Wide Range Bodies or 'big' candles

[Anonymous]

I have stated elsewhere that things that are true tend to correlate from one method to the other.

WRB analysis and VSA are two such methods that correlate very well together.

The fundamental principle of WRB analysis is that WRBs represent CHANGES/SHIFTS in Supply or Demand.

Now, when these WRBs are accompanied with high or Ultra high volume (VSA terms) the stories coincide. Demand (buying by the Smart Money) comes in on down bars. The wider the bar, the heavier the volume, the more likely that there is professional activity in the bar.

85% of a volume histogram is Professional Money.

Note after the WRB we get climatic action/stopping volume. The market does not just head straight up, but the direction is sideways. If there was more selling on the high volume down bars then price should NOT be moving sideways. Clearly, there must of be a small change/shift in the supply/demand dynamic on these two bars.

[brownsfan019]

Pivot - what market is that a chart of? Just curious.

[Anonymous]

Here is view from a 30 minute timeframe chart.

Again we see the WRB representing a change/shift in supply/demand.

While no trade was signaled on the 5 min, on the 30 we do have a valid bullish white hammer pattern.......

Sometimes you're the dog and sometimes you're the hydrant

The valid pattern did not work out and a contingency plan trigger might of caused a reversal to the short side. This too would not work out. Contingency plans are beyond the scope of this thread, but the advanced WRB users among you will note that there is another WRB involved.

I say might because I am still learning this myself.

[brownsfan019]

Pivot - your chart brings up an excellent visual of why I believe VBC's are sometimes a better way to set up your chart. I labeled your chart with 3 main zones to trade. Where would you rather be trading?

Zone 1 = moderate movement, possible trade setups, but nothing 'big'.

Zone 2 = I want to be trading during that huge down move. When moves like that happen, I need to be in the trades, not watching a massive amount of money exchange hands.

Zone 3 = ugly.

I realize this is the WRB thread, but it's a great example of how changing the way your chart is displayed can make a huge difference. This is a perfect example of why I no longer use time based charts. Huge massive candles do nothing for me, esp in candlestick analysis.

[Anonymous]

BF,

It turns out I was mistaken and that is NOT a valid hammer pattern.

However, something very important can still be learned:

WRB is where changes in supply/demand occur. Demand did indeed come in on that bar. It was not enough to send prices shooting up, but it did move price sideways.

WRBs are also highly correlated with VOLUME. Hence, constant volume candles do not show the true supply/demand dynamic going on in the bar. More over, a bar like this would not be present.

So the essential information about the changing supply/demand dynamic is NOT SEEN. To be sure that candle may be traded on a Constant volume chart, but can you see the forest in spite of the trees?

Simply, changes in supply/demand and volatility are seen via WRBs. Holding volume constant mutes this information to some extent. Avoiding long shadows and large candles takes away the meaning of long shadows and wide range bodies. That is, something is changing.

Also note that time is a factor. Currencies trade 24 hours a day, but trades should not be made at any time. The WRB comes later in the NY session. It comes at 1400 hrs New York time. Not a good time to be entering trades. The area you mark as 3, therefore is also during the natural slow period that should not be traded. Simply understanding time, would tell one this. No need to fewer candles to know it is not ideal trading conditions.

How do you handle Candle blending and unblending with constant volume candles?

[Anonymous]

Brownsfan;

Also take note of the price action in box 1. Notice that we have three large white candles (open<close). Then we have a dark (close<open) WRB that

* engulf the most recent white candle

* has a body greater than all three prior white candles.

I suspect that Mark would trade this type of price action. Hence it is possible to be short prior to the large dark WRB that follows at 1400.

Even if it is not a valid set up, I am sure he would say that this action sets the stage for the large WRB. In other words, one needs these large candles to set up the even larger candle that follows. The supply/demand dynamic begins in box one and culminates in box 2. Constant volume candles mute the range disparity and thus belie the underlying shifts going on.

This is part of the "why" price does what it does.

Now let's suppose that this is a valid set up. I would be looking to exit on the close of the WRB. Why? Firstly, because of what a WRB means: changes in supply/demand dynamics. Secondly, I exit all trades around 1400-1430 and no later than 1500 except on Fed days.

I also do not enter a trade after 1300 except on Fed days.

