[VSA] Volume Spread Analsysis Part III

[robertbumbalough 10]

 

Anyway the question is: do market makers ever test for supply by marking the price up?

 

 

Hello Quinn from Robert Bumbalough: I think that orthodox VSA would say no and that if makers/specialists thought supply present at higher prices and desired to move prices higher still they would gap or quickly run price through the price range where suspected sellers might be ready to close positions. However, I think that big capital will test markets to the upside in search of buyers using the same principle as testing for sellers, a rapid markup and subsequent withdrawal of further buying to see if other big money operators are interested in higher prices. If a high volume bar closed at its highs and then the next few bars were on lower volume while maintaining higher price, then other big operators would not see that as a selling opportunity, and then higher prices would be more likely. Charts that show stair stepping price appreciation patterns exhibit this phenomena so I like to think. Maybe I'm wrong and my account balance would tend to indicate that I am wrong. However, it makes sense to me and thus when I see that I trade it to the long side.

 

Best Wishes and Regards

 

follow me on twitter at Twitter

[laurus12 10]

... I think that big capital will test markets to the upside in search of buyers using the same principle as testing for sellers, a rapid markup and subsequent withdrawal of further buying to see if other big money operators are interested in higher prices. If a high volume bar closed at its highs and then the next few bars were on lower volume while maintaining higher price, then other big operators would not see that as a selling opportunity...

 

I think you have nicely presented a valid picture here. If I should comment something, it would be the use of the term "markup".

 

Anyway the question is: do market makers ever test for supply by marking the price up?

 

Quinn, strictly speaking regarding terminology a Markup or Markdown is the effort to break out of a trading range on high volume making sure that everybody is scared off taking positions in opposite direction and keeping people with open positions in the "right" direction from exiting theirs. Thus Markup or Markdown is used when testing for supply or demand have already been done. If they did not do it in this order they would risk risking too much capital trying to make price going higher or lower. Unlucky they could get the opposite of what they intended.

 

Larurs

Edited January 8, 2011 by laurus12

[Intel55 10]

Do market makers test for supply by marking it up?

 

I know an official test is done by quickly marking it down into an area where there was previous supply. Then they withdraw there interest to see the result. If the bar comes to finish near its high on relatively low volume you can assume there is not much supply present. If the next bar is up, it confirms the lack of selling pressure.

 

You can also have a failed test if the test bar finishes on its low on relatively high volume and / or the next bar is down suggesting supply is still present.

 

Now the thing that is confusing me: do market makers ever mark prices up to search for overhead supply? Am I just stuffing around with the terminology here? Should I just be calling this a mark up bar or something? I commonly see a stocks price quickly marked up on the open then they withdraw there interest, sometimes picking it up in the afternoon. This is in the mark up phase of accumulation (the last phase). If you were a market maker would you ever mark up price to test for supply? It's not really a test is it because a test is rapidly marked down, usually on the open, then they withdraw there interest to see what happens.

 

I think I have been looking at this the wrong way, if you marked it up in the morning, then waited, and you started to see some selling pressure enter the market, you may as well withdraw and let the price fall as far as it can so you can pick it back up again, especially if there is bad news.

 

Anyway the question is: do market makers ever test for supply by marking the price up?

 

Thanks, Regards,

 

Quinn

 

Hi Quinn,

 

In VSA there is no 'Test for Demand' on a single bar. However, in reality you can find this 'test of demand' bar everywhere. SM do use this tactic just as they use a 'test of supply'. Tom hasn't mentioned a 'test of demand' in his work and there may be a good reason for this. If there is, it eludes me.

[jaygo 10]

May have a crack at friday's action.

 

Our background at A is a fairly strong move higher on large volume.

 

A- ex volume, bar closes in lower half, supply entering.

 

B- First down bar on large vol in a while.

 

C- move down fails with a no supply bar at C

 

D- High is tested on lower volume, rejected but makes a higher low.

 

E- To me this looks like a test, low spread/vol and price rallies hard next bar.

 

F- test of this high occurs on low vol at F, the previous two bars have both closed at middle. F is a potential no Demand for a short with out background weakness being the supply at B and successive dry up of vol on these attempts to rally higher.

 

G- this bar and the previous two have all closed in the middle and are narrowing in range, reaction may be failing.

 

H- gives us a no supply bar, vol is drastically lower and we have already stated that there was strength in the background.

