# Recognising Volume - opportunity or trap?



## tech/a (29 October 2007)

Thought Id start this thread as many have a view that increased volume must indicate strong bullish conditions.
Sometimes this is correct others not so correct.
I thought it might be of interest to go through some case studies to see if we cant identify the possible meaning of volume at specific points of Trades.

Here is example 1
What do you think will happen/happened and WHY?
No need to specify the stock as its about reading the volume and price action.


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## prawn_86 (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Hey Tech, i like you posts, and as you know am a begginer at t/a but here is my interpretation...

I think that the price will increase from here as it originally broke through resistance at 5c on volume.
2 days after that opened and closed the same but had a large intra-day high, indicating more sellers than buyers at the higher levels.
The final day is the decider for me, as once again big volumes, but the price was pushed up from an intraday low to close higher than open.

I would suggest that it would mean a rise in the future, or at the least, new support has been found about 5.9c.


Is this a deliberate trap tech? ie - do you already have the next set of data?


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## glenn_r (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

G'day Tech

Maybe another thing to discuss first IMO, is do you believe volume spread analysis is the same for blue chips and penny dreadfuls?


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## IFocus (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Hi Glen



> G'day Tech
> 
> Maybe another thing to discuss first IMO, is do you believe volume spread analysis is the same for blue chips and penny dreadfuls?





Over the years i have noticed that as long as there is plenty of liquidity it tends to apply at both ends of the market, I am sure others may disagree.

Focus


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## motorway (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Liquidity is not a fixed attribute

And in any case

When Mkts are at extremes of liquidity
Risk reward is often most unfavourable

It is always changes in a relative sense that mater
changes in liquidity gives pointers in any case.

The vast majority of people
would prefer to buy
after they see liquidity increase
after they see volume and price expand

they would rather do that and buy at higher prices
Then risk Buying at much more favourabe prices
when the stock is dull

So there is a bit of psychology that should make reading that chart a cinch.

motorway


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## tech/a (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

*Prawn *yes I do. 
Yes it could be a trap and in further exmples there will certainly be some curly ones.But you have supported your case and right or wrong will give you confirmation of your thinking or some other things to think about.

*Glenn*
I know your a keen follower of VSA.
In response to your question.
I've been working with Small caps and VSA for some months.
Yes I do think/know that it is applicable and infact sometimes more so representative of crowd behaviour.While "Smart" money may not be the cause and effect (Institutions) I'm sure there are big money players involved.
I'll be showing mainly small cap plays as examples.

Another point which your question leads indirectly to is Liquidity.
On a daily basis you have to have it and you need reasonable range overtime to be able to read the chart.If its not there I'll pass. However when it does come in then it is often very possible to apply it.

One step more is the question of liquidity relative to timeframe.

EG can I trade VSA with a  min chart.
For most things I'd say no.
Ive found for 15 min for very liquid stocks and 120/180 min for most others,this tends to give good enough volume and range to be meaningful.

I have a thing with smalls.
I like 10-20-50% gains in short periods.
I know you can apply all the Risk rules and take low risk high return entries often enough for me to have a desire to become "expert" at this.
Getting better everyday!


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## Aerosky (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

My production on this is that in the next day volume will fall and so will the price (to 5.6ish) except if there is high level of buyers at 5.8 and 5.9. 
However I’m not the person to listen to when it comes to volume reading.


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## Awesomandy (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

I think this one is a little bit hard to call. It has broken through the resistance at 5c, but the large increases in volume hasn't really given the sp a run. I would expect a 5c share to go up quite a bit more, actually. The prices for the past few days seem to be quite volatile as well. It's moving up and down, but has no clear indications of where it really wants to go. So, being a beginner and with my rather cautious ways, I would watch this one for a little longer. Generally though, I interpret volume as an indicator of change; whether the sp goes up or down it's a different story.


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## MS+Tradesim (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

I don't have TG yet, but based on my experience I would say the probability slants towards a fall to about 5.5-5.6 on relatively low volume. If that level is breached I would then say there is about a 40-50% chance of an accelerated fall towards the 5c mark. If that level is not breached I would see the probability of it drifting sideways and then lower over a period of weeks. I would say there is an extremely low probability of an upside breakout any time soon. The gravestone candle with the highest high indicates the upper side was tested and failed on high volume. The following day has an opening markdown and buy-up but on lower vol - I read this as the larger volume holders only coming out close to the 6.0c mark. They are not dumping down but waiter for the buyers to come and meet them. The next day again tests the 6.0c mark on very high volume but fails again to translate into a breakout. The higher volume but failure to continue upwards indicates to me that large volume holders are taking the opportunity to dump stock into strength.

Ps. Longer term I would put odds on consolidation between 5c and 6c with a breakout down the road. I would not trade this at the moment though.


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## nizar (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> Thought Id start this thread as many have a view that increased volume must indicate strong bullish conditions.
> Sometimes this is correct others not so correct.
> I thought it might be of interest to go through some case studies to see if we cant identify the possible meaning of volume at specific points of Trades.
> 
> ...




I'll give it a go.
Breakout day = Day 1.

So on day 1 we have a break through resistance on volume.
Very bullish.
(I probably would have bought on or near the close of this day if I saw and would still be holding).

