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vsa with Malcolm

  • #25,501
  • May 8, 2014 3:01am May 8, 2014 3:01am
My EUR/USD charts and my home work for review. shorted at 1.3920 with tp 1.3880 and no sl.
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Think Twice Low Volume is Key to Success
  • #25,502
  • May 8, 2014 7:15am May 8, 2014 7:15am
Quoting classix
My EUR/USD charts and my home work for review. shorted at 1.3920 with tp 1.3880 and no sl. {image} {image} {image} {image} {image}
Why? I know why you picked that level but what was the entry signal?

Let's not forget that the most recent PA background was a break of both the 3900 level and that 3920 level. We went 30 pips up out of the high of that zone and returned back into the zone on UHV as we found support back at 3900 and the last point of demand where the decision was made to break 3900. At this point a long from 3920 back to 3950 is a smaller risk trade than a short from 3920. The best you could have hoped for is a return back to 3900 until we see 3900 broken and held on real signs of sellers.

Also the smallest TF chart you posted was a 15 min. I did not see a short enrty into 3920 but I did see a nice 15 min test into 3920 once we moved back above. At this point we know that we should be clear back to at least that recent swing high around 3950ish.

Don't sell unless you see signs of selling especially in a market that is trending upwards. Look at the moves even just on your 15 min chart. Strong and quick move up from the mid purple level, a break of 3900 / 3920. Now look at how slow and painful the move back down to 3900 was. While the upward move paused there was no real selling that came in. Profit taking and a controlled move lower to fill more buy orders is all I saw. No SOW worth getting excited about.
Today's zone = Tomorrow's opportunity!
  • #25,503
  • May 8, 2014 9:01am May 8, 2014 9:01am
Now there is clear sellers stepping in as price neared the huge round number 1.4. First time we were that high since back in 2011. Spike back above this years high into some fresh supply and down we go with authority. Some nice new zones will be formed today.

Sitting right at this years high so close to 1.4 right at ECB and USD news time... Coincidence? I think not!

Agressive spike up and breakout traders go nuts, others see price take off without them and buy just because price is climbing so fast and less than 1hr later price has dropped 120 pips from the high. How many longs got slaughtered in there do you suppose?
Today's zone = Tomorrow's opportunity!
  • #25,504
  • Edited 3:28am May 9, 2014 2:51am | Edited 3:28am
Quoting pres78
{quote} Why? I know why you picked that level but what was the entry signal?
so much thanks for your time and review. ok another reason for entering i can't show on chart is that i was afraid of missing the trade.
Quote
Let's not forget that the most recent PA background was a break of both the 3900 level and that 3920 level. We went 30 pips up out of the high of that zone and returned back into the zone on UHV as we found support back at 3900 and the last point of demand where the decision was made to break 3900. At this point a long from 3920 back to 3950 is a smaller risk trade than a short from 3920. The best you could have hoped for is a return back to 3900 until we see 3900 broken and held on real signs of sellers.
Also the smallest TF chart you posted was...
unable to absorb in mind.. can you show and simplify.
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Think Twice Low Volume is Key to Success
  • #25,505
  • Edited 8:22am May 9, 2014 8:00am | Edited 8:22am
Quoting classix
{quote} so much thanks for your time and review. ok another reason for entering i can't show on chart is that i was afraid of missing the trade. {quote} unable to absorb in mind.. can you show and simplify. {image} {image} {image} {image} {image} {image}
Neither of the ND bars you marked are ND. ND is by VSA definition a narrow range up bar closing preferably towards the middle on volume less than the previous 2 bars. Both bars you marked were on increased volume and looked nothing like what you want to see for ND.

The bar before the one you marked on the weekly chart was ND, but printed in an uptrending market (HH's and HL's) and was not into anything of any value. Despite the low being taken out on the next weekly bar as we can see the market carried on higher.

Look at your 1hr chart as price approached that 3920 level. Back to back NS bars so there was no sellers at that level.
Today's zone = Tomorrow's opportunity!
  • #25,506
  • May 9, 2014 1:13pm May 9, 2014 1:13pm
Quoting pres78
{quote} Neither of the ND bars you marked are ND. ND is by VSA definition a narrow range up bar closing preferably towards the middle on volume less than the previous 2 bars. Both bars you marked were on increased volume and looked nothing like what you want to see for N.
fgured out processing ND with sentence markets dont like high volume on up bars. lucky to exit with profit. and good lesson.thanks for correcting me again my hero.
Think Twice Low Volume is Key to Success
  • #25,507
  • May 12, 2014 4:10pm May 12, 2014 4:10pm
How can you tell:
a) if the volume considered for one's analysis is generated by 'informed' traders for future profits
b) if the volume considered for one's analysis is generated by a hedge fund who's hedging it's positions from another market (equities, bonds etc.) actually betting against its position in Forex market?

