Trade Using VSA (Volume Spread Analysis)

Hi,
I think i didnt say it clearly....i'll try once again...ok so i did read some parts of this thread (not the full thread) via thread search and picked some pages to read in order to determine whats happening and if things make sense and during the same process i came across the broker pages and also found the info on using eSignal and Interbankfx and later in my reasearch over google i dicovered that Interbankfx has got a low customer satisfaction rating etc ...I also understand that the more major data sources(banks) a broker has such as interbank or esignal the authentic their volume reading would ....this whole issue of brokers must have been discussed here ...given the size of this thread.

So far i have bee able to get this much info on the brokers and i am digging for more however in the mean time if someone can spare 1 min or 2 either to direct to the thread or write a couple of line it would be much appreciated or i'll land to the right info eventually.

Well it is true this info is discussed many times throughout the thread. Suggest starting at post #1 and begin to read through everything.

However, ODL is the broker I use for volume (demo), and it's very close to esignal. If you want to test a broker, just get a demo, and match the volume with an esignal chart that gets posted on the thread to see how close it is. That's what I did...

mktscape,If you want specifics about brokers, check the broker discussion forum if you don't see it here on this thread. As far as volume feeds and the accuracy, start with post #316.

[quote=MktScape;3526753]Hi Guys,
Interesting thread!... i am not following this method right now ....however I did read this thread once before but didn’t followed it based on the argument of Fx market being decentralized and therefore inaccurate volume etc. However, here it looks like ppl are using it successfully and that lead me to think that probably i can use it with my own trading style to get more clues, hence higher probability trades. Before, I delve further I thought it would be appropriate to as about the broker ppl are using:

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Hi MKTScape I 'm using IBFX 4 digit ,live account and here is what i got.
EURJPY chart:

At point "A" wide spread up bar with high volume .market doesn't like this....but it seem to me it was effort versus result( refer to master the market page 39). it says :effort to go up with wide spread up-bar ,closing on the high ,with increased volume is bullish and furthermore it penetrate the resistance line .and
(refer to master the market page 29....it says A sudden rise through the top of the side ways trading channel encourages trader not to sell) thus i decided to go long.

I entered at point B closing with low volume and narrow spread. At daily r3 line ,the spread getting narrower and finally I closed my positive long trade at point C... when the up bar spread was narrower with low volume.

and this was clearly tell us that pro was buying (increase in volume that is excessive ,this indicate that demand is in the background)
at point A during NFP the volume was very high ....down bar closed with narrow spread....i did not enter long immediately ...but wait for confirmation ...that was at the point B...which shows low volume with narrow spread...closed the positve trade at point C ..Any comments is appreciated..cause i'm new with VSA.

good trade ... expand the charts and look at Thursday 4 hour .... you missed very vital information that would have caused you to overleverage account and make 50 in a day

the point c was a low volume test after a break out of resistance. In fact I am expecting to see 1.3850 or higher next week

You mean GPUsd going to 1.3850?Thanks malcomb for the comment

THanks for taking time to respond ..i'll have a look at ODL.

Your input is much appreciated. I'll check thread #316

what about EU?

always look to the left of the chart

chart 1 daily ...rounded bottom

chart 2 daily futures. In the middle of the rounded bottom we had a test and since then several shake outs.

chart 3 weekly eu futures 4 dojis with the highest volume in the history of eu futures charts. Last week volume is not real , and gets adjusted monday of the following week , but it was about 1.8 million ultra high

This sounds whacked BUT we could see eu back at 1.5000 or higher based on these weekly charts. In fact this could have just been a retrace of the 1,2500 to 1.5000 move. for sure 1.4000 to 1.4200

Unlike Silverwhite1, I had issues yesterday.

Take a look at the chart below:

A. This is the essential candle. As we know, the first place to start looking when analyzing the market is an ultra high volume candle. That candle is even more relevant when it is a news/report candle. Here we have an ultra high volume ultra wide spread candle created on the release of the NFP report. While we do not want to trade the news, we do know that this is the very type of event the Big Boys use to take their positions. Said positions are usually against the herd and contrary to popular opinion.