On Day 2, gapped up too much, sold down.

Day 3 gapped up again and then still UP before getting smashed back down to the open. But the next day it opens lower and we have a buying opportunity or so the market says, and we get a nice white candle close on the high. 

Continuation on the next bar (just noticed it wasnt daily).

Overall bullish, higher highs and higher lows since the breakout day. High relative volume is still there showing sustained interest in the stock.

Looks good to me.


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## black_bird2 (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

As a newbie, my stab in the dark is that with the price appearing to flatten out but still good volume, I think that the next day would see a slight increase in the SP and volume to drop off. The next day profit takers coming on in and volume up but price down a little and a new support level around the 5.5cents level. However, I will keep a keen eye on this thread and see if I can learn something. 

Would it not be correct to think that with an increase in price and volume that there is obviously demand and therefore a continued increase in SP the following day??


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## Kauri (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Good basing for a few weeks, a couple of probes lower quickly rejected.. the last a couple of weeks back... might have had me buying on the break of 52...  the high vol and finish on the days lows a couple of days back would have seen me out... but then again.  
 Cheers
..........Kauri


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## cuttlefish (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

technicals not my strong point but have been enjoying reading and learning on this site and starting to apply some of it.

My view - bar 1 breakout on volume - very bullish. 

bar 2 gap up bullish, then it retraced but this is on lower volume - so sellers weren't prepared to let go. It also still closed above previous days close so still bullish.

bar 3 - higher volume top - buying volume increased but still didn't beat sellers - bearish.   

bar 4 - gap down on open - then rising, but on lower volume than previous day - so buying exhaustion - failed to close above previous day - neutral/slightly bearish.  

bar 5 very high volume but still failed to significantly overcomes sellers. I think the sellers in bar 5 are probably buyers from the previous few days looking to escape, while the buyers on this day are looking for short term gain, because  long termers have had an opportunity for four days now and would have taken it earlier and HELD thus creating low volume on this day. So the high volume in this bar indicates previous spec buyers selling.  The new buyers are probably also spec buyers because long termers have had ample opportunity the previous 3 days.  The high volume means that there is an even larger number of short term holders now looking for an exit and likely to panic on softness.

So I reckon its likely to fall on the next bar.   I think the last bar would have been bullish if volume was low, but the high volume without a significant rise is bearish.

I've probably just proven that I should stick to fundamentals!

(but while I'm enjoying the fantasy let me continue )
Rejection of lows prior to breakout and the actual breakout itself are still bullish overall, so possible retrace back to 5.4 over next couple of bars, then consolidation in 5.2 to 5.4 range before continuation of uptrend.


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## tech/a (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Bars 13 to 1 have significance.Some good attempts here I wont comment as I know the answer. After 8 tonight I'll post the continuation of the chart with a significant bar to interpret as the last bar.


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## doctorj (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> as I know the answer



Your post implies there is a single, certain answer.  While in this case there is because it's historical, even the best analysis will only provide a balance of probabilities on a prove/disprove basis but never certainty.


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## tech/a (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



> While in this case there is because it's historical




Thats why I *KNOW* the answer.



> even the best analysis will only provide a balance of probabilities on a prove/disprove basis but never certainty.




A mantra of my own.
Mind you I'm seeing a regular in balance in probability with the application of certain analysis.


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## Vito (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Hi,
   I am only a novice and i trying to learn about VSA. My interpretation is as follows.

1. The bar of five days ago tells me that long term holders  have taken the opportunity to sell the stock on good news or some sort or demand. High volume close off the high.
2. 4 days ago has also signs of distribution.
3. 3 days ago a definite blow off high.
4. Bar 2 Low volume close on the high suggest that there arn't many sellers about. Lower volume close on the high.
5. Bar 1. I think its distribution. Very high volume, not a large ranging bar and a close of the high.

To me this looks like distribution and I would want to see more evidence  that all of the sellers are out of the market before I would buy the stock.


Vito


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## motorway (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

I agree with vito

That is a ultra high Volume Bar

A lot of supply is meeting the demand

So will it go down
or sideways 

The higher low

suggests that demand is at least absorbing the supply

If the buyers are smart
they should pull their bids

But maybe the buyers are not smart
because that is what that ultra high volume suggests

There is no icon for a head on the chopping block 


motorway


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## tech/a (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Just realised that the chart is a 180 min chart.
I dont have that at home so you'll have to wait for tommorow.
Sorry.

Seems most agree that stops should now be tight.There is evidence presented but not *conclusive*---Yet.

The struggle between buyers and sellers though is being won by the buyers as price is still rising overall as some have pointed out Motorway says that supply is being absorbed by demand.

Till tommorow.


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## Garpal Gumnut (29 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> Just realised that the chart is a 180 min chart.
> I dont have that at home so you'll have to wait for tommorow.
> Sorry.
> 
> ...




Jeez tech , you really know how to ruin a bloke's 8 o'clock.

gg


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## motorway (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> Just realised that the chart is a 180 min chart.
> I dont have that at home so you'll have to wait for tommorow.
> Sorry.
> 
> ...




