VSA Trading: Reading the Tape & Learning to Wait

Timing is everything and mines needs work.

I think this month is going to be pivotal for the US markets. Leaning towards bearishness, but we'll see how things play out.

Here's the Daily chart for the S&P 500

 

1. Down bar as a sign that supply is hitting the market. Volume might be excessive.
2. Next bar up as a sign that there was demand in the prior bar
3. Tries to selloff and closes nears its highs. Supply is still present (volume above the last two bars) but subtle strength
4. Attempted rally w/ supply present fails. Volume declines but is still above average which is concerning and alludes to potential distribution
5. Selloff attempt that closes off the lows, in spite of the increased volume. Someone is accumulating here still
6. Another selloff similar to #3, yet this goes even lower before recovering. More obvious strength coming in

Ideally, there is a test on low supply early on in the week which would show that supply has been absorbed before an attempt higher. What makes me more concerned is that the weekly bar appears more definitively bearish.

Here's the Weekly chart for the S&P 500

1. Supply starts to enter the picture. Note the increased volume relative to prior bars
2. Price tests for supply and volume declines, so bulls can take charge in the next bar
3. No strength up here. Buyers have disappeared
4. Strong response by the bears here, driving price lower. The one caveat is that there's no real volume present
5. Bulls attempt to fight back here. The give a lot of effort, but have little to show for it. Someone must have been selling into the attempted push higher.

My gut says the long-term timeframe will win out, but we shall see. Some potential scenarios:

1. Test bar -> rally away
2. Test bar -> failed move higher
3. No Demand bar -> selloff
4. Price is spiteful and rallies higher w/o me.

I am prepared for the first 3 but will sit on my hands if #4 plays out.

Bitcoin seems more bearish IMO:

 

1. Strong up bar. Bulls are in control after some consolidation. Price is entering overbought territory though which could spell trouble
2. Price explored new highs and has nothing to show for it. On top of that, the bar narrowed yet has the heaviest volume in months. Someone might be selling @ the highs
3. The bar rallies only to close near the lows. Volume is above average again. likely more distribution
4. Sell off, but volume declines. No interest in lower prices as of yet
5. Very weak up bar. Couple that w/ the weakness in the background and it looks like a potential No Demand bar
6. No downside follow through to confirm the no demand bar, but the price action is just as bullish, resulting in an upthrust
7. Buyers attempt to step in and defend the price level
8. Buyers fail and closes on the lows. If I were short, I'd admittedly be holding on here w/ the expectation of lower prices
9. Not the strongest up bar, and has the lowest volume since April
10. Still below average volume. Expecting lower prices
11. Weird EvR on this bar. Potential buying?
12. Above average volume on this down bar too. I'd probably have been bearish in the moment, but I can see how it was actually accumulation in hindsight
13. Pent up buying over the last two bars is released here
14. Rejection of the highs. Now, price has failed @ 2, 6 and 14. Not a great sign for the bulls
15. Same amount of volume as #12 but bears made much more progress.

IMO Bears appear to have control and the background suggests that path of least resistance is lower.

Where do you think itll head to? atleast 107 again tho. currently its sitting at 110

My (uneducated) guess is that it will at least get to support around 93,000. Engulfing candle on the monthly suggests that it might need time to absorb additional supply in the market imo.

Today was the best trading day of my life. Didn't make a fortune or anything but I objectively felt in tune w/ the market throughout the morning. Things were shakier in the afternoon with the trend reversal, and since my over-confidence led to over-leveraging, the stop outs cost more than they should have. I will draft some rules up for myself, but it was a promising step in the right direction.

I do need to take better care of myself tho. I was watching charts 15 minutes before the open and didn't eat anything until 30 minutes before the close. Sizeable positions + tight stops are a lot more stressful than I expected. Mentally I'm exhausted but also my body is strained as well which is a sign that I pushed myself too hard and 6 hours of stress is not ideal. I might pull back from trading tomorrow until I can better structure my trading day and force some timely breaks and ways to decompress.

I mostly post in the VSA w/ Malcolm thread. Last week was bumpy for me. In October, I gave back all of my gains for the year lol. It wasn't a big blowup or a large amount percentage-wise. In retrospect, it was the result of two things:

1. More day trading of the S&P 500
2. 1-2 highly levered positions when I thought risk was on my side.

I was proven wrong/early and given my size and it was painful. To put things in perspective on where I was last week vs this week, Similar positions were 10x smaller this week

I say all this to say I plan on increasing my risk again next week lol. There's a possibility that it's the type of week I've been waiting months for. It's a confluence of weakness across the economy and the stock market in a way that could make or break things. Will spend a chunk of the weekend planning and drafting parameters so that I don't blow up in case I'm premature.

Here is the S&P 500:
Monthly

Weekly

Daily



Specifically for the weekly, what makes the narrative (potentially) ominous is how buyers have reacted to supply and what it says about their intent.