You just can't tell who's generating the volume and more importantly, why?
Volume Spread Analysis is a technique which arose having as cornerstone the stocks volume which indeed most of the time are traded solely for profits. When trading stocks, you know that the vast majority of the volume traded is for profit so each tick expresses the commitment and the hopes of traders for either a rising or a falling in stock price. That's not how things are in Forex.

A country's currency doesn't have a value of it's own, like stocks do, but it's always traded against another country's currency. Even though in terms of "profit vs. loss" Forex is still a zero sum game, not every participant in the market generate volume for profits so they don't care if they lose, if they don't get the best price and so on because the main use of currency is not speculation. If Toyota at the end of month needs 10.000.000.000 ¥ to pay wages it will exchange dollars or euros gained from exports to yens. The bank will offer a price and then will go interbank and carry out the transaction. It will probably use some algorithms to either unload the dollars incrementally or when specific conditions met, all at once generating a spike in volume. Is that 'informed' trading? Definitely, not.

As highlighted above, a currency always gets it's value through another one and the most popular ones (for speculating) are also the main foreign-exchange reserves of all Central Banks in the world. They are the titans of this market and when one steps into it you'd better get out or front run it. Interventions like those of SNB in 2011 or Bank of Japan a few decades ago are very rare but they do diversify their vaults monthly, quarterly or annually and they will always do that in times of high liquidity surging against their desired position. And that's how you'd get a misleading stopping volume when in fact all the informed, uninformed and other types of investors thought the other way. Albeit a central bank has in view only its currency, the € and the $ are still the main currencies of every national bank in this world. So EURUSD is the most prone to illogical behavior when everything points to a different outcome. And at the end, after rebound, you don't know if the Bank fulfilled its goal or if the level is going to hold. So that stopping volume gives you the same edge that a plain chart would give: 50/50 for either holding or breaking.

As such, having these ideas in mind, I am still yet to find any value of volume in Forex market. Maybe the data provided by Futures has more relevance since there are less market participants that from a volume point of view generate noise.
  • #25,508
  • May 13, 2014 2:52pm May 13, 2014 2:52pm
Tradestation has the best spot volume imo.
Number #1 in PnL and Pips on Dukascopy Trader Contest since 2011
  • #25,509
  • May 13, 2014 4:40pm May 13, 2014 4:40pm
Quoting Pollux
How can you tell: a) if the volume considered for one's analysis is generated by 'informed' traders for future profits b) if the volume considered for one's analysis is generated by a hedge fund who's hedging it's positions from another market (equities, bonds etc.) actually betting against its position in Forex market? You just can't tell who's generating the volume and more importantly, why? Volume Spread Analysis is a technique which arose having as cornerstone the stocks volume which indeed most of the time are traded solely for profits. When...
Hi Pollux,
You make some valid points. I would offer another point of reference. For me, I tend to look a Forex Volume more from a context perspective. High volume or High Activity vs. Low Volume or Low Activity... The key word here is Activity. Not the traditional volume structure we see in Futures... (Which is my primary source of trading for the last 14 years) having said that, for me, it is still context. For example... not all wide spread candles / bars have High Volume. Add to that where this High Activity is happening... Inside a VZ... Approaching a VZ...or at Supply / Demand .. Support / Resistance -- Not the same ( it is how I trade) ... Some PINs have High Volume... Some do not... More importantly?? Where they occur with High Activity...
Today Forex is a 5 Trillion market per day. I am of the opinion in order for this size of market to move dramatically takes a lot of activity or volume... Again where and when is the second part of the equation. I too have my concerns with VSA... But there are some aspects that have become solid adds to my trading. Adding VSA to Context is what I am referring to... Not just VSA alone.

An interesting article I found http://www.dailyforex.com/forex-arti...f-Trades/10825
Excerpt below
Is Forex volume reliable?
There is a common misconception that volume cannot be used reliably in Forex trading for two reasons: firstly, there is no central exchange and therefore no official volume data. Secondly, when you’re looking at volume data on your Forex platform, you’re actually seeing “tick volume”, and not actual volume traded, such as the volume with a stock chart.

“Tick volume” measures the number of times the price ticks up and down. This is an excellent indicator of the strength of activity in any given bar. But also, the correlation between tick volume and actual volume traded is incredibly high. In 2011, Caspar Marney, head of Marney Capital and ex-UBS and HSBC trader, conducted an analysis of actual volume and tick volume in Forex. He used data from e Signal, EBS and Hotspot. For the pairs he studied, he calculated the correlation between tick volume and actual volume is over 90%.

