[Eiger]

Originally Posted by mcfotos »

Hi Eiger,

.... Are there any guidelines/ tipps of how to analyse the background? what are you looking first, what second and so on...? ....

In assessing the background, I personally take a top down approach. I look at the weekly chart for the major trend and the daily chart to see where we are in that trend. That gives me the larger picture. I then drill down using the 180-minute and hourly charts for a finer view of Support/Resistance, trend lines, and trend channels. I am always aware of the S/R levels from the hourly chart, and especially yesterday's highs and lows.

On the intraday charts I draw lots of lines, again for S/R, trend lines, and trend channels. I then look for confluence with important larger time frame areas (described above) and how volume and price interact within these areas. It is all about preparation, which is done religously every night.

Eiger

[Eiger]

Ani - You need to post your charts correctly as we cannot see the details. Charts need to be uploaded separately and not pasted into the text area of the post reply box. Click on GO Advanced (bottom right corner of post reply box) and you will see a section to upload charts, which have easy to follow instructions. From what can be seen on your charts, it looks like you are missing the background conditions of a trending market, which typically takes more than one bar of weakness to turn.

[MANTRA]

Hello Eiger

I'm beginner in VSA trading approach. I'm just trying to paper trade (SIM). Market NQ mini - from 1 pm to 3 pm

I read a lot about VSA a can recognize bars like ''no demand, no supply, upthrust etc. but I'm struggling whith these bars in a real time. It's very easy to interpret these bars on the left side of the chart when I can see the right side.

I'll try to write down my feelings during a real time.

60 min. chart - market in trading range, I expect the move of the market within this area

10 min. chart - market starts to turn down just on the very strong SR line,

1- upthrust, volume increased, next bar close of the high
2- no supply
3- no demand - I started to think about short position
4- upthrust - I started to think about short position - the low of this bar was not taken
5- wide spread UP bar with ultra high volume - I started to look for no demand or upthrust - short again
6- test but still a lot of supply there - I did not take long position (the wide spead UP bar with ultra high volume was the second reason)

5 min. chart

1- no demand
2- hidden upthrust
3- some demand enters - this is the reason why I did not take short position
4- wide spread UP bar + high volume = weaknes
5- no demand - I wanted to take short position - the low of tis was not taken

When I can see the right side of the chart - after the trading session

1o min - chart

1- upthrust, volume increased, next bar close of the high
2- no supply
A- some demand enters
3- test with low volume
B- supply enters
C- second test with low volume
5- pushing through supply- strenght
6- shake out?

5 min. chart

1- test with low volume
2- no supply
A- supply enters
B- second test with low volume
4- pushing throught supply
5- test with low volume?

[Eiger]

Hi Mantra,

Good Questions. The key to your questions and difficulties reading this market is in the background. I can never emphasize this enough: Always seek first to understand the background, then look at your trading time frame chart and bars.

The background is your context. You have to have some context to take trades. If you don't have the background firmly in mind, you are trading random patterns. It doesn't matter if you are using fibonacci, MACD, VSA, MAs or any other methodology. If you don't have the background conditions in mind, you are trading random setups, and this is one good receipe for failure.

You have the background on your charts. It's in the 60-min chart. Looking at that chart, I see an uptrend. The 60-min is making higher highs and higher lows. Although not shown here, volume comes in on up bars and tends to recede on down bars. There has been no climactic action or a clear tiring of demand at the top of the rally on the 60-min. These would suggest a turn in the market, but they are not there. There is no weakness. Everything points to strength.

When you have good strength in the background as you do on this 60-min chart, you want to be looking for long setups on your trading time frame. Longs in this background context will be safer and will produce greater profits than shorts. If you do elect to countertrend trade, it should be scalp-only, otherwise, you will be paying the market for your play. That is what you found out when thinking about shorts. Upthrusts and No Demands do not work well in uptrending conditions, just like Tests fail in downtrends. Background.

Let's go a little deeper into the 60-min chart so you will be able to recognize these conditions again in the future:

From the bottom of the chart at 1, the market rallies at 2. Look at the character of that rally. What do you see? Wide spread up bars pushing through the resistance (supply) and continuing higher. Demand has clearly overcome supply at this point - bullish.

The market rallies up to he market at A. Note what happens here. There is a resistance line drawn at A representing supply from the old top to the left. Note the qulity of the reaction at A. It doesn't react much. The market is not giving up ground. Instead, it is holding its gains. THus, rather than reacting, the market is just resting and absorping whatever supply exists from the old top. Supply is unable to take control, and this is bullish behavior.

At B, we see a similar event. You can see to the left, there is a larger congestion area compared to the old top at A. Thinking about this logically, this area is larger and could represent an impossible obstacle for the current market to overcome. However, just as at A, the market rests rather than reacts here. It is longer in duration than the resting at A, but this makes sense because the supply area to the left s larger. Nevertheless, the gains are held. No big reaction takes place. At the bottom of the trading range, the market tried to go lower, but lower prices were rejected. All of this is bullish behavior.

With all the bullishness in the background, it is far better to be looking for long trades rather than shorts.

Hope this is helpful,

Eiger

[MANTRA]

Thank you Eiger for the clarification, I'll try to post and share some charts and trades and of course focus more deeply on the backround of the market.

thank's

[GLE%]

For Eiger -

The question I have simply is why you dont make mention of the annotations I added to the chart - all the ND's, tests, NS's, upthrusts, etc. There were plenty of signals that I added to the chart (in the elipse) but they havent been mentioned by you at all - why?) Hopefully you can answer those questions because then I can see why you chose to stay out of some trades, and stay in others.

