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Trade Using VSA (Volume Spread Analysis)

  • #5,561
  • Mar 7, 2010 8:40pm Mar 7, 2010 8:40pm
Quoting malcolmb14
no test is always on a down bar
Hi Malcolmb,

See that most of your charts posted are small tf, 5 and 15 min. Do you plan & trades with these time frame only ? What is your thinking process before decide to take a trade ?
  • #5,562
  • Mar 7, 2010 9:34pm Mar 7, 2010 9:34pm
Quoting Dutchy
.......1a: does the same hold for higher volume ?........
Great question. I am a bit frustrated that nobody took a stab at this one. Partially because I am not sure of the answer and would like to know myself.

I am not sure but this is what I have come up with. Caveat emptor.

The first things we need to consider are two VSA tenets.

1. Bullish volume is INCREASING volume on UP bars and DECREASING volume on DOWN bars. Bearish volume is INCREASING volume on DOWN bars and DECREASING volume on UP bars.

2. 85% of a volume bar is the Smart Money. I have seen then number anywhere from 80-90% so I have split the difference. I do not want to get into the validity of this claim. But I will say that VSA is not a house of cards that collapses if this particular tenet happens to be false.

Now let's look at volume moving up. If volume is increasing as price is increasing this is healthy. Why? Because more and more professional money is entering the market. You can do the math yourself, but obviously if the first bar has 85 % SM involvement and the next bar is greater, it must have a greater number that represents 85%.

However, increasing volume is only healthy to a point. At some point the volume will be increasing but the results of the volume will be negative. That is to say, closes will not be on the high (for an up bar) and the next bar will be down. Now we know that the high volume masks hidden selling by the professionals.

So volume greater than the previous two should be healthy and not considered extreme or high.

This brings me to a point I should clear up from the last post about volume. VSA looks at volume in two (2) dimensions.

The first is relative to the previous bars. Is today's volume bar higher (or lower) than the previous bar? Or the bar 3 days ago. Or the bar 25 days ago? All these are just comparisons and are done by sight rather than actual number where possible.

The second dimension is about relative comparisons to an average and its corresponding standard deviations. So we can look at today's volume and SEE if it is higher or lower than a moving ave of volume. We can also judge it's size by standard deviations. In TG, for example, the stds are represented by different colors. Any volume bar that is in the salmon color is said to be ultra high or extremely high. I believe that the salmon color is 3 std from the average maybe less. The real key is this- You really don't need to know the actual number of the std or the actual number of tics/contracts. If it is in the salmon color area it is ultra high volume.

Basically, you could remove the volume scale from your charts because you never really care about the actual volume number, only its relative comparison to either previous volume bars or the average and its standard deviations. So while it is true that a volume bar less than the previous two is considered low (on one dimension) it can still be considered high if it is above the volume average. That is why the optimal No Demands will both be less than the previous two bars AND less than average.
Without VSA, you're playing checkers while the Smart Money plays chess.
  • #5,563
  • Mar 7, 2010 11:32pm Mar 7, 2010 11:32pm
Two disclosures before we begin:

1. This was not an actual trade taken. A bit early for me. It just contains at least one worthwhile element for discussion.

2. This falls into the "trade what you see" category because if the gap does not exist on your platform or it is corrected later on mine, the principles remain intact. I may look like a fool if the gap turns out to be a laps in data, but gaps do occur and we can use them.

Really nice market movement since the open today (Sunday night). I haven't said much about this, but ACTUAL GAPS (hint) can be used as Supply/Demand Delta Zones. This fact should be obvious if you have looked at past charts showing Supply/Demand Delta Zone created by WRBs.

The saying is that gaps are filled. Gaps are filled. But sometimes before they get filled, they offer excellent areas to look for trades. That is what we have here. The market gapped open moved up slightly and then returned not to close the gap, but to take off.

Take a look at the chart below:

A. This is a wide spread down candle on very high volume. Note that the close is slightly off the low. This is an effort to fall. This is to be expected, as we expect the market to "back and fill" the gap. Whilst the next candle is down, there is actually some demand (buying/strength) in this candle.

B. Here the range of the candle decreases as the volume is increasing. A squat. A sign that the BBs are keeping the range narrow as demand swamps supply. We don't as of yet have No Result from an Effort to Fall (A) but it looks like that is a real possibility. Note that the next candle is up confirming that some buying happened on the previous candle.

C. The candle prior to C has volume less than the previous two candles. It is not No Demand however. In fact, low volume is common at the beginning of a nascent trend move. C would be an Up Thrust if it was in the correct place. With strength in the background, it is merely a narrow range up candle closing near the bottom portion of its range on increased volume. A squat.

D. This is the key candle. First note that the low of D is roughly even with the low of candle B. Yet, the volume is lower. In addition, the low of D fails to trade lower than the low of the candle prior to it. That previous candle did trade lower but close well off the low. Back to D. D is a narrow range down candle on volume less than the previous two candles. It is No Supply. While I like when No Supply candles make a lower low than the previous candle, the fact that this does not is actually a sign of strength. Especially when you consider it closed on its low. Making a lower low and closing on it would be somewhat bearish.

