vsa with Malcolm

Hi all, Just a quick grab on GU trade


After the drop from London session, GU have provided a opportunity to counter trade the up move with the presence of climatic action & follow through. (Note how nicely the price bounce off fib extension at 261.8%.

PS: AR means "automatic reaction" usually occur after a strong climatic action when price bounces of the lows or after its high after a rally in which market will try to test the lows again, in this case.


Errata on the chart posted earlier where the "1st sign of weakness" was indicated. It should be strength.

sleeping NO .. 4;30am wake up on west coast Vancouver island for slamon fishing offshore ...

have not traded since Wednesday of last week

did not like market action , long weekend in us and nfp right before it.

Also holiday in UK

gu right now is in a channel ...1;5350 to 1.5480 .

15 min right at top channel .. double top

1st stop buying climax , 2nd top ut ..failed prior days value area high

gu is in a channel , hence the easy long off 1.5350

I have been having a discussion with a trader friend. He is interested in attending a webinar by a gentleman, whose name escapes me at the moment. The topic is Wyckoff BAR BY BAR analysis. I was not aware that Wyckoff did "bar by bar" in his day.

I am a believer in "bar by bar" analysis for Volume Spread Analysis as almost every bar/candle is telling you something. However, it is much more effective to make trading decisions by stepping back away from the trees and view the forest.

The chart below shows many different types of VSA candles. In my opinion the best entry comes from a composite of the individual candles. If I can mix my metaphors, each candle is a note. Only when the notes come together in a certain way do you end up with Beethoven’s 9th symphony.

Tom Williams, the master, said "If you waited for nothing more than an Up Thrust to enter, you would have to be a very poor trader to not make money."

I have identified 5 Up thrusts in the chart.

The first on is on the left side of the chart. This is a beautiful example of an Up Thrust. The close is in the lower third of the candle, the candle is up, the volume is high, the candle has high higher than the previous two highs, and it is a Dunnigan candle. It is not a good place to short however. Why? Well what does the background say? Not much at this point. In fact, some would say it is not a "true" Up Thrust because there is no background weakness. This of course if a half truth. But it does prove my point that context matters and not simply individual candles.

The second Up Thrust is harder to see. It does turn out to be the Up Thrust at the top of the market though. Ideally an Up Thrust will close in the lower Third of its range, but some will not. As is the case here. Notice that we do have more context by the time we get to this candle. We have seen an No Demand that followed a wide spread up candle on high volume with the next candle down. Not to mention the first Up Thrust that we look at.

Let's look at the 2 candle reversal for a moment. As an individual pattern it is bullish. If price moved back down towards these two candles on low volume that would be a good sign to get long. But there is weakness behind it. Again we want to string our notes together to make melodies.

The third Up Thrust is the best place to get short. First we must note that this is an Up Thrust that closes lower than the previous candle's close. This is not the text book definition, but we understand the differences between the book and the real world. It does make a higher high than the previous two candles and it does close in its lower third (at the low in fact). Also note that the volume is low. It is less than the previous two. Moreover, it is yellow which tells us it is the lowest volume in the last 20 intervals. Because it makes a higher high on this volume we know it is a form of No demand as well. To top it off it is also a KRB. It opens higher than the previous close, makes a higher high than the previous candle and closes lower than the previous close. And lower than its own open.

The last part of the above paragraph was not VSA. So let's get back to the VSA. Let's look at the context. 5 candles after the Up Thrust there was a wide spread up candle on very high volume with the next candle down. If all that volume was buying than the next candle could not be down. This candle is an Effort to Rise. We immediately see No Results from this Effort to Rise as price moves down and closes below this Effort candle.

Next we get a Test. The volume is less than average but increasing. But the next candle is up confirming the Test as successful. Then wham. A dark WRB closing lower than the low of the Test candle. This is No Result from a Test. The market must therefore be weak.

The key comes now. Despite the weakness shown by the No Result from a Test, price drifts up. Note that the next two up candles actually have lower volume than the down candles that proceed them respectively. Then we get the Squat. Very high volume on a narrow range up candle that closes just below the middle of its range. This must be supply swamping demand. Momentum moves price a bit higher, but this next candle has lower volume. Now we are moving back into the range or area of our Effort to Rise candle and what happens? Volume dries up. We get the Up Thrust in the form of No Demand. A clear sign of market weakness.

Mixing my metaphors yet again, while every word has meaning a sentence can only be built when words are put into an appropriate order or structure.

I'm not going to say much about the other two Up Thrust, except that they come when the trend is down and the background is weak.

That's why I love to see charts by Intel. He is very good at understanding the individual bars and yet paying attention to the bigger picture. I think everyone should seek out Sebastian’s videos before he was "squelched" by Gavin. Seb focused on each candle/bar and it is very helpful. The trick is to not get so bogged down in the minutia of each candle/bar that your focus on the trees causes you to miss the fact that you're in the middle of a Forrest.

Awesome post

You heard it here first folks.............Beethoven was a VSAer

Only HG could compare VSA principles with Beethovens' 9th and have it make sense. Nice post mate.

Someone get this post into the HG.doc.

LOL

Just watching a program about mathmatics on the tele and up pops a spot about 'Leonardo of Pizza' a little coincidental maybe!!!

I didn't think Wycoff did bar by bar either. I would like to read his thoughts on this. If anyone knows where he discusses bar by bar, please let me know. Ta.

I don't think hg meant Wycoff used bar by bar analysis. Wycoff read tape.

Wycoff certainly read bar charts as well as point and fugure and wave charts. The question here is, did he read bar charts in a bar by bar manner also?

Hi Intel,

I have found an old analysis (2006) of Sebastian. It's not a video but it is really intresting to read how he interprets each bar.

Here is the link:
http://www.elitetrader.com/vb/showth...6&pagenumber=1

Mel

Thanks Mel. His bar by bar analysis is fantastic. However, I have read all of his BBB analyses and seen all of his BBB videos.

As HG says, if you haven't read them and seen the vids......you should make the effort.

Here are some of the Seb Manby BBBs I have saved.

Happy reading.

Hi everyone, I got a question about adding-up positions. I know we should add on sucessful tests/no supply. What I don't know is where I should put the stop loss of this add-on trade, and what should be the add-on amount comparing to the amount of money invested already? I find adding positions a money maker manouvre, but I don't know to control the risk with it.

And is there any other situation where we should add, like reaching a trendline or support with low volume?

Hello everyone i took eurjpy sell and eurusd sell looks very good to me..On EURUSD we have low volume on stront TL (Chanel),eurjpy is based on High volume on UP bar with sup-res confirm...


Cheers

Petar

lets see

2) cad closed
3)us closed

all bars will be low vol and price moved around at players will .... to me there are time to trade and time not to trades ... today is a time not to trade

AS i said i trade according strong points and my trades are based on strong points+sup res zone..I dont care wich market now works becouse i see just price action in my eyes.High volume on EUJRP from last weeks is still in play for me and i stick for that...

Cheers

Petar

yup ej for sure had a buying climax on nfp day ...

"Olá colega Tuga!"

About the add-on amount, though I don't usually do it (as I only trade intraday), I think a good rule is to start with a bigger amount, and add-on a smaller one... because as the trade advances, the closer you get to a possible stall or turn.
Something like a 3:2:1 relation, or 6:3:1 (for a 3 step add-on) sounds good.