# Volume/Range/High Low and Close--reading and application



## tech/a (10 January 2009)

I've asked the question myself to many.

"How much is enough volume to analyse"?

Frankly I've never had a good answer so I've attempted to make one work for me.
The problem lies in the dilution of volume and price movements as you look
into lower time frames. The question always begs how low can I go in time frame
before volume and price action become insignificant. Just as attempting to read a chart
which on a daily basis have very little volume and price action.

Reading say CBA or Forex on a Daily bar has massive volume and price range --generally.
If we cut it back to a 1 min chart then we have diluted that information 360 times in the same day.
Lower time frames even more!

After a great deal of pondering and charting I have come up with the following.
(1) There must be clear range --low to high-- in the majority of bars on the chart.
(2) There must be enough volume to cause clear movement in a 10 period SMA of volume.

This means that each instrument under analysis will return a different time period
in which the above is satisfied. So to a great degree this becomes discretionary--BUT
there are conditions which must be met.

If I am open a chart which in a 1 min time frame doesn't satisfy the above I just double the 
time frame---starting at 1 min---until it does. For Forex 1 min and lower will satisfy the above
for some stocks even Daily wont satisfy the above. If I cant get satisfaction in the time frame 
I wish to trade than I wont trade it---as I cant reliably use Volume and Range analysis on the chart.

This leads to the next question
"How do I determine Extreme volume,Average volume and Very low volume."

For this I use an SMA for a very quick visual (And for search criteria).
From the chart (1) below you'll see I have.

Click to expand




(1) Low volume as 25% of Average volume over 10 periods.
(2) Average volume as the SMA of 10 periods Volume.
(3) High volume as 2 times volume over 10 periods average volume
(3) Extreme volume as 3 times--plus volume over 10 periods average volume.

I have this set in a template for metastock and it roughly equates to the background
in Tradeguider.

So what are we looking for?

I look for extremely high volume 3 x plus as a starting point,and certainly during a trade!

Volume in isolation can be misleading. So we need other criteria to best read what it is!
Supply OR Demand.
This is what I look for.

(1) In the life of the move (Looking back 360 periods) Where does it fall.
At a current top?
At a current bottom?
At either and or a period of consolidation.
See the charts below.

*Extreme Volume after a gap down during a down move*
Close on High commentary relates to NEXT bar.
Notice the very LOW volume on the bar before the Next bar with an alert on it.



*2 extreme volumes in an up move*
Come back and read the next 3 bars after each Extreme Volume bar to help consolidate whats happening (explanation below).
Note the very low volume in the bar just after the last extreme volume bar.
No the software doesn't label EVERY extreme volume bar.




Fine but now how can I tell with some degree of confidence,what THAT volume in THAT place in its journey is Supply OR Demand--- how is it likely to affect future price action.

I am not interested in the open (Other than Gaps) But the high the low and the close.
Firstly the bar itself.

(1) Did it gap? If so in the direction expected or not?
Did that gap push price through resistance OR support?
Often large player push price above an area to lock sellers in or buyers out.
Its human nature to hold when in profit (or larger losses) or resist buying if price falls below
a well held level.

(2) During the period was range Wide Average or Narrow?
Narrow ranges tend to indicate capping at a level. Wide ranges will often tell a great deal about
sentiment within the bar and often the high or low will test an old area old support or resistance.
Reaction to that cannot be overlooked.A close ON resistance on high volume at the high of a bar
should be viewed with suspicion.Supply is often strongest here. Many will see this as an early opportunity
to trade in that direction.

(3) Where did it close.
Movement of the close toward the upper 25% or lower 25% of a bar indicate strength of the move in THAT BAR.

So the picture is coming together. But still little confidence.
For this we must now move to the next 1-3 bars.

It is believed by the EXPERTS in this type of analysis that a single bar of significance only holds influence
over the next 3 bars in the time frame it is being traded in. Seems pretty right from my observations.
Reading in conjunction with the following bars is in my view the most important stage in this form of analysis.

The next bars Volume/Range and Close will tell us a great deal about what the volume was (Supply or Demand)
in the bar in question.
(1) Confirmation of Demand (Further upside normally on reduced volume v the bar in questions volume,testing into the range of the previous bar).
(2) Confirmation of Supply ( Immediate down bar on volume, Very small range bar on high volume,test of the high confirming.)
(3) Unclear 
Further upside on even more volume (Bias toward Supply and weakness)
Down side on very low volume (Bias toward Demand and strength)

Then to the next bar and the same 3 questions asked again.
At this point any testing of the high or low is to be observed closely,is it being supported or rejected. Small jumps above the high and then retreat to a lower close are REJECTION particularly on volume.
Any testing of lows which hold generally indicate some form of consolidation is occurring.
Within these patterns (Consolidation) we need to be looking at how well the lows are being supported and how strongly the highs are being rejected to gain an indication of distribution OR accumulation for future price movement.

HINT
Often doubling the time frame (Turning 2 bars into 1) can really clarify the answers to those 3 questions which of course are asked in that time frame. See *chart(4)*

This is the SAME CBA Chart but in a 2 day format I'm sure you can see things more clearly on this chart! Makes the daily easy to interpret---Pretty weak EH!




It takes a while (Many many charts) to advance to the next stage where we can read EVERY bar relative to its position. The best I have seen is Sebastian Manby.

Given this brief I though we could have a look at some in real time for comment and practice?
Can do some R/T on stocks and soon Futures! (I'm getting the R/T feed). Those that have it can perhaps if they wish post some of their own charts to practice on.

Hope this answers more questions than it creates.


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## Cartman (10 January 2009)

insightful post Tech ----- 

briefly ----  (re the time frames scenario) --  points u make are important ----- 

it is important for those 'investing' to look at longer term charts/trends because that is *their* time frame ----

for eg  --- dont go studying 1 second charts when u r looking to invest in BHP for yr kidz inheritance  ---

to abbreviate and paraphrase yr post ----- match yr trading style to the appropriate time frame ------- VSA on  daily/monthly can have a vastly different 'meaning' than it might on an hourly etc --


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## barney (11 January 2009)

Tech ..... would you agree that VSA is probably more "reliable" when considered over a longer time frame? ..... and may have greater significance at the beginning/end of cycles?? 

