vsa with Malcolm

Here was a trade from yesterday, which I was stopped out at a loss.

Fairly straight forward, we see a shakeout at the lows on Aug 7th to which price rises after the buying. Early in the Asian session we see absorption volume pushing through an old high showing that professionals are willing to absorb any sellers. I went long on a test and the black line shows where my stop loss which was hit during the London session.

Just going over the trade, I don't think that my stop loss was too tight and that this trade was just the cost of doing business. I was just trying to think of alternatives, but I really wouldn't want to put my stop loss all the way at the bottom of the low from Aug 7th.

A beautiful example of Accumulation (the intelligent activity of the composite operator):



I've labeled everything as a Sign of Strength (SOS) because the names don't matter as much as the concept.

PHASE A: Stop

1: Sign of Strength. A wide spread DOWN interval on Ultra High Volume with the next interval UP. This interval closed on its low with heavy volume, but the next interval closed higher. If this interval was all selling, then the next interval would not close higher. This is our first sign of Accumulation.

PHASE B: Build a Cause

2: Sign of Strength. After making a lower low, this interval closes in the upper 25% of its range and closes higher than the previous bar. This is clearly a strong candle. The lower wick tells us there was some "rejection", or more appropriately, some Demand swamping Supply.

3: Sign of Strength. This is an equal range interval on increasing volume that closes off its lows. If this was all selling, we would expect the bar to close on its lows and for there to be an expansion in the interval's range (H-L). This is a Squat or Churn interval. Churning implies a lot of "paper/contracts" changing hands with little price movement. As we are told in, Master the Markets, market makers tend to compress the range (of a down interval) when they are bullish. The public, which is bearish, thinks it's getting in at a better price not fully understanding "Why" they are getting a better price. Confirmation of the weakness did not come on the next bar with the next being UP. However, the weakness of the next interval itself does, to a lesser degree, confirm this intervals weakness.

4: Sign of Strength. An increasing range (H-L) DOWN candle that makes a new low on increasing (and greater than average) volume that closes well of its low and above its midpoint. This is demonstrative of strength. If this interval represented weakness, how could the close be so high in its range (H-L)? Additionally, the next bar UP giving even more confirmation of this interval's true strength. Unlike the previous interval, the range was expanded in order to get the public to chase. FOMO causes the public to get short as the range expands, but the Smart Money steps in and pushes the price higher as it "absorbs" all the selling. We can call this a "Shake Out, or a Spring, or a Pin", as long as we understand the essences of this interval is found in strength.

5: Sign of Strength. At first glance, this interval may be the "hardest" to recognize as strength. That's because the volume is neither increasing nor less than the previous two intervals. But the key to this interval lies in where it is. This interval is occurring in the lower shadow of SOS 4. Accordingly, what we see is an interval with decreasing volume in the area where volume was previously high. As a general rule, decreasing volume on DOWN intervals is bullish. This is especially true when the decreasing volume interval occurs where volume was once high. Importantly, the next interval closes UP confirming the strength.

6: Sign of Strength. The interval just prior to this interval was an UP candle with an increasing range and volume less than the previous two intervals. This is No Buying Pressure (NBP) or No Demand. At this point, the Composite Operator is not interested in higher prices. We know this because their activity is low (volume is activity) as price moves UP. This may indicate there is still some supply overhead. Accordingly, the Composite Operator must "test" for supply. SOS 6 is a Test and is confirmed with the next interval UP. This interval has almost everything. Although it does not make a lower low than the previous interval, it does close well of its low and in the upper 25% of its range (H-L), have a narrow range on increasing (but far from excessive) volume, and the next bar closes UP.

Phase C: Test

7: Sign of Strength. A narrow range DOWN bar that closes in the middle of its range on increasing volume. This is a Squat. Moreover, the compressed range coupled with the increase in volume is evident that something is constraining the interval's movement. And that something is professional Demand. This is also a Test, but the volume is increasing rather than decreasing.

Phase D: The Mark Up


***** So WHERE do you get in?*******

From a Wyckoff perspective, you're likely waiting for the Test in Phase C. However, one could really enter after the confirmed strength of any interval that appears after the initial Stopping Volume interval. That is to say, SOSs 4,5,6, and 7. SOS 2 does not confirm but is a reasonable place to enter. Although a Wyckoffian would expect lower prices as Phase B develops.

Of course, sometimes you can get a Distribution "event" (one or two candles) as opposed to a full Distribution Phase.

