Trade Using VSA (Volume Spread Analysis)

Here is the same trade on the 15minute and 5 minutes.... obviously we probably could have got out at a better point by dropping down the timeframes.

WG

PS ... anyone else want to put some charts up for discussion ?

it seems not so easy to view this, the next bar, after the highlighted one, is a great stopping vol, u have to wait succesive bar to get it!
On 15 min u can confirm it!
Good!!

Lubo.

Here are some of my thoughts as I see the gj, all feedback welcomed.

I basically agree with Malcom mainly because I'm not convinced that the move up through a very strong resistance zone around 140 had any momentum, see chart.

Madog

Just noticed some nice price action on the weekly EURJPY (see chart) a nice pin bar off a price pivot zone and the 38 fib. The reduced volume also makes last week look like a possible No Interest Bar(NIB)

Madog

This is my view on GJ.

Lubo.

This looks like a good example of Accumulation followed by Marking Up.

Although I realise the increase in volume appears at Europe open... the second doji on increased volume would have been a perfect entry.

I am hoping for feedback rather than trying to teach here as I am still learning myself, so the more criticism the better - that is the only way to learn !

WG

Hi guys,

I found this excellent summary of volume in Forex. I thought I would share it as it does explain it very clearly.

WG.



Trading with Volume indicator offers the following features:
Volume confirms the strength of a trend or suggests about its weakness.

A rising volume indicates rising interest among traders, while a falling volume suggests decline in interest.

Extreme Volume readings — Climax Volume often highlight price reversals.

Points where market trades on high volume are the points of strong support and resistance.

All various kinds of breakouts and market spikes can be validated or voided with a help of Volume indicator.

Why Volume?
Volume is the second most valuable data after the price itself.
Large volume signifies that there is large number of market participants involved, including financial institutions. The last ones bring the highest turnover to the market, and if they are trading, it means the interest to the price at certain point and/or to the trend overall is high.
Small volume tells that there are very little participants in the market, neither buyers no sellers have any significant interest in the price. In addition, no financial institutions will be involved, thus a market is going to be moved only by individual traders and so the move will be weak.

Volume and Trend
Volume helps to learn about the health of a trend.
An uptrend is strong and healthy if Volume increases as price moves with the trend and decreases when price goes counter trend (correction periods).

When price is going up and volume is decreasing, it tells traders that a trend is unlikely to continue. Price may still attempt to increase at a slower pace, but once sellers get the grip on it (which will be signified by an increase in volume on a down candle), the price will fall.

A downtrend is strong and healthy if volume increases as price moves lower and decreases when it begins retracing upwards.
When price is falling and volume is decreasing, the downtrend is unlikely to continue. Price will either continue to decrease, but at a slower pace or start to rise.

Volume and Reversals
To understand the nature of spike in volume before a trend reversal, traders need to know how the data for volume indicator is gathered in Forex.

Forex volume cannot be measured precisely as it is done, for example, in Equity market, where every share traded equals 1 volume, and selling 200 shares means 200 in volume. Forex by nature cannot count how many contracts and what sizes of contracts were traded at any given time, because the market is wide and decentralized. Therefore to count volume in Forex the number of ticks/changes in price is used. 1 tick measures 1 volume. As it moves up and down volume adds up.

When volume rises, it means lots of participants are actively selling and buying currencies. When volume spikes at certain price level, traders know that there was lots of interest shown by traders to that price level. If there is a lot of interest, it means the level is an important one.
This simple observation of a volume indicator allows identify important Support and Resistance levels, which would certainly play significant role in the future.

Where Volume spikes are distinctively extreme (larger than any historical spikes around) — Climax Volume — traders should look for clues from the price itself. Candles that have a narrow range, spinning tops/bottoms, dojies, stars, other candles with extremely large tails have highest chances to become the price turning points.

Single volume spikes only bring price to a halt. A lot of stand-alone average volume spikes occur during fundamental economic announcements on daily basis. News can cause spike in volume for a single day and then volume disappears again.

Reversals, however, happen not over one day but a series of days. If higher than average volume stays on the market for several to many days a huge volume spike — volume climax — will crown a point of market reversal.


<See chart 2 attached (bottom one) ... courtesy of article source>


Volume and Breakouts
Volume indicator helps to validate all kinds of breakouts.
When market is consolidating on a low volume, a sudden pick up in volume would signify that a breakout is due.

Breakout occurring on rising volume is a valid breakout, while a breakout that caused no interest from traders as it is happening on a low volume is more likely a false one.

Trend lines and other breakouts are validated or voided the same way.

Reading Volume Indicator step by step

<See chart 1 attached (top one) ... courtesy of article source>

We’ll compare the weeks, not individual days.

Week 1: as price falls, volume rises compare to previous week – interest to downtrend among traders grow.