Mainly because the insto's and larger investors will naturally not want to "hit" the market all at once ..... The only way they can try and "hide" their volume is to "filter" it into the market ............ 

Working on that premise, it would seem plausible that we can get a handle on what the insto money is doing by taking a "wider" view relative to price action ....... for that reason, VSA will be more effective as a swing trading strategy, and not suitable for shorter time frame trading ....... any thoughts on this .. Cheers.      

Ps surprised this thread has not gained a bit more interest..


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## tech/a (11 January 2009)

*Barney.*

Insto's are involved in all timeframes.

VSA is also valid (I have found) in all timeframes.
Infact the better signals come in shorter timeframes and more often.
My Realtime Charts are at the office which is really annoying as I would have liked to have shown-- and will show-- Volume analysis at work in the lower timeframes.

I certainly wouldnt say VSA is a long term analysis tool infact the exact opposite.

My intention is to run through some bar analysis (Setups) and show them in practice.
If I can in R/T.(Meaning if I have time).

Also getting R/T futures feed so will be able to look at those charts as well.

I have adopted my own way of trading these setups (As well as conventional application) and happy to share and have others comment on methodology (Application).

As for interest---there is just about every form of analysing the market up for discussion inone thread or another. Those that strike an accord with a method will investigate further.


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## barney (11 January 2009)

tech/a said:


> *Barney.*
> 
> Insto's are involved in all timeframes.




I agree with that .... would you also agree that when the Insto's aren't "playing the game" ... ie. volume is lacking ..... that actually tells us just as much (when taking previous volume/price action into consideration)  as when they "are playing"



tech/a said:


> *Barney.*
> 
> Infact the better signals come in shorter timeframes and more often.
> 
> I certainly wouldnt say VSA is a long term analysis tool infact the exact opposite.




I guess it would depend on each persons view of "short term"  yes? ..... What would you say, from your study, would be the most reliable VSA/time scale to trade in? ............... 

For me short term would be "day trading" ... whereas someone like TH or MRC might be 1 minute ......... 

I appreciate that the stock/instrument being traded may affect the time scale/VSA credibility as well?? ............. all food for thought ...


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## tech/a (11 January 2009)

barney said:


> I agree with that .... would you also agree that when the Insto's aren't "playing the game" ... ie. volume is lacking ..... that actually tells us just as much (when taking previous volume/price action into consideration)  as when they "are playing"




Absolutely.



> I guess it would depend on each persons view of "short term"  yes? ..... What would you say, from your study, would be the most reliable VSA/time scale to trade in? ...............




Provided you have enough volume and spread every timeframe.



> For me short term would be "day trading" ... whereas someone like TH or MRC might be 1 minute .........
> 
> I appreciate that the stock/instrument being traded may affect the time scale/VSA credibility as well?? ............. all food for thought ...




I have seen 1 min traded.
But watching videos of the pro's on FOREX which is very liquid it seems 3 min,which still is a short time frame.

You maybe interested in having a look at this Video which is FOREX.
*(1) Right click the link.
(2) Download/save
(3) Play from the download.*

*It wont play with video direct from the link.*
But all OK if you download first.
Should wet the appetite.

http://rs6.net/tn.jsp?e=001wjOGVuLA...2uHYjP39A8WH3K04zUKAeZXBl7vNjyVuYg-zGJ72WWGAL

The meat of the video starts at 13 mins.
Its over 1 hr long.
You will get advertising blurb at beginning and end.


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## cuttlefish (11 January 2009)

Cheers tech - I always find these specific VSA analysis examples interesting.  

I do sometimes get a bit confused as to which bars you are specifically referring to though and how you come to your conclusions.  Its the sort of thing that would be easier to understand if you were able to point to the bits of the chart you are referring to while talking.


In this case - first some silly questions - Chart 1 and 2 in the post are the same chart of CBA yes?   The third chart is a different stock is it?  And then the final chart is CBA again but a 'two day' chart instead of a daily?

Now the main feature in the CBA charts you are referring to is the high volume after the gap down and then the subsequent behaviour.

Would you mind explaining again what conclusion you draw from the bars following large volume bar?    In the annotation on the first chart you are saying it indicates strength - but then qualifying this by saying if the previous bar has extreme high volume it negates this?

But then when you discuss the final chart (the 'two day' chart) you say it looks weak?

Apologies but I'm a bit confused by it, but very keen to understand your comments properly.


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## cuttlefish (11 January 2009)

barney said:


> What would you say, from your study, would be the most reliable VSA/time scale to trade in? ...............




Barney - in relation to timeframes - I've been trying to apply VSA intraday (on large liquidity blue chips).  I'm definitely a novice so I have no clue if I'm always interpreting the volume correctly - but on some days I've seen fairly clear signals where the volume has really helped to give an early indication of a coming change in direction and confirming the directional change as well. 

I use 1 min candlesticks but am typically consolidating them in my head and often expand out to the 5 min and sometimes the 15 min to help get a clearer picture.  The other valuable thing that tech has offered is about the signals really only lasting a few bars - so apparent strength can quickly become weakness if not confirmed by the bars that follow - and can actually give a very good indication of continuation of weakness for example which is tradeable.  (and useful for both exits and entries).

I think tech's heuristics for selecting a timeframe at the top of his post are a very good idea.  The same stock will exhibit different price action depending on the day and even the hour.  On some days if volatility and volume is low the 1 minute bars aren't as much use and the 5 minute bars or wider will give a better view.  On other days where there is volume and volatility the 1 min bars can be of use though I'd typically always be looking for confirmation on the 5 min bars - but often an entry can be achieved before the end of the 5 min bar if the 1 min bars are showing something readable.


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## Cartman (11 January 2009)

tech/a said:


> Should wet the appetite.





i pretty much watched the whole video --- no disrespect to the speakers but they had trouble making a decision on a trade based on the pattern they were following ------  i made four trades (in real time) based on what i was watching ( my son was a witness --- and he was crapped off cause he wanted to listen to Cold Play   lol ---- : to him ) ---

i based my decisions purely off pattern recognition cause i normally like to use momentum ---- i got 4 from 4 (with fairly tight stops)---- these guys just waffled on about maybe this and maybe that ------ 

just TOO slow to be useful in the cut and thrust of FX ----- and im an *amateur*  -------- these guys are professionals??  ----- still not convinced but ill keep an open mind


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## MRC & Co (11 January 2009)

Cartman said:


> just TOO slow to be useful in the cut and thrust of FX ----- and im an *amateur*  -------- these guys are professionals??  ----- still not convinced but ill keep an open mind




Didn't watch the video, but perhaps these guys are looking for an entry to run a position intraday, whereas you were just scalping Cartman?  Would require a completely different approach......