Amazing post, I've read it three times.

Can i get this volume indicator plz?

Polomine thanks for this indicator.

Can you share the .mq4 file, I wanted to see if I can tweak the code to make the close just a little bit shorter, or perhaps you could add another user input in the indi settings, we already have the close thickness, you could add "close length", so the close don´t touch the next bar. I tried all parameters and could not make the close shorter, all bars look glued to each other, when they don´t touch each other you have cleaner look.

Thanks!

Today was really obvious, but hard to hold a trade.

I didn't trade EUR/USD, I took a short on CAD/JPY and got stopped out and called it a day.

Here's EUR/USD.

A. Shakeout, I guess this is preliminary buying. Not sure where I first heard the term "preliminary buying".

B. Down bar on high volume, I'll admit my first reaction to this bar would be bearish because it's taking out the low of bar A.

C. No supply, text book No Supply at that, the spread is so small and I like how there is very little wick on this bar.

D. This bar looks like supply is hitting the market with the large wick, but we have a strong background especially with bar A and bar C behind us.

E. Test, bar is testing the supply that came in on D. The next bar closes up showing a successful test, also price continues to rise from bar E.

F. Shakeout, this bar shakeouts out all of the stops from any buyers, which would make it hard to hold a position.

G. Test in a rising market, honestly I wouldn't be able to see this in real time. The entire body of this bar is above the body of the shakeout, its hard to see for me because of the spread of the test and the volume is too high, but it's there.

I guess in hindsight the perfect entry would have been on the shakeout, not saying that I would enter after seeing such a violent bar.

I didn't realize at the time I took this pic just how well it dovetails with my prior post.

As always, my reason for posting this chart is selfish. It's so I can learn. Don't get me wrong. I'm happy if others find value in my ramblings, but I have never claimed to be anything more than a mere student.

I've been watching a lot of Wyckoff videos lately. While Wyckoff and Volume Spread Analysis (VSA) have some differences, they are, on the whole, more similar than they are different. The same three principles guide both: (1) Supply versus Demand, (2) Effort versus Result, and (3) Cause and Effect.

I initially took this pic because it is demonstrative of the importance of understanding HalfBack (HB). Wyckoff talks about the importance of HB. For a Wyckoffian, HB is defined as the 50% retracement (or midpoint) of a trading range. This is true for the VSAer as well, but VSAers also talk about HB in the context of a High Volume Bar. I have watched nearly all of TradeGuider's videos. When Gavin first brought the trigger number concept to light, he said the trigger number was the close of a High (usually Ultra-High) Volume bar. Later, he changed the trigger number to either the High, Low, or Midpoint (HB) of the High Volume bar. Technically, the Close is a possible trigger number but is has been de-emphasized.

This brings me to Volume Zone Analysis (VZA). With all due respect to Pres78's pioneering work, VZA is VSA. In fact, VZA is the logical execution of VSA there is. VZA identifies the highest volume interval, and FIBs the range (spread), creating a Zone that consists of the interval's High, Low, and 50% retracement (HB). Accordingly, using the term VZA rather than VSA is to make a distinction where there is no difference. While I will be using the term VZA, just keep the previous sentence in mind.

Okay, on to the chart.



As previously stated, I noted how demonstrative the pic is in showing the importance of HB. If start with the wide spread UP bar on Ultra High Volume that closed off its High, we see Climatic Action and potential weakness. However, the next bar is UP which does not confirm the weakness. Moreover, if we look to the left we see an old top. Meaning this interval is pushing thru supply and absorbing all the selling volume at that top. Which would ultimately make this bar a Sign Of Strength (SOS). The next two intervals are both DOWN but on volume less than the previous two. Thus making them No Supply bars. Skipping ahead a few intervals, we see price close at HB, but it never closes below it. HB is really like the line in the sand: Longs above Shorts below.

Now we note the white line marked YHVZ H1 (H). The ideal trade in VSA using the trigger numbers is when price moves beyond the trigger number and then comes back to "test" the line on lower volume. This is where VZA steps in. VZA creates both dynamic and static Zones. Dynamic Zones can change throughout the day and are based on the highest volume seen on the chart being traded. Static Zones remain constant for the day and are based on the highest volume interval from the previous day. In the case of YHVZ H1 (H), it is the High of highest volume interval on the 1-hour chart from the previous day. As the chart shows, the second NS or either Test bars are potential entry points. While one can take trades from HB, some emphasis is placed on the "edges" i.e. the High and the Low of the range/zone.

