.

	Quote:	dandxg
	Another suggestion, wait for it to clear that resistance overhead and then buy a pullback on lower volume. You will have missed points, but you want be trying to guess if the trend is going to change. If you attempt to buy that pullback be aware of where the next overhead resistance is to the left of you entry or on the next higher time frame chart you look at. I do think filtering these set ups with NYSE tick or Ticki for Naz would help. Just some food for thought.

I've observed the TICK for some time and I've also noticed dbphoenix employing the TICK for the NQ, but according to what I've read the tick can sometimes invalidate a good setup, or at other times confirm a bad setup. For the time being I think it's best if I keep it just to price & volume because the signals already seem to be confusing enough... If I'd add another layer I fear I might have tick saying go long, price saying short and volume saying stay flat... if you know what I mean.

[dandxg]

Zeon, just a suggestion to keep in mind. If you look at a daily chart of the ES, for example we appear to have formed a bottom as off 1/22 and 1/23. Then on the 17th of this month we retested that area on lesser volume. So from a PV we are attempting to transition from bear to bull market. You have alot of folks that look at 50 and 200 DMA on the daily, including big funds. We are struggling at the 50 right now. This is normal action to be expected as the ES, and it's siblings attempt to transition from bear to bull a zig zag back and forth. This zig and zag action can knock us out of perfectly good trades on small time frame.

This is actually healthy as long as we don't take out the low of 1255 with increasing volume. The greater the energy built up in the accumulation phase the great the move up with be. The ES is attempting to form accumulation phase right now on the daily. If you look at your own set up how many candles or bars made up that accumulation phase, many not many? If not many than the move up many not go far as there wasn't much stored energy. My point being to all this is be nimble for the next week. I think your expectation of it retesting overhead resistance is correct and it's important to remember that this is game of probabilities not certaintities.

You have end of quarter and there may be some bad earnings for banks and others. I don't trade off of fundamentals, but it's silly to not think that some really good or bad earnings isn't going to affect your position.

This is debatable, but it's the bigger money which trades off of bigger time frame that propel the big moves, not us day traders we just need to read the macro picture correct and ride the wave. The Macro picture to me is in a state of transition. From bear to attempting to be a new bull market. I think Wyckoff called it hitch hiking, riding the wave that is. Anyway hope this helps. Good trading to all.

[Eiger]

I am away out of town and not trading through early next week. I won't be near a trading computer during the weekdays.

A few quick comments:

Just because there is a support level and price hits it and bounces from it does not mean we are now in an uptrend. It also does not mean that price will travel from that support area to the next overhead resistance area, especially in a downtrend.

Trends:

A simple, but effective rule of thumb for a downtrend is to see a series of lower highs and lower lows. Once you see a lower high followed by a lower low, you should be thinking short, watching for low volume, narrow spreads, and looking for no demand and upthrusts on the next rally.

On Monday, the market made a high. Tuesday saw a lower high. Yesterday, there was a lower low and another lower high -- I am doing this from memory (I don't have charts in front of me), so I could be off, but you should get my drift. We are in an established down trend. Resistance for today was at yesterday afternoon's rapid run up (about 3:00-3:15, or so). That is key resistance for today because obvious supply came in there, driving the market down to the lower support area (about 1336, I think), making another lower low. Put up a 30 or 60-min chart that includes this week's data (from Monday) and draw trend lines. You should be able to see the downtrend clearly. (I think I posted a chart showing the downtrend yesterday?)

Weakness on the daily:

Sebastian also provided us with an astute analysis of the market. He saw significant supply confirmed by a failed test. Just a casual look at the daily chart would show a recession of volume on the last few days of the rise, indicating some level of weakness.

Practical application to trading:

Tom Williams makes a clear point in his book: As a trader, you really want the market to tell you what to do. During the last two days, it was saying you wanted to be short. If you take a long trade at support in this kind of environment because you see a little demand come in, that's OK, but it is best to trade this as scalp only, until we have an uptrend or a clear indication that good demand is coming into the market and the trend is likely to change. You can't expect bigger moves on long trades in a down trend. In any event, most trades over the last two days were best taken on the short side.

See you next week,

Eiger

[Sledge]

	Quote:	zeon
	it's very frustrating once you see a profitable trade turn into a loser.

Zeon-
All I can hear over and over in my head is Todd K saying "Bank $" "You've got to Bank $"

Their is NO SHAME in taking a quick hit and banking $. If it didn't go where you anticipated- bank your money and after you are counting your cash, you can analyze why it didn't, learn from it and look for your next set-up!

Sledge

[Sledge]

Beautiful "Head and Shoulders" pattern formed on the GBP/USD this AM.
As it should the "Left Shoulder" volume is higher than the right. After a wild night in the London session we are having some slight pullback occouring as NY opens with London taking profits, and some sideways consolidation.

My position:
Pending order placed at 1.9896. This would be about 30 pips below the "Neckline" and would be a safe entry with plenty of room to run if triggered. I doubt it will go today, but it is in, just in case- while I am away from my trading platform, the pullback retreats enough and downward we go!

Sledge

head_shoulders.bmp

[dandxg]

Sledge, I know it's not VSA per se but I think that's potentially a nice set up. A gentleman named Jason Jankovsky that I learned some good stuff from on price and volume told me that H & S is one of the best TA set ups. I don't monitor this market so I have no idea how it turned out. I have studied these and as I recall you want to see the neckline break on increasing volume and then a pullback on lower volume, possibly a no demand or combo no demand upthrust would be a nice potential set up. Anyway hope you made some $$$ if you took it.