VSA Intro 1. Volume is activity. Hence tick volume can be used where actual contract volume is not available. 2. Two ways of looking at volume: * relative volume: volume in relation to the previous bar or bars. * actual volume: the amount (size) of volume an individual bar represents. 3. Strength comes in on down-bars and weakness comes in on up-bars. 4. Markets do not like high volume up bars with wide spreads? Why because there is a possibility of Professional Selling into such a bar. 5. Professional Money deals in large amounts and thus sells into up bars so as not to be hurt by their own selling. The converse would also be true. 6. 85% of a volume histogram represents Smart Money activity. 7. Smart Money is active on all time frames. Various time frames are used to hide their actions from those that can read a chart and each other. "In any business where there is money involved and profits to make, there are professionals. We see professional diamond merchants, professional antique and fine are dealers, professional car dealers and professional wine merchants, among many others. All these professionals have one thing in mind; they need to make a profit from a price difference to stay in business. The financial markets are no different and professional traders are also very active in the stock and commodity markets-these professionals are no less professional than their counterparts in other areas..... It is important to realize at this stage, that when we refer to the definition of professional, we are NOT talking about the 'professionals' who run investment funds or pensions........... So what do I mean by a professional trader? Well, one example is the private SYNDICATE trader that work in co-ordinated groups to accumulate (buy), or distribute (sell), huge blocks of stock to make similarly huge profits." Tom Williams, Master the Markets, p.14 Syndicate traders are secret, well-heeled, highly skilled, and happy that you believe (wrongly) what you believe. Just a quick point. 'Pure' VSA as described by Williams does not pay any attention to the open. Williams does look at the previous close in comparison to the current close. In fact this is the basis used to determine an up bar / down bar. He also looks at net change (last close -> current close) but that’s a fairly secondary thing and not written about anywhere. Most of the information is there with HLC bars though perhaps not in as visually accessible form as a candle. Of course the only time that it is not is when there is a gap i.e. last bar close <> this bar open. Intraday not likely to be much of a problem. When there are gaps VSA may consider a bar an upbar where a traditional candle may consider it a downbar. The thinking is that the close is the most important price point as it represents the result of the struggle between the bulls and the bears for the particular interval you are looking at.
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VSA & Candlesticks It should be said that candle can be used. TG offers them because many traders like them. I used to like them myself. But bars are easier to see especially at first. Tom Williams (father of VSA) uses bars Todd Krueger (TG and leading VSA expert) uses bars Gavin Holmes (TG) uses bars Sabastin Manby (Tom's friend and VSA expert) uses bars. Read his article on the T2W forum. Joel Pozen (Formerly of TG, Student of Richard Ney, and one of the best chart readers, second only to Tom Williams) uses bars. Check out his site at Tradingmentor.com If one uses candles, one need to remember that the close is more important than the open. Hence while a candle may close in the middle and have an equal open, what matters first is the middle close. The fact that the bar is a Doji is secondary. As far as multiple time frames. The best approach may be to find certain support/resistance levels on various higher time frames, but trade off of just one lower time frame chart.
VSA Scenarios Interesting discussion, folks. What I'd like to see is a compendium of VSA setups, with a dozen or so examples of each, to show how the same setup might look with different scenarios. I've only been studying VSA for a little while, and Tradeguider says it has over 400 signals, but they seem to come down to a common few, really: 1. tests (successful and unsuccessful) 2. shakeouts 3. no demand 4. stopping volume 5. pushing through supply 6. upthrust 7. selling/buying climax 8. climatic action 9. support/weakness coming in 10. trap up/down move 11. no result after strong effort 12. selling/buying pressure 13. bottom reversal 14. end of a rising market
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Smart Money Here is a chart of some of today's price action in the Euro.
What is telling here is the actions of Professional Money PRIOR to the news release. We can see when they begin to position themselves and on what side through the use of VSA. Almost an hour beforehand, we see an Ultra Wide Spread Bar with Ultra High Volume, that closes down from the previous bar and closes in the middle of its range. This bar represents a transfer of ownership. That is, the Professionals are buying from the retail traders. Why would they be buying prior to a usually volatile news release ? Seems like a risky thing to do. Could they already have an idea of what it will say? Now VSA tells us that if this is the case, we would expect that if they are BUYING now, they will be SELLING into the release itself for profit taking. Especially If the news spurs the retail traders into entering the market on the long side. However, if the retail trader is believes the news to be bearish, they (Smart Money) would be BUYING more. That is, if the retail traders are getting short, who are they selling to? So we should see both Professional selling and buying. We don't expect then to get net short in other words. Check out the large dark hammer as the news is released. There was some profit taking on that bar. But the bar has ultra High volume, closes on its low with the next bar up. Some 3
buying must of taken place as well. More exactly, they took profits and then began buying as the retail traders (weak hands) rushed in on the short side. We always want to consider "who is on the other side" with VSA. Usually, its the Smart Money and that is not good. I should say, without VSA it's usually the Smart Money and that is not good. Note that price did begin to fall for a few bars. But then we get a dark hammer line. The Long Shadow of the hammer line happens, not so coincidently, to trade into the region of the First candle mentioned where the transfer of ownership begun. The Smart Money is becoming aggressive on the demand side. They are locking in the weak holders (retail shorts) as they know price is going HIGER NOT LOWER. The down move and the dark hammer itself may have even pushed some weak longs out. If you look at a chart beyond the time shown here, you will see the strong up move that ensues. 1. The Smart Money began getting long (long) prior to the News. 2. Some used the event to take a bit of profit. 3. Most got even more long (demand). 4. Once the weak holders where short, price found support in a such a way as to knock out weak longs and lock in weak shorts. 5. what can not be seen in this picture, is a large inverted white hammer that represents the last effort for the weak shorts to get out at break even if the bought on the news release itself. When we use VSA we get a 3 dimensional picture: volume, range and price. Ignoring one of them (like volume or keeping volume constant) is like cutting off one leg of a tripod...............
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Squat Bars and Volume Spikes Another example would be what Bill Williams calls a squat. Basically a squat is a bar with a narrow range and higher volume. VSA teaches us to pay attention to a narrow range bar that has higher volume (especially) if it is ultra high and closes in the middle. Essentially, this is just a more specifically defined squat bar. Soultrader: "I have a litte trouble understanding volume demand bars after a selloff. I have attached a chart from yesterdays action. The rectangle box shows couple sell volume spikes. My questions is this: How do you watch for demand bars after that spike? In the first rectangle the volume spike is created by a doji. The next price bar closes above the high of the doji... this occurs on lower volume. How do you interpret this? To me it seems like supply is cut off but price continues to drop. The same thing occurs in the second rectangle box. Volume spike is created on a down bar but the next bar closes above the low of the previous bar. Any advice would be appreciated."
PivotProfiler: "A couple things to think about. First at the time of the volume spike what was the trend? This is very important. If the trend was up then what we would be looking for is different than if the trend was down.
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Next, are we around a known support/resistance area. These areas are usually respected by Smart Money. If we are and the trend is down, then we would expect to see demand enter the market, but not necessarily a change in trend. After the large volume spike that closes on or near its high, we know that there must of been some Professional buying going on. Price does indeed move up. But as the trend is down we might expect to see a narrow range bar with volume less than the previous two that closes up from the previous bar, with the next bar down-No Demand. Once you see the spike bar, You begin to look for either No Demand , No Supply, Tests , or Up Thrusts." "A squat is the strongest potential money maker of the four Profitunity windows. Virtually all moves end with a squat as the high/low bar plus or minus one bar of the same time period........ The squat is the last battle of the bears and the bulls, with lots of buying and selling but little price movement (NARROW RANGE). There is almost an equal division between the number and enthusiasm of both bear and bulls. A real war is taking place and the equivalent of hand to hand combat is going on in the pits..............", Bill Williams, TRADING CHAOS, p.93. Bill Williams' technical definition of a squat bar is a bar with greater volume than the previous bar and decreasing MFI (Market Facilitation Index). The short hand definition is, volume greater than the previous bar and a SMALL range than previous bar. As I do not use mathematical formulas, it is the short-hand definition that I look at. Tom Williams says that the range of a bar tells us the sentiment of the market makers, the ones who can see both sides of the market. For Volume Spread Analysis the story above is off while the bar itself is of note. VSA would say that the volume is the retail trader rushing into the market. The spread is narrow because as the retail rushes in to buy, for example, there is a substantial amount of Supply from the professional to a meet that demand. Because the market makers see resting orders to sell from the smart money, they have a different perceived value of the stock/index/currency. This perception of value is such that they are willing to keep the spread narrow as they see expect prices to fall. If they, the market makers, were in fact bullish, they would increase the spread, not let retail traders come in and get "good fills". Simply put, as volume increases the range of the bar should increase as well. If the range is decreasing, something most be going on underneath. What is going on underneath is either Supply swamping Demand or Demand swamping Supply. This often happens at Market tops or bottoms (like Bill said). We are yet again at situation where we see two different methods coming to the same conclusion. Tom never mentions squat bars, but he talks about narrow spread bars on high volume (p.77 for one-when discussing market tops.) A squat and a test are not related, but could be the same bar. A test that has a narrower range than the previous bar and has higher volume is by the short hand definition a squat. An UpThrust might also be a squat. Note that at potential turning points as defined by VSA: Tests, UpThrusts, we have the potential for a squat. Which as stated above often come at plus 6
or minus one bar from said turn. To be sure, not all squats are turning points and not all turning points have a squat. Generally speaking, the higher the volume the more likely the squat will be a market turning point. PivotProfiler on Narrow Spreads & High Volume (Squat):
" This is very simple to see. The public and others have rushed into the market, buying before they miss further price rises. The Professional Money has taken the opportunity to sell to them. This action will be reflected on your chart as a narrow spread with high volume on an up-day. If the bar closes on the high, this is an even weaker signal.........." Tom Williams, Master the Markets, P. 77. Just wanted to show something a bit different. A few caveats: * As previously mentioned, Not a good idea to enter trades after 1300 and certainly not after 1400. * The above is even more so the case on a Friday.
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What I wanted to show here was the narrow range bar on high to Ultra high volume. Of course, this is the type of bar where WRB & Long Shadow Analysis skips over. VSA, however, does not. Again, the over-arching concept remains the same. We would be looking to see some type of entry signal within the body of a significant WRB or Long Shadow. What happens here is after an effort to rise we see a No Demand bar. This bar closes on its high and has volume less than the previous two bars. The very next bar has a narrow range, closes on its high and has greater volume than the previous bar. THIS IS A SQUAT. The above quote tells us the importance of the close on the high with this type of narrow range high volume bar: Weakness. So if we step back, we have just seen a No Demand bar. Which tells us the Smart Money is not yet interested in higher prices. The next bar we see has a compressed range on higher volume that closes on its high and closes equal to the previous bar. "..So by simple observation of the spread of the bar, we can read the sentiment of the marketmakers, the opinion of those who can see both sides of the market.", Master the Markets, P.28. Some may note the No Demand signal a few bars earlier. This would be a good place to short if we were not in a naturally low volume period. More over, the reason this short could be considered is because of the Ultra High Volume seen as an effort to rise. Then the following No Demand/Squat sequence. Simply, volume as a whole increased during this time so while the time of day remains a reason not to enter, the lack of volume doesn't. What is important here though is the idea of the narrow range bar (narrower than the previous bar) on high volume, which is higher than the previous bar. In other words, the squat; Bill Williams' term, not VSA's term.
