[Eiger]

Since the VSA II thread now has over 2,200 posts and 128,000 visits, it seemed time to start VSA III. To get us rolling, here is quick VSA look at how the market unfolded this morning on the 3-minute time frame (S&P e-minis).


The market opened higher than yesterday’s close, fell off over the first 15 minutes to A, and then tried to rally.

B – the rally to B did not bring out demand, and the bars at B were weak, closing on their lows.

C – A very weak bar with an increase in spread and volume to the downside. Supply came into the market here.

D – No demand on the first rally after weakness appeared and a good short.

E – Volume drops off as the market moves lower into the area of yesterday’s close.

F – A bottom reversal on good spread indicating demand.

G – the market tests the lows of E/F and is unable to draw supply. As it begins to rally, it tests again at G1.

H – An increase in volume with a good close, but the spread narrows – caution for longs.

J – Down bar, on wide spread and high volume shows supply has reentered the market.

J – No Demand followed by a small hidden upthrust.

K – Again we come back into the lows and find no supply and the market rallies.

T – Tests occur below the resistance at I indicating a rally and a break of I.

L – small bottom reversal/key reversal bar which tests for supply by dipping lower one last time before moving up to close on its high.

M – Break through the resistance at I and a rally into the noon hour. Note that the volume falls off as we move into the noon hour and come into the morning supply at A.

Hope this is helpful,

Eiger

[Tasuki]

At the start of this new thread I'd like to share with you an indicator that someone made for me. The idea was as follows: VSA folks often place significance on volume that's less than the previous two bars. Why not create an indicator that reflects this by painting such a volume histogram blue? Well, I started with tradestation's "Volume Average" indicator (standard issue) and tried to play around with it myself to adapt it, but I'm not good enough at EasyLanguage, so I threw it out to the tradestation forum and somebody coded up for me the indicator I've got attached.

As you can see from the attached chart, it doesn't work so hot. All the vertical lines are places where the volume was less than the previous 2 bars, but it didn't get a blue color added to it. I'm not sure why that is. If someone can fix it so it correctly shows each and every instance where the volume of a given bar is less than the previous two, I'd be very grateful.

As it is, the indicator does have some value, especially when you get multiple bars with decreasing volume. It just gives you a visual cue that can be especially helpful when scanning charts.

Good trading all,
Tasuki

[Eiger]

Originally Posted by Tasuki »

At the start of this new thread I'd like to share with you an indicator that someone made for me. The idea was as follows: VSA folks often place significance on volume that's less than the previous two bars. Why not create an indicator that reflects this by painting such a volume histogram blue? Well, I started with tradestation's "Volume Average" indicator (standard issue) and tried to play around with it myself to adapt it, but I'm not good enough at EasyLanguage, so I threw it out to the tradestation forum and somebody coded up for me the indicator I've got attached.

As you can see from the attached chart, it doesn't work so hot. All the vertical lines are places where the volume was less than the previous 2 bars, but it didn't get a blue color added to it. I'm not sure why that is. If someone can fix it so it correctly shows each and every instance where the volume of a given bar is less than the previous two, I'd be very grateful.

As it is, the indicator does have some value, especially when you get multiple bars with decreasing volume. It just gives you a visual cue that can be especially helpful when scanning charts.

Good trading all,
Tasuki

Thanks for posting this. It would be a very useful paintbar application. It is interesting that you post this now as I just sent a check out today to open an account at tradestation. I haven't used TS for quite some time, but when I did, I thought it was quite good. So, I would find this helpful as well. It would also be useful to color code the price bars as up (higher close than previous bar's close), down (lower close than previous bar's close) and level (same close) -- see example in the chart in the first post on this thread. If no one picks up on this in a day or two, I'll copy it into the coding forum and make the request there. Thanks, Tas - it's a good idea.