Just another point of view

Good trading to all

TSD
  • #25,510
  • May 13, 2014 5:34pm May 13, 2014 5:34pm
Quoting Pollux
How can you tell: a) if the volume considered for one's analysis is generated by 'informed' traders for future profits b) if the volume considered for one's analysis is generated by a hedge fund who's hedging it's positions from another market (equities, bonds etc.) actually betting against its position in Forex market? .....

A) Let's not get too complicated. We assume that the "informed", by definition, would not be selling if they knew price was going to rise. And conversely, we assume the "informed", would not be buying if they knew price was going to fall.

This is very simplistic to be sure. But it's an example of Occam's razor: the simplistic answer is usually the best. More precisely, in the absence of certainty, the fewer assumptions that are made, the better.

B) See A.
Without VSA, you're playing checkers while the Smart Money plays chess.
  • #25,511
  • May 13, 2014 6:09pm May 13, 2014 6:09pm
Quoting HiddenGap
{quote} A) Let's not get too complicated. We assume that the "informed", by definition, would not be selling if they knew price was going to rise. And conversely, we assume the "informed", would not be buying if they knew price was going to fall. This is very simplistic to be sure. But it's an example of Occam's razor: the simplistic answer is usually the best. More precisely, in the absence of certainty, the fewer assumptions that are made, the better. B) See A.
C) If you don't trade Forex with volume, nor believe it has any value for you and your trading style don't waste your time visiting threads based around using volume to trade Forex.
Today's zone = Tomorrow's opportunity!
  • #25,512
  • May 13, 2014 6:27pm May 13, 2014 6:27pm
Quoting TraderinSD
{quote} Hi Pollux, You make some valid points. I would offer another point of reference. For me, I tend to look a Forex Volume more from a context perspective. High volume or High Activity vs. Low Volume or Low Activity... The key word here is Activity. Not the traditional volume structure we see in Futures... (Which is my primary source of trading for the last 14 years) having said that, for me, it is still context. For example... not all wide spread candles / bars have High Volume. Add to that where this High Activity is happening... Inside a...

correlation between tick volume and actual volume is over 90%

I agree with this statement. I've compared volume on charts of gold & EU forex with futures charts & the volume charts are very close.
  • #25,513
  • May 14, 2014 8:53am May 14, 2014 8:53am
Hi Jason,

This post has cleared up an important question which was annoying me from time to time.

Many thanks,



Quoting pres78
{quote} That lable is wrong... I mean't testing to see if any supply is remaning... we tested and were rejected at that zone and then finally busted through and the normal path after busting through a supply or demand zone is to re-test it... we did so this week and obviously found a little remaining supply moving us back down through but we quickly found support and bounced back up through. Looking at the weekly bar the whole thing for me shows as low volume and looks like a test bar or even a NS. That's why I feel next week will be up. The market...
  • #25,514
  • May 14, 2014 9:09am May 14, 2014 9:09am
Quoting Trappist
Hi Jason, This post has cleared up an important question which was annoying me from time to time. Many thanks, {quote}
Wow that was an old school post of mine. Not sure what the question was but I am glad if something I said help to clear it up for you.
Today's zone = Tomorrow's opportunity!
  • #25,515
  • May 14, 2014 9:31am May 14, 2014 9:31am
I have a quesition which is a little bit related to vsa.

Since you are an experienced trader, i would like to ask you and any other experienced Vsa traders, if they have ever tried to use call and put options instead of using stop loss to prevent being shaked out.


Quoting pres78
{quote} Wow that was an old school post of mine. Not sure what the question was but I am glad if something I said help to clear it up for you.
  • #25,516
  • May 14, 2014 10:03am May 14, 2014 10:03am
Quoting Trappist
I have a quesition which is a little bit related to vsa. Since you are an experienced trader, i would like to ask you and any other experienced Vsa traders, if they have ever tried to use call and put options instead of using stop loss to prevent being shaked out. {quote}
No because I don't like risking 100% for only 85% gains. Let's say I want to risk 1% of my account which for this example is $10. In options I risk that $10 to gain $8.50. The risk could be on say a 60 second option or an hour or a day... No matter what happens if price ends higher than price at entry and I said price would go up then I gain $8.50, no more... no less.

With my FX broker if I risk the same $10 on say a 10 pip SL and price goes up 10 pips than I gained my $10 for 1:1. If price continues and goes up 40 pips well now I have $40 or 4:1 where on options I make $8.50 no matter how much it moves.

I am also confused on how options prevents being shaken out. If price is going up but we get in early and we get a SO move before continuing higher we end up with a potential loss on both options and FX.

No matter how you slice it you are risking your $10 and have to be right to gain money, wrong to lose money. Nice thing about FX is you can get out at BE, or protect some profits, or trail for better gains. I think with options you win or lose with no other option.