Put another way, they are usually taking a position opposite to common wisdom or the initial reaction would have you believe. Such is the case here. Some people have talked about the demise of the Euro lately. Others are talking about Euro/USD parity. Ultimately, either or both may prove to be correct, but currently they add fuel to the negative sentiment along with the situations in places like Greece and Spain.

The stage was set: newfound dollar bull sentiment is on the rise (just a few months back everyone was talking about the death of the greenback) and a "better than expected" NFP report.

As for the actual candle, we see an Ultra high volume, ultra wide spread candle that closes off the low. Now we do want to see the next candle. If it is up, then we can be sure there was hidden demand (buying) in this candle. However, it reasonable to conclude this candle contains hidden demand (buying) just based on the relation of the close to the volume used ON a news candle where we are predisposed to expect certain actions by the Smart Money.

B. This candle closes down, but let's take a closer look. It has a narrower range than the previous candle, closes near the middle of its range and has only slightly less volume than the previous candle. Again, the position of the close tells us that there is some demand on this bar. More telling is the range. The range is being kept Narrow because price is being supported. More exactly, any selling (by the herd) is easily being matched due to an abundance of buying (by the BBs).

As MTM tells us, we can tell the bullishness/bearishness of those that can see both sides of the market through the size of the spread (range). If the BBs were in fact bearish, not only should the close be on the low, the spread of the candle should be wider.

At this point we can conclude that the BBs have been BUYING on the last two candles. As VSA teaches, when strength appears, it appears on down candles. Strength has appeared. This is the basis of our background. We know that the high volume on the first candle will need to be tested. A successful test will be good place to get long.

C. This is an interesting candle. The volume is less than the previous two candles, the close is lower and the range is narrow. In fact the range is the smallest range in the last 7 candles (NR7). This is a No Supply candle. To confirm we want the next candle up.

Here's where the issues arise for me. I would prefer a Test to enter- a narrow range candle closing down on volume less than the previous two candles and a close in the middle or upper portion of the range. But there is nothing wrong with using a No Supply. The place to enter is on a breach of the high. Note that the next candle does not come close to the high.

D. This candle, as just stated, does not trade higher than the previous high. It makes a lower low and not a higher high. It closes up and near the middle of its range on volume less than the pervious two candles. So volume is decreasing from the previous candle. This candle is Both a hidden test and a key reversal candle (bar). Notice that it opens lower than the previous candle, but closes higher.

Now here's the rub. As a test (hidden) it needs to be confirmed by one of the next two candles closing higher. The very next candle does not close higher. It actually closes lower than the low. This is not a good sign for me. In fact, if this next candle had been an EB7 (WRB), then I would say we have a failed test. So while it is not an EB7 it is nevertheless closing lower than the low on increased volume and bringing me pause.

At this point the entry is still a breach of the high of the hidden test candle and the next candle does not do this either.

The next candle, two candles after the hidden test, closes higher than the close of the hidden test and makes a higher high. The close confirms the test.

The breach of the high of the hidden test bar SHOULD have brought me in. But the fact that the previous candle closed lower than the low of the hidden test candle has me perplexed and unable to pull the trigger.

I find myself on the sideline as the market moves up. Note that E is a down candle on volume less than the previous two. I don't like it as it makes a higher high than the previous candle. Making a higher high, then closing near the lows is usaully a sign of weakness, not strength.

Comments?

Hi Hidden Gap,

I am interested in what wide range body analysis is.

Is there any source to learn it that you recommend us ?

Thanks for in advance.

Bruce-li

you and me both ....

I did manage a little sniff at eu on the test 1.3580

hiddengap, many thanks for your breakdown. IMO, the key to this play is the very next candle to the right of the one you have labeled D. It has hidden buying volume in it. On the surface it looks, like a strong bear candle with only slightly more volume than the previous bar. However, there is definitley hidden buying. At least according to my data.

This is in response to a question I was pm'd. The last time I tried, I could not put an attachment in a pm, so the answer is here. It is a much oft asked question so everyone seeing this should at least further the discussion.

How much background is needed?

On the one hand, what one needs as evidence to enter a trade is really personal. On the other, sometimes it takes awhile for the market to set up properly. A basic tenant of markets is that the longer it moves sideways (builds a base) the greater will be the eventual break out when it occurs. In VSA we speak of building a cause for the next movement. So the greater the cause the greater the movement (or result).