And there is a lot of gasoline in the tank at the moment

ie what was very dull has exploded into action

So one should probably give weight to that fact

Sponsorship has become active ,, for some reason,, 

However ... without more context I would be on the sidelines
With more context it could be different
( I would like to Know , How many shares issued , held by the top twenty , does the company regularly issue new capital, Does the Stock have a history etc .... All this helps define the technical position )

With such Volume all the bars together could be good buying
Or it could be a get out of jail card for those long locked in..

Some of both etc

Absorption is, in the setup of those bars the key.

This phase is incompleted... The bars breakup esp the volume action. *Which You need to see as a continuous unfolding*

After Successful Absortption

Are Successful Breakouts

*And breakouts in that context are valid buys and not traps*
So the next few bars will reveal
Which side supply ,( which IS very evident ) or demand ends with the following which overcomes ...

Change of ownership is occurring
technical postion is changing..

Motorway on the limited information is waiting
Supply could still be stronger than the Demand..

Enough  such cases fall back to dullness
Though the wake up call can be valuable later on..

motorway


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## tech/a (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Tied up in meetings but here is a bit of history.

I agree with M/W its difficult without history.So----


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## glenn_r (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

G'day Tech

Yeah I've been using VSA as a final filter and/or alert in my short term trading and it is  proving very valuable when used in confluence with other analysis, i.e. candlesticks, EW, S & R etc.

As I trade equity CFD's short term and equities/warrants longer term, my short term universe is based around the ASX200, therefore I'm biased to trade the bigger cap's and more particularly so when shorting, each to their own of course.

I prefer to use VSA as a component of the trade setup, its amazing how most times a trade plays out as the analysis suggests, but on its own it is not the be all and end all.

Anyway thank your mother for the rabbits and good trading, also sorry if this has gone off on a tangent.


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## cuttlefish (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

motorway makes a good point that knowing how much issued capital there is and how tightly held is important if looking at volume.  

For example 5 million shares traded in a stock that has 2 billion shares on issue with only 30% held by the top 20 is far less significant and event than 2 million shares in a company that only has 200 million shares on issue with top 20 holding  60%.


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## tech/a (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Cuttlefish.
You can add whatever filters you wish to your analysis.

Here we are reading Volume and range only as thats all we have,other than history shown above.

This is how the next few bars played out.
Howthen fdo you think the last bar played out.
Very strong volume with a definate thrust into new territory.


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## nizar (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



cuttlefish said:


> motorway makes a good point that knowing how much issued capital there is and how tightly held is important if looking at volume.
> 
> For example 5 million shares traded in a stock that has 2 billion shares on issue with only 30% held by the top 20 is far less significant and event than 2 million shares in a company that only has 200 million shares on issue with top 20 holding  60%.




In that case you should take a look at MIN.

Not enough liquidity in it for VSA but the top 5 shareholders hold about 80% of the stock. (Yes the top 5).

Doesnt take much to make it run.

Disc: I have a few.


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## motorway (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> Tied up in meetings but here is a bit of history.
> 
> I agree with M/W its difficult without history.So----




And suddenly what a difference that context makes..
What looked like a single splash from one event
Now is seen to be connected and have History and context..

As regards the extraneous matters
With enough context They are not absolutely necessary

You should always look at the bigger picture .
And from different perspectives
Then the tape will tell ALL

or as much of all as can be told

motorway


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## Porper (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> Cuttlefish.
> You can add whatever filters you wish to your analysis.
> 
> Here we are reading Volume and range only as thats all we have,other than history shown above.
> ...




Not really my strong point but I would say the last bar is a bit of a last hoorar for now.Volume exceptionally high with a close off the highs.(Like most of the last few bars).

The volume bubble around 0.055 is significant and would be a great time to get back in. If history repeats itself and we drift down on low volume to that area, could take off again.

I wouldn't jump in now, but that's me thinking I'd missed the boat.


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## cuttlefish (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

The extended context of the second chart makes a big difference. Knowing that recently there were much higher volumes means the high volume of the final bar on the original shorter chart isn't actually that high compared to historical volumes and volume is still actually lower overall compared to the last fairly recent big flurry of activity, which changes the interpretation. 

So it'd probably be more fun if you gave us all the relevant facts 

But working with just the information as hand I can honestly say I don't have a clue so shouldn't rely on my technical analysis skills : 

Won't stop me having a go though.

Third chart looks like bullish breakout of a short term pennant/flag type of continuation.  Last two bars of the pennant rejected lows on falling volume which is good, but failed to open above close, and the breakout volume is reaching historical highs - so possibly getting close to exhaustion.  I think its likely to open higher but after that you'd have to be looking at it intraday - would expect either a very good continuation on moderate/lower volume or a blowoff top on very high volume, closing below open.


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## MS+Tradesim (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Have to agree with cuttlefish. The extended history does change the interpretation. As already stated the volume is not excessively high in relation to the previous upwards attempt. Won't comment further at this stage as interpretation can be manipulated through the amount of data shown. IOW, what else don't we know which would be pertinent before entering a trade? On the info available I would look towards a moderated continuation upwards.


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## tech/a (30 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

All excellent comments and great to see so many having a go.

