[VSA] Volume Spread Analysis Part II

[Eiger]

I think your trendlines could be adjusted. E looks like it is going into the supply line. Plus, there is a larger downtrend than just today (see 30-min chart).

[DbPhoenix]

	Quote:	zeon
	This is how I look at today (uptil now): Pink line is support. It's about 1825 on the NQ, but this is a QQQQ chart. Anyhow: (a) selling climax (b) a lower low but on lower volume ànd the bar noticeable closes at the high, hower price is still below the trendline (c) the trendline I've drawn is broken, and there's a tiny little bar on very little volume => no supply? (d) volume picks up when price moves higher (e) volume confirms selling is done, price rises nicely, bar closes near the high and up we go Now the problem is... (e) would be a clear long signal for me, because (1) the downtrend is broken (2) there was a lower low but on lower volume (3) all this happened at support (4) there was a 'no supply' bar (5) price rises on the way up But here I am, down the same road again, price goes back to support and I'm out with a loss :-/

Take care not to learn the wrong lessons. You are correct in nearly everything you've done, though you should note that the 09:55 bar is also climactic, an example of buying support coming into the market. Whether it's genuine or not is unimportant at the time because you're waiting for support at 1825, as you should. And when it turns out that the buying "support" seems more likely to have been a feint to lure the vague into going long (note the character of the bar at the top of that arc and the volume which accompanies it), you don't care because you weren't there.

You then near support and another potential selling climax. This is tested as you note. But you're overlooking the bar between b and c. This is an important one in that it is here, along with b, that the shift from supply to demand takes place. "C", however, is not "no supply"; it's "no demand", though not the way VSA defines it. Note what happens to price in the next bars (better "no supply" bars are at 12:55 and 13:00).

As for "e" and the seeming long signal, it does seem as though selling is done and the way is clear for the upside. However, you're not using trendlines; you're using supply lines. A trendline would be drawn from one of two places, either from the top of the 09:35 bar or from the top of the 10:20 bar. If drawn from the former, price "rides" this line from 12:25 onward. If drawn from the latter, the line is never broken, at least on your chart.

Eventually, of course, both lines are broken, at 13:10, after your chart (note the volume on the 13:05 bar). So you have to ask yourself if your stop was too tight, if keeping it tight and standing aside for a possible second entry or a short entry on a break below support is a better choice, or if waiting for more confirmation for a long entry is called for. The choice you make will depend on your skill at reading the action and the amount of risk you're willing to assume.

[zeon]

	Quote:	Eiger
	I think your trendlines could be adjusted. E looks like it is going into the supply line. Plus, there is a larger downtrend than just today (see 30-min chart).

Thanks Eiger. But this doesn't really change the fact, on your left hand chart (QQQQ 5-min) the trendline remains broken. And if you're trading off 5-minutes or lower you can't really use trendlines on a higher timeframe right? At least it doesn't seem logical to me.

Meanwhile however price has gone up from 1825 to 1834. So it's going up like it should - according to the reasons/signals stated in my previous post.

So why I am still not making money of it.

[zeon]

	Quote:	DbPhoenix
	Take care not to learn the wrong lessons. You are correct in nearly everything you've done,...

Thanks, I suppose I'm making some progress then after all.

	Quote:	DbPhoenix
	...though you should note that the 09:55 bar is also climactic, an example of buying support coming into the market. Whether it's genuine or not is unimportant at the time because you're waiting for support at 1825, as you should. And when it turns out that the buying "support" seems more likely to have been a feint to lure the vague into going long (note the character of the bar at the top of that arc and the volume which accompanies it), you don't care because you weren't there.

This is an example of where I ask myself, why is there huge volume at this particular price level ('a' on the attached chart). It's not on support, yet the market moves up after it and the bar closes way off the lows. Who is buying this then? The bar is climatic, so professional money is supporting the market here, right? Perhaps the 'smart money' isn't always that smart then.

	Quote:	DbPhoenix
	You then near support and another potential selling climax. This is tested as you note. But you're overlooking the bar between b and c. This is an important one in that it is here, along with b, that the shift from supply to demand takes place. "C", however, is not "no supply"; it's "no demand", though not the way VSA defines it. Note what happens to price in the next bars (better "no supply" bars are at 12:55 and 13:00).

One thing is not clear in this, 'not the way VSA defines it'. How is 'no demand' defined then, I mean, it can occur at support as well at at resistance, not?

	Quote:	DbPhoenix
	As for "e" and the seeming long signal, it does seem as though selling is done and the way is clear for the upside. However, you're not using trendlines; you're using supply lines. A trendline would be drawn from one of two places, either from the top of the 09:35 bar or from the top of the 10:20 bar. If drawn from the former, price "rides" this line from 12:25 onward. If drawn from the latter, the line is never broken, at least on your chart.

I can see that now. In fact, price is only broken later and that looks like the real 'long signal'. It's also accompagnied by a rise in volume ('b').

	Quote:	DbPhoenix
	Eventually, of course, both lines are broken, at 13:10, after your chart (note the volume on the 13:05 bar). So you have to ask yourself if your stop was too tight, if keeping it tight and standing aside for a possible second entry or a short entry on a break below support is a better choice, or if waiting for more confirmation for a long entry is called for. The choice you make will depend on your skill at reading the action and the amount of risk you're willing to assume.

