[Anonymous]

Originally Posted by Tasuki »

Pivotprofiler, Thanks for explaining about why the market doesn't like high volume upbars (or downbars I presume)--I never got that clear in my head before.
Technically, I can't be wrong if it's true (as you said in an earlier post) that 85% of the volume of any bar is professional money. On that bar in my chart, the high volume upbar, it would appear that 85% of the professionals were wrong, yes? If they represent most of the money, then by definition, most of them were wrong to go long as the market was about to retreat. I don't see any way around that.
BTW, be as harsh as you like. I've got a tough hide, and there's no doubt that you're the master of VSA here. I'm just here to learn, so I throw stuff out as I see it.

First, I did not mention that it is nice to have you on board. Nice chart set up you have there. Please keep the chart examples and posts coming.

Now for the meat.

As I have mentioned, I do find the 85% idea as the only real "Leap of faith".

Now, let's look at you nice chart again. I do not know if that large volume spike candle was made due to a news event. VSA asserts that professional money uses news events to manipulate price and market direction. Suppose that there was a news event that was "bullish", well the professional buying was on the left side of the chart. The professionals would be buying at wholesale, and the large volume spike would be the bar that they sold on. They would be selling at retail. On that news event, the herd would rush in and be bullish.

So in truth, the volume surge is more likely to be the herd. The question, as always, is WHO IS ON THE OTHER SIDE OF THE TRADE?

If there was more buying on this bar than selling, then the next bar should not be down. More over, the bar after that is a Hidden Upthrust/Trap UP Move. This is a manipulated bar designed to get traders long and is a good place to short (with the weakness seen in the background).

Basically, you have to get away from the idea that large volume on an up bar is inherently bullish. You need to look at:

1. the range of the bar (spread)

2. the close of the bar

3. What happens on the next bar and sometimes even the bar after that.

Also note that there are no old tops to the left that can be seen on your chart. This is more reason to assume that the high volume is masking selling, rather than actual buying by the Smart Money.

Remember, we (VSAers) are not saying that professional money is sitting in a smoke-filled room conspiring together. We see the composite of their actions thru volume and price. So in practical terms, it is possible that some Smart money trader did indeed buy on that bar , if that makes you feel better.

One more thing:

The retail trader is now wondering if there is something to the adage: "buy the rumor and sell the fact". The Smart Money bought the fact ( while it was rumor to most) and sold the fact when it was widely known.

But this may not of even be due to a news event as I do not know exactly when this chart pic was taken.

[Anonymous]

Originally Posted by notouch »

Here are a couple of charts showing how VSA is great with hindsight but not so great in real time trading.

I don't think VSA is worthless on a 5 minute chart but I don't think you can point at high volume and say "that's Professional Money!". We really have no idea who or what is behind a volume spike from one 5 minute period to the next. The 5 minute charts are useful if you're looking for the perfect entry but you're getting your directional bias from the 15 minute charts. That's why I think multi timeframing is an important part of VSA.

I don't think it's necessary to try and identify who is behind a volume spike. The important thing is to recognise that reversals occur on high volume around support and resistance areas.

The first thing I see on this chart are two small tops to the left that represent supply. Hence the large candle with Ultra High volume could be "Pushing thru supply". That means the volume is absorption volume as the smart money is willing to buy at higher prices. If they are willing to buy at higher prices, they must expect even higher prices.

As you have said, one timeframe is usually not enough for proper analysis.

[Anonymous]

A couple of charts......

[BlowFish]

Hey PP,

85% is not such a leap really. Even if you accept this figure the problem remains that at least 35% of those 'professionals' are goig to be wrong! Certainly in futures markets. If you asume that a few 'retail' traders are correct (even if ocasionally) then the percentage is higher.

Now this dosent matter in my mind but as you may know from my odd posts in other threads I do think it is important getting core beliefs sorted out (which includes verification I guess) and of course making reasonable assumptions based on your own 'reality'.

Actually I have rather oversimplified the argument. On any trade there can be a winning player liquidating, a losing player liquidating, or someone opening. Jankovstky talks about who is on each side of a trade in his book (reviewed elswhere on the forums I believe).

This 3 legged equation kind of makes things hard, but the outcome over time is total winning capital = total losing capital it can be no other way. If all the losers are retail then they need to make up 50% of liquidity.

Final thought - we need a better term than smart money (we might get noTouch on board then ) JAJ talks about 'order flow' (though this term has existed way before he coined it). Perhaps this is a better term to describe money entering a market on a particulear side?

Cheers,

[notouch]

Where does this mysterious 85% figure come from? We're expected to take this figure as an article of faith on the basis of what - some guy on the internet having a guess?