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VSA and WRB's VSA and WRB & Long Shadow analysis are the primary methods and are used to understand the contextual backdrop thru which a candlestick pattern trade can be taken. Take a look at the chart below.
We see a WRB on Ultra High Volume. VSA tells us that markets do not like Wide Spread up bars on Ultra High Volume. Because there could be hidden selling in the bar. Now check out the very next bar. This bar has almost as much volume as the WRB, in fact it has 3 ticks less. BUT the range is much more narrow and the bar closes in the middle of its range. This is a transfer of ownership bar. The Smart Money is dumping supply into the market. As retail traders rush in to get long, the Smart Money is all too happy to sell to them. Like I said, we need to always be aware of who is on the other side of the trade. While this bar is up, on high volume it is not "up volume". Most volume indicators and volume analysis would assume it is positive. But we know better than that. A few bars later, we see a narrow bar that close up from the previous bar and closes in the upper portion of its range, but on volume less than the previous two bars. This is No Demand. Professionals are not interested in higher prices at this time. At this point we have context. Supply has entered the market. Note that price overall begins to 9
move sideways. There are some who would go short after the No Demand with the background selling that can be seen. This is a personal choice. For me, all that the context says is, "now is not the time to be going long". I need to see some candle pattern, preferably within the range of the WRB, to get me short. (if you look at a chart from today, you will see that price plummeted after the jobs report). But my point is this, the context, or story, at this time says more about NOT going long than simply get short. A Tradeguider "sign of weakness" might appear on the transfer of ownership bar. It would therefore look like the top was called and thus possibly sold. This is the error that most indicator only traders who look at TG make. Another example: BEFORE & AFTER: I have attached two charts. The first is the before and the second is the after. Let's look at the chart before:
For me the key concept comes thru at least a basic understanding of WRBs. Of course, VSA doesn't look at the open, but I think much is missed if you don't. More over, I think that if VSA did, they would come to the same conclusion. And in fact, they DO come to the same conclusion partially when dealing with wide spread bars (more on this later). The first bar with the double arrow is a wide spread bar that closes in the middle on ultra high volume. Supply enters the market on this bar. Not a place to go short. The reason: the reason 10
is explained in the next highlighted bars. The next bar we have is a Long Shadow and in VSA terms, it is Ultra Wide Spread bar on high volume, that closes lower than the previous bar, and closes in the upper portion of the range. DEMAND entered the market on this bar. Now, here is where I depart from VSA. We now have a Long Shadow that creates a support/resistance zone. We also see that this Long Shadow tells us that demand overcame supply on the lower portion of the bar. Not to mention, this bar is a Doji (close=open). VSA does not care that it is a doji, yet the conclusion that something is changing in the supply/demand dynamic is the same-Buyers came in on this bar. Still not the bar to get into the market on. The next key bar is a WRB. WRBs also tell us of shifts or changes in supply and demand. Then we get a No Demand bar. Again not a bar to enter on. What we need to see is something happen within the RANGE of the WRB AND OR THE RANGE OF THE SHADOW OF THE LONG SHADOW BAR. Ideally, the market will move back down and give us a No Supply or Test within these ranges. Then we should be looking to go long. And that concept is what Todd does not say much about. Clearly, he would not talk about within the context of the WRB because he does not look at the open, but he can talk about the overall range of the Ultra Wide Spread bar. In other words, even though he would not know it is a Long Shadow, he would recognize the bar as Ultra Wide Spread and thus should be used as a matrix to measure what comes. The next chart is the AFTER:
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We do indeed get the No Supply sign in the range of the WRB and the Long Shadow candle. Once we have the confirmation bar up, the next bar, we get long at the close of that bar/open of the next bar. Note that there are two gaps and gaps are usually filled so we need to keep that in mind. Reply by Pipprofiler:
After the up move in price what happens next? There is on thing we want to keep in mind; we had a couple of Gaps on the way up. Gaps are usually filled. They can at times, however, act as support and resistance areas...... Let's look at the what happens when a test fails. The first thing you will notice is a WRB. Not important to VSA but oh so telling to the rest of us. The best places to see tests, upthrusts, and no supply/no demand bars are within the body of a WRB or shadow of a Long Shadow candle. We have our WRB in place. This creates a natural support/resistance zone. Next we see a narrow bar that closes near its high, closes equal to the previous bar, and has Ultra High volume. THIS IS A HIGH VOLUME TEST. Smart money is looking for sellers and is 12
finding some. While it is true that sometimes the market goes up on high test, it usually does not go up far and then comes back down to re-test the area. As always the next 1 or 2 bars need to be considered. To actually confirm the test we need to see one of the next 2 bars close Higher than the close of the test. Otherwise, we have a failed test. Notice what happens here. The next bar is down and then the bar after that is an up bar but closes equal to the close of the test bar. Now, look at the next bar. We have an up bar that closes in the middle to slightly up on relatively high volume. It is not as high as the test, but it is still high. Up close (from previous bar), on high volume closing near the middle: This is supply entering the market. At this point, we have a FAILED test on high volume and more supply showing up. The very next bar closes on the high with volume less than the previous two bars and closes higher than the previous bar. This is no buying pressure. As it would happen, the high of this bar is equal to the close of the WRB. TG WONT TELL YOU THIS. Then we get the next bar down. From a VSA point of view, now is the time to go short. * the test of supply has failed. * New supply entered. * No buying pressure. couple that with the fact that there are gaps below and all this is happening at the low of the S/R zone of a WRB. Now let's take a look at a test that does not fail. I would first point out that from a time of day perspective, this is not an ideal time to be entering a trade. It all starts with a WRB. We have an Ultra Wide Spread bar on Ultra High Volume that closes on the low. But the next bar is up. If this bar is up then there must of been some buying in the previous Ultra Wide Spread bar. WRB analysis tells us that changes and shifts in supply/demand occur in WRBs. More reasons to think something is indeed going on. 3 candles later, we see a narrow range candle that closes on its high, makes a lower low and has volume less than the previous two bars. THIS IS A TEST. Technically a possible test, as we do not have a confirmation bar yet. Confirmation comes 2 bars later when we see an up bar that closes higher than the close of the test bar. First possible entry point, with no regard to time of day. If you missed that point there is another. We get a bar that closes on its low, has a narrow range, has volume less than the previous two bars, with the next bar up. THIS IS NO SELLING PRESSURE/NO SUPPLY. What is nice about this bar is the volume. While the test volume was lower than the previous two bars, it was not as low as the volume on this bar. More evidence of the lack of sellers underneath. Also note that we are within the range of the WRB as on this bar. So we have a second chance entry which may in fact be the most ideal entry of all for some (leaving time of day out of the equation). Back to the test candle. Some may note a hammer line that appears to traverse into a bullish
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white hammer pattern. It does not. But if you had mistaken it as such, here too, time of day should have kept you out. And some more replies:
Not all WRBs are created equal. While there may be many factors in what constitutes a significant WRB, the three main are: * Size in relation to other WRBs * Amount of volume * If the WRB is the result of some news related event NihabaAshi is the true WRB expert and may be able to enlighten us as to some of the more reasons that determine a WRB's significant. As I know you are looking at VSA, don't let what I just said about WRBs confuse you. There are three factors that constitute significant bars in VSA as well: * Size in relation to other wide spread bars * Amount of volume * If the wide spread bar is the result of some news related event
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Now in the chart below we see numerous WRBs or wide to Ultra wide spread bars. However, they are all not equal. Let's just focus on the very first one on the left hand side of the chart. We see an Ultra Wide Spread bar with Ultra High Volume that closes up from the previous bar. VSA teaches us that markets do not like Ultra Wide Spread or Wide Spread bars on high or Ultra high volume. Because they could hide selling (supply) within them. Although some times they are indeed strength. Which by the way, much time is spent on in the bootcamp. Because many people after hearing weakness (supply) comes in on up bars automatically assume all up bars are weak. We know this bar had some selling (supply) once we see that the next bar is down. If all that volume was buying (demand) then the next bar could not be down. What we often see next, if the market is strong, is either a No Supply or Test for supply bar. Here we see a test. This is a low volume test. Note that volume is less than the previous two bars. Note that the test makes a lower low than the previous bar and closes on its high. It hard for me to separate some things, so I must point out that this test bar is in body of the WRB. But from a pure VSA point, note that the test is within the range of the Ultra Wide Spread bar. SIMPLY, A LOW VOLUME SIGNAL WITHIN THE RANGE OF A PRVIOUSLY HIGH VOLUME BAR. Many concepts in VSA are logical. Here we see some supply enter the market. The next thing we see is a test of supply. The Professional want to take prices up, but are making sure that the supply is out of the market. If there were sellers underneath, then there would be more volume. And if a large amount of supply had entered (more than the demand present) then price would go down on more volume. The key(s) here are that the 'test' comes immediately after we see supply enter the market showing us market strength. Or, simply put, location and background information. An aggressive trader might enter once the test is "proven" on the next bar that closes higher than the close of the test. Shown here. The reason for the question mark is that not everyone would enter at this point. Some use multiple timeframes, some use price action patterns, and some even use indicators ( ). To be sure, the market did indeed move up and a quick profit could have been made. In fact, one could still be long as of this pic and in profit using only one timeframe and that repeatable and reliable pattern. Once you witness Ultra Wide or Wide Spread bars on High or Ultra High Volume, you want to then start looking for bars with low volume. This is where you find no supply, no demand, and some test bars. Sometimes there will be high volume tests or Upthrusts on high volume. An Upthrust is kind of like a high volume test but showing weakness rather than strength. That is, a high volume test will close on or near its high and an Upthrust closes on or near its low. Ideally a high volume test will make a lower low while the Upthrust will make a higher high. There is a lot more here, but it is enough to say that every No Supply or No Selling Pressure sign in this pic is within the range of a significant Wide or Ultra Wide Spread bar. More precisely, within the body of a significant WRB.