The bulls rush in on the next candle and the market is off to the races. This post is really about where the action happens-within an actual gap. By definition a gap is an area where there has been a change to the supply/demand dynamics in the market. When you are long from below a gap or short from above, gaps can make good profit targets because they do get filled. Yet there will be times when they create trading opportunities prior to being filled.

WRB Analysis is a form of Gap Analysis............
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Without VSA, you're playing checkers while the Smart Money plays chess.
  • #5,564
  • Mar 8, 2010 2:51am Mar 8, 2010 2:51am
Quoting nico28
HI Bruceli,

How do you get those words, such as "stopping vol; No demand etc..." print out on the price bar ?
I dont know whether it is useful. I found it here before.
Here you are
Attached File(s)
File Type: mq4 VSA_Text.mq4   5 KB | 1,042 downloads
File Type: ex4 VSA_Text.ex4   7 KB | 687 downloads
  • #5,565
  • Mar 8, 2010 3:25am Mar 8, 2010 3:25am
Hello guys, everyone !!

I am quiet surprised I found this thread. I want to make sure that I am on the same page with you guys. What I mean is - you can't be serious analyzing VSA on MT4, are you for real ?!!!!!!

Try any MT4 broker and compare the volume results - you will always get it different lol, so how come you analyze and look for all this volume spikes when u get the fundamentals wrong ?

I mean you cant be serious analyzing VSA with fake or unfulfilled volume.
Personally I use Ninjatrader to analyze volumes with proper broker. The alternative is Volfix - which is currently the best service over the internet, people make shit loads of money from volfix working with the right volumes on fx markets.

I did some tests, volfix and ninjatrader brokers even have the different results sometimes, coz some of the volumes cant be found from db coz they are within the spread boundaries.

So tell me are you for real trying to make it work ?
Btw, thanks to the topic starter for the VSA information, good stuff.
  • #5,566
  • Mar 8, 2010 3:58am Mar 8, 2010 3:58am
Hello all,

I would like to ask to HiddenGap, what software do you use please ?

I find the charts very clear, and would like to know

Thanks !
  • #5,567
  • Mar 8, 2010 4:18am Mar 8, 2010 4:18am
Quoting m1kz
Hello guys, everyone !!

I am quiet surprised I found this thread. I want to make sure that I am on the same page with you guys. What I mean is - you can't be serious analyzing VSA on MT4, are you for real ?!!!!!!

Try any MT4 broker and compare the volume results - you will always get it different lol, so how come you analyze and look for all this volume spikes when u get the fundamentals wrong ?

I mean you cant be serious analyzing VSA with fake or unfulfilled volume.
Personally I use Ninjatrader to analyze volumes with proper broker. The alternative...
You might want to read the thread, as answers to your questions are there. These types of questions are asked all the time (although usually more delicately). But to address your question, I use ODL MT4 volume "for real" and it works just fine. But if you have something that works for you, may as well just stick with that...
  • #5,568
  • Mar 8, 2010 4:24am Mar 8, 2010 4:24am
Lol..

You sound excatly like the intern I have now.
  • #5,569
  • Mar 8, 2010 5:25am Mar 8, 2010 5:25am
Quoting TC East
You might want to read the thread, as answers to your questions are there. These types of questions are asked all the time (although usually more delicately). But to address your question, I use ODL MT4 volume "for real" and it works just fine. But if you have something that works for you, may as well just stick with that...
hmm.... interesting. Im gonna check it with different real account brokers on MT4. if the results are different, this is equivalent to gambling my friend. sorry but this the truth

Im really keen on finding out wheather this works on MT4 not the technique, technique obviously does work !!

Maybe some one could help me by participating the tests....
  • #5,570
  • Mar 8, 2010 6:36am Mar 8, 2010 6:36am
Quoting m1kz
hmm.... interesting. Im gonna check it with different real account brokers on MT4. if the results are different, this is equivalent to gambling my friend. sorry but this the truth

Im really keen on finding out wheather this works on MT4 not the technique, technique obviously does work !!

Maybe some one could help me by participating the tests....
Lol... do you really think this thread would be 374 pages long if it couldn't be done on MT4?

Here's a clue:
Ideal volume for this comes in e-signal feeds or such... but some MT4 brokers have very close bar relation to it...
Now go and do the homework (meaning read the thread from its start)
  • #5,571
  • Mar 8, 2010 6:42am Mar 8, 2010 6:42am
Quoting m1kz
hmm.... interesting. Im gonna check it with different real account brokers on MT4. if the results are different, this is equivalent to gambling my friend. sorry but this the truth

Im really keen on finding out wheather this works on MT4 not the technique, technique obviously does work !!

Maybe some one could help me by participating the tests....
Well although I appreciate your warnings (?), don't worry! I'm very happy with the way my VSA trading has progressed using MT4 (after a learning curve of course), so if this is gambling (which it isn't), then I'll take it any day.

