[VSA] Volume Spread Analysis Part II

[DbPhoenix]

Within the context of VSA, it really doesn't matter. The important things are the degree of volume, which suggests professional activity, the length of the climax bar, the rejection of the low by the next bar, the volume on the retest, and the length and positions of the closes on the climax and retest bars.

[rodney]

	Quote:	DbPhoenix
	Note first the NQ. You've got the aforementioned climactic volume and blended bars that create a hammer (that's the blended bar to the left of the two bottom climax bars). Then you've got the retest, which makes a higher low on lower volume. These two bars also form a hammer when blended (you can do that in your head). Now the ES. Here you have essentially the same dynamic except that the retest is a lower low, not a higher one. Also the blended bars do not form hammers that are quite so in your face. Other than that, the principles are the same: climax, retest, Go! Sorry if I gave anyone a headache. .

Db ,
Can you be more precise about the "go" part on these charts-- a preferred entry level?

When trying to find a balance between what you call "information risk" and "price risk,"

1 Is entry taken at the open of the bar following the retest?

2 Or, at the point where the bar following the retest moves above the close of the re-test bar?

3 Or, at the point where the bar following the re-test moves above the high of the re-test bar?

[Bearbull]

	Quote:	habi
	Thanks Db for the elaborate explanation. I have to reread it tomorrow once again. What I'm most surprised about is your statement: "Thereafter, volume is largely irrelevant" I see often, that when high volume comes in, at least a retracement occur. Today e.g., short after the highest volume spikes in a 3 and 5 minute chart we saw the start of the largest move for the day. o.k., at this time we could not know, that it will be the highest volume for the day, but it was at least the highest volume since the "open". "the key is to be consistent" Yes Bearbull, I fully agree with your statement, I'm working on it.

Well habi, you are not going to get these kind of details provided by Db on entries and trade management in any of the tradeguider webinars, bootcamp cd or in their books and it is freely given, with all the negativity directed , another guy would have walked away and not given a toss. This really is the essence of Wyckoff, take my word for it, I have studied both.

You really need to pay attention to Db's comments on :
once you are in the trade, then it has to managed via observed higher highs, lows etc along with demand, supply lines and finally vol on violation of these.
There is no point going ga-ga on every twist and turn and forcing to inject meaning into every bar thereafter, the VSA experts are adept at doing just that in hindisight

[milliard]

	Quote:	Sledge
	Last night London Marked the Market up as a primer to the forthcoming pathetic NFP #'s (est -50K, actual -80K) 2. You see that in the opening hours of London the professional $ Marked the market up significantly to "set the trap" on the would be bulls. Once again proving the VSA theory that with the bad news for the USD looming- if the supply and demand are in the right position- they will use it to their advantage and make the "herd" pay dearly!

Could I ask a couple questions regards your post here Sledge please? It’s an interesting view of events.

I don’t in any wish to distract this thread or disrupt the flow, but am (casually) curious as to your meanings/definitions on a couple points.

What or who is the ‘professional $’ you refer to, & who are these Bulls that they’re setting a trap for?? Are you tick boxing Funds, Leveraged money or 2nd tier accounts here?

And what do you mean by “proving the vsa theory” blah blah? In the context of yesterdays pre-NFP activity, what is it supposed to be highlighting? and who are "the herd" ?

I'm not attacking your commentary or anything, just curious.

You'll have to excuse me, but I've only ever seen this vsa stuff mentioned on retail boards, I don't know any of the heavyweight, serious money who pays attention to this stuff & we speak to quite a few folks over the course of an avg business week.

I think you’ll find that the only money playing tag yesterday, especially pre-NFP, was dumb or gambling money. Funds, accounts & serious leveraged players will have jobbed & worked their positions into the box into Thursdays NY trade & wouldn’t be participating again until next week.

A good percentage of them have upper (2.0100 to 2.0220) & lower (1.9975 back to 1.9710) boundaries snagged & tagged where the real supply-demand clips lie.

