Trade Using VSA (Volume Spread Analysis)

Should we filter the Sundays when using VSA on a FOREX daily chart? The volume looks strange so.

It looks really nice. What are the parameters to use? For me the two curves like bollinger bands appears as almost flat horizontal lines.

Daniel

Hello to everyone!

It became to quietly here! Where are everybody?

What your opinion on bar "1"? Maybe it's a failed test? Which shows us that there is still supply?

Ok there are a few things going on here, see my chart below.

Firstly, I have drawn 2 S&R lines and a Supply/Demand Delta Zone.

See how many times that the price has hit these lines and retraced. Out of the 11 times it hit these lines, it caused a retrace 10 times and a reversal 1.

Next find the bar marked '1'

1. We are in an up trend with decreasing volume when we get an UT on average volume showing supply coming in.

1+1 Next bar is down as we would expect however beware, the volume is low suggesting that this is a temporary move.

The next 4 bars wonder upwards with very little volume. SM know that in order to break that area of resistance they will need to be sure they have removed all of the supply first.

2. Right on cue! The price is pushed down to test the UT area of supply seen on bar 1. It has low volume showing that there is no supply left. In fact, it is the lowest volume bar in the whole session so far!

2+1 Wallop! Demand comes in and pushes the price right through the resistance. See the high volume.

The next 2 bars show price spiking high on ultra high volume then taging that resistance area again on lower volume(but still higher than average) before raising the price again. Why?

On bar 2 a good chunk of the herd, having seen a bounce of that resistance area, followed by a down bar, would have entered short. A good price to place a stop loss on this trade is a few pips above the resistance area. So, when SM marked the price up through that point it triggered a load of stops which they had to sell. This marks the start of selling by SM.

The herd having seen the 'new up move' will start entering long providing SM with the opportunity for more selling.

At the top we have an ultra high volume wide spread up bar followed by a down bar closing on the lows on even higher volume. A sure sign of weakness, SM are showing their selling now.

The second down bar closes off the low on low volume. This shows signs of the herds stop losses (from their long entries earlier) being triggered (a transfer from the weak holders to the strong holders). If you check the M5 you'll probably see an up bar in this M15 bar.

As the mark down (red bars) approaches our old friend the resistance area, the volume drops off, signaling that a retrace may come.

4. After hitting the resistance area we have an up bar but with low volume. This is a major area for stop losses from the long side(selling) so the SM have to buy into this (not good for them). But they will buy anyway mmmmmmm I wonder why???

Once there is no demand left, the price is free to fall. We see this on a very wide spread down bar but, look at the volume.....lower than the previous 2 (in fact there's only 1 bar with lower volume in the last 12). This is called a 'no selling pressure' bar. Meaning there is a lack of interest in lower prices from SM.

dvarrin....pay attention

The next bar is very important to us. We have a much narrower spread bar closing well off the low on ultra high volume. This is 'stopping volume'.

After seeing that huge down bar, the herd has jumped on board and gone short but, the price hasnt dropped much. Why? Because as soon as a sell order comes in, SM buy into it, stopping the price from going down.

Next we have a still narrower spread bar on even HIGHER volume. The reasons for this are the same as the previous bar but, it is more significant when it's the second time. It's called a 'squat'.

5. We have a shake out on lower yet still high volume (better if the volume was larger but, compared to the last 2 bars, it woud be difficult). After the previous 3 bars, an entry long here might be acceptable.

5+2 We have a test (it would be better if it made a lower low). If your not already long, then a break of the high of the test is your sign.

Just in case you're SUPER SUPER SUPER carefull about your entries, SM gives us another chance a few bars later!!

I will end my analysis here but have a look how price reacts when it reaches the resistance areas further down the chart.

BTW

The whole area of the chart we have been talking about also forms a classic head and shoulders pattern!!