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And another reply:
Primary methods: 1. Volume Spread Analysis 2. WRB & Long Shadow Analysis
We trade right by first looking left. First we look at the higher time frame. Markets are fractal and the higher frame dominates the lower one. The 15 min chart . As previously stated, the start of the day should be at 0200 New York time according to Mark Fisher. This is when London trading begins. Notice that we see a squat. A narrow range candle (narrower than previous candle) with volume greater than the previous bar. Supply is entering on this candle. At 0400 hrs we get a No Demand sign. At this point we have seen a squat and a dark inverted hammer with a Long Shadow. Supply is entering and volume is less on up candles. At 0430 we see another No Demand sign. It is a good guess that there are no buyers in the market. If Professional money is not buying (supporting) then the path of least resistance is down. Jump over to the 5 min. The fist significant candle is the Effort to Fall candle just after the No Demand candle. Note that we see a test candle after this WRB, which is also an effort to fall candle. While the volume on the test is low, we have not seen strength on the 15. No reason to be looking to go 16
long. The next candle is up on Ultra High Volume. Markets do not like up bars on high to ultra high volume. Indeed, supply entered the market on this bar. But we now have our WRB that creates a Support/Resistance zone. This is where we would like to see an entry signal. Preferably a low volume signal where there was once high volume. Or a high volume (squat) or UpThrust. AT 0435 we see a narrow range bar that closes up on volume less than the previous two bars. This is No Demand. We have seen Weakness on the 15 min chart and now we are getting No Demand on the 5 min. Even though there is no "vsa indicator" we are reading the candles and see our entry. We note that this No Demand is both within the body of the large white WRB and within the body of the Effort to Fall candle. If the Smart money was trying to push prices down around this area (range), then it is a good sign (of weakness) to see little volume on a candle in the opposite direction within that range. My definition of a WRB is a candle (or bar) with a body (Open -Close) larger than the previous 3 candles. Hence there are 4 candles(bars) in the definition, not 3. While the amount of candles used in the definition can be changed to 4 or 5, 3 should be the minimum amount. This is the definition used by the man who pioneered this concept, NihabaAshi. The only thing I see as a potential problem with your definition is that it is hard to SEE that a candle(bar) is a certain standard deviation wider than other candles. That is to say, the traditional way is more Visual and thus more adaptable when one is watching multiple markets/charts. I also think you can miss a great deal of what is going on as the WRB does not have to be a set amount larger than the previous 3 candles, only on handle(pip/tick) larger. While the more significant WRBs tend to be large, they do not need to be. Mark would tell you that WRBs represent, among other things, volatility changes in the market. Sometimes that change or shift is subtle (think of three dojis followed by a candle with the open 1 pip below the close-a dark WRB by definition). In this case the WRB is not large and not all that important, but it is expected. As we would expect to see increased volatility after a period of little or no volatility. Volatility here of defined by the size of the body.
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Entry/Exit Concepts
The concept: Best entry/signals tend to be low volume signals that occur within the range of a previously high volume bar. First, it should be noted that the attached chart was taken as the market was in a normally low volume period: the Sunday night opening period. It should also be noted that I have shown some Result on the chart and that means that the candles discussed do not appear to have the amount of volume they actually have. What that means is After the appearance of these candles with high and Ultra high volume, more candles were created with even higher volume. This gives the impression that the candles discussed have less volume. But keep in mind, we look at volume both relatively (relation to the previous bar or bars) and absolutely (actual size of the bar in question). That said, let's see what we have here. Note that the very first candle highlighted is an inverted white candle with Ultra High Volume. This gives us a Long Shadow. Long Shadows signal changes or shifts in supply and demand and so too does Ultra High Volume. After the supply enters the market there is a No Supply sign a few candles later. Despite the supply that came in, the Professional Money is not yet interested in lower prices. Price thus moves back up where we see a narrow range bar with higher volume than the previous candle. This candle also is a Doji. Note that the close of the Doji is within the range of the Long Shadow. It closes at the high of the Long Shadow. But before we get to that point, we see a white WRB created 18
with High to Ultra High volume. Now here is the key. We see a No Demand candle, which happens to be a Doji, created within the range of the large dark WRB. But notice that this low volume signal has traversed back into the shadow of the Long Shadow inverted white hammer line and the white WRB. So we are seeing low volume in previously high volume area. If any of that volume represented buying that buying pressure is no longer present. Simply, looking at where the volume was once high and now seeing little volume is a clue that the supply/demand dynamics have certainly changed.
No Result From A Test
"No immediate results from a previous test can show weakness is present in a bear market. However, you should remain observant for a second test in a strong market. If you can see a what appears to be a successful test, the market makers, or specialists will also have seen the indication. If there is not an immediate up-move, or the up-move fails over several days (or bars, if on a shorter timeframe), this now becomes a sign of weakness. The professional money has not responded because at that moment they are still bearish.", Master the Markets, Tom Williams, P. 155. A while ago myself and BrownsFan got into a discussion about "knowing when you are wrong, or at least early into a trade". He argued that he does not know he is wrong until his 19
stop is hit. My point at the time was that one can see if he is wrong, or wrong on timing, prior to the stop being hit. Therefore, like the POP said, there is no need to wait for the stop to be hit. Don't wait for the market to prove you wrong, look for it to prove you right. What neither of us mentioned was something NihabaAshi is a proponent of: a Contingency plan. Basically, a contingency plan is a price action pattern used to tell you something has changed and the prior signal is no longer valid. Once this pattern appears, a long is reversed into a short. Note this is different than a simple stop and reverse procedure as it is possible for the contingency plan to be triggered before one's initial stop is hit. If you are interested in contingency plans, NihabaAshi is the one to talk to. What this chart shows is based on the concept however. First we see a good test. The volume is not low, but it is not high either. It is confirmed on the next bar with a close up. This is where you go Long. My stop would be just under the low of the test bar. Note what happens next. price moves down and a dark WRB is formed. From that point, another test candle appears. On this test, the volume is lower than the first test, and the candle is at the same range of the first test. Again, this test is confirmed on the next bar. Two bars later, we see a No Demand sign. Not a good sign for the longs. This No Demand is completely within the bodies of Two WRBs (hint). But the bar that confirms the no demand sign is key. It is another large dark WRB. What is most important is that this candle (Dark WRB) closes below both test candles' lows. A dark WRB closing below the low of the test candle should trigger a trader to at least re-evaluate the long position. Note here that it would have stopped many traders out, but not all. With the appearance of a No Demand and a dark WRB that closes lower than the low(s) of the test candle(s), we have no doubt that we are seeing No Result from a Test. Our contingency plan would thus be triggered and a short is placed on the next bar. Again, understand, these are not failed tests, they are good test with no results. Simply, we have negative action. Negative Action: "If you observe a positive indication, but you do not observe the expected results, then we refer to this as 'negative action'...." P. 152
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Narrow Range Bars Gordon G: Hi PivotProfiler, As regards Ultra Wide Spread Bar and the search for signals within its range, do you think it is worth considering also entries within narrow spread bars with ultra high volume ? Thanks PivotProfiler: Narrow range bars with Ultra High Volume are very important. However, with a narrow range bar it is less likely that a signal with appear within its range. That is, because the bar IS narrow, it is "harder" for a signal to appear within its range. Of course that depends on how narrow the range actually is. It is better if the narrow range bar comes within the range of a WRB or Long Shadow. But if a low volume signal does appear within the range of a narrow bar with Ultra High Volume, it is surely worth taking. (as long as everything else is in alignment). As this thread is VSA, I will not say much about the Low Close Doji pattern, but it too signals a short entry. I would say that the pattern happens where we would want it to be: within the range of a WRB.
Fist let's start with the 15 min. Notice the Effort to fall sign followed by a No Demand. See how the No Demand is within the range of the Effort candle. This is a sign of weakness. Next, we see a narrow range bar with increased volume: a squat. At this time we now have seen supply enter the market and some downwards price action that will make us predisposed to be short on the trading chart. The trading chart. First Note the large white WRB. This sets-up the support/resistance zone. As I must apparently repeat things, we want to see something happen within the range of this candle. 21
Price trades higher after that white WRB on high volume, but the range of the bar narrows, so we know that there was some supply (selling) in the high volume WRB. Now the key bar. A dark WRB (although smaller than the white WRB) appears. WRB: body greater than the three (3) prior intervals. This WRB happens to be "effort to fall". In other words, the Smart Money wants to take prices down. Note that we then get a No Demand bar within the range of this dark WRB and within the range of the large White WRB. Time to get short. Upside weakness where the market previous showed downside strength. If you missed that, There is a doji that also happens to be an Upthrust 3 bars later. Get short. Weakness in the background and an UpThrust a classic short signal. Did I mention that the Upthrust is within the body of the WRB? (well, the one's I favor would usually be)
Through the Looking Glass
Beautiful chart to post on what one should be seeing when he/she looks at the market through the prism of Volume Spread Analysis and WRB analysis. In my opinion every trader should have a "story". That is, a reason "why" price does what it does. "Why" certain players behave in certain ways. "How" the players are. "What" an overbought reading on the RSI means. VSA has a story. I believe in that story. 22
Let's take a look at how the story placed out last week. This chart is from Friday before the Payroll report. The first thing to see is an Effort to Fall bar on the left side of the chart. VSA's story tells us that effort represent professional money trying to move price either up or down. This bar is also a WRB. I have melded the concepts of effort from VSA with WRBs. Now, WRB analysis tells us that a WRB represents a change/shift in supply/demand among other things. Therefore if there has been a shift in supply/demand it is to the downside-an effort to take the market lower would mean adding supply to the market. Okay, we need on more thing. Professional money is not sitting around a large table in a smoke-filled room saying " Let's try and take price down on the retail trader in 10 minutes.......". No some Professional money will want to go long and some may want to go short at certain price levels. So we see the cumulative actions in price and volume. Of course, those professionals that went short (for example when price rises) also see what is going on and are usually quicker than the retail trader to 1. admit they are wrong 2. get out 3.get long. Okay now let's skip to the squat bar. Bill Williams tells a good story about what this bar means. It is , however not quite correct. Our story is that the narrow range means that the market makers are keeping the spread narrow because they have a particular perception of value. In this case they are bullish. Hence they are willing to buy from the sellers entering. These traders thing they are getting a good price but fail to wonder why. Note what happened. Range narrowed, Volume increased on a bar that made a lower low and not a higher high (Selling Bar). However, this bar is not weakness rather strength. The market goes up. Take a quick look at the first effort bar. We do not close above the High of this Effort to Fall bar. Simply, the high is being supported on a closing basis. Let's skip to the first No Demand bar. This is an Ideal place to go short. It represents a low volume signal within the range of a High volume candle. Now think about the story. Supply/traders rushed in an attempt (effort) to take prices down. Price went down a bit but now has made its way back up. If volume is low that must mean one of two things: 1. All the traders that went short are still bearish. If they were not and their stops were being hit, volume should be high. 2. No rush of new bulls is taking place at this time. Again, think about what an Effort bar means. Professional money came in at a certain area with some resolve to move price down. Low volume up bars in this area should therefore be bearish: the high volume represent a desire to move price one way, the low volume should show the opposite. That is, no desire. Now let's move to the next No Demand bar. Another nice entry/add on point. Note that we again have low volume in the area of previously High volume. That high volume in fact, is on an Effort to rise candle. Same as an effort to fall, just in the opposite direction. The story changes slightly. This time we see traders willing to step in and buy the market, which results in the Effort to 23
rise bar. Yet, price moves down. THIS IS NO RESULT FROM EFFORT. So we see no result from the effort to rise, but are seeing result form the effort to fall. Then we get an Up bar on low volume (second No Demand). Volume on an up bar is falling. Those who wanted to take price higher have lost their resolve to do so. Think about it. In this price area (range) bulls stepped in. But now in this same level they seem to be nowhere. This must be a bearish sign. One quick note: we could also see Upthurst or Squats in the area of previously high volume. These two are usually higher volume themselves, but there is a logical and consistent story here too. This chart does not show them. It shows the low volume sign within the range of previously high volume. Moreover, that low volume sign is within the body of a WRB......
