[Eiger]

Thursday, February 05, 2009

A – Bag Holding – Heavy volume on a narrow spread at the bottom of the pre-market Demand Line. Note the NQ made a higher high at this time! Great clue!
B – Bottom Reversal
C – Test
D – Another Test
E – Hidden Test and EOM up with increase in volume
F – Narrowing sopread with close in middle on high volume – supply.
G – SOT
H – No Demand. Next bar is down with narrow spread and low volume – No Supply
I – Hidden Test
J – Test, next bar is up
K – Down bar that closes on lows, but look at the supports and volume from J – K. Supports rise as volume rises.
L – Heavy volume on an up bar. Next bar has high volume and spread narrows, close off highs.
M – Up Thrust-like bar near yesterday’s high. Next bar is down.
N – No Demand.
O – First bar where volume increases to the downside - supply.
P – No Demand
Q – Top Reversal
1 – Volume does not expand as support is approached. Note the narrowing of the spread at support.
R – Inability to close above resistance. Narrowing spread & SOT. Volume and spreads are also not near as great as the last wave up.
S – Stopping volume.

Eiger

[VolumeJedi]

Thanks a lot Eiger. I have posted my chart in VSA part II thread.

P.S. Hope this weekend goes well .

[Eiger]

VJ made a terrific post on the VSA Part II Thread of the Euro/EUD chart that includes applications of Market Profile. You can see how other high quality analysis can be used along with VSA -- there is nothing wrong with that at all.

http://www.traderslaboratory.com/for...html#post58814

[JeremyGoh]

Hi everyone,

I have converted Eiger VSA analysis to PDF for my own use,
however I decided to share it with everyone here.

Do let me know if I can or should continue to post the PDF here,
if not this will be the first and the last.

Jeremy

[JeremyGoh]

Hi Eiger,

Can you please explain why.

B - Market falls, but volume recedes. On B and the bar before B, closes are in the middle indicating buying coming in. Note the lack of progress on the lows from the bar before B and B. Next bar is up.

My Question : With low volume on B, next bar up, indicate buying I can understand. Isn't this bar B with low volume shows that professional traders are not interested in the up move?

C - Market rallies and volume comes in on C, indicating buying.

My Question : I thought when we see a UT on C, with the next bar down, it indicate selling. Why did you indicate buying? How do you know what bar is buying and not selling?

Many Thanks,
Jeremy

[Eiger]

Originally Posted by JeremyGoh »

... My Question : With low volume on B, next bar up, indicate buying I can understand. Isn't this bar B with low volume shows that professional traders are not interested in the up move ...


My Question : I thought when we see a UT on C, with the next bar down, it indicate selling. Why did you indicate buying? How do you know what bar is buying and not selling ...

Hi Jeremy,

I'll try to answer your questions.

Bar B is a down bar (not an up bar). The lessening volume as the market drops down to B along with the lack of downside progress (look at the lows) does indicate professionals are not interested in the downside. The closes in the middle indicate there was buying on B and the bar before it. Were the market weak and going down at this point, we would have seen wider spreads down on increasing or sustained voulme, closes on the lows, and progress to the downside being made (each bar would be quite lower than the last bar with closes well below the last low and not back into the spread of the preceeding bar).

There certainly was some selling on Bar C, but the volume on C and the bar before C - both up bars - was greater than the downside volume from the open at A to B. It is a change in character of the market, so to speak. We had been going down, now, all of a sudden, volume comes in to the upside on wide spread up bars. Look back over your charts and find a downtrend. You will note that rallies in a downtrend are weak on low volume, narrow spreads. Had the move from B to C been weak (consisting, for example, of bars mostly like the bar after B), then you would assume supply was still in control. Here, we see the opposite and read that (at the time) as potential demand. D and E confirm the demand.

Also, C is not really an UpThrust. For a true UT, there has to be an old top in the background. Bar A on this chart is a better example of an UT. At best, bar C would be a 'Hidden' UT - a hidden UT just means that it was an UT on a smaller time frame making it a bit difficult to see on the trading time frame. I haven't checked, but if you look on a tick or 1-minute chart you would probably see an UT there. And that is the problem with the smaller time frames. Unless you are scalping only, you would be taking a wrong position against what the market is truely saying, which is easy (easier) to see and clearer on the 5 & 3-min charts.