Hope this helps. Please feel free to comment.

that little bar (on higher volume) puts a cap on the up move. someone is keeping prices down (or level) at the moment despite interest in buying (increased volume). i would expect the next candle to close down, and then reevaluate.

going out on a limb now: the 3-candle pattern in my modest experience looks like an upthrust or rejection of anything above 1.3246...an upthrust/test that took a little more time (over 3 bars). from my tom williams notes on upthrusts: if the next bar is down with a close lower than the previous bar, this tends to confirm that the weakness is genuine.


cheers
mark

I think you're right it is a 3 bar UT or, more commonly known as an evening star formation!!

It is a little weak in that the volume would ideally be higher on the 3rd leg showing more interest in the lower prices.

This weakness probably means that the down move will be a retrace rather than a reversal, but not necerarily.

Just for interest, read my last post with chart. Guess where your 'stopping volume' and 'shake out' bars are bouncing off!!!!!!

mmmmmmm.......

Looking for the next insider information !!(The Original VSA )
DENDREON was great Today!

????

Ah the cancer company.

Prostate Cancer drug was approved by the FDA today--
Stock took off , was halted , re-opened and went up some more.lol

these kind of play by plays are VERY helpful thank you!

i find it very easy to see what's going on around the point '5' reversal... but some of the more subtle tests are not as easy to pick up right away and require thinking it out as you have done here.

speaking of the '5' point on your chart- if price is going down that far that fast yet on only modestly high volume (not ultra high volume) then i just figure that SM is marking prices down using as little volume as possible to do so, until it hits their target zone for buying and they start scooping it up. this results in the 2 low-spread down bars and the pin bar. Pros want to buy at the best price possible, and they know in advance where they want to do this. obviously they can't buy all their inventory at the lowest point (because it's a market with so many participants = movement) but all the volume in this range definitely shows their accumulation in a range. i'm just saying that it is fitting that the highest volume comes at the end of the move: ideally that's the best price the pros are able to pay, and they are going to take advantage of it.

VSA is tricky though, you have to admit-- from the start of your analysis point (the low) volume decreased overall until the big markup bar. u could quickly interpret this as lessening interest as price increased to the previous top ~1.3216. but instead of taking a coarse look like that we have to analyze each bar and it's buy/sell pressure, letting the story unfold as the swing progresses.

good stuff
cheers
mark

It's ok for the smaller moves but for the biggger moves and to be more consistant, you really need to pay attention to accumulation/distribution phases. They are key.

I have trouble recognising them so, I'm working on it!!

seeing accum/dist happening- differentiating the two- is a really big hurdle here. does tradeguider help in this respect malcolm et al. ?

Came home from my marvelous - job answering calls from angry people who did not get their money back - at the Call Center and found this setup. I saw some stopping volume and a big shake out followed by some low vol tests and no supply bars and decided to try my luck and go long. I placed my SL below the shakeout (30 pips below) and a TP of 50 and closed it out a while ago at 27 pips profit. Since this is a low vol part of the day I closed it out with a smaller gain. Which takes me to a bit over my low and humble target for the week of 100 pips.

Like Malcolmb said, not every bar is a setup, that's why I consider a combination of bars to determine my trades, in this case, the presence of stopping vol, shake out, low vol tests and no supply, led me to take the trade. I got home like 4 bars before my entry. Here are the charts. The reason I closed my trade was not based much on VSA, just wanted to take profit, cause I dont like trading when vol is this low.

eu bears watch out
vsa shows the way 1.3450 here we come

Putting it out there to this awesome thread, and all the fantastically generous VSA experts... can we find and post chart examples of these setups?

here you go if this does not move up next 24 hour some form of news is coming out on weekend that may cause it to gap sunday

Already bought some euros-DW2-@ .3239 to---30 pips--

malcolm the first test you marked was a test of supply, i see that. the secons 'possible test' is that a test of demand, to see if prices would rise? sorry for so basic a question but i get lost during trading ranges with all kinds of dojis etc

thanks
mark

thanks...so its perfectly safe to go long now at 3250 ???
we can book 200 pips great

just want to be 100% sure ...before i sell the kids for margin..