[joshdance]

I am looking for practical ways to correlate principles of VSA and bid/ask volume in my trading.

So, in VSA a wide spread down bar with high volume after a period of trending can show exhaustion of the trend, and weakness, correct? If, in a down trend, we get a wide spread down bar on high volume, and indeed there is weakness, according to the principles of VSA, wouldn't we typically expect to see a large negative delta, that is, more market sellers hitting the bid, to indicate passive buyers beginning to accumulate for a move up?

[TheNegotiator]

I think it's all got to be viewed in context to current market activity and position of the market within the overall price structure. I am no big VSA expert although there are a few here on TL, but some of the principles are more widely used in trading. I think for delta though, I'd be using it as a confirmation. On a reversal such as the one you described, I would think a large negative delta to indicate an imbalance in trading would likely be useful in your decision making. You'd have to watch the delta though for these types of circumstances and see what you would believe to be a large delta imbalance in terms of the market and 'time'frame you trade is.

[johnw]

Originally Posted by TheNegotiator »

I think it's all got to be viewed in context to current market activity and position of the market within the overall price structure. I am no big VSA expert although there are a few here on TL, but some of the principles are more widely used in trading. I think for delta though, I'd be using it as a confirmation. On a reversal such as the one you described, I would think a large negative delta to indicate an imbalance in trading would likely be useful in your decision making. You'd have to watch the delta though for these types of circumstances and see what you would believe to be a large delta imbalance in terms of the market and 'time'frame you trade is.

Excellent thoughts.

And watch carefully when a large MO[s] reverses the imbalance before you have time to be filled.

MOs move price and deltas lag.
This is not apparent in anything other than real time.
The Neg is correct "You'd have to watch the delta" and you can only watch in real time.

[joshdance]

Thanks Negotiator .. johnw, what is "MO" .. (momentum?).

How true that these things can't just be taken as mechanical signals, that's definitely not what I want anyway.. just a way to add a bit more objectivity to my analysis. Have a look at this chart and see the delta associated... thoughts?

In real time today when this happened, I thought the third bar would be the one to short if I were going to go against the strong movement because of what I saw in the volume, though I was not confident enough to take the trade. The first bar with the arrow says to me "we're getting tired" .. the second says "one more try" from the bulls (note the higher delta on this bar, indicating they still have the momentum). The last one says that the bears finally have enough on their side to push it down even if just for a bit, with the lessened positive delta compared to the first two bars, and the close near the lows.

What do you think of my analysis?

[johnw]

Originally Posted by joshdance »

.. johnw, what is "MO" .. (momentum?).

MO = Market Order [as opposed to Limit Order]

[joshdance]

Thanks john, got it.

[TheNegotiator]

Originally Posted by joshdance »

Thanks Negotiator .. johnw, what is "MO" .. (momentum?).

How true that these things can't just be taken as mechanical signals, that's definitely not what I want anyway.. just a way to add a bit more objectivity to my analysis. Have a look at this chart and see the delta associated... thoughts?

In real time today when this happened, I thought the third bar would be the one to short if I were going to go against the strong movement because of what I saw in the volume, though I was not confident enough to take the trade. The first bar with the arrow says to me "we're getting tired" .. the second says "one more try" from the bulls (note the higher delta on this bar, indicating they still have the momentum). The last one says that the bears finally have enough on their side to push it down even if just for a bit, with the lessened positive delta compared to the first two bars, and the close near the lows.

What do you think of my analysis?

With context, some of the best indications given from delta are when heavy buying or selling fails to take out a level. In this case, I would say the first clump of +ve delta shows that there is buying interest which is likely to take the market higher. The second single high delta candle showed some strength although in isolation it would have to be questioned. A pullback to the high volume candle in the first delta push and failure to retake it to the downside should've said that the market was not quite ready to give up on it's attempt higher. When the test came however, it was on slightly lower volume but considerably lower delta. Coupled with the fact that it couldn't close above the high of the prior high delta candle, that would've said that at least the move up was over for now.

Hope that make's some sense!!

[TheNegotiator]

I have to ask josh, do you ever look at cumulative delta?