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## tech/a (11 January 2009)

Cartman said:


> i pretty much watched the whole video --- no disrespect to the speakers but they had trouble making a decision on a trade based on the pattern they were following ------  i made four trades (in real time) based on what i was watching ( my son was a witness --- and he was crapped off cause he wanted to listen to Cold Play   lol ---- : to him ) ---
> 
> i based my decisions purely off pattern recognition cause i normally like to use momentum ---- i got 4 from 4 (with fairly tight stops)---- these guys just waffled on about maybe this and maybe that ------
> 
> just TOO slow to be useful in the cut and thrust of FX ----- and im an *amateur*  -------- these guys are professionals??  ----- still not convinced but ill keep an open mind





*Cartman.*
This analysis may not be for you.

They never made a trade as the characteristics *THEY *were looking for did not appear.
Thats good trading in my book---professional trading---discipline,There was no confusion just patience.

You and T/H could well have made a dozen trades under *YOUR* criteria.

*Cuttlefish*
I will label each bar with comments when I have time.That should help


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## Cartman (11 January 2009)

MRC & Co said:


> Didn't watch the video, but perhaps these guys are looking for an entry to run a position intraday, whereas you were just scalping Cartman?  Would require a completely different approach......




yeah yr no doubt right Mirc ----- i may have sounded a bit like a smart a*se --- my apologies  ---- id luv to be able to position trade long trend trades ---- it just seems too unreliable a strategy in the current climate ----

Tech,  i dont discount the power of volume analysis ---- the type of volume im finding valuable to my testing atm funnily enuff parallels exactly what u have spoken about in some of yr posts  ------

*excessive volume* ----  as u point out ---- *often signals weakness*!!! ----- Price/Volume spikes at the extreme top/bottom of short term cycles on FX are proving very interesting for quick reversal trades ------ only trouble is if u get them wrong they can punish u very quickly ------ 

its the volume in the middle of cycles im finding ambiguous on VSA ---- thats where i find momentum more reliable --- but as Mirc says, im looking predominantly very short term, so that alters the perspective ---

ps the way TH trades is totally out of my league and i make no secret of that -----  the man is a freak


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## Frank D (12 January 2009)

Volume is still a lagging indicator because you are waiting for high volume 
to take place and only then you make a decision to enter the 
trade thereafter, though as a tool it can be valuable *if that’s the best 
you got.*

You mentioned support & resistance only briefly, *but that's the key of trading dynamic markets.*

*CBA as an example:- Where was the ‘high’ Volume day on the Stock….*

It was around the timeframes dynamic lows in December, which is a high probability pattern (Dilernia Model)

*As a trader you want to already know where and 
when those high volume days will take place before they actually take 
place*, and as the volume begins to come in you already have
 a reason which is matched with dynamic support or resistance:- rotation and extension.

In the Monthly chart (left Below) I’ve already modeled CBA moving towards the 
January 50% level or down into the lows, but CBA is simply going to live 
or die by it’s next report regardless of the price action taking place now.

If it’s a favourable report it will probably continue towards the monthly 
50% levels around $33.00 and if not, it’s down into the lows once again 
and continue lower, which is what I think CBA will do anyway even if it's 
a favourable report and after going ex-div based on the Primary cycles in 2009


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## tech/a (12 January 2009)

Frank.

It took 4 hrs to put together the first post so wasnt able to put everything related to the analysis in the post! As time goes on things will be added to.

Your points are excellent and of the few forms of analysis I personally have time for yours is on the very short list.

The value of combining analysis you have demonstrated above. Each can be used in isolation.
Thanks for your comments.


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## cuttlefish (12 January 2009)

Tech - I watched the video - I found it useful, thanks for posting it.

A question that has arisen for me in looking at all of this:

A low volume up bar can be interpreted either as 'no demand' or as 'lack of supply'.   No demand is obviously bearish, lack of supply arguably bullish (but not always).

In relation to determining whether to interpret a bar as 'no demand' vs 'lack of supply' is it just decided based upon the spread, volume and closes of the immediately preceding and following bars - or is the trend that the sequence of bars is occurring within also a component in the interpretation?

(I've mentioned this specific example but of course I'm ssuming the response will apply to any situation where there can be an ambiguous and conflicting interpretation of a bar in terms of whether it is supply or demand).


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## tech/a (12 January 2009)

Cuttlefish

An excellent question and one every exponent of analysis should be asking.

You are indeed giving me some work---I dont mind!

Will answer tonight---you are on the right track but examples are needed.


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## peter2 (12 January 2009)

Cuttlefish: Interpretation is helped by knowing what is in the recent background. If the market is showing signs of strength (SOS) then a low vol up bar is probably lack of supply. If there are signs of weakness (SOW) then a low volume up bar is probably no demand. 

Whenever you notice a high volume bar look to the left of the chart to see if the current price level has been support or resistance earlier. If so then SOS or SOW can provide low risk entries.


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## barney (12 January 2009)

cuttlefish said:


> A question that has arisen for me in looking at all of this:
> 
> A low volume up bar can be interpreted either as 'no demand' or as 'lack of supply'.   No demand is obviously bearish, lack of supply arguably bullish (but not always).




Hi C/F,  exactly what was bugging me about the interpretation as well .... good question .....



peter2 said:


> If the market is showing signs of strength (SOS) then a low vol up bar is probably lack of supply. If there are signs of weakness (SOW) then a low volume up bar is probably no demand.
> 
> Whenever you notice a high volume bar look to the left of the chart to see if the current price level has been support or resistance earlier. If so then SOS or SOW can provide low risk entries.




And an equally good answer thanks Pete ..... 


I think Tech mentioned that with VSA the preceding  3 (??) bars are the ones which give real significance ......  Just wondering if that is true across all time frames?    

For eg.  Three 1 Hour bars = Thirty six 5 minute bars ....... so if we are trading using VSA off 5 minute bars, we should theoretically be trading very short term?? .....  otherwise we are only getting a miniscule part of the picture ?? ......... 