Normally, I would set a stop below support. But given the conditions I've mentioned, I assumed price should now move up and if it doesn't straight away I am obviously wrong. It looks like 'c' is another entry possibility in case the first long was missed. The volume after 'b' than declines when turning lower but rises again on 'c'.

[Bearbull]

	Quote:	zeon
	Thanks Eiger. But this doesn't really change the fact, on your left hand chart (QQQQ 5-min) the trendline remains broken. And if you're trading off 5-minutes or lower you can't really use trendlines on a higher timeframe right? At least it doesn't seem logical to me. Meanwhile however price has gone up from 1825 to 1834. So it's going up like it should - according to the reasons/signals stated in my previous post. So why I am still not making money of it.

Attached is the trendline on the same chart, now read post 941

"In Wyckoff's course he states "It (the trend) is the most important thing to know about the market or an individual stock." Since the intermediate trend is down I'm looking to short near the top of the range. The spring and the strong response to it the next day suggested a move to the top of the range. The rally hasn't been impressive so I don't see any reason to change the plan. If it does jump I'll make it prove itself more than I would a downside break because the counter-trend breaches are more likely to fail."

Next go back to your current chart.
If you trading off a 5min chart, your focus has to be on that, entry/risk/target, any tested setup/tactics on 5min is not going to work on 15min , both stop loss/target obviously will be different. However the intermediate trend can be determined from 15min or even 30min and then you can look for high probability trades on 5min consistent with the trend as per wyckoff (posted by gassah in 941)

[DbPhoenix]

	Quote:	zeon
	This is an example of where I ask myself, why is there huge volume at this particular price level ('a' on the attached chart). It's not on support, yet the market moves up after it and the bar closes way off the lows. Who is buying this then? The bar is climatic, so professional money is supporting the market here, right? Perhaps the 'smart money' isn't always that smart then.

It may be stupid. It may also be a ploy on someone's part to lure ignorant buyers into buying off what they think is a reversal. It doesn't matter since you're no longer ignorant and you're waiting for your spot.

	Quote:
	One thing is not clear in this, 'not the way VSA defines it'. How is 'no demand' defined then, I mean, it can occur at support as well at at resistance, not?

"No demand" is defined in different ways by different people. At its simplest, it means a lot of volume and price isn't going anywhere, in this case, up. Granted demand kicks in later, but you have no way of knowing that at the time.

	Quote:
	Normally, I would set a stop below support. But given the conditions I've mentioned, I assumed price should now move up and if it doesn't straight away I am obviously wrong. It looks like 'c' is another entry possibility in case the first long was missed. The volume after 'b' than declines when turning lower but rises again on 'c'.

This is another reason why I suggested you stop trading until you get all this worked out. You weren't necessarily "wrong"; you may only have been early. Nail the entries first, on paper. Worry about stops later. There's no way in hell you're going to be able to place an intelligent stop if you're trading scared or as a defeatist.

[zeon]

All off this is on paper, since I stopped trading with real money.

But suppose I wasn't stopped out on my long and I would be in, then I would be looking for price to go back up to resistance. But then I noticed price suddenly reversing sharply at 1835. First I thought there was news, but then I thought of something dbphoenix talked about in his blog: the midpoint.

Wow, this stuff is pretty amazing. 1835 is right in the middle of support (1825) and the peak where I started drawing my trendline 1845. Or perhaps it's just all a coincidence...

[DbPhoenix]

	Quote:	Bearbull
	Attached is the trendline on the same chart, now read post 941 "In Wyckoff's course he states "It (the trend) is the most important thing to know about the market or an individual stock." Since the intermediate trend is down I'm looking to short near the top of the range. The spring and the strong response to it the next day suggested a move to the top of the range. The rally hasn't been impressive so I don't see any reason to change the plan. If it does jump I'll make it prove itself more than I would a downside break because the counter-trend breaches are more likely to fail." Next go back to your current chart. If you trading off a 5min chart, your focus has to be on that, entry/risk/target, any tested setup/tactics on 5min is not going to work on 15min , both stop loss/target obviously will be different. However the intermediate trend can be determined from 15min or even 30min and then you can look for high probability trades on 5min consistent with the trend as per wyckoff

I hope you don't mind a few quibbles, Bearbull.

First, trading "trend" off a bar interval that takes one outside the day's timeframe is problematic with futures since one is either eliminating two-thirds of the trading day, which on the face of it makes interday trendlines meaningless, or one is including the overnight, in which case the trendlines are relatively useless. More important is the relationship of the opening price with, to start, the previous day's high, low, and close, though there may be zones in the previous day that trump all this. Using an intraday trendline such as the one you've provided will be far more reliable.

Second, focusing on the 5m does not mean that the focus need remain there. As I quoted in an earlier post,

The most important advantage of a combination of tape reading and trading for the longer swings is that it will aid you in increasing your profits by making your trade at the most favorable moment with a small risk, then letting your profit run into the probable distance indicated by the longer swings. (Wyckoff)

In other words, get the entry off the 5m, if that's the preferred interval, then, once it's got gas, look to the larger intervals to manage the trade. To do otherwise is to be often limited to scalping.

Third, the "Wyckoff" quote that you provided doesn't sound like him, except perhaps the first sentence. Could it be SMI instead?