This is simply a copy repaste of a chart you did recently on the ES - thank you for your time!

To start:

Today's 3-minute ES:

Background - Price rallied after the open, then spent an hour reacting in a slow drift down. Volume was less on the reaction than the volume on the rally off the AM lows. Spreads were also generally narrower on the reaction, and as the reaction progressed, volume receded. A Higher Low (HL) was put in.

After an earlier, failed attempt to break above resistance at 1, price held its gains at 2 on light volume (no supply) and also held the Demand Line YY of an uptrend channel. All of this is bullish.

Note the emphasis placed on the background. We always start with the background.
-----

A - Price pushes through the resistance area (red line) on high volume.

B - Next bar has sustained volume, but the spread is narrowed and the close is in the middle.

C - This bar is up, but the volume has dropped off precipitiously. This tells us in advance that the Supply Line, ZZ, is unlikely to be broken.

D - Supply enters where expected. D is a down bar, closing on its lows on heavy volume.

E - An up bar, closing on its highs after dipping below D indicates another rally will be attempted. However, the narrow spread and low volume indicate that professional money has withdrawn, so the rally is unlikely to go very far.

F - Volume increases and the spread widens a bit (increased activity), but the result is a close on the lows. This Hidden UpThrust indicates supply.
-----

More Background - Support and resistance are important to VSA. Look at the current chart in relation to the 15-minute chart (attached). We are currently just above yesterday's close and, more importantly, in the 825 area which offered support yesterday moring and early afternoon, but which is now likely to offer resistance. Thus, the background conditions from yesterday are joining with the immediate supply conditions seen on the 3-minute chart for a nice short set-up.
-----

G - the market reacts to the previous low at E and rallies, but does so on a narrow spread and low volume - No Demand.

H - A Hidden UpThrust that closes below the close of G on an increase in volume. The market now starts to fall.

Good locations to initate shorts were at F, G & H

I - As the market falls, volume increases. This bar was a down bar on average spread closing on the lows. The increas in volume and poor close tells in advance that the support levels from the trend line at YY and the horizontal support line (red line) are unlikely to hold.

J - Tells basically the same story - supply is in control (down bar, increased volume, above average spread, and close on lows).

K - The bar after J is narrow spread, close in the middle and high volume. Next bar is up. Some buying came in here, but K swamped whatever buying existed with a widerer spread down bar, close below the previous two lows on an increase in volume.

L - The swelling volume that came in between J and K knocked the market sideways. Note the spreads and the volume. Spreads are narrow, volume is low and receding as the market attempts to rally. The two bars immediately before L are No Demand. L is a Hidden UpThrust on an increase in volume which caught stops and then closed on its lows. Another good location to initiate a short. The last bar on the chart is wide spread down bar with an increase in volume, closing on its lows. Supply is in full control.

This is just pure VSA. Not too shabby is it?

Always look first to the background, then follow the bars as they tell the story of the unfolding market. Trying to read the market by looking at a bar or two won't work. It will only hurt you. As you can see, adding other things extraneous to VSA is unnecessary and likely to be confusing.

Hope this is helpful,

Eiger

[Eiger]

Originally Posted by GLE% »

For Eiger -

The question I have simply is why you dont make mention of the annotations I added to the chart - all the ND's, tests, NS's, upthrusts, etc. There were plenty of signals that I added to the chart (in the elipse) but they havent been mentioned by you at all - why?) ...

Because that wasn't the point of the post. The point of the post was all about background in context of the higher time-frame, 15-minute chart. The area you circled wasn't relevant to that discussion. I would encourage you to go back and read the entire post with both charts.

As I try to point out, looking at the trading time fame bars without understanding the background conditions is tantamount to trading random patterns. Sure there are technically plently of VSA indications in that hour, but it was a slow drift down after a good rally up so these are ignored. There was no SOW. Any NDs, HUTs etc were not high odds indications for trades. Given the SOS in the background, these are only random bar patterns. The market will make you pay dearly for trying to make trades out of these. The market had already tipped it's hand to the upside. Until the market hit resistance later, any worthwhile trades were longs, not shorts no matter how many NDs, etc. there might have been.

Eiger

[GLE%]

Hi Eiger,

Thanks for your response. Must be quite a task responding to these posts, I appreciate your efforts.

I have literally poured over your posts and charts so many times, that I have a mini "Eiger" book being created on my pc. So yes, I am not only getting your point, but see further questions with material that you have already posted. I trust that makes it clearer.

So with that in mind - a few more q's:

1) The previous few days on a 15min chart (background, background, background), there was a lot of selling. Literally, it was all downhill.

The rise in the market in the elipse I marked out, was for me, perhaps unexpected. I would have expected you to be looking for shorts, as the short term trend was down - concur?

2) At 10:15 (on the 15min chart) we hit the previous days low (main session). We trade through it, and retreat somewhat. This is on fairly high volume - certainly the highest volume of the 2nd Feb up until that time. Is the only SOS that you are looking for?

3) As we continue in the resistance shown on the 15min chart of yours, the volume definately slacks off. Is this the general SOW you are now looking for (which works well with the resistance on the 15min close).

4) At 11am, we have a traditional No Demand bar - this could be interpreted as a test? - the next 15 min bar, we trade down, making a no supply bar, and the very next bar, another no demand (or test).

The rest of the questions are on the chart. Trying to figure out the signs here, and see if you are using supplementary signs in making your trades.

Mucho gracias!

GLE