So far I'm forming the opinion that VSA appears to have more relevance over wider time frames unless we are scalping etc ....... and the historic nature of the stock/index/whatever we are trading is what we really need to focus on first ......


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## cuttlefish (12 January 2009)

Here's a record of my following of CBA today using my version of VSA, combined with other technicals.  Note I use candlestick charts so a 'down bar' is sometimes just a red candle - (close lower than open) - even if it was higher than the previous - this might be confusing for anyone reading if used to referring to down bar as lower close than previous bar.


Start time around 1:15 pm - this is a running log and I haven't gone back and edited it except for formatting.  I fluked the paper trade well though I think even without VSA it was a reasonably obvious technical trade and what I think is VSA may not be .  And no, if I had not picked a succesful trade in there I would not have posted it .   

It actually started out as a question  for the thread about what was going on but then I decided to turn it into a log as I saw the potential for a short trade and took it (on paper) when it appeared.  I do watch CBA intraday quite a bit.   Apologies about the poor formatting etc.  I typed it into notepad and then it wouldn't allow the full text in one post.   The chart is at the bottom of this post but the text continue into the next post.  

I doubt anyone will be able to actually follow it anyway, but since I typed it up it might be of interest to someone who knows. :

Starting here: (approx 1:15 p.m.)

Based on the 15 minute charts my overall amateur VSA analysis is its moving sideways with a bearish overtone. Volume has been decreasing and its building what looks like a large pennant/wedge type pattern.   In the past 5 minutes its made a small break to the downside of the pennant.  Earlier one of the 1 minute bars had a small test to the downside which failed to attract supply but also failed to attract significant demand (no stopping volume?) - this was back at 12:49 p.m..  It then did a minor test to the upside (12:55/59).   Volume in both the tests was very small though indicating no 'action' - so nothing decisive out of either.     
Because its a large ranging pennant that has been forming all day and volume has decreased to very miniscule levels (very low for CBA) throughout I'm expecting a fairly significant move when/if it breaks out of the pennant formation.

Having watched CBA a bit in the past - its broken to the downside of the pennant on low volume - indicating to me that the small 

volumes of 'non smart' money currently trading it are leaning it to the downside.  The question now is what is the smart money doing. I'm now expecting we'll possibly see a test to of the upside breakout with some volume.  If this occurs I interpret this as smart money testing the upside breakout before backing the downside breakdown with any kind of volume.

Ok we're seeing a test to the upside -  (1:22:00) p.m.  with volume (5573). 

It ranged quite well, failed to attract demand.  It then ranged again (1:26:00) - this range failed to attract demand and also failed to attract significant supply.  (low volume).

1:27/1:28 - another wide range to the upside.  (miniscule volume on both bars 91, 251).

Test still inconclusive to me - its failed to attract demand but also failed to attract supply.

Sitting on a fairly big buy/sell spread at the moment (8c) (1:29 p.m.).

Wide ranging down bar (1:30 pm.)  small amount of supply, no demand attracted.  

Overall at the moment I'm not seeing any demand chasing this upside breakout of the pennant - but its possibly that the demand that  is there is being cautious.

Another up bar, slightly more volume - a bit of supply coming in.   Still failing to pass the high of the peak of the first breakout  attempt.

Looking at depth I'm seeing 4000 on the offer at .50c (1:33) - this is the topside of the breakout - no demand is hitting it.   Now 

new supply at 28.49 as well as at the 28.50.    About 30k shares on the offer between (1:34p.m) 28.48 and 28.54 - bait for potential  breakout demand not being taken.  (my interpretation).

1:34 - new one minute bar - down bar on lowish range with moderate volume (volumes are still tiny anyway).

On my charts I have support at around the $28.32 mark which if the pennant breaks to the downside will be the first test of the 

strength of the break - if it motors through this its a strong downside break imo.  (it hasn't yet broken to the downside, and the  upside test has still failed to attract significant volume - 1:35:00).

Ok 1:36 p.m. - we've got a down bar with some reasonable volume - so some supply now - this is below the peak of the breakout spike. 

Followed by a low volume up bar - volume on the upside of the spread at 28.45 cents not being taken.

Was taken now (subsequent two bars) - but more supply came in.

So the test is failling to attract much accompanying demand ans starting to attract some supply.

Jump out to 5 minute chart (1:39) is showing volume on the original breakout bar, then the peak of the breakout shows no supply  coming in, followed by down bar that also failed to attract supply or demand (same volume) followed by downbar with higher volume -  test of demand failed to break through peak of spike and attracted supply which one and bar closed red but with long tail spike.   

So some demand there - but not enough to overcome supply.    

The upside breakout test is failing to attract additional buying demand.  Has attracted some moderate supply but not overcome it.  

It has also failed to reach the high of the last peak inside the pennant and the current bars are failing to beat the peak of this upside breakout.   Just checking now for possible flag on this breakout -  looking at volume I don't see that because third 5 min bar  of the breakout is showing higher volume than the second.

1:40 p.m. - another downside bar forming - waiting till bar closes.  (on the min chart now - its giving a better picture of volume  because the 1 minute charts had too low volume to give a decent picture).

Quick zoom out to 15 minute chart and this pennant breakout still isn't showing much volume at all.   Was looking for a short entry 

but not enough volume in this upside test so I think we're seeing more sideways action.

Checking depth (1:45) p.m. - some volume on the bottom side of the spread 10k) isn't attracting any hits - so supply not taking the  demand on offer.

The breakout from the pennant.wedge is now also forming a small wedge. 1:47 p.m.).

Still nothing decisive happening.

1:47 - small breakout to the upside on the small second pennant - still no significant volume.  woops spoke to soon small amount of  supply pushed it back. 

Ok the upside breakout test has been in action for a while and hasn't attracted any volume (activity) of any kind.   So I'm calling  the upside breakout unlikely - particularly given than I can see plenty of supply in the queue that isn't being hit as well.

some demand added to the bid side of the queue now.  (1:50 p.m.)

Ok - back to waiting (1:50 p.m.)

1:51 p.m. - three green bars  - little bit of volume - forming at the end of the small pennant thats formed on top of the larger  pennant breakout. 

Ok now a bit of volume (supply) and a down bar.