High Volume Bars 1. Okay, assume the High volume is the retail trader, or dumb money. Now the real questions is this: WHO IS SELLING TO THEM? 2. You do not want to "believe" in Professional money, fine. But Does there seem to be a group that is on the correct side of a trade more often than not? When volume is high at a top or bottom, somebody was doing the selling (at the top) and the buying (at the bottom). VSA seeks to emulate the traders that tend to be on the right side more than on the wrong one. Yet, in the book, Master the Markets, Tom Williams clearly says that some professional are wrong more than they are right. What separates them from the masses is their ability to admit they are wrong and get out of a bad position. They do not hope the market will turn in their favor. They do not curse their indicators (and most don't use any) when they are wrong, the simply reverse their positions. 3. VSA contends that 85% of a volume histogram is professional money. This is the one thing that I call the "leap of faith". Either you believe or you do not. But once you do, that means ALL volume bars are 85% professional money, even the small ones during the none regular trading hours. 4. Most traders have some idea of what the Smart Money is. One does not have to be specifically talking about trading syndicates to find value in the VSA story. VSA teaches that the market does not like high volume upbars. Why? Because there could be HIDDEN selling within that bar. Note that the next bar is down. Why? Because there was supply dumped on the market. The Pros were selling not buying............ I do not mean to sound harsh. But it the basic premise of VSA that WEAKNESS comes in on up bars and STRENGTH comes in on down bars. Simply, if you were looking for more upside, then you, not the pros, were wrong. P.s. Professional money is not professional money because it is never wrong........... It is professional money because it is BETTER at being wrong.
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Pushing Through Supply notouch: Here are a couple of charts showing how VSA is great with hindsight but not so great in real time trading. I don't think VSA is worthless on a 5 minute chart but I don't think you can point at high volume and say "that's Professional Money!". We really have no idea who or what is behind a volume spike from one 5 minute period to the next. The 5 minute charts are useful if you're looking for the perfect entry but you're getting your directional bias from the 15 minute charts. That's why I think multi timeframing is an important part of VSA. I don't think it's necessary to try and identify who is behind a volume spike. The important thing is to recognise that reversals occur on high volume around support and resistance areas.
PivotProfiler: The first thing I see on this chart are two small tops to the left that represent supply. Hence the large candle with Ultra High volume could be "Pushing thru supply". That means the volume is absorption volume as the smart money is willing to buy at higher prices. If they are willing to buy at higher prices, they must expect even higher prices. As you have said, one timeframe is usually not enough for proper analysis. 25
Strong Holders vs Weak Holders There are a few key questions a trader needs to be able to answer: * Why do we have Bull Markets? * Why do we have Bear Markets? * Why do markets sometimes trend strongly? * Why do markets sometimes run sideways? STRONG HOLDERS Strong holders are usually those traders who have not allowed themselves to be trapped into a poor trading situation. They are happy with their position, and they will not be shaken out on a sudden down move, or sucked into the market at or near the top. Strong holders are strong because they are trading on the right side of the market. WEAK HOLDERS Weak holders are those traders who have allowed themselves to be 'locked-in' as the market moves against them, and are hoping and praying that the market will soon move back to their price level. These traders are liable to be "shaken-out" on any sudden moves or bad news. Generally, weak holders will find that they are trading on the wrong side of the market, and are therefore immediately under pressure if price turns against them. * A BULL MARKET occurs when there has been a substantial transfer of stock from Weak holders to Strong holders, generally, at a loss to the weak holders. (accumulation) * A BEAR MARKET occurs when there has been a substantial transfer of stock from Strong holders to Weak holders, generally, at a profit to the Strong holders. (distribution) It is about Supply and Demand. Volume represents little more than activity. Forget about the 85% number. Volume Spread Analysis is not a house of cards built on the foundation of this notion. What you need to understand is: A. There is a group of traders that are consistently among the Strong holders. And because of that, they tend to trade with more size. B. Large-sized Strong holders leave tracks: -- When Volume is high, it is telling. -- When volume is low it is still telling; when volume is low, nothing is being done, and that is telling. C. Even when one attributes large volume to the retail trader (usually Weak holders), one must consider who is taking the other side of the transaction. If it were other retail traders, then 90% of all retail traders wouldn't fail. 26
There is little doubt that there is a group of traders who are consistently among the Strong Holders. Whether they are syndicate traders, hedge funds, pension funds, or banks matters little. Whether any single individual amongst the group is always right, matters even less.
No Demand Doji's
There is a particular type of No Demand that I did not mention before and would like to say a few things on it now. Check out the attached chart. Notice the No Demand near the middle of the chart. This is an exceptional type of No Demand bar because it is also a Doji. With a Doji I am not concerned with a narrow range. Nor does the close have to be in the high, middle or low. For candle traders, a Doji is a bar that represents indecision. This goes well with what VSA teaches us. Although it is more lack of interest then indecision-a subtle difference. Bill Williams talks about certain extreme bars. These bars, as it turns out, are Dojis with closes in the high or low of the range. He states that 95% of the time a market changes direction 1 to 3 bars later after such a bar. As VSAers, we put the missing piece together: volume. Again, VSA does not technically look at the open. Yet, No Demand bars that are also Dojis are usually very strong signs of weakness. This is one reason I like to look at the open. The other being WRBs. The astute among you will note that this bar actually closes LOWER than the previous bar. However, it is a buying bar (positional relationship) and thus a No Demand bar.
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Bullish & Bearish Volume First we should define "Bullish and Bearish" volume: 1. Bullish volume is increasing volume on up-moves and decreasing volume on down-moves. 2. Bearish volume is increasing volume on down-moves and decreasing volume on up-moves. Now we can incorporate the concept of The path of least resistance: * It takes an increase of buying (demand), on up-days or bars, to force the market up. * It takes an increase of selling (supply), on down-days or bars , to force the market down. The appearance of No Demand (low volume) on an up-move, shows little or no buying. Which means, if there is no trading going on in one direction, the path of least resistance is generally in the opposite direction. The appearance of No Supply (low volume) on a down-move shows little or no selling pressure. Which means, if there is no trading going on in one direction, the path of least resistance is generally in the opposite direction. Posted by Blowfish: Price advancing on declining volume = weakness (no 'pro' support for the move) Price declining rapidly (wide bar) on climatic volume but closing up. VSA is based on Wycoff's ideas regarding accumulation/distribution and volume however it does go a fair way further.
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No Demand Bars
The story continues........ Here is more on the underlying story. I have noticed that very often after a No Demand/No Supply (or low volume in general), 1-3 bars later we see an Effort bar. Let's examine the story. No Demand means there is little to no activity by the Professional Money. For practical purposes, we will define Professional Money as those traders who trade with enough size to actual effect market change by creating imbalances in supply and demand. Now if the Professional Money is not buying as prices rise, then the must expect that prices are poised to fall. If they expect price to fall, one should not be surprised to see a bar in the down direction where volume picks ups as they try (effort) to take price in their desired ( or expected) direction. This is shows up as an Effort to Fall bar. Individually, neither bar is defined by the other. That is to say, they are independently defined. Hence their propensity to occur around each other gives more insight into the validity of the story they purport to tell. 29
Note that the chart also tells the opposite and as telling situation: a No Demand in the range of an Effort to Rise bar. As there was an effort to take price higher, price moved down. It begins to move back up. However, there is no longer any interest in higher prices. Since we are in the range or area where Bulls rushed in, we would expect more bulls to rush in. Or at least the same bulls to exert more force (effort). By NOT seeing this, we can see underlying weakness in the market. Story is the "why". Story coupled with repetition allows us to see things as being more than mere coincidence. Story gets us thru the down draws. All those traders looking for the "Grail" , might first start out by finding a story they can believe in. It wont take away the losses, but it makes them more palatable.
