[VSA] Volume Spread Analysis Part II

[dandxg]

	Quote:	DbPhoenix
	Guess what? You and I aren't the same people. Why would you follow in my tracks and manage your trades exactly the way I do? You can't trade correctly until you decide what you want.

This reminds me of a post you made on ET quite awhile ago I read and I will paraphrase if ok by you? Correct me if I wrong

" You have to address someone's belief system about trading before you can teach them and address their issues".

How true that is. I don't trade with PV because I think you are successfull and want to copy you, although I am very grateful to the help that you and others provide me. I trade with PV because it makes sense to me.

I stumbled around and spent several thousand on trade set ups and methods that I could never trade because the risk parameters weren't right and I didn't believe in the way they traded period. Some of the educators couldn't even explain the reason why their method worked sometimes! The reason why trading with price and volume is for me is that it fits my personality, I seek value, I love a deal. I won't pay what I know is extravagent prices for anything unless my life depends on it. I have to see the value, it has to make sense and be logical to me. Supply and demand drive price in a capitalist market.

It's funny on a side note, but you see ppl. speculating is this the bottom in RE market, huh? Generally speaking it can't be otherwise you should generally see increasing prices and increasing volume of transactions which you generally don't except in certain markets.

Anyway enough of my rambling.

[DbPhoenix]

	Quote:	dandxg
	It helps a lot to use suggestions...to find logical areas of S/R as possible warning areas IMO. This combined with reading price action, and seeing capitulation buying or selling is the key IMHO. The reason it will never be easy is that it is subjective just like trading in general.

No, it will never be easy. And there are two more reasons why: hope and fear. Not exiting because one hopes that the trade will go farther. Exiting because one is afraid that the trade will reverse.

Until one grabs hope and fear by the neck and wrestles them to the ground, it's going to be next to impossible to develop an acceptable management system, much less implement one.

[mister ed]

	Quote:	Ricks Inn
	Yeah, my three Ney books reside in the high-mildew section of my library (bought through the used book Amazon partners).

	Quote:	Eiger
	I just got a copy of Richard Ney's Wall Street Jungle. Here's the opening line: "Most of us enter the investment business for the same sanity-destroying reasons a woman becomes a prostitute: it avoids the menace of hard work, is a group activity that requires little in the way of intellect, and is a practical means of making money for those with no special talent for anything else." This really should be a cracking good read

Hi Ricks Inn & Eiger - I haven't read any of Ney's books, and am only familiar with his works from what I can find on the net around the place. I would be interested in any review you could provide, no matter how brief.

How do his views fit with VSA etc.?

[Soultrader]

	Quote:	mister ed
	Hi Ricks Inn & Eiger - I haven't read any of Ney's books, and am only familiar with his works from what I can find on the net around the place. I would be interested in any review you could provide, no matter how brief. How do his views fit with VSA etc.?

I wrote a review on the Wall Street Jungle located here. The book is quite interesting with alot of insights on market manipulation and specialist manuevers. However, It did get a little slow towards the middle especially the section on tax benefits that specialists take advantage of.

Its worth a read, especially when its listed on amazon for only a few bucks now.

[CandleWhisperer]

Wanted to post a pic of a beautiful set-up with not so beautiful results.

This chart actually shows two set-ups, but I will just focus on the first one. I hope some other VSAers will tell me what they see and what they would have done (or not done) in this situation.

Let's start at the beginning.

First thing we see is a ultra wide spread candle on ultra high volume. Markets don't like this type of candle. Unless it is tested immediately or unless there are tops to the left, in which case the BBs could be pushing thru supply (absorption volume). The BBs are willing to buying into the selling because they expect prices to rise. That was not the case here.

This WRB on ultra high volume starts the set-up. Note that the next candle is up. However the volume is lower and the range is narrow. This is an indication that something is holding a ceiling on price: supply is overhead. We also note that the WRB did not close on its high. Supply must have entered on that bar.

The next candle of note is the Doji. While it is not within the "required" area, it is a very key candle. It is a narrow range bar, with a lower low, closing up and closing near its high. This is a test. But the volume, while relatively low, is up. In short, the test fails. The very next candle is a Dark WRB that closes lower than the low of the test bar. This is not at place to enter for me as the test is not within the correct area, nor is the dark WRB engulfing. However, this is a clear (up to this point) sign of market weakness.

