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Trade Using VSA (Volume Spread Analysis)

  • #5,541
  • Mar 7, 2010 1:04am Mar 7, 2010 1:04am
Hi i am not sure if this is the right place to ask but i was wondering if anyone could help me.
I have been reading master the markets and i have been also trying to use the better volume indicator. My problem is the methodology doesn't seem the same.
To give an example:

In master the markets : Buying climax (start of a bear market) Exceptionally high volume accompanied by narrow spreads into new high ground. Also in the last phase the market will be seen to close in the middle of the bar.

The better volume indicator :Volume climax up bars High volume,High range up bars (red) Start of up trend??

Could someone clarify this for me?? as they both seem to contradict?
  • #5,542
  • Edited 2:40am Mar 7, 2010 2:25am | Edited 2:40am
Quoting abritton76
In master the markets : Buying climax (start of a bear market) Exceptionally high volume accompanied by narrow spreads into new high ground. Also in the last phase the market will be seen to close in the middle of the bar.
Hi,
I havent read the book you are referring to however my take on your question would be .... dont depend on the indicator to tell you as to what is happening etc I would personally use an indi with a simple moving avg on it to keep a eye on when we are below or above the avg volume for that TF and would do the volume analysis bar by bar keeping in mind their relationship with the previous bars and Price action and at which price level this whole action is happening.

Having said that .... Long range bars with high climactic volume means Hidden potential selling/buying (depending on the background i.e. the move happening prior to that bar) this long bar with high volume should be an alert signal to be ready to whats coming next i.e. confirmation bars.

If price is reaching a strong resistance/support level and somewhere before that level this long bar with high volume appears and the following bars start getting short with closes in the middle or lower of the bar along with up/down thrusts and no demand/supply bars this shoud mean that previous move has lost steam and price will turning around some time later.

We need to keep in mind that not every end of the move would be laid out this way becuase markets are dynamic however as i said if i know that the price is or coming close to a strong support/resistance levels and there is lot of effort to take the price up/down on higher volume with no avail i.e. no range increase and price closing is oppostite to the current price direction then this will give me the extra clues to be ready for a reversal.

I am myself learning and working to gain some experience in using VSA with my own trading style which is trend trading with entries at strong confluence levels ..... I hope i havent confused you further .... there are a lot of experienced pure VSA traders who can guide you in this regard. Just my few cents.
  • #5,543
  • Mar 7, 2010 3:28am Mar 7, 2010 3:28am
Quoting abritton76
.....In master the markets : Buying climax (start of a bear market) Exceptionally high volume accompanied by narrow spreads into new high ground. Also in the last phase the market will be seen to close in the middle of the bar.

The better volume indicator :Volume climax up bars High volume,High range up bars (red) Start of up trend??..........
Forget about the color and the placement for a second. Next think about the term Climatic Action candle/bar. Now the better volume definition of this would be: Highest V*Range in x number of intervals, where x is usually 20.

Now think about the three extreme ways to achieve this:

1. Ultra High/Extreme volume AND an Ultra Wide/Extremely wide range.
2. Ultra High/Extreme volume AND a Narrow range. In this case, the volume must be enough to compensate for the (comparatively) small range.
3. Low volume AND Ultra High/Excessively wide range. Here the range must compensate for the (comparatively) low volume.

Let's look at 2. Not all ultra high/extremely high volume candles/bars on a narrow range are buying climaxes, but ALL buying climaxes are ultra high/extremely high volume candles/bars.

So we can use the buying climax definition to talk about a specific candle and the more broad definition of Climactic Action when talking in general.

A one bar shake out, will have Very high/Ultra high volume and a wide range. So a Shake out falls under category #1. VSA teaches that markets don't like wide spread up candles/bars on ultra high/very high volume. These candles/bars again, fall into #1.

Thus when Better Volume identifies a Climatic Action type candle/bar, you can then narrow in and define the specific candle/bar type using VSA's definitions.
Without VSA, you're playing checkers while the Smart Money plays chess.
  • #5,544
  • Mar 7, 2010 5:55am Mar 7, 2010 5:55am
Quoting MktScape
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.?
I think it was you who posted the question some days ago, wondering if IBFX is ok to trade with... saying we speak a lot positively about it, though it has complaints or bad reviews;

What you seem to have missed is that, when someone in this thread recomends a Broker's for its volume, he's only doing that... not recomending it for trading at all. That's another story, and there's other threads to help choosing the right broker.

In fact, myself and all that I can remember of, have IBFX (or other nice volume wise broker) demo charts setups, but actually trade with another broker of their trust
  • #5,545
  • Mar 7, 2010 9:11am Mar 7, 2010 9:11am
[quote=MktScape;3528129]
Quoting silverwhite1



..how is your experience with them ...have they imporved their service or they have always been ok.?