But the key here is that as the NY session comes to a close, we SEE a shift in the underlying buying/selling forces. Of course, Mark uses the WRB as a profit target and would be getting out of at least some of the position on a bar like that. I still like the idea of just trailing the stop. Yet, as a daytrader one has to be out at the end of the day. So there are layers of reasons to get out on this bar. With the most compelling being THE SIZE OF THE BAR ITSELF. Take away the size of the bar and you take away a large portion of the story being told.

[brownsfan019]

	Quote:	PivotProfiler
	WRBs are also highly correlated with VOLUME. Hence, constant volume candles do not show the true supply/demand dynamic going on in the bar. More over, a bar like this would not be present. So the essential information about the changing supply/demand dynamic is NOT SEEN. To be sure that candle may be traded on a Constant volume chart, but can you see the forest in spite of the trees? Simply, changes in supply/demand and volatility are seen via WRBs. Holding volume constant mutes this information to some extent. Avoiding long shadows and large candles takes away the meaning of long shadows and wide range bodies. That is, something is changing. How do you handle Candle blending and unblending with constant volume candles?

Pivot,
A few items of consideration:

1) Regarding VBC charting and WRBs - I would actually argue that WRB's are more of an impact on VBC's vs time based charts. The reason is that in order for a WRB to appear on my charts, there has to be significant volume being pushed in a short period of time (since my VBC settings are lower). So, when I see a WRB appear, that grabs my attention as there is a brief momentary imbalance of buyers and sellers. If I am in a position, I look to exit at the high/low of the WRB. So, before discounting WRB's on VBC charts, think about what is actually going on and what is being displayed on the chart. You want to know when there is a volume push and we know that WRB's are pretty good for planning exits... therefore, when a WRB appears on a chart that is purely based on volume, that requires attention.

2) Regarding the chart that you posted, one item stands out that you did not comment on - why would you WANT to wait and watch that WRB form in front of your eyes? You're a smart guy and realize how much $$$$ is exchanging hands there, so why would you purposely opt to not trade during that time? I understand the conundrum though - if using a time based chart, there's nothing you can do but sit and watch. I know, I used to do that. Talk about frustrating. So, to summarize on the chart posted - you would consider trading during the 'ok' Zone 1, watch the big move in Zone 2, and then either trade or bypass Zone 3 due to time. So, what was really accomplished here? 2 out of 3 possible trading zones were passed on and the one that might have provided a trade or two wasn't that great either in my opinion.

Before you answer about why waiting b/c the WRB is telling you something, ask yourself if you really enjoy sitting and watching price drop right in front of you and you have to wait for that drop to end before considering an entry... Why does the drop have to end in order for you to consider a trade? Seems odd to think that - I will enter once price stops moving so much.... :rolleyes:

3) Regarding candle blending and unblending - I just don't do it. Nison talks about blending in his books and to be honest, I don't see the value. If you need to blend your candles, go to a higher timeframe. If you need to unblend, lower the timeframe. Problem solved as far as I am concerned. Of course, I can post charts where blending worked and charts where waiting for the blend cost you money. For me, keep it simple - no blending/unblending.

Please keep in mind that I used to trade off of minute charts exclusively and your chart posted provided a perfect example of why that did not work for me - you get to watch when there is serious action going on and then join the party once things 'settle down'. Well, if you are daytrading and looking for movements, don't you need/want the action? If so, then I would argue that you cannot wait for the action to end, you need to be ready to pounce when it presents itself.

Two very different points of view I suppose, but a good discussion.

[Anonymous]

BF, I think you misunderstood the post.

First let's again say that this is hypothetical. NO POSITION was actually taken in this example.

Now, If the large dark WRB that engulf two of the three large white candles AND is larger than all three is a PRICE ACTION signal via Mark's rules, then I would trade it.

So I would thus be short in box 1. Note that there are NO WRB profit targets in this box. When box 2 begins, therefore I am ALREADY short. I thus get the advantage of the WRB if you will.

And in this case, from a "Big Picture" point of view, the price action that creates the trade set-up is the price action that creates the large dark WRB we see in box 2. This is the key to me. Trading during the formation of the large candle via a constant volume chart is nice. Price is moving and that is when you are in. However, can you see that there is a change/shift in supply and demand if you can not see the WRB?