The analogy that comes to mind is a star employee who suffers from burnout and eventually puts in their notice... All the sustainable practices which made him a star employee fall as the employee has reduced incentive to follow processes and won't be around to deal w/ the ramifications.

Buyers who no longer care about the uptrend are indifferent about sustainability the same way... they won't be around if/when things fall apart. On top of that, they likely are now bearish and so it's also in their best interest to rope-a-dope and make the unsustainable price action more liable to lead to a reversal.

I (re)watch trading videos based on areas I'm currently struggling with or see opportunity around. I will try and share those resources in real-time as a blueprint for my path and current line of reasoning.

Recently, I've revisited the basics around trend channels as they've become more important for me, and this indirectly lead me to revisit some of the basics around market structure. Especially the concept of the market moving in waves of supply and demand, which result in higher-highs and higher lows or lower-lows and lower-highs. (Note: I do not care about the Weis Wave, which is popular among some Wyckoff/VSA traders but in my personal experience, feels like a rough shorthand in lieu of good chart reading)

Here are videos of note. The first three have overlapping content but are good to drill the point home.

Jako speaks to waves in a way that is applicable for both Wyckoff and VSA:


Jako touches on the fundamentals of waves


Jako tackles waves some more


Also, there are ICT-esque traders that I've watched before and although I'm not interested in their actual strategy, their framework of market structure is surprisingly nuanced and applicable regardless of your core strategy. This video touches on how you can use multi-timeframe analysis to better time the end of a larger counter-trend wave by watching the short-term timeframe wavesTimestamp to 1:24 where it summarizes the concept)

With a bit of distance from the charts, I'm a bit less "watch out below" and a bit more "prepared for the possibility that the S&P 500 pulls back to 6760".

If this does occur, then I'll reset and reevaluate from there, but I think initially got a bit out over my skis. The journal is keeping me in check and its name is as relevant as ever.

Didn't even make it to today's rally before I had to stop trading lol.

As of late, I have creeped onto lower and lower timeframes with the expectations that my analysis on the Daily would lead to a definitive push lower. The market is as bearish as ever, but the breakdown has been 2 steps lower and one step higher which caused a lot of intraday pain on Tuesday. I had a sizeable drawdown with price gapping lower, regaining most of the ground, and then selling off again. It proceeded to rally today as well but I am on the sidelines at this point.

My overall analysis of the market is still unchanged as today was another bearish close, but I realized after my drawdown yesterday that I cannot execute new trading ideas to live markets on the fly.

Today, I doubled back to backtesting to gain more conviction so that I can eventually execute trades emotionlessly.

I am contemplating live-traidng again but reverting to only using the Daily chart instead of trying to fine-tune my entries on the short term timeframe, but I'm on the fence for the time being. I went on tilt on Tuesday which is concerning, but I also see the reward outweighing the risk re: downside potential

Backtesting results
Yesterday I literally entered based on test/no demand bars on the 30m trend channels and it was profitable. Outside of waiting for a test/no demand, I used zero VSA-related analysis smh. I suppose it's a testament to the efficacy of a simple strategy. I still believe in VSA and will (eventually) try to streamline a VSA setup as well. In the interim, I'm going to backtest the simplified strategy some more to confirm it's not a fluke and gain confidence in it.
Works out to 16% profit of 31 trades from February - October 2025. Definitely a trendy market so far this year though, so Claude suggested I also backtest the S&P 500 for 2023 (more choppy) and 2022 (bearish market). That'll be my plan for today/tomorrow.

Speaking of backtesting, today I updated my mouse's config to recognize the shortcut keys for backtesting software. The configuration settings were pretty intimidating when i set it up two years ago (A few weeks after I made the switch to Linux) but since then, I'm more acclimated and the setup is more intuitive. It's probably symbolic to trading in general. You don't really recognize your improvements until you remember past struggles and sticking points.

Happy trading yall.

Price closed at 6753 today. Lucky guess lol

This week's move lower was fraught with intraday rallies that (eventually) failed but overall showed that demand is still present. Couple that w/ the average volume and I wouldn't be surprised to see the markets retest the highs. There's was additional supply on the October monthly bar, but at this rate wouldn't be surprised if November turns into a test bar.

With that said, an alternative scenario is that price rallies on below average volume and/or fails to test away today's bar. If that happens, then it seems increased odds that price heads lower and might bring out some real supply.

My current theory is that the economy is in a recession in terms of human labor but is experiencing a boom regarding productivity and reduced costs (for non tariffed business models at least).

Narrator: It was a fluke



Sound advice by Claude to backtest 2023 for a more accurate representation of how it performs in different market environments. Where 2025 was trendy, 2023 was choppy.

Even with such a simple setup, while using paper money, I still felt pangs of anxiety when it came time to pull the trigger after a big winner or a stack of losses. That is the part of me that I need to wear down and reconstruct to be more disciplined. I begrudgingly tried out the strategy when Claude said my setup was too convoluted and and even tho it is a loser for choppy markets, it was good practice forcing myself to take trades irrespective of the outcome.