_*Enter short position now 1:52 p.m.  price 28.41*_ (note this is just a paper trade) 

Reason - upside test of the pennant breakout hasn't attracted activity so we're not seeing demand come in on the upside.  We've now  seen a little bit of volume push the upside breakout back to the median level in the large pennant thats been forming throughout the  day.   This to me is confirming that the upside test (which my view was done in response to an apparent tendency for the market to  break to the downside) has not attracted any demand so the smart money is now comfortable that there isn't much buying pressure here and will be happy now to throw some volume at a downside move.

Stoploss set at 28.52.   Will also look to exit if move fails to be confirmed. If position goes to profit will trail a stop.  Will be looking for possible congestion/slowdown around the 28.32 mark - and if it  gets down to here we'll move our stop down to 28.44.

If it continues to break down through the 28.32 mark we'll move the stop down to just above this. (28.37).

Charts below - text continue in next post.  (charts- CBA 1 minute whole day, CBA 1 minute focused on time period of log, CBA 5 minute focused on time period of log)


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## cuttlefish (12 January 2009)

continued ...

Ok now to wait and see what happens ...  (time is 1:58), price 28.39.

Looking back we have a down bar with an upside tail at 1:55 that has some volume - this is confirming supply coming into the down  move and demand that appeared was beaten down by supply.   Another wide ranging down bar with moderate volume at 1:58 - possible demand coming in.

1:59 bar - up bar half volume of previous down bar - moderate demand attracting moderate supply.

2:01 p.m. - down bar countered the last two up bars - still relatively small volume/buying pressure and relatively small amount of  supply was able to overcome it.   Supporting the theory that there is little demand in the market today.  Still waiting to see if there is any supply that will bring the price down and make this trade worthwhile.

2:02 p.m. - 1 min bar - reasonable volume - green candle with upside tail - check depth and there is reasonable demand at 28.38 in the queue (the midpoint of this green candle)   Supply overcame moderate demand - positive sign.  2:05 and 2:06 - two down bars both  with reasonable volume.  Second had lower volume that first so not seeing increasing demand to meet the down move.   

So supply is lower but its still ranged down same amount as previous bar.   
Shows that demand is not overcoming supply.

So now hoping to see supply build up and this down move gather momentum.  

2:07, 2:08 - two up bars, moderate volume, failed to move  above the previous down bars high.  Second of them has a top shadow that tested the upside but moderate supply still brought it back.

2:09 up bar closing at top of previous large down bar that took us into this range.  

And now 2:10 pushed past it but we're seeing  volume indicating there is supply - its having to work to push past it.   The next bar will give us some interesting info.

2:12 - No trades(!) for a whole minute in one of the most heavily traded stocks on the ASX.

2:13 - small up tick,  2:14 small down tick.  More supply appearing to counter any small demand (2:15).  

Still quite indecisve - the supply hasn't come in strongly into this move, but demand hasn't stepped in either.  We're 'drifting' out of the pennant which is a bit unusual.   Still expecting to see some volume and momentum at some point here.

2:19 p.m. - small reversal starting to form a top.  Starting to see a potential downtrend forming here outside the pennant breakout 

(not quite there yet).

2:20 p.m. reverse dragonfly doji.  Volumes still low - not much buying pressure behind this reversal but not much supply meeting it  yet either.

Looking back through the bars - the 2:05 and 2:06 bars are possible stopping volume now that we've seen a reversal - we'll need to  see trend continuation or we could be looking at a move back into the days trading range.

2:25 - small range down bar with good volume - worth noting - possible smart money early supply, or possible demand coming in.

2:31 - down bar test buyers won moderate volume.

2:32 - down bar opened and closed lower than previous down bar - buyers in previous bar overcome and more selling.

2:33,4,5,6 - no range, no volume no demand - good sign imo - but still need supply to appear.
2:34 - down bar - supply (slight volume increase) but closed at its open so demand overcame supply - but not strongly.

Starting to feel pretty comfortable with the lack of demand - still waiting for proper supply - but it can drift down on the current  levels if demand is still not present.


2:39 Starting to see a potential down trend support line on the chart which will intersect my 28:32 resistance point soon - we might  see this 28.32 point tested soon.

2:40/41 - both bars touched 28.33 - so a pip above the support line.  A move down through this will be good but volume is still low  so this price fall so far is driven mainly by lack of demand not due to supply.  My view is we'll need to see supply come in for  this to get some energy into it otherwise we're likely to see it bounce around between here and the various overhead resistance  points set earlier in the day for a fairly boring close.  Stoploss moved down to 28.44 because we've touched this 28.32 line (well not quite but close enough to move the stop down).  Interestingly there is a fair bit of volume (28k in the bid queue at 28.30 so it  looks like others view this as a support area as well - and hence the need for supply to come in to move it down through this.

2:45 - down bar hit the 2:32 support now.  Two in a row - bit of volume coming in here - so some supply but also evidence of a bit  of demand - work happening.  37k on the bid at 28.30 - will probably quickly dissappear (props) if we actually see price get down to  here).  

2:46 - wide ranging green bar touched 28.31 but no volume in it - certainly not seeing supply appear because it topped at 2:34 but with minimal supply in it (no volume).  At the moment not looking like anywhere near enough supply to get through this  support point - but no demand coming in of any kind either except in the queue at the support. (which could dissappear and turn into  supply in an instant if it actually gets hit).   

Note - I had a longer term resistance line from the daily's drawn at 28.32, but the intraday low is 28.30 set at 10:11 a.m. so thats the main cause of support at this level in the queue.   Its interesting that this  intraday early low matched my support on the dailies and probably not co-incidence.


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## cuttlefish (12 January 2009)

continued ...

2:50 - moved down through the 28:30 level.  Most of the volume in the queue ran away as it touched it.  28.30 level (and my daily 

28.32 level) should now act as resistance.  This is a good supply - moderate supply pushed it through the 28.30 level and we haven't  seen much renewed demand here.   This is strengthening the viewpoint that there is a genuine lack of demand.  With the close coming in we might start to see a bit of supply come in.

2:55 Ok its moved fairly decisively down through this 2.32 point (currently sitting on the 28.30 level on the bid) so we'll move our  trailing stop down to 28.37 as mentioned above.

2:57 - it moved back up through 28.30 and touched 28.32 again on prety small volume - this will be a good test of this resistance  now.