Perhaps others can offer a better view if they have traded or do trade options rather than straight FX. I know some guys like Liam (Kinsale) trades with spreadbetting so for some (depending on where you live I think) that may be another option also but I know absolutely nothing about that.
Today's zone = Tomorrow's opportunity!
  • #25,517
  • May 14, 2014 11:43am May 14, 2014 11:43am
Quoting pres78
{quote} No because I don't like risking 100% for only 85% gains. Let's say I want to risk 1% of my account which for this example is $10. In options I risk that $10 to gain $8.50. The risk could be on say a 60 second option or an hour or a day... No matter what happens if price ends higher than price at entry and I said price would go up then I gain $8.50, no more... no less. With my FX broker if I risk the same $10 on say a 10 pip SL and price goes up 10 pips than I gained my $10 for 1:1. If price continues and goes up 40 pips well now I have $40...
The options you're talking about are "binary options" & not "standard options". You're right about the profit limit with binary options but with standard options your profit potential is nearly the same as owning spot forex if it's an in-the-money option with little premium.

Example of Standard Option:
Buy spot @ $10.
Buy $8 call(option) @ $2.
If spot goes to $15:
Spot profit is $5.
Option profit is $5

If spot drops to $5.
Spot loss is $5.
Option loss is $2. (Cost of option)

With Binary Options, you're basically drawing a horizontal line on the chart & making a bet that price will be above or below that line in 10, 30, 60, etc, minutes. For bets made near the current price, you're usually risking $10 to make $8-$9 as you correctly stated. For bets made farther from the current price you could be risking $10 to make $2. You're either 100% right or 100% wrong.
  • #25,518
  • May 14, 2014 11:51am May 14, 2014 11:51am
Quoting srt
{quote} The options you're talking about are "binary options" & not "standard options". You're right about the profit limit with binary options but with standard options your profit potential is nearly the same as owning spot forex if it's an in-the-money option with little premium. Example of Standard Option: Buy spot @ $10. Buy $8 call(option) @ $2. If spot goes to $15: Spot profit is $5. Option profit is $5 If spot drops to $5. Spot loss is $5. Option loss is $2. (Cost of option) With Binary Options, you're basically drawing a horizontal line...
Interesting. Yes I was speaking of Binary Options... I know even less about standard options (as you can obviously tell). If that's the case and Trappist was speaking on standard options then I have no clue about whether they are better than or equal to FX broker trading from a risk / reward point of view etc... would be interested to hear from anyone who trades this way.

What are the costs? I see that Questrade for example charges fees to trade but how much money do you need to buy one standard or mini option?

I mean as I see it you are risking $10 either way either with a SL or being wrong on the put / call so I am not sure what the advantage would be?
Today's zone = Tomorrow's opportunity!
  • #25,519
  • May 14, 2014 12:01pm May 14, 2014 12:01pm
Quoting pres78
{quote} Interesting. Yes I was speaking of Binary Options... I know even less about standard options (as you can obviously tell). If that's the case and Trappist was speaking on standard options then I have no clue about whether they are better than or equal to FX broker trading from a risk / reward point of view etc... would be interested to hear from anyone who trades this way. What are the costs? I see that Questrade for example charges fees to trade but how much money do you need to buy one standard or mini option? I mean as I see it you are...
I've traded standard options for quite a few years but only on futures & equities, not forex so I'm not sure what the costs are. With futures/equities the commission costs are similar to trading the underlying futures contract or equity. Margin requirements are lower since you're only risking the cost of the option. As in the example, if I pay $2 for a call, my maximum loss can only be $2 but if I buy the underlying instrument for $10, my maximum loss is $10.

In a volatile market, if your SL was @ $8 on the spot & price went to $7 then back up to $10, your stop is hit & you have a $2 loss. If you buy the $8 call for $2, in the same situation the call survives because there's no need for a SL as you're risking the total cost of the trade. You still own the call worth $2 even though price went down to $7 & back to $10.
  • #25,520
  • May 14, 2014 6:27pm May 14, 2014 6:27pm
There is an example how it might be applied. The most important thing is to find a call ( if we are short on spot market) or put (if we are long on spot market) option which has a cheap premium.




http://m.voices.yahoo.com/trading-fo...378.html?cat=3


Quoting pres78
{quote} Interesting. Yes I was speaking of Binary Options... I know even less about standard options (as you can obviously tell). If that's the case and Trappist was speaking on standard options then I have no clue about whether they are better than or equal to FX broker trading from a risk / reward point of view etc... would be interested to hear from anyone who trades this way. What are the costs? I see that Questrade for example charges fees to trade but how much money do you need to buy one standard or mini option? I mean as I see it you are...
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