My goal this week is to try some VSA-specific rules w/ a simple setup. I am both looking forward to it as well as anxious about it... I've invested a lot of time understanding the strategy yet seeing results worse than a monkey throwing darts would be pretty disheartening lol.

I think the mindset I'll have going in is to just focus on what I can control and focus on the process instead of the outcome like all the psychology gurus say

Back to live markets, there are rumors on an end to the govt shutdown:

The lack of supply that came out over the entire week is a sign that there's no conviction in lower prices too. Same applies for Bitcoin which I initially thought might get to 93000.

Need to see how the week plays out, but things might be shifting from somewhat bearish -> decisively more bullish.

Here are my latest results. In this session, I traded early 2025 again but w/ barebones VSA principles layered in. I shoot for 25-30 trades per session. I'll refer to these as trade series moving forward fyi:

This took a lot longer than it should have because I got off to a hot start and took a break to avoid jinxing it. Crazy how the mind tries to protect itself.

The results are not as great as my first session I shared, but I am optimistic because it is a completely different beast... My first trade series was swing trading on the 30m and took ~10 months to get to 30 trades. This trade series had the same amount of opportunities in 2.5 months and being that it is intraday trading, it isn't as dependent on a trending market AFAICS.

Strategy Explanation

1. My steps in a nutshell
   1. Develop a bias on the daily chart
   2. Wait for my setup on the 3m
   3. Take every test/No-Demand once setup is in place

2. Of note is that my intraday setup has no VSA present. It uses general market structure (HHs & LLs) to enter when one side cede control to the other
   1. The reason behind this approach is of this is to have more definitive entries that are harder to second guess.
   2. My setup was based on expecting a counter-trend move. (Ie: supply present on the daily, the intraday chart shows price rallies to resistance and I would be looking to get involved on a reversal). This wasn't a conscious decision fyi

Takeaways

1. I am gaining confidence on the daily chart. An uneducated guess is that I take the background into account and anticipate subsequent price action 2 out of 3 times, and I am surprised/unprepared a third of the time.
2. This is a great standalone edge but reminds me of that quip about how someone can give you the price of tomorrow's close, but most people will still lose money trying to trade it. I have not had enough reps to approach consistency here, but I can sniff that I'm barking up the right tree. It will take repetition and since I'm just getting acclimated w/ the new entry type, I have to give myself grace and ground my expectations in reality.
3. I suffer from analysis paralysis on intraday charts due to all the moving parts. Removing the intraday guesswork has helped me focus on probabilities. I might re-add it down the road if I have more bandwidth, something like reading the hourly bars before an entry, but for now, it's too noisy
4. If I was anxious to resume trading and give back profits, it's a sign that I still need to shift my focus from the outcome to the processes itself
5. I did not purposefully commit to counter-trend trading. I will try to layer in a trend-trading setup in the near future, but for the time being, I want to tackle 25-30 more trades w/ the current setup, but w/ less second guessing of myself

Adjustments to make

1. In retrospect, there were still times I convinced myself not to take a trade. I am going to tackle 25-30 more trades without changing anything to stamp out the dissent some more.

I'd be lying if I didn't say I wasn't second guessing things after yesterday's selloff, but bulls appear to have regained control. Barring any craziness before the close, the best case scenario for bulls is testing on Monday and a rally away from the danger zone.

Every weekend I watch the weekly breakdown by JMP Trading. It really helps me zoom out and compare my perspective with an informed trader.



This week, I'm more bullish than him when it comes to the Dollar, and also reevaluating the S&P's strength as a result (and evaluating the weekly chart).

One updated scenario for the S&P 500 is that Monday tests and fails on Tuesday or (perhaps a bit more plausible) the market rallies on Monday and puts in a No Demand bar or brings out supply, either of which leads to a continuation lower.

IMO we are just biding time until the next job report confirms we're in a recession

Strong rejection of the gap higher after NVDA's earnings. Might be the nail in the coffin for the bullish sentiment as a whole

Edit: haven't been paying attention to live markets, so my analysis is not very detailed tbh. Some accumulation intraday but the current daily bar looks ugly AF. We'll see how things play out:

In addition to backtesting, I've watched some +10 year old Tom Williams videos on YT. The videos tend to have the same structure w/ VSA newbies asking Tom for his opinion on some charts.

I like to pause the videos once the chart is shown, analyze the chart, and then compare that to Tom's reading. It's a good exercise comparing my notes to a master. He also drops random gems occasionally as well that aren't in Master The Markets.

On a related note, I noticed Tom limits his charts to ~20 bars, regardless of timeframe. Yes, his eyeshot was shot at that point, but he clearly could create a rich VSA story w/ 20 bars or less most times. I've been cutting back on the data in my charts as a result.