The things to look for is the effort required for result.
Are the pushes forward being met with strength from buyers or flooding from sellers.
Tommorow morning I'll post the Tradeguider chart with alerts which I havent done here so far.
Even without the commentary I think you'll agree that the alerts make the chart much clearer. While as it is it is to a degree subjective some are very close to the mark.Analysis from another scource for me at least helps me gel my opinion of what I think I see.Often the Brain sees things before the algorithms particularly in the lower timeframes (I'm finding).Makes the decision when all catch up with each other (Brain and software) a snap!.

This is actually a chart of a smallcap which I began today to trade.


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## tech/a (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Here is what the software says and confirms the views of some who made comment here.
Do you think it would be a good short? If so what would you need to see to go short,other than a reversal of price.


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## Porper (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> Here is what the software says and confirms the views of some who made comment here.
> Do you think it would be a good short? If so what would you need to see to go short,other than a reversal of price.




I wouldn't short it, but a gap up on very little volume and a close off the highs would be further evidence to support the bearish picture.(Demand waning) Any close infact off the highs could be seen as negative.

Also a high volume very narrow ranging bar would be negative.?


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## tech/a (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

So huge volume large range.
Next day gap up and IMMEDIATE supply.

Now What do you think happened?
What would you now be looking for to re enter this stock as I have?


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## Porper (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> So huge volume large range.
> Next day gap up and IMMEDIATE supply.
> 
> Now What do you think happened?
> What would you now be looking for to re enter this stock as I have?




I would say that the upward path continues.

Strength is shown on down bars and the last bar is strong.

There has been a test, which showed there was no supply (low volume bar), with a close well off the lows.The way is open for another leg higher.


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## nizar (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Tech/a,

Does VSA work equally as well on weekly bars as opposed to intraday bars?

And I hear there needs to be sufficient liquidity for VSA to be applied?

What exactly is sufficient? i mean like generally, as a rule of thumb.

And would I be correct to think that using VSA would improve my win% on my weekly trend following method?

ie. by only taking the signals in which VSA supports a breakout.


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## Synergy (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Why is the high bar on high volume here so bearish? I'm trying to work my way through this and am not really getting it. High volume on a higher close is not a good thing? Is the fact that it's opening lower of more concern than it not closing on its high?

When looking at only this bar and the bar before it, is it still a bearish signal or is it only bearish if looking at the entire picture?


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## cuttlefish (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



> Now What do you think happened?
> What would you now be looking for to re enter this stock as I have?




Be looking for next bar to open lower but show high volume rejection of intraday lows possibly around the 5.6c mark (66% fib retrace from the 4.8->7.3 rise).   That'd provide good evidence of a support level and reasonably safe entry to the established uptrend.


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## tech/a (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



Porper said:


> I would say that the upward path continues.
> 
> Strength is shown on down bars and the last bar is strong.
> 
> There has been a test, which showed there was no supply (low volume bar), with a close well off the lows.The way is open for another leg higher.





*Porper* 

I'll go through the entry and the trade in progress tomorrow as the chart STILL isn't to the entry point YET.But your on the right track---but then you knew that anyway!
The trade may or may not pan out.



> Tech/a,
> 
> Does VSA work equally as well on weekly bars as opposed to intra day bars?
> 
> ...




*Nizar *
Yes it works well with weekly,but I tend to use that just as a confluence rather than a signal,not that you couldn't.
In your case trading longer term you could look at introducing VSA as a filter,but not having done any work on longer term trading methods using VSA I really cant say. I would be more inclined to think that its use in exit filtering would be more beneficial than entry.

Where as short term its use in timing both entry and exit is in valuable.
longer term your looking at gaining as much trend as possible so you have to give some back to catch longer trends.Short term your trying to get the most you can out of a singular move or in my case wave.(Which could have a few pull backs rather than full corrective moves.
You dont need to buy the software to test this just the book so you can understand what you need to code.

*How much volume for analysis?*
A question I posed to Gavin at the conference.One which he didn't answer specifically.However I think I can.
There are 2 ways you can have to little volume and range to be of analytical value.
(1) The stock is traded to thinly----Don't trade it!
(2) The time frame is so low that this dilutes volume and range to a point where analysis is meaningless.

I get around it by not trading anything with (1).
Selecting a timeframe where I do get enough volume AND range to be able to use the analysis. This may vary.With the example stock thats around 90 minutes for the minimum but 180 is even better.



> Why is the high bar on high volume here so bearish? I'm trying to work my way through this and am not really getting it. High volume on a higher close is not a good thing? Is the fact that it's opening lower of more concern than it not closing on its high?
> 
> When looking at only this bar and the bar before it, is it still a bearish signal or is it only bearish if looking at the entire picture?




*Synergy.*

Yes it takes a while to get your head around it but when you do its like walking out of a dark room.
The give away here and in any bar which shows EXTREME volume and often extreme range is the very NEXT bar.Once it turns from the gap open its obvious that sellers are now swamping buyers.You cant tell before that bar that that is definitely going to happen (Although Tradeguider will ALERT you to this strong possibility). The bar after the reversal clearly shows that buyers STILL want the stock,pushing prices back to open on good volume.

*BUT* look at the very next day almost NO VOLUME.Where are the buyers?
Holders notice this and sell strongly over the last 2 days,with some interest appearing around the 6c mark.This will become important soon as will the 6.9 to 7.0 cent area. Let me know when it clicks.