Which brings us to point two. WRBs show changes in the supply/demand dynamics. As of this post the EURO is UP .0046 pips. If you were watching the charts yesterday, you could SEE the shift in the supply/demand dynamics that results in price moving up today. Go back to the first chart, the 5 min. Notice that price went sideways on the appearance of the WRB and ultra high volume. The first clue to today's price action came yesterday. And it came via a WRB.

Now, if that price action does not constitute a trade set-up for Mark, then what? Well, yes, one does not trade the WRB, but one SEES the overall context of supply/demand and can look to get long with understanding of the broader context of the market.

If that had been a valid hammer pattern, then you would have a trade with contextual background of changing supply/demand dynamics. With price and volume leading the way, that trade would make more sense and possibly be safer.

So it is not just trading a hammer line because a hammer appears. It involves price action and (for me, volume action) that create the Prism thru which the hammer line is viewed as it traverses into a hammer pattern.

Simply, there is a story behind the trade. It is not just about movement. It includes Imbalances in supply and demand, price action, volume and to a lesser extent news releases. While the WRB trade may be missed, what is gained is a trade taken in the context of an overall market understanding. Rather than a simple candle here or there.

Having said all that, I do like the idea of trading when the chart is moving faster. But I think that has more to do with wanting instant gratification than anything else. I am trying to be comfortable being in the market, which is probably more so the case than the instant gratification to tell the truth. That is, not being comfortable in the market causing one to want to be in and out quickly.

[brownsfan019]

Pivot - I see your points.

I suppose I am the same as well - I want a profit and want it quickly. Patience isn't always my strongest point, which is why I think exiting on WRB's works for me. There's no random price target sitting out there and no *hoping* that that target is hit at some point in the day. With WRB's as the exits in conjunction with my setups, it's been a good mix so far. Sometimes the WRB's happen to be dead on for the ideal exit at that point in time for me. Other times they may be a bit early, but still a good exit for me. Since my stops are small to begin with, I can't afford to sit for hours to see if a big move is coming later. Simply, I will look for my trades and take them and hopefully if/when the big move comes, I am already in the trade.

[Anonymous]

BF;

When I first read your posts about CV candles, I was under the impression that one reason you (and others) liked them over time based candles was because CV mute most WRBs and Long Shadow candle lines. I see that I may have been mistaken.

Without neither WRBs or Long Shadows nor Changing volume, it would seem hard to detect changes in the supply/demand dynamic.

You are a successful trader and many would do well to follow your steed. As a trader I know it is about the making the trade for you. That is, the buying and selling. However, my personality, and the fact that I am learning a new method means that I find myself looking at WHY at trade is made rather than simply when or how.

The chart below seems to give so much information about the underlying dynamics of the market.

We see a WRB on Ultra High Volume. The first clue that something is changing in the market. The next bar is ultra wide spread on ultra high volume. Even more volume than the previous bar. Note that this bar closes in the upper range and creates a Long Shadow. Clearly, this bar had demand (buying) within it. This fact is Hidden to those who only see a down bar on "heavy selling (volume)".

Now can these two bars be seen on a chart that keeps volume constant? Check out the test bar. Volume is less than the previous two bars. What goes beyond VSA is the fact that this low volume test appears in the Long Shadow of the Ultra High Volume bar. Simply, that is more than just a Doji. But I don't know if I could know that without volume.

So here we can see a WHY we would want to be long. Of course a long may lead to a loss, but that matters little. What matters is that there has been a shift in the supply/demand dynamics as shown thru the WRB and the Long Shadow candle (which of course, was a WRB during the interval). There has also been a test for supply back into the area of the Long Shadow. Prior to the test, we had a bar that closed on its high with volume less than the previous two bar, this is No Buying Pressure. Hence price falls down and the Smart Money tests for supply.

Markets do not like wide spread up bars on high or ultra high volume. The reason being there could be "hidden" selling in the bar. However, there are times when the Smart Money is willing to absorb the selling from the weak hands. This is called absorption volume/ pushing thru supply. Here again we see a WRB. This time it is not so much a change in supply/demand but a willingness for the Professionals to buy at higher prices. If they are willing to buy at higher prices, they must expect even higher prices.

I'm not trying to change your mind here. Just wondering if the essential shifts in supply/demand can be seen when volume changes are taken out of the equation and large candles or Long Shadows are muted.

This is a 5 min chart. Would love to see this as a constant volume chart if you have it.