Eiger

[kuky969]

I would like ask Eiger ,what do you think about it. ??
It is chart 5 min ES yesterday.
http://www.sierrachart.com/userimage...ploadImage.png
After spring (S) bar 12,30 -- 12,35 h. I looked for test bar but I didnt find, so I didnt take long trade.

It is chart 5 min ES yesterday too,but every bar starts 9,37 -- 9,42,--- 9,47 h.......
http://www.sierrachart.com/userimage...ploadImage.png
Here I see test (T) in bar 12,37-12,42h. What is your opininion. It is good take long trade after this test bar ???
Thank you

[sevensa]

Originally Posted by Eiger »

Thanks for posting this. It would be a very useful paintbar application. It is interesting that you post this now as I just sent a check out today to open an account at tradestation. I haven't used TS for quite some time, but when I did, I thought it was quite good. So, I would find this helpful as well. It would also be useful to color code the price bars as up (higher close than previous bar's close), down (lower close than previous bar's close) and level (same close) -- see example in the chart in the first post on this thread. If no one picks up on this in a day or two, I'll copy it into the coding forum and make the request there. Thanks, Tas - it's a good idea.

Eiger

Hi Eiger

I've been hesitant to post the volume indicator I am using because I am not a very efficient programmer and also don't really want to start supporting indicators, but here it goes... Maybe someone can use this as a building block, or optimize the code.

The colors used are:
Green = Regular up bar
Dark Green = No Demand
Red = Regular down bar
Dark Red = No Supply
White = Same close than previous bar on higher volume
Yellow = Same close than previous bar on lowest volume in two bars
Magenta = Highest Volume of last two bars, smallest range of last two bar and at a 5 bar high or low.

I also plot the 20 bar moving average of volume and 1.5 and 2 times the average volume.

I am using MultiCharts, but the code should compile on tradestation.

inputs:	PlotAvg(True), 
		AvgLength(20 ), 
		Val1(1.5),
		Val2(2),
		UpColor(Green),
		DownColor(Red),
		NoDemandColor(DarkGreen),
		NoSupplyColor(DarkRed),
		ChurnColor(magenta);	
	
variables: 
	Vol( 0 ),
	VolAvg( 0 ),
	StdVal(0),
	Body(0);
	
If BarType >= 2 then Vol = Volume else Vol = Ticks;	

VolAvg = AverageFC(Vol, AvgLength ) ; 
StdVal = StandardDev(Vol, AvgLength, 1) ;

Plot1(Vol, "Vol" );
If PlotAvg then begin
	Plot2(VolAvg, "VolAvg" ) ;
	Plot3(VolAvg * Val1,"SDV1");
	Plot4(VolAvg * Val2,"SDV2");
end;	

                  
if C > C[1] then begin
	SetPlotColor( 1, UpColor ); 
	If Vol < Lowest(Vol,2)[1] then SetPlotColor(1,NoDemandColor);
end	
else if C < C[1] then begin
	SetPlotColor( 1, DownColor ) ;
	If Vol < Lowest(Vol,2)[1] then SetPlotColor(1,NoSupplyColor);	
end	
else begin
	if C = C[1] then SetPlotColor(1,White);
	If Vol < Lowest(Vol,2)[1] then SetPlotColor(1,Yellow);	
end;	

If (Vol > Vol[1] and Vol > Vol[2]) and Range <= Lowest(Range,2)[1] and 
(High = Highest(High,5) or Low = Lowest(low,5)) then SetPlotColor(1,ChurnColor);

[teodosy87]

I just wanna say thank you for opening this new thread!I hope that it will be as successful as other 2 : }

[Eiger]

Originally Posted by sevensa »

Hi Eiger

I've been hesitant to post the volume indicator I am using because I am not a very efficient programmer and also don't really want to start supporting indicators, but here it goes... Maybe someone can use this as a building block, or optimize the code.