2:58 - back down through on a wide ranging red bar with an upper tail - with a bit of volume - bar closed at 28.29 - ths is  confirming that there is little support now at this level and its becoming resistance.

2:59 - this is nice - a green bar same range as previous down bar closed on its high on good volume (more volume than previous) - so  demand appeared but failed to beat supply - supply is starting to show its hand.

3:00 - no range moderate volume price 28.29 - still confirming some supply and some demand and supply winning.

Checking 5 min bars - the 2:50 p.m. 5 minute bar is showing nice volume and really showing this move down through that support area  - was potential stopping volume but subsequent bars have shown it was supply and supply overcame demand.

3:01 - back to 1 minute bar. 3:01 - another high volume test of the resitance point but failed to close above it (closed on 28.30).

3:02 - now made it through the resitance point and closed on 28.31(the 5 min bars will be showing this differently and will be  probably starting to show this as possible demand coming in).

3:03 low volume low range no demand no supply - demand isn't appearing as it moves through this resistance.

3:04 - down through the resistance again on moderate volume - the resistance didn't turn into support - there is still no real  demand.  Little bit of supply but not massive took it back down through here and has moved it down to 28.26 - this is good for a  continued move to the downside (imo) - battle over support by the buyers was a weak battle and easily won (and now has been won imo  - that resistance at 28.30 should start to become stronger).

3:05 - moving down on volume now - the supply is starting to appear - close at 28.24

3:06 - good volume - high volume bar and down to 28.20 - look out for demand entering but just looks like supply starting to appear  properly to me.

3:07 - more down moves on volume - range not as large - volume the same still getting supply but also demand.

3:08 - some demand apearing but after such a quick move down its to be expected - moderate volume and only just matched supply (test to the downside on moderate volume) - possible short term reversal here but not enough volume to signal a turning point to me.

3:09 - this is more positive stuff - moderate volume bar still at these lows  no demand entering even though price has spiked down  and supply still continuing

This spike is good and possible capitulation so this might be a good point to take a profit if we see any reversal but while its  still moving down we'll stay in it.

3:10 - lowest close on high volume - possibly seeing demand come in but its been low volume all day - it could just be supply amping  up a bit.

3:12 - demand starting to match supply.

3:13 - supply won the previous bar but volume was high - coming into possible reversal here.

3:14 - green bar - lower volume than previous down bar and full range is higher - possible reversal now - demand beating supply.

3:15 - this is an important bar - its a down bar, but volume is lower than the down bar two bars back and its failed to breach that  earlier bars low - the next bar will be significant.

3:16 - no demand - no range bar on low of previous - short view stil intact.

3:17 - little downside test didn't bring any supply or demand.

3:18 - upside test - big volume big range - shows demand but also supply there - closed on high, but will demand follow through.   

(stop moved down to the 28.32 level by the way because we're well below it now - and we're also looking for an exit on reversal).

3:19 - no range, no volume - no supply came in at this higher level - demand starting to appear.   
*Close trade. 3:21 p.m. 28.19*

Trade closed but just following through for a bit - 3:25 p.m. - bit of supply here but not much and subsequent bars showing no supply.   No re-entries here at the moment - this could have reversed - we're near the close of day as well.


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## cuttlefish (12 January 2009)

And interesting addendum is that CBA closed at 28.32 which is exactly on the resistance line that came from the daily charts, as mentioned inside the log.


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## The Edge (12 January 2009)

Sunday  11 January 2009

Ahhhhhhh, price and volume, aka market activity, the best source of a market's
behavior.  It draws me like a moth in heat to a bright light.

I trust tech/a will provide more information to his charts.  Given my inabiility to
post any, I will piggy-back his last chart of CBA provided in #1 above.  All of my
references will be to that specific chart.

The most important piece of information one can have, and this can never be
overemphasized, is to know the trend...for sure in the time frame in which one
is operating, but knowing all higher time frames, as well.  Why is this the
singlemost important information?

It enables one to put the market, [stock, futures, etc], into a context.
Simplistically, [and ideally], results will be best when all time frames are in sync,
directionally.  Then, making decisions to buy or sell, going with the direction of
the trend, is easier, and anyone going against the trend takes huge risks.

These comments do not apply to time frames under 10 minutes because those
lesser time frames contain a lot of 'noise,' and are less reliable.  Those who
trade in smaller time frames, cheers!....they just are not for me.  The mention
of using 10 minute time frames would be to hone in on a specific entry chosen
from higher time frames, but usually, 60 minute or 15 minute time frames will
suffice.

cuttlefish poses an excellent question, above: [in statement form]

> A low volume bar can be interpreted as 'no demand' or a 'lcak of supply.  No
> demand is obviously bearish, lack of supply arguably bullish [but not always].

This is why comments were prefaced with the importance of knowing the trend.
In an uptrend, demand has already been established.  It is supply that has to
assert itself, prove itself.   Therefore, a low volume bar is not 'no demand,' for
demand is already proven and present.  it does not have to show up on every 
bar.  That same low volume bar does not have to mean lack of supply.

Caveat:  Volume interpretation is an art, not a science, and any attempt to
"mechanize" it would be a huge mistake.

What was omitted was the inclusion of the close on any given bar.  The bar's
range is the 'battleground,' and the close determines who won that bar's battle
within the overall war. [trend].

To the chart, CBA.  Being an Australian stock, I do not have access to higher
time frames for analysis.  I would want to see a Quarterly, monthly and weekly
chart in order to put this stock into a more cohesive context.  Absent that, CBA
has been in a protracted nine month trading range from which price has declined
and is now in another, lower price level, two month trading range.  One can 
easily conclude that all time frames are down, and within that context, there
is absolutely no reason to be a buyer.

Starting with the high volume spike, between 15-22 December, [print out a
chart to follow along with this text.], the bar is a wider range with a close near
the low.  Mention was made in another thread that high volume bars can be
climatic...not trend changing, necessarily, but at least stopping action for a 
while.  This activity is a red flag.  One would expect continuation to the downside
next day, given the identified trend is down, and volume was high.  What happens
next day?  A small range bar with a slightly higher close...but...note the volume...
it is relatively high.