 

I tricky bar, clearly shows selling into that bar. Price reacts slightly but vol dries up quick, Price struggles back up to J

 

J- strong selling into this and next bar, if i were long this would not be a good sign, however price again reacts on low vol

 

K confirmed test, however price has already rocketed higher before you can take advantage of the signal. Any input on what others would do here?

 

As far as trading this i found pretty tricky, the supply that kept entering at the high kept me looking for shorts. the low volume reactions however were a big clue in telling us that the reaction was a withdrawal of demand rather then supply being in control.

 

Any mistakes or input? ill try and post a few of these charts next week.

[robertbumbalough 10]

Thanks Jaygo for posting your chart and analysis. This is helpful. The E7 action is bullish. There is much strength in the background because like Tom Williams says in his books when big capital sees strength in the cash market they buy in the futures and options market to better their own accounts. The attached image shows a 15M E7 chart from yesterdays trading. The strength seen in the move off a double bottom will be endure for some time till selling pressure overcomes it.

 

Best Wishes for Big Profits

[gabibbo 10]

Hi fellows, I've read many posts from VSA 3ds here @TL but I've not found much stuff about applying VSA with MetaStock so I'm now wondering if someone here is aware of a place somewhere in the web (not necessarily here @TL) where to find formula or ideas to apply to MetaStock.

 

Thanks for answering.

 

Marco

[Georgerdx 10]

Hi everybody

 

I am new here. I have read many posts about VSA - Part I and Part II and now I have decided to post a chart myself. I am not a trader and I have never traded anything - but I would like to learn it.

 

So here is my chart: GMM.DE

 

Background:

Long term 2 years: I see a upternd and a sideways movement – long term is bullish

 

Mid term 6 Months: The sideways movement has turned to be a continuation pattern a triangle. I would see the mid term chart also bullish. The nice thing on the pattern is that everyone sees the support and resistance. I draw them into the 6 month chart.

 

Short term 3 Months: Here I see that there is an effort to break the resistance line. The first attempt has failed and the price action went down again to the suport line.

 

Then I see a wide spread up bar on a high volume (bar 1) piercing through the first resistance line and closing at the second resistance line. This is a bullish behavior – absorbing supply .

 

The next bar (bar 2) doesnt make a significant higher high and stays actually at the second resistance line. This tells me that the Bar 1 contained a lot of selling and that the market will possibly not immediately go up. Based on the backgroung I see that the market is strong and I would like to go long. This bar however is not a good entry. I need more information.

 

The bar 3 is a down bar on a volume lower than the previous 2 bars – no supply. This could be a long entry but I see weakness on the bar 1 and the fact that the price action is at the resistance doesn‘t make it a good opportunity. So I would pass on this one.

 

The bar 4 is an up bar, volume is increasing a bit. The close is at the resistance. Now we see that the price action is in a sideway movement. The price will break either up or down but till now it is not clear.

 

Bar 5 & bar 6 are both upthrust like bars – sign of weakness.

 

Bar 7 is an upthrust on a high volume. The price action refuses to go up. The price will probably fall. The first resistance has now become support. So on the way down the price will probably stop there (now first support) or at the bottom support (second support).

 

Bar 8 & Bar 9 are down bars taking the price to the first support line. The price action can bounce here back up or go lower to the second support line. This is not clear at the moment.

 

Basicly to go long I would wait for a no supply and/or test bars at support line.

An Exit would be at a Resistance line - depends on the further price action.

 

So that‘s all. Does it make sense?

 

Thanx

GeorgeRDX

[Georgerdx 10]

Hi everybody

 

I am new here. I have read many posts about VSA - Part I and Part II and now I have decided to post a chart myself. I am not a trader and I have never traded anything - but I would like to learn it.

 

So here is my chart: GMM.DE

 

Background:

Long term 2 years: I see a upternd and a sideways movement – long term is bullish

 

Mid term 6 Months: The sideways movement has turned to be a continuation pattern a triangle. I would see the mid term Chart also bullish. The nice thing on the pattern is that everyone sees the support and resistance. I draw them into the 6 month chart.

 

Short term 3 Months: Here I see that there is an effort to break the resistance line. The first attempt has failed and the price action went down again to the suport line.

 

Then I see a wide spread up bar on a high volume (bar 1) piercing through the first resistance line and closing at the second resistance line. This is a bullish behavior – absorbing supply .

 

The next bar (bar 2) doesnt make a significant higher high and stays actually at the second resistance line. This tells me that the Bar 1 contained a lot of selling and that the market will possibly not immediately go up. Based on the backgroung I see that the market is strong and I would like to go long. This bar however is not a good entry. I need more information.