VSA Formulas No Demand 301 Base Definition: Narrow range bar closing up with volume less than the previous two (2) bars. p. 32, Master the Markets. TG (signal): Narrow range bar closing up with volume less than the previous two(2) bars. The close should be in the middle or low of the bar. p 153, Master the Markets. Joel Pozen (Signal) No Demand & No Supply: No Demand: C>ref(C,-1) and Vref(C,-2) No Supply: Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and V
Vref(C,+1) and H>=ref(H,+1),1,0); NoSupply:=If(Lref(H,-1) and L>=ref(L,-1) and (H-L)>ref((H-L),-1) and C=O and C>ref(C,+1) and H>=ref(H,+1) and Vref((H-L),-1) and C=O and Cref(H,-1) and L>=ref(L,-1) and (H-L)>ref((H-L),-1) and C=H and C>ref(C,+1) and H>=ref(H,+1) and Vref((H-L),-1) and C=L and Cref(H,-1) and L>=ref(L,-1) and (H-L)>ref((H-L),-1) and C=((HL)*0.5)+L and C>ref(C,+1) and H>=ref(H,+1) and Vref((H-L),-1) and C=((H-L)*0.5)+L and Cref(H,-1) and L>=ref(L,-1) and (H-L)>ref((H-L),-1) and C=L and C>ref(C,+1) and H>=ref(H,+1) and Vref((H-L),-1) and C=H and Cref(C,-1) and (H-L)ref(C,+1) and H>=ref(H,+1) and Vref(C,-1) and (H-L)=ref((H-L),-1) and C=O and C>ref(C,+1) and H>=ref(H,+1) and Vref(C,-1) and (H-L)=ref((H-L),-1) and C=H and C<>O and C>ref(C,+1) and H>=ref(H,+1) and VO and Cref(C,-1) and (H-L)=ref((H-L),-1) and C=((H-L)*0.5)+L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and VO and Cref(C,-1) and (H-L)=ref((H-L),-1) and C=L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and VO and Cref(C,+1) and 31
H>=ref(H,+1) and VO and C>ref(C,+1) and H>=ref(H,+1) and VO and CO and C>ref(C,+1) and H>=ref(H,+1) and VO and CO and C>ref(C,+1) and H>=ref(H,+1) and VO and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C>=ref(C,-1) and C=O and C=ref(C,+1) and C>ref(C,+2) and H>=ref(H,+1) and H>=ref(H,+2) and Vref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C>=ref(C,-1) and C=H and C<>O and C=ref(C,+1) and C>ref(C,+2) and H>=ref(H,+1) and H>=ref(H,+2) and VO and C=ref(C,+1) and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C>=ref(C,-1) and C=((H-L)*0.5)+L and C<>O and C=ref(C,+1) and C>ref(C,+2) and H>=ref(H,+1) and H>=ref(H,+2) and VO and C=ref(C,+1) and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C>=ref(C,-1) and C=L and C<>O and C=ref(C,+1) and C>ref(C,+2) and H>=ref(H,+1) and H>=ref(H,+2) and VO and C=ref(C,+1) and Cref(H,-1) and L>=ref(L,-1) and C=O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and V
NoDemand20:=If(H>ref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=H and C<>O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and VO and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=((HL)*0.5)+L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and VO and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and VO and Cref(H,-1) and L>=ref(L,-1) and C=O and C>ref(C,+1) and H>=ref(H,+1) and Vref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=H and C<>O and C>ref(C,+1) and H>=ref(H,+1) and VO and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=((HL)*0.5)+L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and VO and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and VO and Cref(H,-1) and L>=ref(L,-1) and C=O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and V=ref(V,-2),1,0); NoSupply27:=If(Lref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=H and C<>O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and V=ref(V,-2),1,0); NoSupply28:=If(LO and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=((H33
L)*0.5)+L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and V=ref(V,2),1,0); NoSupply29:=If(LO and Cref(H,-1) and L>=ref(L,-1) and (H-L)<=ref((H-L),-1) and C=L and C<>O and C>ref(C,+1) and H>=ref(H,+1) and V=ref(V,-1) and V=ref(V,-2),1,0); NoSupply30:=If(LO and C
-I wanted to place myself between TG and Joel. That is, I wanted more than Signs than TG but fewer and better placed signs than Joel. -I have used confirmation bars, but any low volume bar, especially a buying bar (or selling bar for no supply), gets my attention. -I have broadened the definition of low volume. I include volume equal to the previous two bars. Volume equal to the previous bar and less than the bar two bars back. And volume less than the previous bar and equal to the bar two bars back. -Some UpThursts, Tests, No Buying Pressure, and No Selling Pressure bars are picked up as well. Thus, being able to READ the chart remains an essential element of success. -It bares repeating, these are not simply buy/sell signals in and of themselves. Background information is needed (effort bars, WRBs, WSBs, High Volume bars with the next bar down............) As VSAers we have to adhere to certain fundamental principles, but we should not let ourselves be boxed-in. Case in Point: The "ideal" Test bar will have an equal or lower range, make a lower low than the previous bar, close down and close on its high with volume less than the previous two bars. NEWS FLASH: This is the definition of a Selling Bar. Thus, while the book doesn't explicitly mention selling bars, they are part of the picture. To call the bar a selling bar belies the actual strength that is contained within it. TG, therefore, may choose not to mention this to avoid confusion. Take this for what it is worth. Remeber, we are not talking about buy/sell indicators. Understanding the Supply/Demand dynamics is essential. Questions and comments are desired. I define Effort bars as follows: EffortU1:=If(H>ref(H,-1) and L>=ref(L,-1) and (H-L)=ref((H-L),-1) and O<=((H-L)*0.1)+L and C>=((H-L)*0.9)+L and C>ref(C,-1) and Mp()>ref(H,-1) and V>ref(V,-1) and V>VolAve and V<=2*VolAve and WRB=1,1,0); 34
EffortD1:=If(L>ref(L,-1) and H<=ref(H,-1) and (H-L)=ref((H-L),-1) and O>=((H-L)*0.9)+L and C<=((H-L)*0.1)+L and Cref(V,-1) and V>VolAve and V<=2*VolAve and WRB=1,1,0); EffortU2:=If(H>ref(H,-1) and L>=ref(L,-1) and (H-L)>ref((H-L),-1) and O<=((H-L)*0.2)+L and C>=((H-L)*0.8)+L and C>ref(C,-1) and Mp()>=ref(H,-1) and V>ref(V,-1) and V>2*VolAve and V<=4*VolAve and WRB=1 and Cref(L,-1) and H<=ref(H,-1) and (H-L)>ref((H-L),-1) and O>=((H-L)*0.8)+L and C<=((H-L)*0.2)+L and Cref(V,-1) and V>2*VolAve and V<=4*VolAve and WRB=1 and C>ref(C,+1),1,0); EffortU3:=If(H>ref(H,-1) and L>=ref(L,-1) and (H-L)=ref((H-L),-1) and O<=((H-L)*0.1)+L and C>=((H-L)*0.9)+L and C>ref(C,-1) and Mp()>ref(H,-1) and V>ref(V,-1) and V>2*VolAve and V<=4*VolAve and WRB=1 and Cref(L,-1) and H<=ref(H,-1) and (H-L)=ref((H-L),-1) and O>=((H-L)*0.9)+L and C<=((H-L)*0.1)+L and Cref(V,-1) and V>2*VolAve and V<=4*VolAve and WRB=1 and C>ref(C,+1),1,0); EffortU4:=If(H>ref(H,-1) and L>=ref(L,-1) and (H-L)>ref((H-L),-1) and O<=((H-L)*0.2)+L and C>=((H-L)*0.8)+L and C>ref(C,-1) and Mp()>=ref(H,-1) and Vref(V,1) and V>ref(V,-2) and WRB=1,1,0); EffortD4:=If(L>ref(L,-1) and H<=ref(H,-1) and (H-L)>ref((H-L),-1) and O>=((H-L)*0.8)+L and C<=((H-L)*0.2)+L and Cref(V,1) and V>ref(V,-2) and WRB=1,1,0); EffortU5:=If(H>ref(H,-1) and L>=ref(L,-1) and (H-L)=ref((H-L),-1) and O<=((H-L)*0.1)+L and C>=((H-L)*0.9)+L and C>ref(C,-1) and Mp()>ref(H,-1) and V>VolAve and V>ref(V,-1) and ref(V,-1)>ref(V,-2) and WRB=1,1,0); EffortD5:=If(L>ref(L,-1) and H<=ref(H,-1) and (H-L)=ref((H-L),-1) and O>=((H-L)*0.9)+L and C<=((H-L)*0.1)+L and CVolAve and V>ref(V,-1) and ref(V,-1)>ref(V,-2) and WRB=1,1,0);
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Beautiful shot showing No Result from an Effort to Rise/or Negative Action. Note how price fails to close above the close of the Effort candle.
Anotomy of a Trade Set-up Let's take a look at a nice trade set-up here:
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Let's take a look at a nice trade set-up here. Actual profit was around 20 pips, but that is really not the issue. THE ISSUE IS HOW WE VIEW SUPPLY/DEMAND DYNAMICS IN REALTIME & HOW WE TRADE WITH "SIGNS" THAT USE FUTURE BARS (CONFIRMATION BARS). First turn your attention to the chart on the left. This is a 15 min chart. The first thing to note is an area that is not labeled. In the Middle of the chart is an Effort to rise bar. However, price does not make a higher high and in fact trades lower: No result from an effort to rise/Negative action. This is the first clue of a change in the market. To be sure, momentum does take the market higher. Now let's jump over to the right hand chart, the 5 min. #1 is a Wide Spread bar up bar with ultra high volume that closes off its high and the next bar is down. Supply entered the market here. Note also that this is a WRB and creates a Support/Resistance zone. This is key. We now have a High volume bar that is a WRB. We would love to see a low volume sign within the body of this bar. (we don't get it). Price does indeed begin to fall from this point as Supply entered the market. #1a. After the initial down fall we see an Effort to Rise. Please note that effort bars do not need confirmation. Thus at 2:55 at the close of the bar we know we have just seen an effort to rise bar. No reason to get long. Nothing on the 15 would merit it. The next bar(s) do not make a higher high. We are thus starting to see No Result on the very Next bar as it does not make a higher high. #2 1/2 we jump back over to the 15 min char. We get an up bar with a narrow range an volume less than the previous two bars. THIS IS THE BASE DEFINITION OF NO DEMAND. This bar closes at 3:00. Now, for confirmation, we will need to wait until the close of the 3:15 bar. My software will place the sign on the bar at the close of its period and keep it there as long as the criteria remain met. Thus at the close at 3:00 a red dot actually appears. It would disappear if the next bar makes a higher high and not return. It would also disappear if the current price is equal to or greater than the close of the previous bar. But if the current price changes, the dot would come back. But let's assume the dot does not show up in the first place. We know we have just seen the base definition of No Demand. At 3:05, we see a bar that closes equal to the Effort to Rise bar. This is NO RESULT FROM AN EFFORT TO RISE/NEGATIVE ACTION. We would actually like to see this price lower than the low, but the bar prior does trade lower than the effort bar. Simply, we are not seeing support at the low of the effort bar. In sum: We have a base definition of No Demand on the 15. We have seen supply enter on a wide 37
spread bar with ultra high volume and we now have no result from an effort to rise: GET SHORT on 5 min. #5 This bar confirms the No Demand bar. At its close the x appears and the dot is there for good. So, if we assume only appears at the end of the next bar, then it would appear now at the same time the x appears. BUT WE ARE ALREADY SHORT BECAUSE WE KNOW THE BAR TO BE NO DEMAND. Yes the "sign" may come "after the fact" as the detractors say, but since we know how to read the chart, we are already in the trade. EDIT: almost forgot to mention that the effort to rise bar was within the body of the WRB (hmmm, have I mentioned that before?).
On Gaps The old adage is that "Gaps are filled". Here is an example of a Gap play on the open of the day.
The market opens up with a gap to the downside. The first bar we see is a dark WRB. (Note: while it is beyond the scope of this post, this dark WRB actually forms another larger "gap" and is thus even more reason to be thinking that price should move higher in order to fill the gap.) Things start to get interesting when we see the first labeled No Supply bar. The appearance of this bar itself is something to note, but there is another No Supply bar a few bars prior, and price continues down. What makes this one of note is that a previously mentioned pattern occurs. That is, one to three bars later, we see an Effort to Rise bar. We have now seen low volume on a down bar 38
followed by an Effort to Rise. Is the path of least resistance changing? The volume on the next bar increases and the range narrows. This is a Squat. Supply is entering the market. Again, we see another pattern show itself as the very next bar after the Squat is a No Supply bar. The low volume tells us that Demand must of been swamping Supply on the previous bar (Squat). Now we have are signal. We have a low volume sign within the range of a high(er) volume bar (the Effort bar), which is also a WRB. Things are fine until we get to the No Demand bar. Note that the market does not completely fill the gap at this point. But now we have something happening within the range of the Support/Resistance Zone created by the Gap. On the next bar we see a No Supply bar. Time to move stop to just below this bar. This is an example of playing the gap to fill. We were always looking to go long. It thus becomes a matter of "how and when do we get long" not "if" we get long. We did not try to get in on the bottom, but top and bottom pickers become cotton pickers.