This trade is a great example. Until tomorrow! Where you'll see why and you'll see where Grey matter has to be used in conjunction with the software.

*Cuttlefish*
We crossed.
Like your thinking.---You'll enjoy tomorrow and the analysis.


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## nizar (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> *Nizar *
> Yes it works well with weekly,but I tend to use that just as a confluence rather than a signal,not that you couldn't.
> In your case trading longer term you could look at introducing VSA as a filter,but not having done any work on longer term trading methods using VSA I really cant say. I would be more inclined to think that its use in exit filtering would be more beneficial than entry.
> 
> ...




OK.
Thanks tech/a for your response.
What was the book title again, I'll get myself a copy.


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## tech/a (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Free in E book form here.

http://www.tradethetruth.com/downloads.html


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## Synergy (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

Cheers Tech, its much easier with a bit of a walk-through like that. It makes sense so far, but i'm not feeling any ability to predict the future jsut yet!

Keen to see how it progresses.


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## Awesomandy (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*

It looks to me as a healthy pullback from the run, with relatively less volume than the few days before. There's possibly some support at around 5.9c, as it seems to me that the sp stayed around there for a little while on the way to the high. It's also about the halfway from bottom to up as well, so I would think of that as a possible re-entry point, depending on other stats as well. If it bounces, I think there's a possibility of a new high. Otherwise, the uptrend would be invalid, and further downside could mean we are back to square 1.


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## CFD (31 October 2007)

*Re: Recognising Volume-----opportunity or trap.*



tech/a said:


> Free in E book form here.




Thanks for that, a version I can print. I can't read that much on screen.


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## CanOz (1 November 2007)

*Re: Recognising Volume-----opportunity or trap.*



Synergy said:


> but i'm not feeling any ability to predict the future jsut yet!
> 
> .





think in probabilities, not predicting an outcome.


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## tech/a (1 November 2007)

Just to come upto speed on this trade.

From the low which showed good support at 59c 15 bars back.
11 bars back was my buy bar at 6.3c.
This trade may or may not work out.Support is 5.9-6c Resistance is coming in at 6.8/6.9c on a regular basis.(This is a 180 min chart).

At 5.8c I'm out.
Whats keeping me in the trade is the higher volume on up bars 13 and 11.
However selling has now come in at bars 345 and 6 so I'm left with little confidence after a good setup at the 50% fib level.


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## CFD (2 November 2007)

In response to your last chart, let me first say that I need to learn VSA as to my own understanding and I guess we are not about to see eye to eye any time soon (and let me acknowledge that you make more from it than I do).

I was not expecting this to work on such a cheap (5c) stock, so I was watching with interest. I also note that you obviously didn't agree with a post I made a few months ago about TG's colour coding of volume bars. However to my mind a bar that opens near the previous close, has a wide range up, closes well above its open (and previous close) on high volume is not a supply bar. ie a bar does not have to close right on its high to be a demand bar. (Especially when it occurs near support levels.) Surely there must also be neutral bars and others where the most appropriate reading is "stuffed if I know".
Edit: IMHO

That said I see nothing wrong with your trade and it still looked the goods, unfortunately many of my trades suffer the same fate, they get hit by a runaway train (the dow doing a 2% to 3% turnaround over night) and get stopped out.


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## motorway (2 November 2007)

> That said I see nothing wrong with your trade and it still looked the goods, unfortunately many of my trades suffer the same fate, they get hit by a runaway train (the dow doing a 2% to 3% turnaround over night) and get stopped out.




The smaller the moves You trade
Will tend to involve you with  smaller time  frames

( note I do not trade time frames but moves that unfold across time frames )

NOW every magnitude has magnitudes within it

SO there are traders on those smaller moves making liquidity for the traders
on the larger moves..

Except when Your are operating at the smallest end of the scale then 
there is no one below and often nothing below

The gaps and discontinuities are a given.........

Gaps occur when liquidity is withdrawn
To trade moves that unfold intra day
requires much more anticpation..
You have to get in and out
before the lquidity vanishes

Out on the weakness in the upbars
In on the strength in the downbars

( Think through and past the bars )

But on a magnitude that is useful and tradeable

Again I do not  trade  daily weekly or monthly time frames
I aim to catch moves of a certain magnitude
By anticipating markup and mark down

the smaller moves teach You that in a sense trends do not exist
By the time it goes up or down
There is no one left to buy or sell to..

inventory is simply passed between strong and weak hands
and markup and markdown follows automatically and often quickly.

CFD You are touching on a very important point

It is in trying to follow trends that weak hands buy the bulges and then 
a train hits them..

Using trends properly  is a different thing..


hope that is useful 
motorway


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## motorway (2 November 2007)

--------->The more important are the traders trading on the largest magnitudes.

When they withdrawn from the market ( and they often do )

You are left finally with tic traders buying and selling to each other......BUT all at the same time and all on the same side of the spread....

So smaller magnitude traders need a healthy ecosystem...

A market with a diversity of traders regarding time horizons......

The largest magnitude traders ( years ) .......Don't !...They don't even need a market at all...........Different needs all across the spectrum........