A few candles later we get another test. This is a better looking test in some ways. The range is narrow, the close is on the high and the close is down from the previous bar. To be ideal we would want to see a lower low, however. But check out the volume. It is less than the previous two bars but still high. Another failed test. A failed test means price MAY still rise but any rise should be muted by the latent supply in the market. Price does rise a bit.

Now we have the key candle(which also happens to be a Doji). A higher high, closing up and closing near its lows on volume less than the previous two bars. This is an up thrust in the form of no demand. We have seen weakness in the background in the form of two failed tests and an ultra high volume wide spread up candle. Notice where this up thrust occurs. It is with the WRB support/resistance zone. More specifically, it is within the area overlapping the white WRB and both a Long Shadow (upper) and Long Shadow (lower). This is the area between the cyan lines. Short on the close of this candle. Initial stop just above the S/R Zone.

The stop is moved to the open of the dark WRB only after the appearance of the second dark WRB that closes lower than the first. This second dark WRB finds resistance at the bottom of the S/R zone.

Price moves up. We see a couple of no demands prior to a white WRB that closes on our stop level, taking us out of the market with a small gain.

Stepping back for a moment, it is clear that the white WRB on ultra high volume represents some kind of change in the supply/demand dynamic. Which is why it, and they in general, make good zones for entry. Although that is only one of their many uses.

[BlowFish]

	Quote:	mister ed
	Hi Ricks Inn & Eiger - I haven't read any of Ney's books, and am only familiar with his works from what I can find on the net around the place. I would be interested in any review you could provide, no matter how brief. How do his views fit with VSA etc.?

Briefly :-

Interesting, though in places turns into a one man crusade against the specialist system. For that reason in these passages read like a guy ranting (e.g. the section James mentioned). To be honest I was somewhat disappointed though not regretful.

[Bearbull]

	Quote:	DbPhoenix
	Nic (gassah) and I are thinking of opening up a Wyckoff thread in order to keep all of this from getting tangled. Yes, it's all about price action, but addressing several approaches simultaneously can be unnecessarily confusing.

Great idea, am sure it will prove informative and educational to quite a few who are interested in Wyckoff and avoid the unnecessary controversy and lengthy posts being generated for and against VSA or Wyckoff.
This way folks can read both threads and derive benefit.

[BlowFish]

	Quote:	CandleWhisperer
	Wanted to post a pic of a beautiful set-up with not so beautiful results. This chart actually shows two set-ups, but I will just focus on the first one. I hope some other VSAers will tell me what they see and what they would have done (or not done) in this situation. Let's start at the beginning. First thing we see is a ultra wide spread candle on ultra high volume. Markets don't like this type of candle. Unless it is tested immediately or unless there are tops to the left, in which case the BBs could be pushing thru supply (absorption volume). The BBs are willing to buying into the selling because they expect prices to rise. That was not the case here. This WRB on ultra high volume starts the set-up. Note that the next candle is up. However the volume is lower and the range is narrow. This is an indication that something is holding a ceiling on price: supply is overhead. We also note that the WRB did not close on its high. Supply must have entered on that bar. The next candle of note is the Doji. While it is not within the "required" area, it is a very key candle. It is a narrow range bar, with a lower low, closing up and closing near its high. This is a test. But the volume, while relatively low, is up. In short, the test fails. The very next candle is a Dark WRB that closes lower than the low of the test bar. This is not at place to enter for me as the test is not within the correct area, nor is the dark WRB engulfing. However, this is a clear (up to this point) sign of market weakness. A few candles later we get another test. This is a better looking test in some ways. The range is narrow, the close is on the high and the close is down from the previous bar. To be ideal we would want to see a lower low, however. But check out the volume. It is less than the previous two bars but still high. Another failed test. A failed test means price MAY still rise but any rise should be muted by the latent supply in the market. Price does rise a bit. Now we have the key candle(which also happens to be a Doji). A higher high, closing up and closing near its lows on volume less than the previous two bars. This is an up thrust in the form of no demand. We have seen weakness in the background in the form of two failed tests and an ultra high volume wide spread up candle. Notice where this up thrust occurs. It is with the WRB support/resistance zone. More specifically, it is within the area overlapping the white WRB and both a Long Shadow (upper) and Long Shadow (lower). This is the area between the cyan lines. Short on the close of this candle. Initial stop just above the S/R Zone. The stop is moved to the open of the dark WRB only after the appearance of the second dark WRB that closes lower than the first. This second dark WRB finds resistance at the bottom of the S/R zone. Price moves up. We see a couple of no demands prior to a white WRB that closes on our stop level, taking us out of the market with a small gain. Stepping back for a moment, it is clear that the white WRB on ultra high volume represents some kind of change in the supply/demand dynamic. Which is why it, and they in general, make good zones for entry. Although that is only one of their many uses.