If your actual intention is to see for yourself, then look at some of the esignal charts posted on this thread. Compare the volume on those charts to the same charts on an ODL demo. The volumes are virtually identical. Not an exact match, but certainly close enough. I don't care what other MT4 brokers show. Esignal is accurate, so if it matches that, then I'm good.

Again, this topic has been brought up a lot, and has been resolved by most of the regulars here, so understand that this issue about MT4 volumes isn't new territory; it's already been delved into extensively, which is why I was encouraging you to read the thread from the beginning.

All that matters is having relative volume, and that is available with MT4. I will say that ODL seems quite good compared to esignal, but other MT4 brokers may not be so great. But that's why I analyzed how close MT4 volumes were to esignal, which is regarded by everyone as very accurate, and found ODL was the best match...

For what it's worth...
  • #5,572
  • Mar 8, 2010 6:53am Mar 8, 2010 6:53am
Quoting m1kz
hmm.... interesting. Im gonna check it with different real account brokers on MT4. if the results are different, this is equivalent to gambling my friend. sorry but this the truth

Im really keen on finding out wheather this works on MT4 not the technique, technique obviously does work !!

Maybe some one could help me by participating the tests....
all you need to compare the heights of the volume bars whatever they are in number and also analyze and merge in combination of price action.
  • #5,573
  • Mar 8, 2010 7:34am Mar 8, 2010 7:34am
Watch out guys, it looks like another spammer has found his way into the thread, ready to tell us all how we cant succeed our way - but only by using his doubtless expensive software / service......
Trading Levels with WRBs
  • #5,574
  • Mar 8, 2010 7:50am Mar 8, 2010 7:50am
Quoting malcolmb14
no test is always on a down bar
but what if the big move starts before you even see this?

ok i think i know? (then you move on and wait for the setup). right?
  • #5,575
  • Mar 8, 2010 8:27am Mar 8, 2010 8:27am
Quoting hwsv07
but what if the big move starts before you even see this?

ok i think i know? (then you move on and wait for the setup). right?

I think you're touching on one of the main problems with this and any other way of trading.......

When to enter the trade.

It would be great if we could simply say

'Wait for this, then that, then when we get this....enter'

But the market isn't like that. As discussed here, there are 'signals' we can identify which when occur, give us an idea of what might happen next. But, these 'signals' may not occur all the time. If they do not, and we miss the trade, then so be it (we didn't lose money because of it!).

No method of reading the markets is 100% accurate.

If your particular flavour of entry point requires that you see a ND before you enter, and you don't see one.........don't enter(again, you've lost nothing).

I'm sure that some of the 'VSA Masters' have progressed such that they can see many different 'signals' that may tell them what may happen, that you and I will not see. This is experience and is worth a fortune.....if only they could bottle it

You are not alone. I'm sure there are many of us who are suffering from the 'What if we don't see this or what if we see that....' syndrome.

I'm hoping that time and experience will sort me out!!!!!!!
  • #5,576
  • Mar 8, 2010 9:44am Mar 8, 2010 9:44am
Is this a valid short entry with the ultra high volume up move in the background?

Enter now or wait for a retrace of sorts?
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  • #5,577
  • Mar 8, 2010 10:10am Mar 8, 2010 10:10am
in the chart , acc to vsa, can we have such a result ?
  • #5,578
  • Mar 8, 2010 10:12am Mar 8, 2010 10:12am
gu chart
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  • #5,579
  • Mar 8, 2010 10:33am Mar 8, 2010 10:33am
Quoting TC East
Well although I appreciate your warnings (?), don't worry! I'm very happy with the way my VSA trading has progressed using MT4 (after a learning curve of course), so if this is gambling (which it isn't), then I'll take it any day.

If your actual intention is to see for yourself, then look at some of the esignal charts posted on this thread. Compare the volume on those charts to the same charts on an ODL demo. The volumes are virtually identical. Not an exact match, but certainly close enough. I don't care what other MT4 brokers show. Esignal...
Just checked the ODL demo, alpari, sigdemo with esignal charts, wanna publish the verdict(cant be bothered to upload screens)

It does work as you say TC East, thanks for your comment. My doubts were proved by alpari - I have a real acc with them -volumes are different. But heeey the ODL ones is almost identical with esignal. Thanks for ur comments again TC East and Good luck with your trading.
  • #5,580
  • Mar 8, 2010 10:40am Mar 8, 2010 10:40am
Quoting Islander
Watch out guys, it looks like another spammer has found his way into the thread, ready to tell us all how we cant succeed our way - but only by using his doubtless expensive software / service......
I dint expect such a stupid logic from one of the imbecils on this thread. Listen up you lil scalper, My hedge fund operates successfully for 5 years trading NYSE stocks, yes we use expensive software which u lil sucker cant afford. As a head manager of market strategists,who makes money out of the market on daily basis, would I care about post counts and proving a point ???? Heres the answer I dont really.

Now give urself a favour and look at how many posts I posted on ff.
And please dont kill urself when u hit another SL which will be fatal for ur deposit while I succefully operate funds over couple of millions on stocks - u successfully post shit on forums. Good luck lil flamer

Im done with this thread.
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