On all magnitudes if you come to an understanding of weak and strong hands

everything else follows.......... esp $$$$

motorway


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## CFD (2 November 2007)

motorway said:


> ~~
> hope that is useful
> motorway




And tactfully worded, as always.


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## cuttlefish (5 November 2007)

cheers tech, interesting exercise to look at a chart alone without knowing anything about the stock.  I can see the logic for your entry which seems sound. I've gotten a bit confused about your bar labelling when describing why you hadn't exited on the first break down - do you mean bars 11 and 13 when counting backwards from the end?

Having the stop where you do, do you see risk of slippage on the exit given its just below a significant support level?  I'm also curious as to whether you use automated stops or examine the price at the end of each time period and use a manual stop. 

Do you see the possibility for exit slippage as a risk to overall plan profitability when trading a stock like this that has had high volumes traded after a historically lower period?


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## Millsy (5 November 2007)

tech/a said:


> Just to come upto speed on this trade.
> 
> From the low which showed good support at 59c 15 bars back.
> 11 bars back was my buy bar at 6.3c.
> ...





Fib levels???    tut tut, and i was enjoying this thread as well.  

Seriously tho, been trying to get to grips with vsa myself for quite a while now.


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## tech/a (5 November 2007)

> Fib levels??? tut tut, and i was enjoying this thread as well.




Meaning?
Fib levels are an integral part of analysis.


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## Millsy (5 November 2007)

tech/a said:


> Meaning?
> Fib levels are an integral part of analysis.




They probably are i didnt mean to offend.  

I just find fib levels kind of good after the fact like other TA. Theres probably no reason why you cant trade a profitable system around them tho, if they work for you then......

Once mastered tho i do think price and volume is all you really need to know.
Fib levels, moving averages, moon cycles or whatever will become irrevelent.


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## ithatheekret (5 November 2007)

I've only ever considered volume when calculating VWAP , (volume weighted average price) , the semaphores are too confusing to decypher any coded information held in intraday trading for my attention and are filed under market noise along with any numbers , especially statistics that are spurted out by administrations . Hence I feel safer using volume as a measurement and not a catalyst to entry , especially when right now we are finally seeing risk being priced into the spreads . I did see a mention here of price and volume being all one needs to know ........... words fail me there , I'm absolutely gobsmacked ........

......................
not meaning to be forward , but.....

price and volume alone are like trying to read tea leaves out of a coffee cup , one must take into consideration that movements within the market are not constant , the rate of exchange varies , so too the speeds of the exchanges , hence the flaw in using price and volume alone , there are other variants that need to be incorporated into calculations .


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## prawn_86 (5 November 2007)

there are many different ways of making a profit in the share market and each to their own. If price and volume are all some people need good on them.

It also depends a lot on timeframes i guess.

Point being: there is no 'right' way


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## ithatheekret (5 November 2007)

Of course , that's what makes the market go round , but with price and volume , I would first have to consider a stop loss and if it's forex an attached trailing stop on the stop loss .


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## motorway (5 November 2007)

Lets assume that Mr Smart Money wants to profit from an anticipated move.

What will reveal his intention ?



> That those who know more about it than the observer cannot conceal their future intentions regarding it




Why can their future intentions not be concealed ?

because they have to BUY or SELL first...

They can not BUY or SELL after..

This naturally means VOLUME

And  







> Their plans will be revealed  by the stock's subsequent action




So Volume given context by the subsequent action ( Price movement that results ) in the context of the action prior...

Is impossible to manipulate...

Everything else can be a tool of manipulation

mkts are a double auction process...
allows for all sorts of games..
except with volume ( on balance  )

what time frame does Mr Smart Money operate on ?

All time frames ... The Volume bars are His footprints...

Volume is very important
But it is not everything..
The volume that matters is not necessarily the volume that accompanies the price action.
But is the volume that leads the price action
The volume that stops is often ( but not always ) the volume that starts...

Fib levels have No significance other than  as useful measures of relative strength and weakness... The main reference point is 50%..

motorway


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## Millsy (5 November 2007)

Now ive started something. 

Some time ago i witnessed a bar and volume chart forward and reversed engineered quite accurately, with a detailed commentary on all the shakeouts fakes  etc etc. 
      Of course you don't need to know all of this to be profitable.


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## tech/a (5 November 2007)

> Fib levels have No significance other than as useful measures of relative strength and weakness... The main reference point is 50%..




Absolutely.
You must know where you are in a trade before you take it.
I find Elliot helpful here.
I also find fib helpful in placing myself in a position to take advantage of a setup.
38.2% usually occurs in a continuation of a wave 3.
50% in a retracement of a wave 4
61.8% commonly in a wave 2
1.0 commonly a measurement of a wave 1 to 5
1.618,2.0 also common wave 1 to wave 3 extensions.
When trading short term I can find confirmation at these levels from other analysis particularly VSA to take or terminate a trade.

RANGE and VOLUME rather than price play a huge part in telegraphing a short term trade in all markets.



> Of course you don't need to know all of this to be profitable.




I would argue that you can be much more profitable if you do know how to read theses.


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## nizar (5 November 2007)

prawn_86 said:


> there are many different ways of making a profit in the share market and each to their own. *If price and volume are all some people need good on them.*
> 
> It also depends a lot on timeframes i guess.
> 
> Point being: there is no 'right' way




Not even.
Some systems do well trading SOLELY on price.