On Patience I am not a fan of TG software, as many know. My reasons have nothing to do with what the most oft heard criticism is, however. This criticism has to do with "signs" showing up "after the fact" or in hindsight. More broadly, this same criticism can be laid at the foot of Volume Spread Analysis. Those who look at static charts see signs with an almost uncanny precision. That is, they see many market turns being "called" by these signs. They go as far as to say, "I can buy tops and bottoms on these incredible buy and sell signals". What the charts do not convey, is PATIENCE. Many signs of strength or signs of weakness show up as two or three bar patterns. Most fall into the two bar category. No Demand is defined as an up bar with volume less than the previous two bars on a narrow spread. This base definition, however, fails to look at the next bar where we would want to see the close LOWER than the previous bar, confirming a lack of demand. This is true of a Test. While a low volume test will close lower than the previous bar, close on its middle or high and have volume less than the previous two bars, it is not truly confirmed until we see a close higher than the test bar. This needs to come on the NEXT bar or the bar after that at the latest. That is why these will show up "one bar late" to some. In truth, what is happening is this: one bar is looked at as cause and the following bar is looked at as effect. If you see a wide spread bar on ultra high volume closing near the high (cause), but the next bar is down (effect), then there must of been SELLING in the Wide Spread bar. "..A wide spread up on high volume shows effort to go up. If the next bar is down, this demonstrates that with the high volume seen on the day before, selling overcame the demand, otherwise, prices could not possibly have fallen the next day........." Master the Markets, Tom 39
Williams, P. 145. "If a market is moving upwards on wide spreads, accompanied by high volume and no progress is seen on the NEXT day (bar), this shows the volume contains more selling than buying." IBID, p.154 "For a market to drop, selling pressure needs to be evident, which normally shows itself as wide spreads down on high volume. If the next day is down this usually confirms that the volume seen on the day (bar) before is genuine selling. However, if the next day is up then it shows that there was selling going on, but the professional money was prepared to buy and support the market as well...." IBID, P. 166 Again, the point is that one should usually be waiting one bar after seeing the high volume or the low volume (in the case of No Demand/No Supply or Tests). Having the patience to wait one day(bar) or two allows for a more accurate and complete view of what is happening. Nice work Tasuki. You have basically "proven" to yourself what Tom has written about in the book. The name is not as important as the underlying concept. Tom says the two most important things a trader needs to understand are Volume and Support/Resistance. You seem to be on your way there. P.S. This is not unlike some candlestick patterns that have multiple candles where some come AFTER a hammer or doji line.
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Chart Examples Part 1 I place a small dot on all bars that have volume less than the previous two bars. I also place an diamond on bars with narrow ranges and increased volume.
Trade I took today using VSA techniques. Notice when price reached the weekly pivot that we had a wider than average spread and a LOT of volume and then price closed right near the highs of that bar. About 10 seconds before that 5min bar closed I went long at 148 and was out for a 10 point gain (my personal strategy right now...it ended up going for much more I know.
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The first green rectangle is "Strength coming in" signal. The bar has very wide spread, ultra high volume, it closed in the middle part of the bar and made new low. Basicaly, I think, the most nervous sellers started fixing their profits. The next red triangle was identified as "No Demand" signal. The bar has narrow spread and low volume. It signals the end of retracement. You may disregard that signal in ranging market as not really important. The next green rectangle is called "Climactic action". You see it has ultra wide spread and ultra high volume. In fact it's the widest and highest by volume bar of the day. When you see a bar like this you should think if it's a selling or stopping volume. You may anticipate it knowing about strong support at 12190, or waiting for the confirmation which happened on the next bar. In Drummond Geometry a bar like that is called an exhaust. The second red triangle is a "No Demand" bar again. Next signal is missed here but you already should see that if you combine two bars in 10 min bar it will be the same signal as the first one. And the last red rectangle is Upthrust. The volume is not so high, spread is wide, high is higher than previous several bars and the close is in low part of the bar. They describe it as stop hunting designed by market makers to mislead traders.
So...as you were saying...in the down trend with a spike in volume followed by some demand but nothing trend changing would be shown as smaller, narrow range bars. Such as those circled here. This of course is remaining in tact with the overall trend, just letting you know this where the good bounce is to get in.
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Reply:
One note on stopping volume. Tom Williams, the father of VSA, would enter on the close of that bar. TG, however would not place a sign of strength until the next bar closes and is an up close. (2 bar pattern). Getting in at the very bottom or top is not the most important thing. Here the best entry is after the test. Why? Because we have seen the strength come in on the stopping volume. Then we see a No Supply indication followed by a test for supply. The Smart Money wants to make sure that there are no sellers out there to impede the mark up phase. That is why they test the market. Of course, the mark aggressive you are as a trader the earlier you would enter. But you should be looking for the bar after the volume spike (stopping volume) to confirm before entry. Reply: The No Buying pressure is a bar that closes up from the previous bar and closes on its high but has volume less than the previous two bars (and ideally volume less than average). Although price is moving up, the Smart Money is not involved in the push. Remember, 85% of the volume histogram represents Professional Money. So no buying pressure is coming form the pros. The next bar is down. But here too we see a lack of Smart Money activity. Thus when we say, No Supply, we mean no supply (selling) from the Professional Money. 43
What is happening is this: the market is moving up, but the Pros are not yet fully interested. Why? After such a move down they want to make sure there are no more sellers left in the way of an up move. As they wait to see what happens the market moves up but then stops. The next bar is down on even less volume. The Pros did not step in and start selling (no supply). Just to be sure there are no sellers, the Smart Money now Tests the market on the next bar. They take it even lower and find no sellers (volume is low) and thus take price back up to close on or near the high. Once we see the Stopping Volume we should begin to look for a No Supply or Test bar. When we see the No Demand, we do not automatically look to go short. So our bias isn't changed. We see strength in the form of the Stopping volume and are looking to go long. The No Demand helps set up the subsequent No Supply and test formation.
Perfect today. Note the HUGE action happening here in the circled bar right at VAH (VAH refers to the term value high. This is a market profile term used to describe the upper range pivot of the value area.)...you can also see a diverging delta, showing selling waning, and then BAM!!! You could also notice the increasing volume coming into that VAH. While this may lead some to think that we will go lower...VSA makes you wait for confirmation Good thing...that abnormally large volume spike with closing price in the middle of the bar is showing you right there that professional activity has come into the market. Reply: Nice observations. A wide spread down bar (close lower then previous bar) that has ultra high volume and closes in the middle of its range is a telltale sign of a transfer of ownership. The fact that this is happening at the VAH is of no real surprise either. These areas tend to be where Professional Money will show itself. That is why Gavin talked about the importance of (1) volume (2) support/resistance. For me, what is more important than how one arrives at the support/resistance area, is that one 44
PAYS ATTENTION TO PRICE at these areas. That is, going long as price trades down to these levels makes little sense no matter how "proven" the support area may be. Paying closer attention to what price is doing at this time, however, does make sense. Support/Resistance areas can not always hold. Otherwise there would be no such thing as a trend. Hence what we really want is to force the Professional Money to show itself in these "expected" areas. Their intentions-to go thru or to respect the area(s) can be seen on the chart.
Excellent thread, very interesting. I recently read Tom Williams' book (the older edition not master the markets). I was wondering what you thought about the stock indexes. Looking at the dow I would think that there is background strength, but still a lot of supply. Now bear with me, the concepts of VSA are new to me so this might be totally off, but here is what I see: 1st arrow) We had that down day on a wide spread and high volume the day before. This bar is an up bar on even higher volume. Does this indicate 'hidden' buying on the wide spread down day? 2nd arrow) We make new lows but close near the highs. Is this a stop bar or a test bar? The volume is still high so if it is a test bar does this indicate there is still supply? 3rd arrow and 4rth arrows) These bars look like no demand which would make sense if professionals want more stock at lower prices. 5th arrow) Is this a stop bar, test bar, or down thrust bar? either way I take it to be bullish since we closed on the highs (and found support @ 200 ema). Since we took out the lows from the previous move down it looks like a giant stop run on the daily time frame.
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I'm probably off on my analysis, but it looks like all the market needs is a shakeout move and then it should rally. I would be very interested in your guys comments. Reply:
I wanted to redress this nice post. I have taken another screen shot that is more up to date. Admittedly, this is after the fact as well as hard right edge analysis. First, Todd Kreuger still sees weakness in the market and is calling for prices to fall this week. Note that the last black double arrow points to Fridays action. This bar is a NO DEMAND bar: it closes up from previous bar, closes in its middle and has volume less than the previous two bars. I will begin at the beginning. The first thing we see is a wide spread down bar on ultra high volume. This bar is also a WRB. WRB analysis tells us that changes/shifts in supply/demand occur in bars such as these. From a VSA perspective, we have a large range bar that closes down from the previous bar, but closes off its low with ultra high volume. THERE MUST BE DEMAND (BUYING) IN THIS BAR. If this bar was weak, then the close should be on the low. The next bar is key. This bar closes up. Truly if the previous bar was selling, then this bar should NOT be up. However, we need to take a look at this up bar. Note that the volume is even higher than the previous bar, but the range is narrow. Something is keeping the range down: Supply (Selling Pressure). The next bar is a High Volume Test. It closes on or near its high, makes a lower low and closes below the previous bar. Again the volume here is high for a test. Which is why the next bar is down and what we actually have is a FAILED TEST. Now jump to the next bar with the double arrow. This bar closes lower than the previous bar, closes on or near its lows and has volume less than the previous two bars. THIS IS NO SUPPLY. 46
We do indeed move up a bit from this point. Price moves up and then comes back down. At this point, our secondary method (Japanese Candlestick patterns) is traversing into a valid bullish white hammer pattern. Note the Hammer. THIS IS ANOTHER TEST. The bar makes a lower low, closes on or near its high and closes up with high volume. If the volume was ultra high, we might call this a SHAKE OUT and see strength, but as a high volume test we see weakness. The Professional Money is testing for sellers and they are finding some. In other words, there is supply underneath this market. Still, price moves up. We do expect a move back into the WRB support/resistance zone. The reason is beyond the scope of this thread. Which brings up back to the NO DEMAND sign on Friday. If you use the WRB's as profit target signals there was two so far. It may be time to move the stop just below the last WRB.
ere is an interesting chart from today’s session. Notice new lows with lower volume. Hopefully some of you YM traders were able to capture the reversal movement.
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First we see a dark WRB followed by a GAP in price. Note the first candle with a double arrow. Notice that the volume is ultra high and the bar closes lower than the previous bar and off of its low. VSA teaches that this is a bar that may have buying within it. Now the next bar is key. It turns out to be a WRB, but the fact that the bar is up means the prior bar MUST of had some buying contained within it. Now we move to the white WRB itself. Note that this bar creates a zone or range where we get a change in the supply/demand dynamic. We also know that the market does not like wide spread up bars on ultra high volume because of the possibility of hidden selling. In this case, however, the volume actually fell from the previous bar and is not ultra high. We move to the next candle with a double arrow below. This is a doji that closes equal to the previous bar and in the upper portion of its range. Volume on this bar is Ultra high. There is SUPPLY in the market at this stage. Price moves down from here. Next candle, closes in the upper portion of its range and higher than its open. Volume again is extreme. Here we have Demand showing itself. In other words, Demand is swamping Supply on this bar. SOMETHING HAS CHANGED. Notice that the next bar closes in its middle, has an equal close and volume drops off. The Last bar closes on its high on volume that is less than the previous two bars. Although it does not make a lower low, this is a 'test' bar. The Smart Money is testing for supply and finds none. Now price is poised to go up and fill that gap.