Most of the activity inside those vibration channels are jobbing or averaging levers depending on which side of the fulcrum (& their relevant trend) the respective money is geared. But then, there are very different agenda's & scenario's playing out...which makes me wonder bout the validity of all this disecting & autopsy procedures on specific bars etc.

Still, whatever gets you thru the day I guess.

I’m not suggesting any of your work or research is low key or anything, because I don’t know which angle you’re coming in off, but there was very little activity y’day from the real money. Well certainly not in the cash (spot) mkt anyhow.

[zeon]

	Quote:	Sledge
	Last night London Marked the Market up as a primer to the forthcoming pathetic NFP #'s (est -50K, actual -80K) ... You see that in the opening hours of London the professional $ Marked the market up significantly to "set the trap" on the would be bulls.

I'm not sure to what extent this was "a trap". This looks like a springboard to me with a typical volume dry-up. I doubt professional money has any knowledge of these figures before the are released...

[DbPhoenix]

	Quote:	rodney
	Db , Can you be more precise about the "go" part on these charts-- a preferred entry level? When trying to find a balance between what you call "information risk" and "price risk," 1 Is entry taken at the open of the bar following the retest? 2 Or, at the point where the bar following the retest moves above the close of the re-test bar? 3 Or, at the point where the bar following the re-test moves above the high of the re-test bar?

This isn't an off-the-shelf trading system; it's a way of looking at the market, based primarily on the law of supply and demand and the principles of cause & effect and effort & result. The chief thrust of it is to minimize risk. So your overriding concern should be how you can minimize risk.

If you're very aggressive and very good, you can enter off the climax low. But where? And where are you going to place your stop, i.e., what will the market have to do to show you that you were incorrect? What are the probabilities that such an entry will succeed (and you'll have to look at all the instances in which this exact same setup resulted in a losing trade in order to answer that for yourself; these two worked because of the context, or the "background").

Or you could enter off the retest. Doing so increases the probabilities that the setup is genuine and that the trade will be successful, in which case wherever you enter is largely irrelevant, though you still have to address the question of what the market has to do to show you that you were incorrect. If the distance to that point is too great for you and you don't yet have the confidence to assume the risk, then you either pass or you sweat. If the latter, then you'll likely exit far earlier than you should in order to halt the anxiety. (In this particular case, going long off a lower low is higher-risk than entering off a higher low; however, if you're monitoring both markets and see that one is making a higher low, as here, that may give you the added confidence to go ahead and take the lower-low trade; if it doesn't, then you're entitled to pass and paper-trade it instead.)

You could even wait until price has exceeded the intervening swing high, thinking that this would be the safest point. However, at this point, many professionals are already beginning to sell, or shortly thereafter, and the odds of price returning to your entry point are quite high. Whether or not you hold depends to a large extent on your confidence in the trade (and you won't have any if this is new to you) and in your skill at reading the volume on that retracement to your entry point. (And if anyone recognizes the so-called "Ross Hook" in all of this, very little that is original has been offered since Dunnigan.)

The market couldn't care less how you display price, nor does it care where you enter. Keep in mind that price and volume are continuous and that they move in waves. Some people translate those waves into bars, some into candles, some into lines. But even with bars, you can detect changes in pressure from selling to buying and back again, gauging the strength of each, gauging when one or the other becomes exhausted. This is most easily done in real time or thru replay, but it can also be done using EOD charts. People did it for centuries, in fact. But if you view the bar as nothing more than a notation on a page, you'll never get it. That bar/whatever is the consequence of behavior. Understand the behavior.