Week 2: volume peaks and begins to decrease as price move higher – sellers are still interested in downtrend, buying the currency is going on a lower volume.

3: volume is lower than previous weak, confirming that there is still very little interest in buying the pair.

4: Sellers push down, but this time volume doesn’t increase – it is about equal to week 3.

5: Both sides lost interest as the market drifts sideways on low trading range.

6: market finally finds dome buying interest as the week ends on higher than previous week volume. Buyers seem to be going active.

7: Buyers going full steam – volume rises – it is a healthy uptrend.

8: Correction came – volume drops, no one is interested in Selling the pair – confirmation of a healthy volume.

9: Volume picks up again once price finds its uptrend.

10: Exhaustion gap is seen on the chart, followed by a doji candle with a spike in volume – a highlight of a market turning point. Market ends trading on a lower volume.

11: Even Sunday was busier than usual. The new week market begins with an attempt to rise higher, however volume suggests that the interest to the upper side is much lower.

12, 13 and 14: market attempts to move upward, but volume decreases, signaling that the trend is no longer healthy and a change is coming soon.

15 and 16: some interest arises among traders as the market moves to the downside, Sellers anticipate that this is a moment of a trend change, a volume of new Short orders come.

17, 18 and 19: as the market attempts to rise, volume drops, telling that there is no interest to the upside.

20, 21 and 22: volume picks up again as Sellers take over. A pause on week 21 with a sharp rise in price is met by even higher volume on week 22.

23, 24, 25, and 26: market rises, volume drops – confirmation that remaining traders lose interest in that upward move.

27 and 28: Price begins to decline, volume picks up – interest to the downside is present.

29, mid 30: sideways pattern pause the trend and the volume with it.

30, 31 and so on – trend picks up making new lows, volume confirms healthy trend by rising when price is falling and pausing or falling when price is moving sideways or going into correction. This is something really important I have found.

Thanks for the article. Could you post a link to the source?

BTW, I noticed you like old Rollo's book, from your profile. LOL You may want to get yourself a copy of "Charting The Stock Market" The Wyckoff method by, Jack K Hutson. It is a easy read and a very small, but excellent book. I think I paid about $10 for mine and I am sure they are even cheaper now. Just a suggestion.

check out weekly gj also ..same set up

I think between ej and gj this week , hopefully a little bounce in asia , then sell them both for 500 pips each this week

http://forex-indicators.net/volume-indicators/volume

thanks

Because some people asked where to get Pidgin and how is the setting for the chat room, here a short instruction:

1. Download and Install: http://pidgin.im/ (available for Linux, Mac OS X and even for Windows )
2. Start Pidgin, open a new account through <Accounts> -> <Manage Accounts> and press the button <Add>
3. After the mask showed up, you have to enter the server name for the chat: irc.ircforex.com. You can also type in your user name and the password if this user name is registered. Save it.
4. Now all what is left to do for you is join the chat room: <Buddies>-<Join the Chat ...> and a new mask showed up. Select your account, which you just created and enter #VSA in the Channel line. There you are. You can also use the button <Room List> to find the room and/or to add this room permanently to your room list.

Hope to so you soon in the chat.

cheers robBroker

Data:
Source of Pidgin: http://pidgin.im/
Server name: irc.ircforex.com
Room name: #VSA

Thanks.. I will get a copy

malcomb,

Thanks for this interesting chart. You show an indicator (looks like two MA's crossings) for the volume data which is nicesly synchronized with the price action. Could you please share the logic (or maybe the code) for it ? Which is the TF shown on your chart ? It's unfortunately not readable.

Thanks a lot
Nick

nick that is jurix rsx with a sma on it.. code is locked up for it on esignal and it is password prtected to my ip.... seems to have it well locked up . I use it to keep me in trades for long on 15 min charts. I only trade with the trend of the rsx

5min chart

malcolmb, thanks.

I thought it applied on volume data but seems to be calculated based on price action.

Nick

Thanks for this article Willowgal very helpful. Shamus another article for post 1?

In the chat room we'd had many successful trades using volume and what has been termed T bars - dragonfly doji's at the end of a run down in price and gravestone doji's at the end of a run up. www.candlesticker.com

Still learning a lot and thankful for all the help here and in the chat.

malcolmb14 Where were you learn how to read volume from?Some book, or in the net or?Also how many % of time volume help you to make a trade?

Hey guys what do you think about this?I think that this is a sell signal?What do you think i`m i right?

Thanks Malcolm (and Shamus), much appreciated. Confirmation is a confidence booster!

However as mentioned before I believe the trend to be down on EURUSD at the moment, therefore I would be more likely to short the no demand bars and bail out on any successful tests of supply, jumping back in on the next no demand bar.

I completely agree with you on background, thats why I'm trying to learn VSA using this and 1 hour, 4 hour and 1 day charts as well, but using the 5 minute to make my entry and exit.