Hi mktscape I totally agree with the rating......
Had 2 bad experiences with them, when I tried to deposit fund into my account.Well I wrongly fill up my mail address during online request.After I click submit button and waited few hour,got an email from them about the error,and asked me to resubmit..i was frustrated during that time and decided not to resubmit.I got a strange feeling that something was not right and decided to call my credit card hot line and asked them about the transaction .I was shock after being told that a transaction had been made under my credit card account.I lost US$20 which they charged for every transaction either deposit/withdrawal, but they credited back the deposit amount .

2nd experience regarding my credit card expiry date which did not tally with their record...same thing transaction had been process,lost US$20 ...
Finally I had a live chat with the officer in charge and told them about the problems...and they said that nothing they can do because they just following the rules....

Rules??? I told them in the first place how can they made the transaction with my credit card account if i made an error? only silence...transaction should be done only after everything is in order am i right?

But now they have decided not to have a service charge for every deposit.Well I guess after their popularity declining?

and what makes me stay with them because of the volume that is almost close with esignal..In future maybe I will find another broker.

hope I am clear with my explanation
  • #5,546
  • Mar 7, 2010 9:33am Mar 7, 2010 9:33am
[quote=silverwhite1;3528411]
Quoting MktScape


Hi mktscape I totally agree with the rating......
Had 2 bad experiences with them, when I tried to deposit fund into my account.Well I wrongly fill up my mail address during online request.After I click submit button and waited few hour,got an email from them about the error,and asked me to resubmit..i was frustrated during that time and decided not to resubmit.I got a strange feeling that something was not right and decided to call my credit card hot line and asked them about the transaction .I was shock after being...
Thanks for sharing you personal experience with them acutally i was looking to open a live account with them however I know that these brokers can be really pesky and i wouldnt never open an account based on the fancy name or marketing, which is why i was doing some furhter research....I'll check the broker specifc thread to review the satisfaction rating ...before i do anything with any of these broker.
  • #5,547
  • Mar 7, 2010 9:36am Mar 7, 2010 9:36am
Thanks alot hiddengap and mktscape!! Really appreciate your help. Apart from "master the markets" (which i have read and continue to read) and this thread do you have any advise for recommended reading on VSA- in particular in forex. (i am still going through alot of the links at the start of this thread)
Just out of interest i was wondering what success people have been having with VSA. It all seems to make alot of sense and would be nice to be able to base your trading on the actual cause of market movements.

The book "master the markets" - is also promoting there own software "Tradeguider" so it makes me a little skeptical as to how reliable the methods they avocate.
Any thoughts would be much appreciated- Cheers
  • #5,548
  • Mar 7, 2010 9:39am Mar 7, 2010 9:39am
Quoting tonirai
I think it was you who posted the question some days ago, wondering if IBFX is ok to trade with... saying we speak a lot positively about it, though it has complaints or bad reviews;

What you seem to have missed is that, when someone in this thread recomends a Broker's for its volume, he's only doing that... not recomending it for trading at all. That's another story, and there's other threads to help choosing the right broker.

In fact, myself and all that I can remember of, have IBFX (or other nice volume wise broker) demo charts setups, but...
Thanks Toni .... i'll keep that in mind.
  • #5,549
  • Mar 7, 2010 10:19am Mar 7, 2010 10:19am
look, fxcm micro is the best to start out with if you're just starting. paypal deposit, 25 dollar minimum deposit, extremely low spreads. never had a fill problem. no fixed spreads. what else could you ask for.
  • #5,550
  • Mar 7, 2010 11:33am Mar 7, 2010 11:33am
I have posted 30 min tf GU chart.

According to what I've learned from vsa so far ( or I suppose that I learnt it a bit) in Fridar in hidden selling accumulation phase done and marked up.

And, then, if i am not wrong, distribution will come after opening several hours later. Plase could you correct me if my ideas are false.
Attached Image (click to enlarge)
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  • #5,551
  • Mar 7, 2010 12:15pm Mar 7, 2010 12:15pm
this is a tick profile for friday: we can clearly see accumulation @ 1.5040 area, but as far as distribution at current levels... i don't think so, not yet, activity around here has been quite low.
however price might fall and test 5040 again because of lack of interest for buying. and then up again to meet with 1.54 ... the rally doesn't seem exhausted yet.

Quoting bruceli
I have posted 30 min tf GU chart.

According to what I've learned from vsa so far ( or I suppose that I learnt it a bit) in Fridar in hidden selling accumulation phase done and marked up.

And, then, if i am not wrong, distribution will come after opening several hours later. Please could you correct me if my ideas are false.
Attached Image (click to enlarge)
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Nihil Sine Deo.
  • #5,552
  • Mar 7, 2010 12:24pm Mar 7, 2010 12:24pm
Quoting bruceli
I have posted 30 min tf GU chart.

According to what I've learned from vsa so far ( or I suppose that I learnt it a bit) in Fridar in hidden selling accumulation phase done and marked up.

And, then, if i am not wrong, distribution will come after opening several hours later. Plase could you correct me if my ideas are false.
Don't you mean "hidden buying accumulation phase done and marked up"?