The colors used are:
Green = Regular up bar
Dark Green = No Demand
Red = Regular down bar
Dark Red = No Supply
White = Same close than previous bar on higher volume
Yellow = Same close than previous bar on lowest volume in two bars
Magenta = Highest Volume of last two bars, smallest range of last two bar and at a 5 bar high or low.

I also plot the 20 bar moving average of volume and 1.5 and 2 times the average volume ...

Hi Sevensa,

Thanks for posting this. I am glad you did -- it's a big help.

FWIW - For volume, I have always used a standard deviation function off the 20-period SMA of the volume. Even though our data is not normally distributed, the standard deviation function gives us a pretty good sense of the probabilities of the volume bar. We know, for example, that about 68 percent of all individual volume bars should fall within one SD of the mean. When the volume hits or exceeds 2 SDs,we know it can be significant (either producing an impulse move when pushing though a trading range or stopping/climactic volume). An upper Bollinger Band applied to the volume or a SD function both do the same job.

Hope this is helpful,

Eiger

[Eiger]

Originally Posted by kuky969 »

I would like ask Eiger ,what do you think about it. ??
It is chart 5 min ES yesterday.
http://www.sierrachart.com/userimage...ploadImage.png
After spring (S) bar 12,30 -- 12,35 h. I looked for test bar but I didnt find, so I didnt take long trade.

It is chart 5 min ES yesterday too,but every bar starts 9,37 -- 9,42,--- 9,47 h.......
http://www.sierrachart.com/userimage...ploadImage.png
Here I see test (T) in bar 12,37-12,42h. What is your opininion. It is good take long trade after this test bar ???
Thank you

Springs are one of my favoirte trades. I have studied and traded them for a long time and have a pretty good grasp on their characteristics. Because of that, I usually don't wait for a test for confirmation. Many times springs will just take off like it did here.

So, how would you know whether a spring has high odds or not. Your chart has all the characteristics I look for in a spring:

First, the background. Here, the market is in an uptrend. It has made higher highs and higher lows. Springs do not work well in a downtrend. I never take a spring when the trend is down unless a clear SOS and a base (cause) have occured. When I see an uptrend in place, I start thinking pullbacks and springs. Note that once again, the all-important background is always the first consideration.

What is particularly nice about this spring is that there was a reaction back to support on relatively light volume. This is a choice setup; I really like this look. It is described in the Wyckoff texts as a Jump Across the Creek, and then a Back Up to the the Edge of the Creek. The creek represents supply and the jump across the creek indicates a sign of strength. The market will frequently come back to the edge of the creek and test, as it did here. Testing in this context means not on a single bar as in VSA, but coming back into the area of supply (red curved line) aand testing it to make sure no additional supply is there which would thwart an up move. Volume on the reaction was lighter than the rally.

The bar before the Sping was telling. That bar looked ominous, closing on its low and closing lower than the closes of the last four bars. Volume did not increase substantially, however, and the spring bar dipped lower, turned around, closed on its highs, and volume came in. If you were watching this bar develop real time, you would have seen the volume come in as the bar rallied up - this is demand off the bottom. The spring bar is also a bottom reversal in VSA terms, so it had that going for it, too.

The final piece to this is that the spring bar was powerful enough to come right up to the minor supply line of the reaction. Any further advance in price would take out this line, which occured shortly thereafter.

Regarding switching how the chart displays the bars to look for confirmation -- I personally wouldn't do that. This is akin to committing "confirmation bias," or looking for indications you normally don't look at to support a decision. It is better to either study springs until you are completely confident in trading them without a test for confirmation or specifying that a spring must be confirmed by a test and if a test does not occur, just let the trade pass. Either is perfectly fine.

If your criteria includes a test and a test does not occur, so what. A trade was missed. No big deal. There is always another good trade coming just around the next corner. If you note on the chart after rallying aggressively off the spring, the market moved up above the last high (HH) making another new high, rested, held its gains, and gave a nice VSA Test for entry (green arrow).

Hope this is helpful,

Eiger