I do watch for Hidden UTs and also Hidden Tests. Many times, I will enter a position on a Hidden UT or Test. I do this, though, only when the hidden VSA indication is congruent with the overall market movement and background. For example, when in a down trend, a Hidden UT is a great trade; in an up trend, I like Hidden Tests. As always, knowing the background is the key in VSA.

Hope this is helpful,

Eiger

[HAKUNA]

From your posts(btw which explain VSA in a very clear way), would I be right in saying that the VSA signals are more relevant if read on larger timeframes, so for strictly intraday trading, reading from 15min charts after having gauged the trend, s/r levels etc from 60min would suffice. Then for entry one can look at 5min or 3min. This is I presume what you do in your trading.

If so really speaking messing around with tick or 1min chart is not strictly required,ie. to pinpoint the exact turn affording a very close stop loss, ofcourse depending on how much risk a trader is willing to take. as on 3min or 5min the bars would be that much wider in range and hence stop losses further away from entry.

[Eiger]

Originally Posted by HAKUNA »

... would I be right in saying that the VSA signals are more relevant if read on larger timeframes, so for strictly intraday trading, reading from 15min charts after having gauged the trend, s/r levels etc from 60min would suffice. Then for entry one can look at 5min or 3min. This is I presume what you do in your trading.

If so really speaking messing around with tick or 1min chart is not strictly required,ie. to pinpoint the exact turn affording a very close stop loss, ofcourse depending on how much risk a trader is willing to take. as on 3min or 5min the bars would be that much wider in range and hence stop losses further away from entry.

Great questions. I'll do my best --

I think any signal is more significant the higher the time frame. If we saw an Up Thrust on a weekly chart after a SOW, for example, we would expect a pretty good reaction. It would set the tone for trading (mostly to the downside) for the next several weeks. In general, I like using the 60-minute chart to "frame" the market. In other words, I can see the current structure of the market on that time frame fairly well, including important areas of support and resistance. You can see how the 60-minute chart reveals the structure and background on the attached chart. I also look carefully at the 180-minute, the daily, and the weekly charts. Different pictures and different clues are revealed by all.

Framing the background and structure also helps me anticipate posiible scenarios for the next day or two. For example, we are only a short distance from the 876 high made in late January. Any pullback that holds, might take a run up to that area. If it gets there, another possibility is an UpThrust of the resistance. I am not saying that the market will act in either of these ways - I never try to predict what it will do. I am wrong enough to know I can't ever predict what the market will do. But, I can lay out possible scenarios that are likely and if the market acts consitent with those scenarios, I have trades to make.

Always, always, always keep the background in mind. This is the key to VSA. We then watch the market unfold and look for appropriate VSA signals to trigger trades. When we frame out the market, and the market then acts consitently with the framing, we have a very clear sense of the background picture. If an UpThrust does occur around the 876 level, for example, we can lean on the resistance present in the 60-minute chart and be not only confident in the trade, but reasonably confident to hold that trade for a while, assuming the market continues to act consistent with background weakness.

In terms of trading time frames (the time frames traded from), I prefer the 3 & 5-minute charts. Sebastian Manby will often trade off a 4-minute chart -- it splits the difference and has it's own unique characteristics. I do watch the 30-minute chart during the day. That's a hold over from trading Joe DiNapoli's techniques where the "Key of the Day" for intraday S&Ps was considered the 30-minute time frame. I know that Sebastian and Tom Williams will also look at 7-minute charts, and sometimes 9-minute charts. I think it comes down to watching what you become familiar and comfortable with.

No good VSA trader that I know will trade off a tick or 1-minute chart - just too noisy and too easy to 'see' trade set-ups that aren't really there. Look at the posts by Tawe, VJ and JJ on the VSA II thread. Check their trading time frames. Look on the VSA I thread for the activite traders there and you will see the same. Tom Williams says that trading off the 1-minute chart is like being in combat during WWI. You stick your head up out of the trenches and immediately get picked off. That has been my experience, too.

If you are concerned about tight stops, you could look into trading the YM. Because of the dollar value and tick size, there may be a little more 'forgiveness', though I don't trade that market so take this suggestion with a healthy grain of salt. Regardless of the market, you should understand money management priciples and never risk more than a specific percentage of your account size. Your first priority, especially in the early stages, it to live to trade another day. But this holds true regardless of experience. If the stop is too wide for your pre-established risk parameters, you simply pass on the trade. There are so many trades that occur that this should not pose a problem. If it does, you need to check what you are trading -- the market or your ego/emotions. Needless to say, it had better be the former!

Hope this is helpful,

Eiger