Here comes the art form explanation for that small range bar, the one following
the high volume spike day.  It is an inside day, and the close was just under
mid-range of the bar, generally indicating sellers won the battle that day.  But
did the sellers actually win?  I think not.  In fact, it looks like demand is sneaking in.  

Why?

Note the still very high volume.  Strong volume in a downtrend where supply [sellers] 
is supposed to be in control, yet, with all that strong volume, price closed higher.
Actually, for that to happen, demand [buyers] had to be present.  Otherwise,
the range would have extended lower.

Now, that is just part of the story.  Look at the two bars between 17-25 November.
Good size ranges with high end closes, evidence of demand, and the volume was
relatively high.  These are signs of demand in a market heading to new lows.

Next is the wide range bar, low end close of 9 December.  It looks like all supply:
low end close, high volume and all, but that seeming supply activity did not push
price into lower territory from those 'damand' bars just mentioned.

Then, the next bar, after 9 December, is a very small range, low end close with
the highest volume in weeks.  The low of that high volume day held the lows from
mid-November.  The sharp increase in volume actually represents demand [buyers]
overpowering supply [sellers].

How do we know that?

The high volume, in a defined down trend, should have extended that bar's range
lower, if supply were in control.  The reason why that bar's range is so small is
because demand is absorbing all the offerings from sellers, thus keeping the range
from going lower.

Who would be buying?  Smart money, strong hands.  Who would be selling?
The public, weak holders, tired of sustaining losses, wanting to stop the bleeding,
as it were.

This larger picture, including other surrounding activity, puts that single spike 
volume bar into a more meaningful frame of reference, instead of viewing it in
isolation.  It takes time for market trends to turn around.  The last five bars are
smaller ranges on declining volume, evidence of a lack of demand.

There is overhead resistance around 30, stronger resistance around 34, and huge
resistance from the previous trading range, between 38-45.  Is there a conclusion
to be drawn?

Cover short positions.  This stock is not turning around any time soon.  It could take 
years for it to develop a base from which to work higher, and that identified 
resistance overhanging the market will stem any rallies, for now and for some 
time to come.

Cheers!


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## tech/a (12 January 2009)

C/F.

Just saw your post and havent read it.

Just very quickly this is CBA 5 min chart 5 of your bars to one of these.
Note how much easier it is to read!

Anyway I'll comment more tonight after an hrs reading!

Profitable trade all the same.

Click on chart to expand.


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## tech/a (12 January 2009)

barney said:


> Hi C/F,  exactly what was bugging me about the interpretation as well .... good question .....
> 
> 
> 
> And an equally good answer thanks Pete .....




Thanks Pete.
Edge also gives some great insight.




> I think Tech mentioned that with VSA the preceding  3 (??) bars are the ones which give real significance ......  Just wondering if that is true across all time frames?




Yes.   



> For eg.  Three 1 Hour bars = Thirty six 5 minute bars ....... so if we are trading using VSA off 5 minute bars, we should theoretically be trading very short term?? .....  otherwise we are only getting a miniscule part of the picture ?? .........




No not really there is always another bar and or another timeframe. 



> So far I'm forming the opinion that VSA appears to have more relevance over wider time frames unless we are scalping etc ....... and the historic nature of the stock/index/whatever we are trading is what we really need to focus on first ......




No and Yes.

*Cuttlefish.*
I really think a 1 min bar chart for analysing CBA is to short. Not enough going on in 1 bar. FOREX maybe CBA no. But good practice though.

*EDGE*
Excellent contribution thanks.


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## tech/a (12 January 2009)

Here is a 5 min SPI chart sent to me by another trader--thanks DON.

Some good alerts here and some nice data to practice on.
Click on the enlarge.


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## cuttlefish (12 January 2009)

The Edge said:


> Sunday  11 January 2009
> 
> ... etc.




Edge - cheers for the comments - very well explained and your justification of your analysis makes a lot of sense.  I did have a few comments/questions on your analysis which I'll ask in another post if I get the time.


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## cuttlefish (12 January 2009)

peter2 said:
			
		

> Cuttlefish: Interpretation is helped by knowing what is in the recent background. If the market is showing signs of strength (SOS) then a low vol up bar is probably lack of supply. If there are signs of weakness (SOW) then a low volume up bar is probably no demand.
> 
> Whenever you notice a high volume bar look to the left of the chart to see if the current price level has been support or resistance earlier. If so then SOS or SOW can provide low risk entries.




peter - cheers for the clear and concise response - this is very helpful and makes a lot of sense.   (and Edge has illustrated this in his example as well).


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## cuttlefish (12 January 2009)

tech/a said:


> I really think a 1 min bar chart for analysing CBA is to short. Not enough going on in 1 bar. FOREX maybe CBA no. But good practice though.




Yeah tech I agree with this - most of the bars have little meaning and the distribution of small amounts of volume across the bars is also often random.

So if watchinig the one minute bars there is a lot of ignoring going on and also a lot of mental consolidating of bars and also moving out to 5 minute bars a lot.  But in spite of most of the 1 minute bars being irrelevent on their own - when action does start to occur the 1 minute bars can definitely give the pointy-end signals and be worth following imo.  So the majority of the time they aren't giving much away but at the right point in time they are extremely relevant. 

For the type of trading I'm doing and the positions I'm taking I'm not sure focusing on such tight timeframes makes much sense and if I'm going to spend the energy doing that then I should be trading in those timeframes. Because of this I've started to add some day trades as well as I gain more confidence that I'm taking entries/exits that aren't just random hunches.

I also consider it important to analyse how the market is reacting to changes in the depth alongside the bars.   I'm not interpreting depth at 'face value' of course but but watching how the market is reacting to depth manipulation and tests that are being carried out by the market players.

At the moment I'm really just experimenting with a few different things and trying to get a feel for reading the price action as it plays out and seeing what things seem to work/help with that process.

(Basically getting some of that 'screen time' that TH and others talk about).


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## It's Snake Pliskin (17 January 2009)

Is ths thread intraday only? Or is daily ok?


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## The Edge (17 January 2009)

Friday  16 January 2009

Any and all time frames.