 

The bar 3 is a down bar on a volume lower than the previous 2 bars – no supply. This could be a long entry but I see a weakness on the bar 1 and the fact that the price action is at the resistance doesn‘t make it a good opportunity. So I would pass on this one.

 

The bar 4 is an up bar, volume is increasing a bit. The close is at the resistance. Now we see that the price action is in a sideway movement. The price will break either up or down but till now it is not clear.

 

Bar 5 & bar 6 are both upthrust like bars – sign of weakness.

 

Bar 7 is an upthrust on a high volume. The price action refuses to go up. The price will probably fall. The first resistance has now become support. So on the way down the price will probably stop there (now first support) or at the bottom support (second support).

 

Bar 8 & Bar 9 are down bars taking the price to the first support line. The price action can bounce here back up or go lower to the second support line. This is not clear at the moment.

 

Basicly to go long I would wait for a no supply and/or test bars at support line.

Exit then at resistance line - depends on further price action.

 

So that‘s all. Does it make sense?

 

Thanx

GeorgeRDX

[Jillion 10]

Hi Guys

 

I've currently studying volume analysis and wondered please would an experienced trader be able to confirm please my understanding of the accumulation phase:

 

'If we see accumulation during a long term range, we should see shrinking volume near support levels and an expanding volume near resistance.'

 

Am I right in the thinking that 'Smart money' is buying into the downmoves off of resistance and this represents the expanding volume near the range top, and also would it be correct to say that the low volume at the support levels is absorption. ie. the buyers are absorbing the selling and hence the low volume?

 

Thanks in advance for any help, it can be a bit confusing at first starting out with volume analysis!

[Tasuki 10]

Hi Guys

 

I've currently studying volume analysis and wondered please would an experienced trader be able to confirm please my understanding of the accumulation phase:

 

'If we see accumulation during a long term range, we should see shrinking volume near support levels and an expanding volume near resistance.'

 

Am I right in the thinking that 'Smart money' is buying into the downmoves off of resistance and this represents the expanding volume near the range top, and also would it be correct to say that the low volume at the support levels is absorption. ie. the buyers are absorbing the selling and hence the low volume?

 

Thanks in advance for any help, it can be a bit confusing at first starting out with volume analysis!

 

Jillion, I think you've got it backwards. Timothy Morge, one of the largest traders in the world, makes it very clear in his webinars that the "big boys" do NOT buy at resistance. True, they do accumulate on downmoves, but these are usually engineered down moves which are calculated to scare weak longs and to initiate fresh short-selling. Hence, they will sell at support, but just enough to scare the pants off smaller traders. Then, they come in and buy many times more than they just sold, sopping up the liquidity created by those who are forced to puke their positions. This is known as the classic "wash and rinse" and it has become the bread and butter of big traders, even more nowadays than it was in years and decades past. So, no, they do not accumulate at resistance, that would be foolhardy. If you want a more thorough understanding, you should check out Morge's free webinars at the website of Interactive Brokers. Here's the link:

 

http://www.interactivebrokers.com/en/?f=%2Fen%2Fgeneral%2Feducation%2FpriorWebinars.php#top

 

When you get to the page, click on the "Industry Sponsored" link in the middle of the page, and scroll down until you see the webinars offered by Tim Morge, Market Geometry. In order to see just the webinars given by Tim, you can filter out the others by clicking on the "All Speakers" tab and selecting Tim Morge from the list (the other speakers aren't anywhere near as good as Tim).

To be honest, you will get no better education anywhere on the web, unless you want to shell out the money to join his website, but before you spend money, watch all of his free webinars at this link, and then you can go to MarketGeometry.com and get more free stuff, and if that's not enough for you, you can go to his other website, medianline.com, and there's even more free stuff.

Hope this helps,

Tasuki

[Jillion 10]

Hi Tasuki,

 

thanks for the detailed post that is very kind of you and very helpful. You said exactly what is was thinking, when you said I have got it backwards and for that I am glad and also relieved as this now makes perfect sense, thank you.

 

You are also the second person to recommend Tim's work and the MarketGeometry site and thanks for supplying the link I will check it out now.

 

I've learn't a positive lesson in that I need to be careful of the source of the information, not to blame others for incorrect information published but to be responsible myself for seeking the correct information in the first instance. I must try harder.

 

Many thanks Tasuki for your helpful response.

