Trade Using VSA (Volume Spread Analysis)

thanks a lot Geppy.

Your comments are highly appreciated.

The technical definition of No Demand is:

A narrow range up bar on volume less than the previous two bars.
That's it.

From the base definition, therefore, we can see No Demand anywhere. The problem arises when a trader tries to short a No Demand in an uptrend.

In fact, Tom Williams and Gavin only started emphasizing the weakness in the background aspect because many people were trying to short No Demands in the wrong place. Today, Tom would not call a narrow range up bar on volume less than the previous two bars No Demand (technical definition), if it appeared in an uptrend. But that's because too many newbies would try and short it. NOT because it doesn't meet the actual definition of No Demand.

Volume less than the previous two bars tells us that the SM is not very active on that interval. Volume less than the previous two bars with weakness in the background not only shows inactivity, it also shows disinterest in higher prices.

Simply, whether it is No Demand is based on range, close and volume. Whether it is suitable to short a No Demand is based on background weakness.

To newcomers:

careful reading this thread, your life could change drastically-



Happy weekend guys.........

Maybe quite a nice VSA situation this afternoon after the jobless claim news.
I'm a total VSA beginner, but here are my comments. Feel free to correct me.

Very high volume up bar at the red arrow together with the next low volume downbar, showing weakness/selling. Then some low volume up bars from people who jumped on a false uptrend but with no big buyers.
Then starting from the yellow down bar we see increasing volume on the down bars, showing a stronger downtrend.

thank you tom

really a noobie, hope learn from you guys, thanks!

- bar 1 wide spread down bar with high volume
- bar 2 upthrust bar with high volume
- bar 3 no demand bar with volume lower than previous two bars
- bar 4 test bar but no up bar followed, weak
- bar 5 high volume down bar with wide spread and break the trendline,
with weakness in backround, both bar 3 or bar 5 are good entries
now it plummet, +40 pips already
close 2/3 +160pips, 1/3 free run with SL +100

Yes, NDs on uptrends are often 'pause' candles, they do not necessarily imply imminent reversal/downmove. same thing on NS (no supply) on downtrends.
great reminder


Hey RV,
nice to see u posting more.

thankyou Dr. Geppynius for very nice explanation.we are expecting more from you.

tfflyer,sorry for dealy
yes the answer is very good.and you was right.ND in down trend
i thought iwas totaly wrong,untill i read all other comment.
like Ryan Vega, I was selling after uptrend almost to finish or upthrust and start to look at ND. and it was working good! it seems it worked but now i understand its not the proper site for ND.
thx again tfflyer
thanks HiddenGap.and to others.
p.s: I see many new faces in the thread, that means its a successful and informative thread and members are very friendly and supportive.

Dear Szpower,

I am really happy to see you trading the Beast off the 15m. That is a violent girl and should be observed carefully. Congratulations to your positions. It does not matter whether they are still open or not at all! If you closed hem, you had your profit. If you have them opened you have your big profit this time but that does not matter too much, only the reading. Read correctly, anticipate and monitor whether you were correct, that matters.

My readings - on your chart only & not looking at my charts:

Prior to bar 1 there was serious stuff going on. That bar is very weak for it was pushed back to the middle of the spread on relatively high V. This happened after a bullish WRB. This is always weak and the market may or may not respond to it with down move but caution should be exercised.

Note that bar 2 goes up into the area where Supply showed itself on bar prior to bar 1. Confirming the strong Supply this UT is pushed down - you were correct, this is weak. I would note the bar after this as a nice one.

Correct, yet another powerless effort to go over the heavy supply up there - fails.

Bar 4 is no test IMO. SM tests supply AFTER strength appearers. So if SOS appears and they want higher prices they test. But in our case the background is weak, they want lower prices. This is just a lack of participation in that moment. Two bars after a beautiful ND. Do not mind the V is not that lower than the 2 prev bars, it is certainly less than the bars in the background.

bar 5 - of course selling pressure.

Nice!