Take a look at the chart below.

Note that the first sign of weakness comes in at 0520 and the #2 entry doesn't appear until 0800 and #3 doesn't come until 0935 hrs. That's more than 4 hours later. But as previously state, each individual may find his or her own entries and supporting evidence.

Building the cause:

In full disclosure, this was not a trade taken but merely an example to answer the question (and maybe ramble on ). For me the ideal entry is #2. This is because it has a No Demand (Up thrust in the form of No Demand to be exact) that makes a higher high than the previous candle. As far as background goes, the entire background is weak and complete at this candle as well.

Take a look at the test candle prior to entry#1. We can see that at this point we have had a couple of UpThrusts and Squats and a No Supply that lead to an UpThrust. The market has moved more sideways than up since the Effort to Rise was followed by a narrow range bar on increased volume (squat). This is a sure sign that weakness has entered the market.

But what of this test? Note that the next candle is up confirming the test. However the market fails to go anywhere. Tests should result in immediate price movement, this does not. Moreover, if you move one candle past the candle marked #1 you will see a EB4 (WRB) that engulfs the body and closes lower than the low of the test candle. This is no result from a test and another sign of weakness. And the cause is complete.

Again, #1 is your basic narrow range up candle on volume less than the pervious two candles which we call No Demand and is a valid entry. Yet it still comes a bit more than two hours after the initial sign of weakness.

Entry#3 comes much later. With this entry one not only has a VSA no demand, but also supporting evidence in the form of market structure. The market has just made a LH, so we can conclude the tend is now down. The market can't be in a downtrend and making lower highs. I prefer my No Demands make higher highs as opposed to lower lows than the previous candle, but that's just me.

By the way, the very same information presented in the background can be used to NOT take entry #1L. This is a very nice Test. The close is down and is near the high, the volume is less than the previous two candles and the candle makes a lower low. As you can see we get a small little blip up in price after this test. However there is too much weakness in the background. The trend has changed.

To totally contradict myself, look at the post on Friday's NFP. There are really just two candles that make up the background. This is not actually a contradiction but rather evidence of the importance of certain news releases and the emphasis the BBs put on them. Simply put, the more active the BBs are the more immediate is the effect on the market (or background). And certain news events/reports allow for a much swifter action in terms of positions for the BBs.

Thanks HiddenGap for the analysis. I wasn't watching the five minute chart at the time, a limit order above D looks like the preferred entry to me but I can see how that high volume down candle had you wondering what was going on, I would have been surprised to see that candle after a good looking test like the D bar. There was also an engulfing bar or outside bar that formed two bars after D. An entry at the retracement to the top of bar D could have been a second chance entry in the same area. Just a thought, but i prefer a no supply or test entry using vsa.

Thanks for all your posts HiddenGap.


[quote=HiddenGap;3527821]Unlike Silverwhite1, I had issues yesterday.


Now here's the rub. As a test (hidden) it needs to be confirmed by one of the next two candles closing higher. The very next candle does not close higher. It actually closes lower than the low. This is not a good sign for me. In fact, if this next candle had been an EB7 (WRB), then I would say we have a failed test. So while it is not an EB7 it is nevertheless closing lower than the low on increased volume and bringing me pause.

This thread is very much alive and well again ... thanks to Malcolm and Hidden Gap, and also to everyone who asks the questions. I have had some very good results with VSA this week alone. And it is really nice trading with a clean chart.

HG, I see many people have asked already about WBA, but through the whole thread I have not read that you maybe gave any reference for us to look into it. If it is something you want to keep in your "secrets box" than that is 100%, but you talk so much about it that I figured that maybe you could tell us if there is a place to read up on it a bit more. It looks like a nice way to highlight areas that one can give especially good notice to when using VSA.

Thanks for the great posts you two - if you post it, we will read it.

PH

[quote=silverwhite1;3527207] Hi silverwhite1,
I do apprecaite your response ...for the example that you have posted ....actually that is the only situation (given the sideways consolidation background at a support level where price has retested supply on low volume) where a large range bar burst out with high volume would not indicate potential selling.

Now with respect to IBFX ....i was reviewing forexpeacearmy and IBFX got 2 stars out of around 140 reviews ....how is your experience with them ...have they imporved their service or they have always been ok.?