Anyway, I think you focus too much in spotting accumulation and distribution phases... the real big boys do that during weeks, getting ready for moves of hundreds or thousands of pips, that also take weeks or months to develop... and that is only possible to be spot on a larger scale or larger timeframe.
Don't forget that the concepts in the recomended books were written for stock markets, and we must adapt it to forex.

So even if we can probably scale in to see smaller signs of these phases, I think one should focus mainly in seeing signs of it going up or going down, and act accordingly, without so much focus on "is it accumulation or distribution".
  • #5,553
  • Mar 7, 2010 2:19pm Mar 7, 2010 2:19pm
Quoting tonirai
Don't you mean "hidden buying accumulation phase done and marked up"?

Anyway, I think you focus too much in spotting accumulation and distribution phases... the real big boys do that during weeks, getting ready for moves of hundreds or thousands of pips, that also take weeks or months to develop... and that is only possible to be spot on a larger scale or larger timeframe.
Don't forget that the concepts in the recomended books were written for stock markets, and we must adapt it to forex.

So even if we can probably scale in to...
thats great comments which I also think about the periods of these phases, I mean how much time does it take ?

and actually, it depends on who is in the market, and in my opinion, except us, other prof traders ranged from small to medium and to big speculators and also banks, hedge funds. what I mean by this sentence is that I believe that when banks or hedge funds are not in the stage, then other relatively smaller prof trades take the priority and direct the market, and therefore, for such small prof trades, even (maybe I dont know) 1 day is enough for accumulation and just 24 hours later they start to distribute.

and, every trader know his priority, no any one could direct the market against bigger boys. when a bigger comes to the stage, then all others have to wait for till the end of session.

It may sounds silly, however I believe in that there is such hierarchy in this market as well. and all of these all kind of these traders are supervised by policemen

and also our competitiors are the smallest size of prof traders, because I dont believe that hedge funds, banks or other big player donot seek profits at least taking money from public.

in the meantime, these are the actually questions make me confused all the time that I'd like knwo the fact, however, at the end, so far, I can predict some move thanks to VSA, maybe by chance.

lastly, regarding the current position of the cable, I thought that, if any accumulation followed by mark-up on friday, might not be followed by distribution later on immediately today, because lots of cheap bananas are already bought by profs, and if bigger brothers wish a bullish market, then they would have more profit at higher prices. thats why if the cable continue rising, then there is nothing to do and it could not decrease previous levels.

these are all my silly theories , lets see what will happen.
  • #5,554
  • Mar 7, 2010 2:38pm Mar 7, 2010 2:38pm
do we call hidden buying ?

thanks
Attached Image (click to enlarge)
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  • #5,555
  • Mar 7, 2010 4:18pm Mar 7, 2010 4:18pm
Quoting bruceli
do we call hidden buying ?

thanks
no that is just straight stopping volume , once you see that go down to lower time frames and look for test

there were 2 of them here and 2 more on way up

Attached Image (click to enlarge)
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Blogging daily now at www.volume.zone
  • #5,556
  • Mar 7, 2010 4:29pm Mar 7, 2010 4:29pm
Quoting malcolmb14
no that is just straight stopping volume , once you see that go down to lower time frames and look for test

there were 2 of them here and 2 more on way up

Attachment
thanks a lot Malcolmb for your helps.

For the cable, was it right what I have written here, about accumulated maybe during some days and marked up on friday ?
If yes, then should we wait for tests for "no demand" ? or upthrust ?
Regards,
  • #5,557
  • Mar 7, 2010 4:51pm Mar 7, 2010 4:51pm
Quoting bruceli
thanks a lot Malcolmb for your helps.

For the cable, was it right what I have written here, about accumulated maybe during some days and marked up on friday ?
If yes, then should we wait for tests for "no demand" ? or upthrust ?
Regards,
I find it odd that Monday we had such a sharp down move , then every dip is being bought since then

Almost like it was some form of shake out of longs at 1.5000.

We may still see down moves / shakes outs / test and the likes on daily as bottoms rarely form in a v shape without being a little complex on the bottom

I will be favouring buying dips though .
Blogging daily now at www.volume.zone
  • #5,558
  • Mar 7, 2010 7:07pm Mar 7, 2010 7:07pm
Quoting malcolmb14
no that is just straight stopping volume , once you see that go down to lower time frames and look for test

there were 2 of them here and 2 more on way up

Attachment
and test MUST be a down bar; low volume; small spread.

can a test be a up bar; low vol; small spread? would still be valid?
  • #5,559
  • Mar 7, 2010 7:36pm Mar 7, 2010 7:36pm
Quoting bruceli
do we call hidden buying ?

thanks
HI Bruceli,

How do you get those words, such as "stopping vol; No demand etc..." print out on the price bar ?
  • #5,560
  • Mar 7, 2010 7:49pm Mar 7, 2010 7:49pm
Quoting hwsv07
and test MUST be a down bar; low volume; small spread.

can a test be a up bar; low vol; small spread? would still be valid?

no test is always on a down bar
Blogging daily now at www.volume.zone
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