[Omrudra]

Hi all,

I have been reading the posts in the forum for quite some time and have learned quite a bit. I am attempting to incorporate VSA into my trading. I still have tons to learn. I am attaching this mornings bund futures chart . I am confused by the rally at 9.40 ( around 80 ticks). I could not see any sign of strength in the back ground. Could some one point out some things I should have been watching for?

I realise this must be a noobish question and that I still have to develop my fundamentals regarding VSA . But all answers are welcome.

To moderators: I am not sure if I should be starting a new thread on this , please move delete if required.

Thanks in advance.

Omrudra

[CandleWhisperer]

Nice to have you with us, keep the charts, analysis and questions coming.

I have attached your chart with a few observations.

Overall the chart shows much strength. Let's start at the first double arrow.

1) Up bar on very high volume that closes on its high with the next bar up. Markets do not like up bar on high volume, because they can contain hidden selling (supply). There is supply in that bar, but we go up further. Moreover, we ultimately move sideways and not down. In other words, the supply can't move us down because there is demand (strength) supporting the market.

2) Double arrow two. Down bar that closes in the middle of its range with volume less than the previous two bars. This is No Supply.

3) Double arrow three. Another down bar, but this time the close is closer to the high of the range and the volume is up. If this bar was selling, why would the close be near the highs rather than the lows? There most be demand in that bar.

4) Double arrow four. An up bar with a narrow range, closing near its low and with volume less than the previous two bars. This is No Demand. A sign of weakness. However the market is not weak, just not yet ready to move up.

5) Double arrow five. We see a narrow range up bar that closes in the middle of its range on volume greater than the previous bar. This is a Squat. Selling enters on this bar. However........

6) Double arrow six. Two bars later we see a Test. The market is testing for supply. The volume is less than the previous two bars and the range is narrow with the close near the high. The supply from the squat bar was actually absorbed by the market, otherwise this test would have move volume and be a failed test. Yet again we have strength in this market.

The next arrow points to a No Supply bar after the appearance of a squat and the two large wide spread up bars on ultra high volume. The first wide spread up bar is Pushing thru supply and thus a sign of strength. The last arrow is a Test right after the No supply bar. Volume is equal to the previous bar ,but still low.

[Omrudra]

Hi CandleWhisperer,

Thanks a lot for the great analysis , it was very informative and did answer my questions.

If your reply is any indication of the quality of people in this forum, I am extremely happy to be a part of it.

I will definitely try to upload more charts with questions and my attempts at analysis.

Good trading

Omrudra

[Eiger]

In addition to CW's good bar analysis, it is very useful to keep the overall structure of the market (i.e., the bigger picture/background) in mind:

Starting from the left:

Narrow spreads accompanied by low volume as this market drifts lower indicates a lack of conviction to the downside. Compare this reaction (spreads, volume, distrance traveled, and duration) with the up moves on this chart. There was no conviction to the downside.

When the market did move down on wider spread, the volume wasn't there. It also turned around rapidly. This was a Shake Out. (Note the bar following the Shake Out - one bar takes out the price decline of 7-8 bars. This confirms the Shake Out, lack of downside conviction, and indicates strength).

Next note that the gains are being held at a higher price level. When price does dip back into the area of the "strength bar," volume is less indicating demand remains in control.

At the end of the trading range, price comes to dead center, or Apex. Given the strength in the background, this was a choice location to try a long trade.

Price pushes hard up past the trading range. What is farther to the left of this chart? I would imagine it was some sort of congestion area, which would explain the drive up (pushing up through potential supply).

Gains are again being held (market is repeating itself). Note how little the market has given up in terms of price here. As CW noted, volume is shrinking on down bars and has generally receeded as the market rests. All of this indicates a further advance for this market.

Try to keep the big picture in mind while using VSA.

Hope this is helpful.

Eiger

[Omrudra]

Hi,

I have attempted to use VSA for the below chart. Any advice and corrections are most welcome ,in fact look forward to it.

Point A: I took this bar as a sign of weakness, high vol, closing in the middle with next bar down.

B:Test of supply? Negated by the next bar , point C- No demand? But the next bar( the one in yellow ellipse) has higher vol, narrow spread and close lower than C and low higher than the low of C.How do Interpret this?

D: Sign of weakness.
E: Sign of strength. But Im confused by the next bar ( in yellow ellipse). Is this no demand ? Is it to be ignored with strength in the back ground?
F: No demand
G: No demand
H: What do I make of this?

Chart 2, is a continuation, with some more analysis . In put on it appreciated.
I do apologise if the charts are untidy, will strive to polish the latter charts.

I feel I am going fundamentally wrong some where in my approach.

All advice is appreciated.

Good Trading!

[Eiger]

Originally Posted by Omrudra »

...
I feel I am going fundamentally wrong some where in my approach...

You are ignoring the background and what this market had been doing for the previous several days/weeks. It is the same fundemental error I see many traders commit while attempting to apply VSA. Jumping into the middle of a market and looking for weak and strong bars will lead you astray because VSA indications arrive in varying intensities. What looks like a strong or weak bar on the immediate chart may or may not be, depending on the background. Unless you understand the background, bar-by-bar analysis like this will only be confusing.

[Eiger]

Here is an example from this AM (Oct 6th) in the S&P e-minis (ES):

Background:

Coming into this morning, the market has been in a downtrend since mid-August. There have been no signs of strength on the higher time frames (daily/weekly).

On Friday (i.e., in the immediate background), this market broke through the 1113.50 support level (Sept 19), made a new low at 1102.50, and closed near its low (see 60-min chart).

Overnight in the Globex session, this market made yet another new low (1072.00). After making this low, a rally ensued, but it was lackluster and unable to reach Friday's low. A small range had formed between the Globex low and the late Globex session rally high (see 15-min chart). Just before the day session open, the market was heading back toward the Globex low.

Set-up & High Odds Trade

After the open, the market fell below the overnight range and Globex low. Volume increased to the downside and was high volume right from the open, indicating larger traders in the market. NYSE Ticks were trading to the downside and unable to show a rally, indicating that traders were hitting bids on the way down, quite eager to sell. Conditions for a potential trending morning, if not a trend day, were in place.

I watch both the 5-min and the 3-min charts for VSA indications. These are my trading time frames. At 10:36 AM, the 3-min chart gave its first VSA indication: a No Demand bar in a falling market. Given the larger background and the immediate downtrend in the AM, this was a very high probability trade (see red arrow on 3-min chart).

------
To trade effectively, you must frame out your trades. This means looking at the background and assessing strength and weakness, knowing where support and resistance lie, understanding what moves a market and how this shows up on the charts, being able to identify this with reasonable accuracy real-time, and then (and only then) looking for VSA indications to trade.

Hope this is helpful,

Eiger

[HAKUNA]

Eiger,
Good analysis, see that you use setups shown by Sebastian at the London Symposium.
What are those blue bars at the top on the 3min chart.