[Anonymous]

Originally Posted by Neal »

Pivot, your entry would effectively be at close of the fifth bar in the box you highlighted, as the confirmation of the test for supply. It is confirmation because it is an up bar (price closed above the close of the previous bar).

Yes. Sorry if that was unclear. There is a reason that the rectangle contains these 5 bars. Each bar plays a role in the set-up.

If there is not an up bar in the next two bars after a test, the test has failed and the market is weak. Yes, one must wait for confirmation.

Think of it as a candle pattern. On another forum, there is an excellent thread on hammers. The author makes this point: a hammer is a hammer line UNTIL the pattern is complete THEN AND ONLY THEN does it become a hammer pattern. And in some of those patterns, the hammer comes before the completion of the hammer pattern. That is, the hammer itself is not always the last bar in the set-up.

Originally Posted by Neal »

When you wait for this 'test and confirmation' to occur, sometimes it does not, and price runs up quickly from your support level. Is this a scenario you accept, and look for the 'test and confirm' setup elsewhere or at another time or level of support or resistance?

If there is not an up bar in the next two bars there are two options:

1. Understand that no up bar means the market is weak. Thus look for reasons (more) to now be a seller and a place to sell.

2. Wait for another test that is confirmed to go long. If the market is actually strong, there will be another test or shake out. Or maybe you will see a wide spread bar on ultra high volume that closes down. We know this bar is potentially strong. Then you see a No Supply bar. This is an off-shoot of a 'test'.

Originally Posted by Neal »

When you wait for the full 'test and confirm' setup to occur, price will move away from support, thus increasing your risk and decreasing your potential reward.

I like to see them at support in order to use that area for stop placement. However, if I have to wait for full 'test and confirm', a good place to put a stop is always just below the low of the test bar. By definition, the Smart Money did not find any sellers below this level (at that time). Therefore, if price trades lower than that, something has changed.

I think most people look at reward incorrectly. How much can be gained in a trade is not truly known until after the trade ends. I do not use profit targets, as that is speculating on the future when it is not necessary to do so. So I will stay in the trade until the market takes me out.

I look at like this:

1. assume we have a market that has moved from 10 to 20.
2. one enters at 20. This is after a 100% rise.
3. if the market moves to 110 then the trader has gotten in within the first 10% of the move.
4. The risk was a pull back to 10, so the risk/reward is 10/100.

But suppose the market only moved up to 25. The risk/reward would be 10/5. Yes, a trader will not be a trader for long with this risk/reward. BUT ONE DOES NOT KNOW HOW FAR THE MARKET WILL GO. THE FUTURE IS UNKNOWN AND NOT KNOWABLE.

This is why in this case, one would not want to wait until the market moved back to 10. At about 15-13, a trader should recognize he is on the wrong side of the trade. Why wait for the stop to be hit?

On the opposite side, if you are in tune with the market, grab every pip/tick/hand/point it is willing to give you. Will you get every last point? No. The market will turn around and eventually stop you out. But one need not be concerned with getting in at the bottom and getting out at the top. The middle is where the reward is at.

To the extent that there is an element of control, that control comes on the risk side. Good stop placement, Willingness to admit one is wrong and get out, and precise trade entry all combine for some modicum of risk control. Reward will take care of itself.

Originally Posted by Neal »

When you have the initial indication of possible strength coming in on that wide spread, high volume down bar, do you ever enter at the close of that bar, and set your protection stop loss exits such that you allow for the possibility of a test?

No.

You have to wait and see what happens. Does the next bar close up? IF there was buying on the down day then the next day should be up. But the next bar could be Down. Wide spread down days with ultra high volume can be either : 1. Pressure to Fall (p. 166) or 2. Hidden buying. You have to wait and see what the market does with that volume the next day.

Now, Tom Williams, the father of VSA, would enter on the close. He is the exception rather than the rule. Most prefer to wait for the confirmation on the next bar. If we are talking about Stopping volume or a Selling Climax.

Generally, looking for the test or a no supply bar after the initial buying bar offers the best low risk entry.

[wuming79]

Originally Posted by Anonymous »

You have to wait and see what happens. Does the next bar close up? IF there was buying on the down day then the next day should be up. But the next bar could be Down. Wide spread down days with ultra high volume can be either : 1. Pressure to Fall (p. 166) or 2. Hidden buying. You have to wait and see what the market does with that volume the next day.

Hi, may I know which document are you referring to when you say p.166?

Are there supposed to be charts attached? I only see the first 2 charts on this threads. The rest seems to be referring to some drawings but no picture there.