[walterw]

Pivot : now you got a little more sense on your setup and the indicator usage its fine, you are not trading the indicator, you are using a fine setup criteria ( by itself) and the indicator is helping you to time the trade in the area of your criteria....

[walterw]

Pivot : should you specify what product and time frame your chart is and we should be completely happy.... cheers Walter.

[Anonymous]

This example is less than perfect, but still shows the concept.

First, this is an entry based on Price Action patterns (Japanese candlestick patterns) as the secondary method. WRB & Long Shadow analysis is the primary method.

The bullish white hammer pattern here is discussed in NihabaAshi's trading hammers (revisited) thread on Elitetrader.com.

The first thing we see is a large dark WRB. Two bar later we get a down candle with a Long Shadow. Again, the long shadow shows price rejection and the WRB in general shows changes/shifts in Supply and Demand.

While price does indeed trade lower than the low of the Long Shadow, notice that the white hammer line's body is within the range of that Long Shadow.

You will also see a WRB just prior to the white hammer line. Because of this WRB, we need to look at the price action of the three prior candles.

So, WRBs and Long Shadows create the zones for optimal entries AND they also can be part of the price action that creates a valid price action pattern. Note that the body of the white hammer is within the body of the previous candles body (the WRB).

You should also see that the three candles prior to the WRB in the pattern have narrow ranges and lower volume. Simply, volatility is decreasing in this area.

If you add some VSA into the mix, you can see that demand has entered in the background which adds context to the appearance of the bullish white hammer pattern.

Thus, I have now shown a few ways to enter a trade where the common element is/are WRBs and or Long Shadows. Simply, if you see a WRB or a Long Shadow, it is time to start paying attention to the chart.

[Anonymous]

Originally Posted by walterw »

Pivot : now you got a little more sense on your setup and the indicator usage its fine, you are not trading the indicator, you are using a fine setup criteria ( by itself) and the indicator is helping you to time the trade in the area of your criteria....

I do not use indicators and no not like them. I was merely trying to make a point to the likes of yourself.

Price Action itself is enough to enter the trade, once you know the context that creates the price action. That is where VSA and WRB & Long Shadow Analysis come into play for me. And this is why I call VSA and WRB & Long Shadow Analysis primary methods and Japanese candlestick patterns (price action patterns) a secondary method.

[Anonymous]

B.F.

You haven't posted a chart here in awhile. Still using them? Did the change to multi charts effect on the appearance of WRBs?

Keep the thread alive.

[brownsfan019]

Originally Posted by PivotProfiler »

B.F.

You haven't posted a chart here in awhile. Still using them? Did the change to multi charts effect on the appearance of WRBs?

Keep the thread alive.

Pivot - I meant to post an update here, sorry about that.

Yes, the move to a constant volume chart does impact the appearance of WRB's quite a bit. While they could work with the TS setup, I just cannot subject myself to a 'what if' scenario every day - what if TS does show many today, what if they don't? Just too much open to interpretation by their software.

As a result of the more 'smooth' looking charts with constant VBC's, I have not used WRB's as discussed here. I see the value of the WRB's for sure, but implementing them on a more smooth looking chart is difficult to do.

Now, I should say that depending on how you define a WRB, WRB's are definitely on the constant VBC. For example, if you say if the body is larger than the previous 3, 5, etc bodies, then yes, there are plenty of WRB's on a constant VBC. As I mentioned before however, I was using them more in a visual inspection vs. a hard defined definition.

I realize the devil's advocate here then says to just stick with TS and that I may be on to something there... and possibly there is... Like I said though, I personally cannot go into the trading day wondering how much or little TS will put over my threshold settings. I just do not like being subject to their software's interpretation of volume flow.

I have a question for you though - have you inspected how WRB's react on a tick chart? Just curious...

One other note - on a daily chart I think WRB's could be extremely useful as well. Just some food for thought...

[Anonymous]

Thanks for the update B.F.

I was interested in seeing if there was indeed a change based on the fact that some of the TS bars actually had more volume than they should. I understand where you are coming from.

As you know, my primary methods are Volume Spread Analysis and WRB & Long Shadow Analysis. VSA looks at volume in part from a relational point of view. Hence, time is kept constant to see changes in volume. This is why I do not like Constant Volume. I should say, I can't use constant volume candles. I do like the fact that the chart "speeds" up in proportion to activity.

From a VSA point of view, volume is activity. Thus tick volume can be used where actual volume is not available. However, a tick based chart, still holds the amount of activity constant from candle to candle. So I have not even looked at tick based charts.

But from a pure WRB standpoint, a WRB is defined as a candle with a body that is larger than the previous three (3) candles. OR coded HHV((open-close),4) -the WRB is included thus we are looking at 4 bars at a time. Of course there are other ways of defining a WRB. But my point is that despite the chart type they still do exist. So they would be on a tick chart as well.

Since WRBs represent changes in supply/demand they should by definition have similar effects on tick charts. The Caveat I would add is that there are at least three things that make a WRB significant:

1. Volume.
2. Size (in relation to other WRBs).
3. Creation due to news events.

It is the fist one, volume, that cannot be utilized when the volume (activity) is held constant via constant volume or tick candles. Nevertheless, WRBs exploit changes in supply/demand, exploit trends, exploit support and resistance, and exploit volatility. Simply, there use should not change too much especially if used primarily for market generated profit taking techniques as you do.

P.S. to play devil's advocate myself, it is interesting that when you had bars with varying volume you could take advantage of WRBs. In other words, you actually had bars that were relational in nature, all be it unbeknownst to you. On a time chart, we know that volume and range are correlated............

[brownsfan019]

Pivot - little update here - I did notice that when I increase the volume threshold on a constant VBC chart that WRB's not only appear, they can be fairly strong areas to exit. So, something for me to consider and look at closer since I enjoyed using the WRB's on the 'subjective' TS VBC chart.

To put this in perspective, I looked at an ES chart today of 15k, 25k, and 30k for the volume threshold. I've been using 3500. So, not only are the WRB's appearing on the larger settings, they are more reliable (so far) than something found on the 3500 setting.

I'll try to remember to post some updates and charts here to keep the discussion going and provide good analysis over multiple chart settings.