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Nice Bullish White Hammer pattern. Note that the white hammer line is inside the range of the Ultra Wide Spread Ultra High Volume candle. When we take a look at the WRB, we see a down candle that has an ultra wide spread and closes on its low. There would appear to be heavy selling pressure in this bar. BUT THE NEXT BAR IS UP. If that bar was true selling, then the next bar would not be up. In fact, if one looks at what price did after that bar it moved up. Clearly, the Professional demand created an upward drift in price. Simply, that WRB must of been a shift/change in the Supply/Demand dynamics of the market. Now note the large dark Candle just prior to the shaded area. This candle closes on its low , closes lower than the previous bar and has volume less than the previous two bars. This is No Selling pressure. The close on the low fools the retail trader into seeing weakness. The lack of volume, however, is the real clue. Price does move down a bit and create the bullish hammer pattern. Note that the hammer line itself is a VSA shakeout/test bar. This is the "ideal" set-up. We see strength come in using our primary methods (VSA and WRB) and then we get a buy signal via our secondary method (Japanese candlestick patterns).
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First, let's start at the left side. The first bar with the double arrow points to a bar where SUPPLY entered the market. The bar is wide, closes up from the previous bar, closes near the low of its range, and has ultra high volume. If this bar was buying, then why did it close near its low? Many people will see up volume and up close and think demand. VSA, however, tells us that Weakness comes in on strength and strength comes in on weakness. Next skip to the next double arrow. Here we have an UP THRUST. This bar makes a higher high, closes higher than the previous bar, closes in the middle of its range and has high volume. The Professional Money is trying to get traders to go Long, when the next likely direction is down. They are trying to trick the retail trader into a bad position. So an UP THRUST is a sign of weakness. Now we come to the bar in question. We have a narrow range bar that closes up from the previous bar, closes in the middle of its range and has volume less than the previous two bars. YES, THIS IS NO DEMAND. If the Smart Money was interested in higher prices, then the volume should not be so small. The narrow range also tells us that the Smart Money is not interested in higher prices. They keep the range narrow because they know the market is weak. The retail trader thinks he is getting a good fill, and then the floor drops out.......... The last two arrows point to Stopping Volume/climatic action. Wide spread bar with Ultra High volume that closes in the upper portion of it range and lower than the previous day. BUT THE NEXT BAR IS UP. If all that volume represented selling, then the next bar could not be down. Moreover, if all that volume was selling, then the close should be on the low of the bar, not in the upper portion. On an aside, without seeing the open of the bars, It looks like we have a valid white hammer pattern setting up there. Or at least a Long Shadow that we need to take a closer look at. WRB analysis also tells us about the change/shift in supply that is happening at this key bar. 50
Chart Examples Part 2
The first thing to note is the wide spread ultra high volume bar. You labeled it stopping volume. I think it is either stopping volume or a volume climax. More important than the name, however, is the fact that a change in the supply/demand dynamic happened on that bar. The bar is wide with ultra high volume, closed lower than the previous bar, and closed near the high of its range. CLEARLY THERE WAS BUYING (DEMAND) ON THIS BAR. This created a gap which was filled. I veer off the VSA path a bit to mention that this is a Wide Range Body. Note where the open is (not looked at in VSA, but so telling). Ironically, I think this is an advanced VSA concept despite that they do not look at the open. In other words, if they did look at it, they would logically come to the conclusion WRB analysis comes to. Not to get too far into this, but what I like to see is a set-up (entry signal) happen within the range of the body or the total range of the bar of this ultra wide spread bar. I believe Todd, and Tom would agree with the total range aspect and thus it is more advanced VSA, and not talked about in public forums (webinars) by Todd. At any rate, we then get a No Supply bar. The bar closes near its low, has a narrow range as compared to the previous bar, closes lower than the previous bar and has volume less than the previous two bars. You are correct about the test. That is indeed a test of supply that closes in the middle of its range, makes a lower low than previous bar, closes lower than the previous bar. Volume is higher than the previous bar but relatively low. The bar you labeled as No Supply is incorrect. The volume is not less than the previous two bars. However, the next bar is No Demand. Note that we are at the bottom of the support/resistance zone via the body of that large candle. With a No Demand indication, the Professional Money has to re-test for supply underneath. We thus get another test bar. Here what is of note is the fact that volume here is less than the volume on the first test. This is a sign of market strength. Note the shaded area. There is something going on here that is beyond the scope of this 51
thread. Suffice to say, there is reason to expect price to move back into this area. But even without that concept, one would be looking for a move back to "test" the close of that large Ultra Wide Spread bar. How and where you actually enter the market is another question altogether............... That is, it is a personal decision. But the pattern of a No Supply followed by a test, followed by a No Demand, followed by another test on less volume than the first test and with a low less than the first test, is a repeatable pattern.
Notice that we have a valid High Close Doji pattern. This pattern appears within the body of the WRB and the following Ultra Wide Spread bar with Ultra High volume. Take a look at the test bar. VSA tells us that a test bar is when Professional Money "mark" prices down to see if there are is any supply (sellers). VSA, however, does not look at the open of the bar. But look at what we see if we do. First, we see that this bar is a doji. In candlestick terms this bar represents indecision. More over, the close on the top means price was rejected as it moved down. This is not unlike what VSA tells us. When we look at the entire bar, what must be the way the bar played out? The bar opened up, went down and the price came up to close right where it opened. Clearly, we can see that Professional Money "marked-down" the price only to take it back up again. In this case, we have a "perfect" example of the true intentions of the Smart Money. If the open had been lower on the bar, we would of course still have a test, but the picture would be different. For 52
example, if the open was at the low of the bar, we would still have a test, but we would not get a sense of the "mark-down". Note that the other labeled test candle opens in the middle and closes on its high. We do see the action (mark down-price rejection) here as well. To be clear, tests come in various forms and the key is the volume and the close. But some tests are more reliable than others. Volume plays a role here but so does the open. Tests that are also dojis tend to be the optimal type of tests. To those that use candles, this makes sense. Hammers with long shadows also make ideal test bars. Two methods reaching like conclusions. It should be pointed out that a test bar needs confirmation. Ideally that confirmation comes on the next bar with a close higher than the close of the close of the test bar. If that confirmation bar closes higher than the high of the test bar and it (the test bar) is a doji, well, now we have something..............
Very interesting chart here. I makes these posts to help me learn as much as anybody else. I am really starting to see the relationship between High/Ultra High Volume areas and subsequent Low Volume signs within that area. If I had any doubt about the importance of volume, I certainly don't now. Many of the charts are repetitive but there are two main reasons for that:
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1. Theses things repeat day after day and on all timeframes. 2. Pattern recognition. At any rate, here is a really cool chart with much of the same AND a new twist. First, we see a down dark candle line on Ultra High Volume. But the next bar is up. Therefore there must of been some demand (buying) on that dark candle line. That next up bar, in fact, has even more volume and closes off its highs. We know that the market does not like wide spread candles on High or Ultra High Volume. At this point, we also have a white (close>open) WRB. Thus by extension, we have a Support/Resistance zone. Remember, WRBs represent changes or shifts in the supply/demand dynamics in the market. The bar following this WRB is up, but the volume is less than the previous two candles and the range has narrowed. The candle following the No Demand is down. Now we can see that the WRB did indeed have some supply in it. (while this is after the fact, if we step back and look at what price did following the WRB is move sideways. Which means there must of been supply entering on the WRB. But this after the fact notion only confirms what we see during the fact.) Note that the bar following the No Demand is itself a No Supply bar. The volume is less than the previous two candles with price closing lower than the previous bar. On the very next candle we see a test. This test, however, is not a low volume test but rather a higher volume test. As usual, we look for the confirmation of the test to come one to two bars later. Here it does indeed come on the next bar. But this next bar is also a No Demand bar. It has a smaller range, closes higher, and has volume less than the previous two candles. At this point I would depart from VSA just to note that this is not a High Close Doji as the close is equal to the high of the doji, not higher. Before going into this bar a bit more from a VSA perspective, let's jump ahead two more candles. We see a narrow bar that makes a lower low, closes in its upper portion on lower volume This is a test. KEY THINGS: 1. This second test has a narrower range than the first test. 2. This second test has less volume than the first test. 3. This second test does not make a lower low than the first test. 4. This second test comes within the range of a high volume candle, more specifically, within the body of the High Volume white WRB. This second test is confirmed the next candle by a bar that closes higher than the close of the test bar itself. NOW WE HAVE A HIGH CLOSE DOJI, as the close is also higher than the high of the doji test candle. Note that the volume is higher than the test candle. In fact, the volume is very high on a wide spread. But this time we have PUSHING THRU SUPPLY (a sign of strength). The difference in the two confirmation candles after the respective test candles; Activity. Professional Money was more active on the second as evidenced by more volume than on the first. 54
Chart Examples Part 3
idaxtrader: A few months back a came across Mr. Williams first book Undeclared secerets and ever since I have been hooked on V.S.A. My first question is it necessary to read his more current book or is the original one good enough? My second question stems from a recent trade that resulted in a stop out for me. I have included the chart to illustarte the point of how I was tricked by the volume on the ES. My question is this what are the objective ways that V.S.A. can help identify a bar as hidden supply? In the book he stated if I'm correct that it should be determined as hidden supply if the bar closes in the middle of the range, has enormous volume, a climax type of bar, or the next bar is down right after an important bar with spread or the next bar is level then the following bar is down. In the instance where I was stopped out. The next bar was level right after a breakout. But before a down bar took place there was a follow through up bar. It is apparent that I should have been very alert for hidden supply since right after the break the next bar was level. But in actual practice with the market the bar following a break is often level on good signals. I thank everyone again for this thread and I really hope someone can shed some light on the possible ways to determine hidden supply in a up bar. Z_trade: I marked your chart to illustrate pretty simple concept. Price revisited supply area where market has spent some time on the way down. Short entry can be taken on the very next candle after narrow range low volume green /up/ candle.
