Trade what you see NOT what you expect

Morning Mate

yo bro...u still long..?
this range is nuts

Works everytime, I type something about that fact that she is doing sweet nothing and she will move just to spite me, the beech

David...

How we doing today my friend? Want to thank you again for all the help!!

I know in my heart I'm on the right track. Thinking of changing my sub title to..."I've found my way"....lol

yes i see that as well bullish engulf on the support area..

Still long from 1.6960

yes i think so as well..when u been trading as long as EO and u can place 8 lots on a trade and have no fear..(id sh*t a brick)and make cash consistantly..then your made.

u just cant buy trading pyscology..

Hi all,

I was a fairly regular posted in this thread, but recently I have been studying volume in relation to price, in order to enhance the way I trade. I've been focusing on volume spread analysis, which at a very basic level, says that price movement is about efforts vs result. So if things are healthy, a bar that has a spread of 10 pips between the high and the low, should have more volume than a bar that has 5 pips between the high and the low. By viewing discrepancies between this relationship, we can guage what the smart money is doing, and place our positions accordingly.

My chart settings are as follows, for anyone interested in taking a look on their own charts.

My metatrader platform is from ibfx. This at first seems a fairly bizarre setting to state, but it's important as not all brokers are created equal when it comes to providing volume. Based on malcolmb14's esignal charts, ibfx 4 digit demo (yes, there's even a difference in volume between their 4 digit demo and their 5 digit demo) was found to be closest. Other notable mentions go to mb trading and fxcm metatrader.

The indicator at the bottom is called better volume. It can be found in the first post in the vsa thread here http://www.forexfactory.com/t/157629...ml#post2933953 I use it mostly to identify high volume bars that indicate possible climaxes, i.e. where smart money are looking to offload their positions, and push price for one last gasp to get in as many buyers/sellers to go in the wrong direction as they plan on going in the other.

Finally, the orange line on my chart is the 50 EMA.

Ok, so let's get started. I still trade using EO's methods, but I also use VSA to get more confluence. To get started, let's look at yesterday's GU chart.

Starting from the left, we have some PA at 6910 support. Price tried to break here, but notice how it was on increased volume, and closed in the middle? If that's sellers, where did they go? At this point, we should be alerted to look for the long side.

Two bars later, we have a wide spread down bar on higher volume, and the very next bar goes up, again, it doesn't look like sellers are in control here.

The next white circled area is telling, and is a sign for entry. Notice the down bar on low volume. We call this a test. Basically, the smart money is moving price down to see if bears are interested in taking the price down further. If volume remains low, we consider it a successful test. Ideally, we want the bar to close in the middle to high, but the very next bar should give us confidence to go long. Testing the support, and bouncing off higher volume, indicates buyers are exchanging contracts with sellers.

And then, up we go! A word of caution before we continue - you need several signs of 'strength' to support each other for this to be valid, and it is best used with another system to identify where to look for signs to enter a trade, e.g. at s/r lines.

Moving on to the yellow circled area, we moved up to 1.70, and formed a pin, all on high volume. Looks good for a short, we had high volume so sellers must have been sucking up all the buyers, we had a nice pin. Price did indeed go down, however, look at the two orange circled areas. These are tests, on low volume, indicating we may be going higher. We determine from this that the high volume/wide spread up bar to 1.70 was smart money pushing through previous supply.

After the tests, we did indeed go up, to 1.7040. Leading up to 1.7040, we have several bars with upper wicks, suggesting we have weakness coming in. The blue circled area at the top, notice how the first bar has a wider spread but lower volume compared to the second bar, which has a narrower spread, but higher volume? That volume had to go somewhere, and if price didn't move up as a result of the increased volume, it must be sellers.

Finally, the last circled area, we had really high volume on a wide spread bar closing in the middle, indicates strength. This was followed up by several pin type bars, which confirms the strength, and as expected, price went up afterwards.

Obviously I've glanced over some of the concepts of VSA, but I hope you can see how both EO's method and VSA, can work together to provided added confluence and confidence when entering a trade.

I hope to post some more charts later.

You are welcome anytime good to hear you are on the right path

Don't think about the # of lots per trade. Whether it's 1 lot or 10000 lots. It's all about how much are you risking in your trade. If you keep your risk constant, like 3%, as your account grows, so does the number of lots per trade grow. You should keep the amount at risk a constant correlation to your account. Meaning 3% today might be 1 lot, but 3% tomorrow might be 2 lots.

Man how I wish 3% would work for me. That must be such a nice safe feeling. When my account gets to the point that it will sustain us on 3% per trade, I'll be beside myself with joy....

Great post daffy and I too am studying the VSA thread at Malcolmb's suggestion. Certainly makes sense to add another tool to the box...

hello,
For those I havent met yet, I'm Caroline, french, and been trading for over 10 years.

Please to meet you Caroline

Hi Caroline,

Glad you could join us. Spend some time when things are slow like this going over the first pages of this thread so you can set up the MA's EO uses and teaches us about. Also, download the PDF file. It's a great summary and will get you up to speed quicker.

Chris

anyone still trading after 10 years is an immediate friend of mine

EO, sorry about the post about the Stew stirrers boots and an orifice in the Cable thread. My blood just boiled when I saw that stoopid post of his. Do u want me to track him down and pinch his pips...

Bonjour Caroline! Comment allez-vous ce matin?

Hello everyone else. Nice to see lots of intelligent people discussing cable!

Paul

Hello Paul