Hi CW, To be honest I have never bought into the idea that WRB bars are S/R. It is something I have challenged on occasion but don't really have the energy to argue about. (OK lets say to 'discuss vigorously' ). The reason why they very often appear to 'work' in this regard is because they are pushing through the real S/R!!!! You get a much much more accurate zone by trying to identify that. The reason they sometimes do not work is when they are moving through 'air' (a place with little or no previous S/R). To identify the 'real' S/R you need to look farther to the left. (You would need to look left to see what it was pushing through).

If you look at DB's blog in the section where he does an analysis for the following day you will see how he approaches it, there are also people doing it in the price action thread. It's uncanny how accurate it usually is. I'd really urge anyone with an intrest in identifying S/R take a look. I know you seem to have a great handle on things and I certainly enjoy your posts, but I sincerely think it could turbo charge your identification of S/R.

EDIT What period bars are they on your chart? And is the time stamp in the bottom right what timezone and does that epresent the time of the last bar? Thanks.

[CandleWhisperer]

	Quote:	BlowFish
	Hi CW, To be honest I have never bought into the idea that WRB bars are S/R. It is something I have challenged on occasion but don't really have the energy to argue about. (OK lets say to 'discuss vigorously' ). The reason why they very often appear to 'work' in this regard is because they are pushing through the real S/R!!!! You get a much much more accurate zone by trying to identify that. The reason they sometimes do not work is when they are moving through 'air' (a place with little or no previous S/R). To identify this S/R you need to look farther to the left. If you look at DB's blog in the section where he does an analysis for the following day you will see how he approaches it, there are also people doing it in the price action thread. It's uncanny how accurate it usually is. I'd really urge anyone with an intrest in identifying S/R take a look. I know you seem to have a great handle on things and I certainly enjoy your posts, but I sincerely think it could turbo charge your identification of S/R.

First I do not want a long drawn out discussion over this either, but I think you and others are missing some key points.

1. Tom does not look at the open. He does talk about taking low volume signs with the range of high volume (usually wide spread) bars. It is my contention that if he looked at the open, he would refine that to with the body of a WRB or Long Shadow. Simply, WRBs and Long Shadows narrow the focus from simply "the range".

2. Mark uses the term Support/Resistance Zones so I do as well. Yet, to me WRBs represent three (interlocking) concepts:

* Changes in the supply/demand dynamic. This is technically NOT the same thing as support and resistance. Simply, All support and resistance areas are areas of changes in supply/demand, but not all areas of change in supply and demand are at support and resistance.

* A defined area to look for entries. Again this is the low volume sign within the range of the high volume idea. Of course, with up thrusts it could be high volume sign within high volume areas.

* Profit target zones.

I have a hard time looking at the previous chart and NOT concluding that something happened on the appearance of the WRB. As evidenced by roughly 90% of the following price action has been contained with its body. Again, that area may not be support or resistance; although price seems to be respecting the boundaries. But that area is clearly an area where a shift of some kind has and continues to take place.

***edit****

It should be noted that I have never mentioned WRBs in relation to being swing points or continuing price action. With the former, the more traditional ideas of support and resistance do come into play. These are important to Mark and I am working on these areas. But again, it still comes down to what happens within the body of the WRB.