To my reading

Dr,

this is exactly the method I like the most! Looking for points of high probability turning points and identify entry opportunities with VSA.

Thank you for posting with great comments!

The more I find this EXACT set up, the more I come to the conclusion that this is one of my favorites.

We are in super down move on GU, GJ. Looking at the chart the first thing you note is the Climactic down bar. It can be a potential major Selling Climax and a bigger up move may have started. Who knows?
http://www.forexfactory.com/showpost...stcount=169286

Anyway, what happened to me some months, even weeks ago, was that I saw a move like this and got under immediate pressure. Why I am not in? Bla bla. What a stupid approach that is! If you did not read well at a time and missed a move it is a mistake to get in late without proper consideration. That is called chasing the market and can burn easily.

The good thing is that moves like this have often buying orders in a form of profit taking, Stop Loss orders or better traders, professionals who got bargain prices to their bullish interests and can and do move the markets after all.

If we see this beautiful mushroom shape with nice Tests and NS after a while, we can have a nice trade! There is no need to rush after a collapse like this, the markets can not rocket just like that (in most cases), a nice cause would be built effecting in a reverse up move. A cause like this is better indicated on 15m or even 30m - just look at this one. On 5m there are a lot of bars, only good traders can be safe there with all the stuff. The same set up was CLEAR on 30m TF!

Now, let us have a comparison with IBFX MT4 demo with 4 digit! It is by no means impossible to read out the same set up here, but needless to say how superior the esignal chart is. The climactic V is way too high relative to the other Volumes and makes the others to little dwarfs so it is more difficult to compare them. Eh....

Final note that this is considered a contra trend trade (look at 1H TF) and may be too risky for many. As such, extra caution should be exercised and only quality set ups taken. I have seen similar ones and I took only 2 because of the risk of trading against the main trend - oh man I should never stop learning! I missed 4-5 turned out to be correct and there were more not giving mushroom shape or proper test or whatever and they turned out to be just not good enough.

hi zoli, thanks for your input!
I am really a noobie, appreciate all the teaching from you guys! Really appreciate!

-bar 1 top reversal with the bar before it
-bar 2 low spread bar with volume less than previous two bars, might be a test bar, however no up bar followed, so it shows just weak (no smart money interest)
-bar 3 no demand
-bar 4 confirmation to bar 3 and break the upside TL,
my entry just after bar 4
+45 pips close

Nice trade and good reading! I was about to post the chart but you were faster..lol! We teach here each other. You are a teacher. Of course, there are some really good traders here to help everyone out if needed.

For me there are some important things to pay attention on this market to.
The major is the big down swing in the background.
Previously one of my problems were to find ND or test bars in a consolidation all the time. There are many of them but only few are valid. There was a ND looking thing so I went short only to find out that we were still in the TR for 2 more hours. Eh. Timing is important, you did well.

By the way, as I am writing this after the news came out there is a high V down bar back to 1.5936, previous Demand zone. Following that the market went to north!

Anyone using NinjaTrader with the Barchart.com data feed? I just got the feed setup a few hours ago, and am wondering about how accurate the Volume is?

Cheers Mike.

this showed alot better on esignal feed .

I pmed Z about this one ... enteed 10 pip off top and closed for 100

the background gave weakness

i will post chart later

I'm wondering if we can get a free currency futures intraday (1M data) somewhere to import to Mt4?

Hi szpower.
was good trade but too risky.

Even if your entry was better let say Sell stop on NoDemand.. your risk reward was poor as you can see from my image.
there is support line that you should not ignore.
safer entry would be after this line is broke. or at least you should move yourr stop after 1target was hit.
but you said that your entry was after 4bar..and this bar just hit support line so i dont know why did you shorted after 4bar ?

Also look at my second image
you see where A bar is ? and what a huge volume there is ? it can be CAUSE to go up. you should now anticipate range so no Trend.