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## motorway (5 November 2007)

nizar said:


> Not even.
> Some systems do well trading SOLELY on price.




It depends on how well you want to do

most pure priced based systems 
are variations of breakouts

Volume systems identify turning points
that will lead to price breakouts

This can mean huge difference in Risk /Reward

The mythical one tick stops 



> Absolutely.
> You must know where you are in a trade before you take it.




very good advice

trend is one thing 
the position in the trend is another

motorway


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## professor_frink (5 November 2007)

nizar said:


> Not even.
> Some systems do well trading SOLELY on price.




and some don't even use that.

"Price. We don't need no stinking price!"


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## tech/a (5 November 2007)

> Volume systems identify turning points
> that will lead to price breakouts
> 
> This can mean huge difference in Risk /Reward




This is where this sort of analysis *stands alone*.
When you trade R/R rather than for a profit---profit comes.
But return on the money you use to invest/trade with grows enormously.

*Nizar*
I know the following will make perfect sense to you.
As you know I trade systems.
My main system returns a healthy 12:1 R/R *BUT* my average hold time is *over 1 yr*.It performs brilliantly in Bullish markets and poorly in choppy to bearish markets.

My short term Trading returns 3-7:1 R/R in *an average of 5 days*.
and performs consistently over all market conditions.
Its just the setups that alter with conditions.
Now I'm looking for long setups.
With the first collapse of the Dow I was looking for short setups.

The 2 styles are vastly different and has taken me a great deal of time to get my head around each as an individual trading methodology.


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## nizar (5 November 2007)

Tech/a and motorway,

Yes i agree with both of you.
Firstly, that using VSA can improve your results.

And secondly that short timeframes can be very profitable because of precisely what you said, decreased trade length and therefore increased opportunity.

In fact, short term trading will also provide a much smoother equity curve and gives you less market exposure.

All very favourable.

I will be working on both of the above over the next few months.

Thanks for your thoughts gents.


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## sleepy (6 November 2007)

Hi John,

re: Long Term trading
Are you still sitting on the sidelines or have you re-entered the market?

re: Short Term Trading 
Did you do any backtesting with tradesim or your strategy still evolving?
Are you using any leverage?
Do you think youd get the same R/R if:
a) you werent using Eliot Wave to identify trends?
b) were using Tradeguider EOD rather than real-time?

sleepy


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## ithatheekret (6 November 2007)

Astute analaysis here .



motorway said:


> Lets assume that Mr Smart Money wants to profit from an anticipated move.
> 
> What will reveal his intention ?
> 
> ...


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## Timmy (6 November 2007)

tech/a said:


> When you trade R/R rather than for a profit---profit comes.





Fantastic words.
While getting the analysis right is important, its only going to get me about 25% of the way to profitable trading, the more important stuff is the other things I *do *to manage the R/R, especially on an ongoing basis once the trade is open.


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## tech/a (6 November 2007)

Sorry for the delay just saw the post!



sleepy said:


> Hi John,
> 
> re: Long Term trading
> Are you still sitting on the sidelines or have you re-entered the market?




No still concentrating on the short term. I'm actually committing some (From longer term liquidation) to our new Ponderosa. I'm actually working on short term ideas and trading a few right now.This is more a personal choice than one based upon market analysis.



> re: Short Term Trading
> Did you do any back testing with tradesim or your strategy still evolving?




No Not yet.I'm trading one idea which is a hybrid of Nicks ideas .
I have 3 others I'm refining so to speak.All show much promise.I'm actually lured by the opportunity to make 3-7 R/R in a few days often less than a few weeks!



> Are you using any leverage?




No but am investigating ANZ margin who have 106 stocks that you can short and their list consists of 1100 stocks and trusts you can trade long.I have opened an account but trade about 1/5th of the funds on the smalls at the moment.Not on margin as I never trade beyond the initial capital--YET.



> Do you think you'd get the same R/R if:
> a) you weren't using Eliot Wave to identify trends?




Yes Id just use another filter.Some of the ideas I'm working with don't have any Elliott at all!



> b) were using Trade guider EOD rather than real-time?




Yes but the time frame in which you did it would probably be a little longer.


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## nomore4s (6 November 2007)

tech/a said:


> No but am investigating ANZ margin who have 106 stocks that you can short and their list consists of 1100 stocks and trusts you can trade long.I have opened an account but trade about 1/5th of the funds on the smalls at the moment.Not on margin as I never trade beyond the initial capital--YET.




Tech, you might want to look at the Macquaire Prime platform, can use CFD type margin (without the interest charges that go with CFDs) or no margin at all, but you can go short on most stocks. But it is $20 each way in fees.


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## tech/a (6 November 2007)

Your right I might be very interested.

Thanks for the heads up!


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## sleepy (6 November 2007)

" ... the Macquaire Prime platform, can use CFD type margin (without the interest charges that go with CFDs)"

From the sounds of that they may be better for those using CFDs longer term (ie weeks/months) cf to regular CFD providers ... or am I missing something?

sleepy


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## doctorj (6 November 2007)

Has anyone had any luck coding (or finding) some sort of VSA framework into Ami?