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## lindsayf (18 January 2009)

Hi..this may be a bit off topic..but maybe not...
I am interested in the degree to which tick volume (Forex, futures indices) can be interpreted using the same principles as time interval data.  I have attached 2 images of the ES futures index for the part of the day.  One is a 1 minute chart and the other a 500 tick chart (500 chosen as scale is similar to minute chart)....Note how different the volume characteristics are.  Quite different..I would argue that based on this, the time interval charts provide a much clearer basis for VSA..but that with familiarity, and understanding how tick volume works..that it can also be applied...but very interested in others views.  Any comment?

cheers


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## tech/a (18 January 2009)

Id be using a time related chart not a set number tick chart.
You want to be able to see the flow through the timeframe.

Just one thing on your chart
The green bars you have marked showing clear demand are actually clearly showing the opposite,as the bars follow ig the high volume bars are down indicating that those high volume bars are actually supply.
EXCEPT for the last green arrow which is correct and a great signal.


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## peter2 (18 January 2009)

That's curious, Lindsay, how can the open/close's always be the same price?


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## lindsayf (18 January 2009)

oh..initially I didnt understand yr question....the bars show close only


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## barney (18 January 2009)

tech/a said:


> Id be using a time related chart not a set number tick chart.
> You want to be able to see the flow through the timeframe.
> 
> Just one thing on your chart
> ...




Just curious Tech ... the first green bar is followed by a similar pattern to the third green bar ..... ie. The pattern looks to change to the upside ..... how do we determine not to take the first trade, but that we should take the third trade?  Cheers.


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## lindsayf (18 January 2009)

Barney,   tech , is referring to the top chart..and you the bottom...yes?


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## Cartman (18 January 2009)

time interval chart and tick chart tell u the same story  when the bigger volume comes in -----  if a sharp price change/reversal is accompanied  by big volume  --- its either a bottom --- or the deep pockets are gona milk the swing traders by dumping more volume to the opposite side ( initial trend direction) ---- 

how do we know which one it is ? ---------- in a word 'Momentum' --------- is momentum always correct? ------- definitely not --- but its yr best friend


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## tech/a (18 January 2009)

lindsayf said:


> Barney,   tech , is referring to the top chart..and you the bottom...yes?




Yes.


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## barney (18 January 2009)

lindsayf said:


> Barney,   tech , is referring to the top chart..and you the bottom...yes?




Hi Lindsay, to be honest I have trouble getting a handle on volume spread analysis .... To me both charts looks similar when looked at in a short term time frame.  The tick chart obviously might throw the odd higher range bar in, but the cumulative volume is still indicative over a given time frame .... I think that is what Tech is saying re using "time" as a better scaling scenario ?? ... but I'm only guessing. Cheers.


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## tech/a (19 January 2009)

For those interested.
Playing around with VSA on the SPI.
Have found 15 min timeframes the lowest where VSA is of any value due to liquidity and range.

Developed a very basic trading method and with limited testing (The current months data).The following results.

31 trades
19 wins 
12 loses (Includes B/E trades).
61% win rate.
1 contract
590 Profit pips
144 Loss pips.
R/R 4:1

Still a work in progress.


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## Trembling Hand (20 January 2009)

Tech,

Ticks in futs,

Pips in FX.


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## sleepy (20 January 2009)

Hi John (tech/a),

 ... was that using VSA  on its own - or in conjunction with say Eliot Wave?
... and how much screen time did the trades require ie Real-time or conditional buy/sell orders etc

sleepy


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## tech/a (20 January 2009)

Trembling Hand said:


> Tech,
> 
> Ticks in futs,
> 
> Pips in FX.




Thanks.
Should hear me order a coffee!



sleepy said:


> Hi John (tech/a),
> 
> ... was that using VSA  on its own - or in conjunction with say Eliot Wave?
> ... and how much screen time did the trades require ie Real-time or conditional buy/sell orders etc
> ...




On its own,infact only one aspect of VSA.
Only conditional orders are bracket orders for stops.
You would need to have the screen open to watch for the sell signal.

Still at it.


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## cuttlefish (20 January 2009)

Tech are these intraday trades or longer?   If intraday - how are you factoring in slippage?     (How wide does the spread get on the SPI anyway?  I'm often surprised at how wide it can spike at times on stocks like BHP and CBA etc.)


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## sails (20 January 2009)

tech/a said:


> For those interested.
> Playing around with VSA on the SPI.
> Have found 15 min timeframes the lowest where VSA is of any value due to liquidity and range. ...




Tech, not sure if this is any use as it's been a good few years since I traded the SPI.  However, I do remember finding it beneficial to shorten the time frame in strong, fast moves as way too much price action gets lost in the 15 min bar.   Just a thought - maybe something to check out while you're still testing...


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## tech/a (20 January 2009)

cuttlefish said:


> Tech are these intraday trades or longer?   If intraday - how are you factoring in slippage?     (How wide does the spread get on the SPI anyway?  I'm often surprised at how wide it can spike at times on stocks like BHP and CBA etc.)




All intraday.Hold time varies from 52 pt max to a couple of ticks on the data I have looked at.As I manually traded the plan I just adjusted the Stop by the slippage (Estimate really).



sails said:


> Tech, not sure if this is any use as it's been a good few years since I traded the SPI.  However, I do remember finding it beneficial to shorten the time frame in strong, fast moves as way too much price action gets lost in the 15 min bar.   Just a thought - maybe something to check out while you're still testing...




Yes can see that as a benefit,on the data used there was only a few of these.
Finding lower timeframes just dont have enough volume or Range.I've been using 15 and 12 min.But found 2,4 and 8 hard going.


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## sails (20 January 2009)

tech/a said:


> ...Yes can see that as a benefit,on the data used there was only a few of these.
> Finding lower timeframes just dont have enough volume or Range.I've been using 15 and 12 min.But found 2,4 and 8 hard going.




Yes, they don't happen often.  Although, sometimes around opening and closing time can be pretty fast.  I realise it would be difficult to back test - would have to be done manually when live trading.


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## -Bevo- (20 January 2009)

tech/a said:


> Finding lower timeframes just dont have enough volume or Range.I've been using 15 and 12 min.But found 2,4 and 8 hard going.




Tech have you looked at any other contracts in our region, the Nikkei SGX for example I think it does 3 or 4 times more volume than spi.


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## tech/a (20 January 2009)

No not yet.
Only so many hrs in a day.
Had a good day today using a 4 min chart which worked well.
I notice the last 3 days have had far less volume.
Today was much better.
Been posting on the SPI thread as thats what I'm trading with.


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