[habi]

	Quote:	DbPhoenix
	You're leaving out the most important part: "Thereafter, volume is largely irrelevant. What matters to the trader is whether or not price makes higher highs and higher lows." If you're not getting higher highs and higher lows, then of course volume assumes a much more important role. Taking your example above, there was nothing special about volume until 10:15. At that time, you had what was clearly climactic volume, even though price was at least ten points above support. The blended bars also formed a hammer. Price then rallied and came back down for a retest with a slightly higher low and lower volume, again forming a blended hammer. This was in principle (otherwise I wouldn't bring it up) just the sort of setup one is supposed to take, even though there is no apparent reason for it to take place at that particular level (or at least none that I could see). However, again, once price is in gear and you begin making higher highs and higher lows, volume is largely irrelevant. Only when the momentum begins to curve and price begins to hesitate does one need to pay attention to volume. Even then, though, unless the volume is climactic in nature, the more important focus is demand lines and previous swing points. If price maintains its course, there's no reason to exit. Today, for example, price made it to 83 without ever breaking stride (no pun intended, Wyckoff fans).

Db, thanks for your posts, this gives me a much better understanding what you mean, I highliy appreciate this information.


And yes Bearbull, I will keep your comments im my brain

[Seb Manby]

	Quote:	Bearbull
	Come on folks, is this tick-tack on VSA/Wyckoff/Candlesticks really necessary, afterall they all represent price/volume i.e supply/demand pressures, albeit from different angles. There are some who have studied both Wyckoff and VSA and realise this, however there are others who wish to pursue the VSA path only, and if they are able to read what they post in hindsight with the same degree of efficiency/accuray in realtime, trade with realmoney and are able to keep their cash till ringing that way, fine, that is all that matters at the end of the day. But you will find that even at Tradeguider, they have difficulty reading the market purely on VSA, that is why their charts are full of other indicators , diamonds, H stops, trendlines, channels, moving averages on vol, volume thermometer, trend clusters (have a look at their archived videos) Hence if others wish to express their viewpoints via Candlesticks or Wyckoff, what is the problem, why not leave the egos on the mantlepiece for a change and make an attempt to understand other persons viewpoint, otherwise we are going to end up with another VSA thread with over 100 pages still with no clarity in sight, that is why in my previous posts I have requested the Tradeguider Experts to come in and sort this out, rather than make periodic appearances with a video here and there, merely to promote their products and webinars. Looks like James will have to consider opending VSA III, who knows like those Rocky and Rambo movies we could make it to VSA IX

Hi Bearbull;

I do read the bars individually, and I wish I had more time to contribute to this thread, but I am in Chicago at the moment, and the horizon won't clear until after the 17th. After that I will try to spend more time answering your questions.

Best
Sebastian

[DbPhoenix]

	Quote:	habi
	Db, thanks for your posts, this gives me a much better understanding what you mean, I highliy appreciate this information.

Lest there be any misunderstanding about my comments on short-covering, weak hands, etc, though, I sometimes forget that not everyone carries the same baggage when reading this stuff. I don't make "calls", and I'm not calling for higher prices. There's a lot of resistance up here, and too many people are getting too excited about the "double bottom".

Up and down aren't the only possible directions. After the initial easy credit thrust in 2003, the market spent two years drifting sideways. Two years. The market could as easily drop back toward the recent lows as work its way toward all-time highs. The key to determining where we are and where we're going will be, as its always been, the relationship between volume and price.

[DbPhoenix]

	Quote:	Bearbull
	Well habi, you are not going to get these kind of details provided by Db on entries and trade management in any of the tradeguider webinars, bootcamp cd or in their books and it is freely given, with all the negativity directed , another guy would have walked away and not given a toss. This really is the essence of Wyckoff, take my word for it, I have studied both. You really need to pay attention to Db's comments on : once you are in the trade, then it has to managed via observed higher highs, lows etc along with demand, supply lines and finally vol on violation of these. There is no point going ga-ga on every twist and turn and forcing to inject meaning into every bar thereafter, the VSA experts are adept at doing just that in hindisight

While I appreciate the comments, take care that you not paint all the varieties of VSA -- from the original to the latest TG incarnation -- with the same brush. The concepts underlying VSA are sound, even if most of them aren't particularly original, and those are what I address. The various developments and modifications and tweaks over the years haven't made the original approach any better, though they have definitely transformed it into a product. There's a vast difference between teaching somebody how to understand the relationship between volume and the price spread and teaching somebod