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## nomore4s (6 November 2007)

sleepy said:


> " ... the Macquaire Prime platform, can use CFD type margin (without the interest charges that go with CFDs)"
> 
> From the sounds of that they may be better for those using CFDs longer term (ie weeks/months) cf to regular CFD providers ... or am I missing something?
> 
> sleepy




Yeah it is better for longer & shorter term trading imo, alot cheaper re interest. Also you get all the benefits of share ownership - D/E & franking credits, share placements etc. And you can short most stocks as well. 
Have been using them for a few months and am pretty happy so far.

Only disadvantage in regards to some CFD providers is it is only for Aussie shares.

Link here


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## sleepy (7 November 2007)

Thanks nomores4,
Whats the trading platform like?
Also just found these for those interested ...

http://compareshares.com.au/derk12.php
https://www.aussiestockforums.com/forums/showthread.php?t=6934&highlight=macquarie+prime

Back on topic ...
"No Not yet.I'm trading one idea which is a hybrid of Nicks ideas"
John,
... is it based on breakouts from a base ....or around chart patterns with low risk setup in order max. R/R?

sleepy


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## tech/a (7 November 2007)

> or around chart patterns with low risk setup in order max. R/R?




Setup is Elliot Based.
Buy signal is both Elliot and VSA based.
Sell is Elliot Target and VSA execution.
Stop is extremely tight and as such R/R is very high over short periods.


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## nomore4s (7 November 2007)

sleepy said:


> Thanks nomores4,
> Whats the trading platform like?




Yeah quite good, but the only other platform I've used is Commsec, and it beats that hands down.

Sorry for taking the thread off topic a bit tech.


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## nizar (7 November 2007)

tech/a said:


> Stop is extremely tight and as such R/R is very high over short periods.




Surely at the expense of win %  ?


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## motorway (7 November 2007)

nizar said:


> Surely at the expense of win %  ?




I would not think so....
Buying at only the right time should increase win % ?



> Stop is extremely tight and as such R/R is very high over short periods.




bear in mind that all breakouts start at the bottoms
And that all moves of 100% + start intra day on a particular tic


It is not about time frames .
It is about moves.

About moves that  have enough preparation...
About moves that are going to move now..

 The size of the move that is sufficient for your purposes.
determines what is noise and what is signal..

motorway


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## tech/a (7 November 2007)

Nizar.

NO!!
With the combination of the entry technique I use the win rate is very high.
Remember I only need small moves.
If I have a risk of a few cents,my R/R can be generous very quickly.
I'm currently trading YML.
The day before yesterday I had a signl to buy at $1.07 with a stop at $1.02
Now at $1.22 so 15c or 3:1 R/R 2 days later.

The other benifit is that I can and do exit trades with no demand after entry,if this is clear then I wont stay around rather place it on a watchlist,exit and wait if the enrty is still valid.
This has often seen me out at .5-1:1 R/R and better opportunity cost.

Its just a completely different way of trading to systems trading.


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## motorway (7 November 2007)

Hi Tech 

As I thought and would expect 


The second part of the post 
points to the fact the at critical junctures
The intraday action can be important

Even for large moves

motorway


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## WaveSurfer (20 January 2011)

Too late to post my view on your first chart tech, I would have bought on the most recent bar though, with a stop below the previous test bar.

As for determining if high volume up bars are bullish/bearish. I tend to draw in a line on the close of that bar and use that as my reference point. Below it with increased selling and I'll short any no demands. Above it with increased buying and I'll buy any test or shakeout. Works really well on futs 1m chart.

Not a bad day on the SPI today, I had to wait for my set-up cause I missed the first few hours. But this came along and I was looking for some quick points on longs for sure.

Two bars on big volume, I marked each bar's close and that was my reference point. Immediate hidden test 2 bars later after buying on the previous bar. I was in on the break of the test's high (4764) stop 1 tick below the test (4759).

Added to position (4764) on the dip back into my zone on much lower volume. Stop moved up 1 tick.

Position exited at the top of my channel 4772 after the break above it died in volume.

If I were still trading today, I'd be buying any strength back into that zone. My bullish view would change pretty quick if we see weakness under it. It is a down day, not going to get too cocky.


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## tech/a (20 January 2011)

> As for determining if high volume up bars are bullish/bearish. I tend to draw in a line on the close of that bar and use that as my reference point. Below it with increased selling and I'll short any no demands. Above it with increased buying and I'll buy any test or shakeout. Works really well on futs 1m chart.




If there is one thing I like to see its practical application of analysis.

Thanks a great hint---like it..


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## WaveSurfer (21 January 2011)

tech/a said:


> If there is one thing I like to see its practical application of analysis.
> 
> Thanks a great hint---like it..




No problems mate, I have you to thank for it anyway. The idea came from your high volume zones that you wrote about in another thread.

Here's a stock I've been watching (ROC), and a good example of when the closes of the high volume bars form a range and I'll wait for the range to break. 

Massive wide spread down on huge volume. Price has churned right on the close (red line) for over a year now. Every other high volume bar thereafter you'll notice the close of the bar is near the close of the bar I have marked with the red line, the others I have marked in blue. I drew these three lines in July last year.

Looks ripe for a big move, let's hope it's up cause there's much more room than down


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