VSA teaches us to be mindful of the news. The BBs use the news to position themselves against the herd. The news usually generates high volume and the BBs need to be active when volume is high, so they don't push price up or down against themselves.

When thinking about the news, we should break it down into two broad categories:

1. General news. This is a broad category and encompasses many things. Things like CBS evening news doing stories on "oil supplies are tight and many analysts see prices going to $200.00 a barrel". Or the cover of Newsweek proclaiming dollar weakness.

VSA tells us that we should be contrarians in such situations-When The cover of Time says the bull is back, it probably means a top is near. The oil market in '08 gave a nice End of a Rising Market signal even as many analysts were in the news prognosticating "super spikes" in the price.

2. News reports. Here we are talking about those scheduled releases like Durable goods, Non farm payrolls, GDP, Trade balances, Fed minutes and consumer confidence to name just a few.

With such news reports, the "bullishness or bearishness" of the report matters little. We are not looking to trade the report, but the reaction to the report.

Take a look at the first chart below.

Since we know the BBs use such reports to take their positions, we can pretty much assume that we are dealing with a key change in the supply/demand dynamic. At 0830 jobless claims were released.

We see a wide spread up candle on climatic volume closing off the high with the next candle down. This is weakness. Did the report come in less than expected? Don't know. Don't care. The SM is selling on this candle whatever the case may be. Therefore we should be looking to get short.

With a bit of momentum, price moves up. It knocks up against some resistance (a prior supply/demand delta zone) and then rolls over. As price enters the zone created by the news release candle, we are looking for our low volume sign. Price is now making lower lows and lower highs. From a candle perspective, we are seeing dark (close<open) candles.

Then our old friend shows up: a narrow range up bar on volume less than the previous two candles-No Demand. Ideal trade location. After climatic action and after a change in trend.

Now take a look at the second chart.

Again, we have a news release at 0830 hrs. This time it is Durable goods. On the report we see a wide spread down candle on climatic volume closing off the low. However, the next candle is down. But take a look at that next candle. The volume is lower and the close is in the upper 1/3 of the range. This is a strong candle and tells us there must have been some buying in the first candle. And more buying came in on this candle as it makes a lower low, but closes so high within its range.

Did the report exceed expectations? Don't know. Don't care. What we do care about is the fact that the BBs are buying.

Price begins to move up on low volume (volume less than the previous two), but we have seen strength in the background. These no demand candles (by definition) represent merely a pause and are not signs to go short.

Eventually we see a nice Key Reversal Bar (KRB). This candle makes a lower low, opens higher than the previous close, and closes higher than both its open and the previous candle's close. Note it also closes slightly off its high, which is a good thing for this particular reversal bar type. An aggressive trader could get long here. A better place to get long occurs two candles later when we see a narrow range down candle that makes a lower low and closes in the upper portion of its range on volume less than the previous two candles-a Test.

By the time we see this test, the market has made a swing point. In other words, the trend is now up. So we have seen climatic action and a change in trend followed by a test. This is our low volume signal within the range of a previously high volume candle.

When dealing with category 1, the prudent trader should beware of the news.
When dealing with category 2, the prudent trader should be aware of the news (release).

i just wanted to throw in something for you to view and remind you, that with explaining and spreading this knowledge you/we are all working on the potential upcoming failure of this way of trading.

don't assume that all of those thread views are only small retail traders...i only can say it again: the knowledge spreads it's way from such forums like FF where professionals/ brokers etc. can see the general bias or tading methodologies of the herd and work against it, because this is the way it works. it might just be wrong data which is pretty easy to accomplish. there's no easier way to track the way your prey works than such forums. i wouldn't even be surprised if many brokers are sponsoring FF...

nevertheless, from the time i saw those VSA based threads coming up here in ff my alarm bells began to ring and i contacted the thread creators, without success, because too many who only thought for the next 5 minutes and not on a longer timeframe thought they found the holy grail and needed to scream it out without thinking about alarming the wrong sides of the market.

it is an unwritten law that in our society only a few can profit and this imbalance can never change.