Wyckoff with a bit of a twist. The lowest risk trade from a Wyckoffian perspective is a Test/Spring at the creek after price has "jumped" it. Technically, Wyckoff did not use the term "creek", Robert Evans did. Nevertheless, it has been adopted by every Wyckoffian since. Defining the "creek" may be as simple as defining the high of a trading range (where cause is built), or it can be much more nuanced. Which is another one the main points of the post. From a VZA perspective, the High of a High Volume Zone is a defacto "creek". If we look to the left, we can see that YHVZ H1 (H) does a good job of containing prices and therefore appears to be a reasonable approximation of the "creek".

NOTE: Ignore the quarter lines. VZA only FIBs the High, Low, and HB. Or, and I'm repeating myself to make a point, VSA only places trigger numbers at the High, Low and Midpoint(HB).

Charts that I generated using TrueFX tick data are looking perfect, compared to dukascopy tick data is astonishing the difference, check this VSA analysis from may 2009 EURUSD, both charts are from the same spot on the chart (running the simulator now and practicing):

Quick scalp before bed. Got to get up soon to trade the ES.



Despite the weakness that has occurred, the Market appears strong. Price is above HB and looks like it wants to "jump the creek".

Hello, I'm new to trading. I have a trader friend who pointed me in the direction of VSA. I'm obviously still learning but thought I'd post a trade I took (and lost on).

I sold the close of the bar which I have circled, with a stop just above it. It had a bit of volume and broke last swing high, but closed at it's low. I thought it looked like a distribution bar.


Anyway, I'm glad I found this thread and look forward to reading through it!

Zoo, technically it was a text book upthrust, but there are some subtleties in play here. I also would have taken this short, price is in a downtrend, it is at a supply confluence and closing with high volume below two levels of resistance. BUT, there is an important tell that would make me abort the trade: the very next bar closes above the supply line. With all that selling and closing below the two levels of resistance and back into the channel, the sellers failed to push the prices lower, plus you have a lot of strength behind that up leg (wide range bars closing firm, ease of movement up with low volume), so you should be paying very close attention for continuation. Also, given that the upthrust is very wide, your stop would also be wide (because on top of UT bar), so it is a trade to take with reduced lot size.

Quoting zoo

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Hello, I'm new to trading. I have a trader friend who pointed me in the direction of VSA. I'm obviously still learning but thought I'd post a trade I took (and lost on). I sold the close of the bar which I have circled, with a stop just above it. It had a bit of volume and broke last swing high, but closed at it's low. I thought it looked like a distribution bar.

Ignored

Gaur provided a pretty spot on Wyckoffian analysis. I would just reiterate two things:

1. Waiting for confirmation, especially when you are "new", helps. Your read that the Up Thrust was weakness was correct, but the next interval was UP, meaning the weakness wasn't confirmed.

2. This is more Wyckoff than VSA, but in order for the Up Thrust to be valid on the right-hand side of the chart, you need to see SUPPLY on the left-hand side.

Let's start with the Wide spread UP bar on Ultra High Volume that closes on its high with the next bar DOWN. Typically, Markets do not like Wide spread Up bars on Ultra High Volume. But this interval closed on its high. Although the next bar is DOWN confirming some weakness (SUPPLY) on the previous interval, the following interval completes a 2 Bar Reversal (2(BR). This means that any SUPPY that was present on the previous bar is being absorbed.

Although subtle, the bar prior to the Up Thrust is a Test in a Rising Market and a potentially bullish indication.

But with all that said, I probably would have taken it too. and without confirmation, if it was appearing at the "right place ."

Quoting zoo

Disliked

Anyway,

Ignored

We're glad you found this thread too. Everybody here is on the same journey and willing to help when and where they can. Keep posting and asking questions.

Very nice analysis. I hope to see more.

I left MathTrader7´s tick chart generator EA running the whole day building a 144 tick chart to test some indis on it, it is working beautifully.

Thank you Gauer and HiddenGap. Analysis from experienced traders is greatly appreciated. I'm taking notes.

Update from previous screenshot, price broke the downtrend channel to the upside but then kept going lower, so updated the channel lines:





Also, the story of weakness was corroborated by the analysis of the TPO charts developing value lower:

As I was doing those annotations, price start doing exactly as the analysis forecasted:

Chart dump.