There's no need to guess. The information is in the public domain. CBOT publishes it's Liquidity Data Bank which divides volume into locals (Cti1), commercial clearing members (Cti2), members filling orders through other members (Cti3) and members filling orders for the public (Cti4). In spite of me pressing the point no one in this thread has attempted to identify who "Professional Money" is. But let's assume that locals and commercial clearing members represent "Professional Money" and the public are not. Let's look at 27th February because that was a big day for YM. Total volume was 2,089,414. Breakdown by group was as follows: 362,997 (Cti1), 1,023,334 (Cti2), 6,421 (Cti3), 696,662 (Cti4). We can see from that that the public made up almost exactly a third of the volume, and only two thirds was due to "Professional Money".

What is even more interesting is the breakdown between buy volume and sell volume. It's interesting because there was almost an identical number of buyers and sellers in each group. Looking at the locals (Cti1) there were 182,292 buyers and 180,705 sellers. For the commercial clearing members there were 507,547 buyers and 515,787 sellers. For the public (Cti4) there were 351,724 buyers and 344,938 sellers. So this idea of the "Professional Money" always being right and the public always being wrong is nonsense. There were winners and losers in every group.

The market is a lot more complex than this "Professional Money" controls everything nonsense.

[JustMega]

NoTouch,

I agree with you on the first part of your post that 85% is baseless. Perhaps if one gauged all markets the percentage of 'professional money' would be close to that figure, who knows. Who is to say that 'smart money' consists of those working for some big firm with an exchange seat or those with billions in capital. Couldn't smart money consist of members of the public who are informed & educated, including some on this forum, as opposed to those who blindly bet on the markets? Maybe that would bring that figure up even higher.

As for the latter part of your post..."What is even more interesting is the breakdown between buy volume and sell volume. It's interesting because there was almost an identical number of buyers and sellers in each group. Looking at the locals (Cti1) there were 182,292 buyers and 180,705 sellers. For the commercial clearing members there were 507,547 buyers and 515,787 sellers. For the public (Cti4) there were 351,724 buyers and 344,938 sellers. So this idea of the "Professional Money" always being right and the public always being wrong is nonsense. There were winners and losers in every group."...these figures show only volume. Not where the 'smart money' or the public bought or sold at. If I had to venture a guess I'd probably say the percentage of 'smart money' selling near the top/buying near the bottom was greater than for the public in general.

Moderators, no offense but I think this thread has veered from its intended subject of VSA. Maybe the matter could be continued in a separate thread?
Thanks.

[Anonymous]

Originally Posted by BlowFish »

Hey PP,

85% is not such a leap really. Even if you accept this figure the problem remains that at least 35% of those 'professionals' are goig to be wrong! Certainly in futures markets. If you asume that a few 'retail' traders are correct (even if ocasionally) then the percentage is higher.

Not sure where you get your figures from.

Simply, within that 85% comes a percentage of the Smart Money that is wrong.

I really don't care.

What I do not understand, is why you do?

The price bar shows the composite opinion of the Smart Money (winners and the losers.) The winners make up a higher percentage of that whole, so we follow their actions. Smart Money losers do not stay that way for very long. THEY KNOW HOW TO READ A CHART. And can see when the rest of the Smart Money is doing the opposite .

Take a look at a chart. Ask yourself why there are large volume spikes at certain highs and lows. This goes against the general idea of what high volume means: high volume on an up bar MORE buying. High volume on a down bar MORE selling. Now if that were the case, then these areas would not be tops and bottoms to the degree that they are. In other words, something is going on underneath. Thus we need to ask, WHO is taking the other side of these trades? And why does this group seem to be on the right side at the right time?

As you said, this is a zero-sum game. Somebody is on the other side of these high volume trades at tops and bottoms, and we want to follow that group. Call them what you want. Of course, there is much more than trying to pick tops and bottoms going on; or at least if you are doing it right, there should be.

[notouch]

Originally Posted by JustMega »

If I had to venture a guess I'd probably say the percentage of 'smart money' selling near the top/buying near the bottom was greater than for the public in general.

The Liquidity Data Bank goes into detail about that too. We can look at volume by price for the month of February. We can look at the price range 12747 to 12826. This price range is "the top" before the big 500 point fall. For commercial clearing members there were 167,765 buyers to 169,707 sellers. For the public there were 126,034 buyers and 123,895 sellers. So the commercial clearing members did marginally better than the public, but only by a tiny percentage. The full figures are in the image.

We still don't have a definition of smart money or professional money - are they necessarily the same thing? What about dumb professional money? The only definitition that makes any sense is the circular argument that to buy at the bottom and sell at the top is smart, so smart money must have been doing it. If that's what smart money is then I agree with it. But the implication that some people are making is that there's a particular type of trader (undefined) buying at the bottom and selling at the top. My invitations to identify them (e.g. are they investment banks, locals, pension funds, central banks or what?) have been ignored.