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Hdcafe: A few things to look for here some VSA some not. A) Your trade took place during lunch time trading 11:30 to 12:30 when volume becomes relatively light. B) The WRB just after 11:30 has no follow thru (lunch time trade?) This tends to cause the shorts to cover their positions prematurely which is what stopped out your trade. C) You have to consider the WRB with ultra high volume to be a sign of strength whether it truly is or not and once that occurs you then have to get a strong sign of weakness to take a short position. That sign does not come until the upthrust occurs at 1:00 I am sure you are fully aware of this but I will comment anyway. When trading the futures markets IMHO it pays NOT to use the terms "Supply and Demand". With futures, the supply is unlimited and demand is not. I prefer to use the terms "Willing Buyers and Willing Sellers". This reminds me that the Smart Money has to be searching for signs of what other traders are willing to do and not do rather than searching for the availability of a limited amount of stock. This makes the futures market that much more of mind game. It appears that you are using a 2 minute chart here. That is a lot of noise to have to filter thru especially with the ES. I use a 5 minute chart on the ES and then use 3 and 4 minute charts to back up the 5 minute. Sometimes the VSA bars will be more recognizable in different time frames. This also helps with volume changes during different times of the day. The high just before 12:30 is also an upthrust but a weak one and you could have taken the trade at the close of the down bar. I would have waited and taken the trade at the 1:00 upthrust. 56
Pivotprofiler: On the bar itself: 1. Closing in the middle on Ultra High Volume is a good sign of supply within the Upbar. As is closing on the low. 2. If volume is too excessive, there is a good chance that supply is swamping demand. *the real keys come in the next bar: 1. If we see Ultra High Volume on an Up bar that closes off its highs and the next bar is down. There must of been some selling (supply) in that first bar. 2. If the bar closes on its high but the next bar is down, again, some selling in the first bar. 3. If next bar is up, but the range narrows and the close is in the middle or low, there was selling (supply) in the first bar. Why else would this bar have a reluctance to go up? Reluctance is demonstrated by narrow range and middle to low close. Also look for tops to the left. If price is trading into new ground, then there may be supply contained within the bar. IF, however, there are tops to the left, or places where supply previously entered, then the volume may mean the Smart Money is willing to absorb the supply.
I am not much versed on VSA and I expect to see what the experts have to respond here, but I see a very nice VSA setup there as price keeps going up with less volume which I understand so far that means no demand... correct me if I am wrong.... cheers Walter.
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Chart Examples Part 4 Tasuki: See attached 15 minute ES chart from today and yesterday. Just a short question on "no demand". I seem to see it every time the market starts going up, which can't be right, so if somebody would kindly straighten me out and show me which (if any) of my putative "no demand" bars are the real McCoy, I'd be most grateful.
PivotProfiler: Let's start with the most basic definition of no demand: An up-bar with a narrower range than the previous bar and volume less than the previous two volume bars. I have pointed to three such situations. Now, there are at least two more things to consider that the basic definition does not; * Price: We would like to see the close in the High, middle or low of the bar. Tradeguider uses only the middle and low in its definition. * Confirming action: Is the next bar down. This is tricky and a sticking point for some. The next bar down confirms the sign, but again, by definition the sign does not need confirmation from the next bar. TG waits for confirmation before placing a sign on the bar. I too in my signs like to see the next bar close down and have a less than or equal high. Joel Pozen will paint any bar with volume less than two that closes up or equal (if the bar prior is up from the bar two bars back) as No Demand and will paint it at the close of the bar. Hence one gets a lot of No Demand bars that seem to be "out of place". Also one gets No 58
Demand bars on bars that have greater ranges than the previous bar. For me, a bar with a greater range than the previous bar needs to have a close in the High, middle, or low not just anywhere on the bar. A close on the high, in the middle, or on the low would actually make the bar "No buying pressure" a form of No Demand but involving larger ranged bars. A better definition to use as you trade would thus at least include size of the range (narrow) and location of the price within that range ( on the high, in the middle or on the low) with volume less than two bars. To sum it up: A bar with a range narrower than the previous bar that closes equal or up on volume less than the previous two bars; and is closing either on the high of its range, the middle of its range or the low of its range.
Chart Examples Part 5 Thanks BlowFish for your posts, you got thinking of some real important issues. Trying to catch tops and bottoms is NOT the best way to trade with or without Volume Spread Analysis. Trying to get in on the bottom with VSA is no different than trying to get in on the bottom with CCI. Sure, VSA is better in that it tells more of the truth about what is going on, but it is still predictive and not surrendering to the market. If the trend is down, then one should be looking to trade from the short side. Prior to a real sustainable change in trend there is usually an Accumulation or Distribution phase (this is key). This means many of the best moves come AFTER a sideways period and not a "V" shape hard down, hard back up. Check out the chart on the left:
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It was clear that the trend was down on the day. Why fight that? The market gives us a Dark WRB followed by a No Supply bar. A few bars later, we get a Valid Test. Taken together this is a time to get long. More precisely, taken in isolation, this is a time to get long. Isolation because it ignores: multiple timeframes, current trend (a trend in motion tends to stay in motion), lack of any accumulation phased needed to make a sustainable rise possible. Now, suppose one went long. As previously mentioned, a contingency plan should be in place. Once there is a Dark WRB that closes below the low of the Test bar, it is time to reverse position and get short. At that point we see Negative Action or No Result from a Test. This is weakness. True that the No Supply is strength and the Test is strength, but what results from their existence proves to be weakness. If one was trying to surrender to the market, one would not be looking to get long in the first place. Now the No Result from a Test/Negative Action is actually a Signal to get short. I used to call Walter (and other indicator traders) the short bus-squigglely line crew . Now I am one of them. The Balance of Power Line was signaling bullish control as the PRICE ACTION SET- UP was appearing. While the indicator is NOT used to signal a trade, it is used to nullify a Price Action signal. There is no need to worry how much volume is needed to change the trend-create a bottom or top. Tops and bottoms can pick themselves.
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The chart on the right.
This chart shows two more great short Price Action Set-ups. We get our WRB and then a VSA sign within the body of the WRB. In both cases the No Demand comes when the Bears our in power (red). Multiple timeframes can help us know that the trend is down. Traditional use of indicators probably would have none looking for an "oversold" signal and a way to get long....... Note that there is a Price Action Long Set-up in-between the two shorts. Good in isolation, but we don't trade in isolation. The Balance of Power favors the bears. More importantly, once we get that Dark WRB that closes below the low of the test bar, we know we have Negative Action/No Results from a Test. In other words, weakness. Once again, thanks BF and TG for the help/ inspiration. This is why an interactive thread is so important. As this is not one, this is likely my last post.
When it all comes together:
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15 min chart: Valid White Hammer (open>close) Pattern. The whit hammer line completes at 0930. 5 min chart: Dark hammer line creates a Long Shadow. We see a doji, which in VSA terms is a Test bar. Now the hammer closed in the upper portion of its range on higher volume and closed equal to the previous bar-there must of been Demand entering on that bar. The next bar is a test for Supply. Technically a test is confirmed by a close higher than the close of the test bar one to two bar later. One bar later we get that. The time is 0930. So as the trade-frame is confirming a test within the range of a Long Shadow bar where demand swamped supply, the trend-frame completes a Bullish White Hammer Pattern
Trade 1- I see a valid High close Doji pattern. From a VSA point of view, I see an Effort to Rise bar. Which you correctly pointed out. In short, I would of most likely gone long here too :sad:. Trade 2- I see a valid white hammer pattern which culminates with the white hammer line. You are correct with the No Supply (low volume) candle prior to the hammer line. I have also marked off another No Supply that appears within the range of a WRB as an alternative entry signal. Moving back a bit. We see the candle prior to the first No Supply has High Volume and a wide spread but closes on the upper portion of the range. Some Demand must of entered on this bar. (Strength comes in on down bars)
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I have attached your chart with short-term support and resistance drawn in by myself - the levels are rough but hopefully get the idea across. Support 1 and 2 show where there were small bounces in the downtrend, then a (small) gap lower. Then resistance forms just under the prior support. The large white candle off the low shows demand coming in, and you would expect to get a 63
trade higher in coming days. What you do get is an immediate reaction, on the following bar no less, all the way up to short-term resistance, above the 50% retracement but below the 61.8. In conclusion, and from a short-term perspective, this is the reaction, and with the confluence of the Fib retracement levels and the support that has now become resistance, this is the shorting area and bar, if that is the trade sought. I know this is not a VSA analysis (and PivotProfiler has already posted his), and also that it is hindsight analysis, but I hope it is useful
The basic premise is this-you're coming up to resistance, and the live bar pierces that resistance on increased volume, and closes near the high. All of these factors are designed to fool traders into thinking that there really is demand coming in, and that higher prices will follow. The fact is, the professionals have figured out that people are looking at volume nowadays, so they bump up the volume to make the breakout look real. When this happens at resistance, BEWARE. Wait to see how the next bar behaves.
First, on the hourly chart, we see a WRB which serve as a change in polarity between buyers and sellers and serve as a support/resistance zone that we can use to find possible entries in the future.
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Later, we see an up-trust which is also a squat bar which illustrate again the concept in VSA of change in polarity from the buyers to the sellers. In effect, if there was a real intention by the big players to continue to push price higher as indicated by the previous bar, why then after making a higher high on higher volume than the previous WRB candle, this bar closed in the low and at the same time having a spread range lower than previous bar but with volume bigger than previous bar? This activity, on one hand, show the intention of big players to suck in new longs so that they can take their stop and add fuel to the downside (up-trust) and, on the other hand, a definite turn around of polarity represented by the formation of the squat bar which is also the same bar as the up-trust. This squat bar, by having a higher volume with a narrower spread and making new high show clearly that the "balance of power" shifted to the sellers. Most importantly, in relation to the previous WRB support/resistance zone, we see an effort to fall candle (19:00-20:00pm est) with high volume but failing to close on the low followed by a successful test ( 21:00-22:00pm est) with a volume less than the 2 previous bars. The salient point of these 2 candles is that they do appears in the previous WRB support/resistance zone and both of them failed to filled the open of this previous WRB.
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Finally, looking at the 15 min chart, we see a failed test (19:45-20:00pm est) on high volume in the previous WRB support/resistance zone followed 6 candles later by a successful test (21:15-21:30pm est) with a range narrower than the previous test and with a volume less than the previous test. According to my little understanding of VSA concepts, this multi-timeframes analysis is a good example of the power of VSA in one owns’ analysis. Particularly if one look to find signals of lower volume in the range of previous higher volume in a zone of a previous WRB support/resistance zone. All of the above is just my 2 cents and do just represent my new and beginner understanding of VSA concepts and WRB concepts from PivotProfiler and NihabaAshi by their posts on this forum and others.
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The trade for the day was to the upside (see next post). Thus, this would be a counter trend trade until the market falls far enough to constitute a change in trend. Also there are time of day issues to be concerned with. I really like the interaction between the 15 min chart and the 5 min chart. In this example we see signs on the 15 that there may be a top of some sort. That is, we get a No Demand sign after a healthy day's trend. The market falls and then we see a Squat. Supply is entering the market on this bar. Note that we do not see a WRB with something happening within its body here at the top. Shift to the 5. First we get a Test. The bar that confirms the Test, turns out to be a No Demand candle itself. A few bars later we see a dark WRB that closes below the low of the test bar: No result from a test/Negative Action. Simply, weakness. We then see a Squat which is also an Up Thrust. Note that we close on the low, make a higher high and have higher volume than previous bar. Supply enters here. Yet, the market claws it way even higher. Then we get a Trap Up Move, or Squat. Again more supply entering the market. Finally, we get a narrow range bar that closes up from the previous bar on higher volume and closes in the middle of its range. This is a clear sign of supply entering the market and a Squat. So we have a WRB that has high(er) volume and a high volume sign with the body of said WRB.
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