Hey can anyone explain how you guys use vsa with this method? example if you have a large down bar that breaks the dragon below accompanied by high volume or a down bar with high volume that is formed below the dragon, is this a short signal? vice versa for a long? from what I understand when you have a high volume down bar thats an indication of buying going on and price may not have that far to go before it turns around, with that said witht this method you are still going to short with that premise in mind? Vice versa for longs?
First off, our VSA is not exactly like the "original" VSA. Our VSA is a more simple combination of coloring of the volume histogram using blue bars to indicate volume rising above the 10 period average volume by 38% or more, and using green and red bars to show "institutional activity of note" when bull or bear candles have the highest product of spread X volume over the past 20 bars.
The blue bars are simply an indication "business is picking up". The green/red bars denote "institutional trading" went into high gear. These green/red bars can come near the beginning of a move, so possibly denoting a run is in the making. However, if the resultant move was very modest, ending soon after such bars, then these bars can be denoting both the beginning and end, something like the final spurt of activity, and possibly before a reversal. These green/red bars can also come during a move, so possibly denoting a run is coming to a close, or a pause.
A study of volume is not the basis for a Sonic R. System trade. However, if a current Sonic R. setup points in the same direction that a study of recent volume points to, then there can be added confidence the setup will not end in a headfake. Also, if you are in a Sonic R. System trade and suddenly a green or red bar appears, especially if the volume bar is exceedingly tall, that should alert you to the possibility the run is nearing the end.
Conclusions drawn from the study of the relationship between price and volume cannot be exacting. For one thing, forex volume is only the count of trades on your broker's server, not the market-wide count on total currency being traded. For another thing, and more importantly, the "Big Money" trading outfits can turn price around on a dime and send it far off in the opposite direction. And they can do this at any time, no matter what any sort of technical study has been "telling" you!
Hoping this helps,
-tah