 

Jillion, I think you've got it backwards. Timothy Morge, one of the largest traders in the world, makes it very clear in his webinars that the "big boys" do NOT buy at resistance. True, they do accumulate on downmoves, but these are usually engineered down moves which are calculated to scare weak longs and to initiate fresh short-selling. Hence, they will sell at support, but just enough to scare the pants off smaller traders. Then, they come in and buy many times more than they just sold, sopping up the liquidity created by those who are forced to puke their positions. This is known as the classic "wash and rinse" and it has become the bread and butter of big traders, even more nowadays than it was in years and decades past. So, no, they do not accumulate at resistance, that would be foolhardy. If you want a more thorough understanding, you should check out Morge's free webinars at the website of Interactive Brokers. Here's the link:

 

http://www.interactivebrokers.com/en/?f=%2Fen%2Fgeneral%2Feducation%2FpriorWebinars.php#top

 

When you get to the page, click on the "Industry Sponsored" link in the middle of the page, and scroll down until you see the webinars offered by Tim Morge, Market Geometry. In order to see just the webinars given by Tim, you can filter out the others by clicking on the "All Speakers" tab and selecting Tim Morge from the list (the other speakers aren't anywhere near as good as Tim).

To be honest, you will get no better education anywhere on the web, unless you want to shell out the money to join his website, but before you spend money, watch all of his free webinars at this link, and then you can go to MarketGeometry.com and get more free stuff, and if that's not enough for you, you can go to his other website, medianline.com, and there's even more free stuff.

Hope this helps,

Tasuki

[vcv13 10]

Jillion, I think you've got it backwards. Timothy Morge, one of the largest traders in the world, makes it very clear in his webinars that the "big boys" do NOT buy at resistance. True, they do accumulate on downmoves, but these are usually engineered down moves which are calculated to scare weak longs and to initiate fresh short-selling. Hence, they will sell at support, but just enough to scare the pants off smaller traders. Then, they come in and buy many times more than they just sold, sopping up the liquidity created by those who are forced to puke their positions. This is known as the classic "wash and rinse" and it has become the bread and butter of big traders, even more nowadays than it was in years and decades past....

 

Hi Tasuki!

 

could you please illustrate a good (& a bad) separation with an image please?

 

just coz the close of a test bar with good separation is well above the up sloping line it is a sign of buyers in control, right? could you please clear it up for me?

 

Thank you.

[Georgerdx 10]

Hello everyone,

 

What happend to Eiger? I liked his posts very much.

It is a pitty that he is not posting anymore

 

BR

GeorgeRDX

[Tasuki 10]

Hi Tasuki!

 

could you please illustrate a good (& a bad) separation with an image please?

 

just coz the close of a test bar with good separation is well above the up sloping line it is a sign of buyers in control, right? could you please clear it up for me?

 

Thank you.

 

Yeesh, I'm so sorry I didn't answer this earlier. Not sure how I missed it. See attached pic. Hope this helps. To answer your question, yes, if price bounces off a median line, then you expect that buyers were there. The question always is, which buyers, the strong hands, or the weak ones? That's why we don't trade with just one indicator or tool, but rather we look at the whole gestalt of the market before placing a trade.

 

Tasuki

[mm_wayan 10]

who will take the advantages of Floating spread, broker or trader??

and why??

[JohnTrading 10]

VSA setup on USDCAD please any comments welcome!

[facttory 10]

Hello,

 

Anyone has Hidden Volume V1.3? Please share

 

https://www.youtube.com/watch?v=aU9xJ-WQrg8&feature=youtu.be

Edited May 18, 2015 by facttory

[Connect 10]

Hello,

 

Anyone has Hidden Volume V1.3? Please share

 

https://www.youtube.com/watch?v=aU9xJ-WQrg8&feature=youtu.be

 

LOL..........................................................

[facttory 10]

LOL..........................................................

 

?? what u mean?

[Georgerdx 10]

Hi!,

 

Anyone knows why Eiger is not posting anymore?

 

Georgerdx

[stocktrd 10]

how about this case? what's hapen next?

 

 

[ChimpTrader 0]

Greetings All,

Some chain of events have forced me to take a close look onto VSA. Until recently I had procrastinated learning VSA being too subjective, however, at the cost of systematic objectivity - procured by Indicator based trading - have learned the essence of Value created, that is ought to be noted by reading Volume only.

And none other than this forum offer so vivid explanation of VSA. Truly fascinated!

Thank you,

P.S. Has anyone tasted this new bottle of old wine (pun intended)? BTW price is a shocker for me.