# Volume Spread Analysis



## Bobby (13 February 2007)

Comments or detail on this subject please.


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## It's Snake Pliskin (13 February 2007)

Bobby said:
			
		

> Comments or detail on this subject please.




Hi Bob,

It is the study of price spreads, opens, closes with consideration of volume, to simply put it.

Take care
Snake


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## Bobby (13 February 2007)

It's Snake Pliskin said:
			
		

> Hi Bob,
> 
> It is the study of price spreads, opens, closes with consideration of volume, to simply put it.
> 
> ...



 Greeting Snake,

Thanks.

I think there maybe a book on it ?

Have fun
Bob.


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## It's Snake Pliskin (13 February 2007)

Bobby said:
			
		

> Greeting Snake,
> 
> Thanks.
> 
> ...




Bob,

I'll PM you.


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## tech/a (13 February 2007)

Bobby.

I'm going through my experience with Tradeguider VSA software here.

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=4;t=000327


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## theasxgorilla (13 February 2007)

This might be over-simplied, but if I am looking for a bar that opens and closes in opposite thirds, and has volume either greater than the previous day, or above the x-period moving average of the volume histogram...is this a practical implementation of VSA?


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## tech/a (13 February 2007)

> This might be over-simplied




Yes.

It has literally turned SOME of my beliefs in analysis on its head.
There is an E book on the topic but to read it without being able to see application in realtime on charts is not going to make anyone much wiser.


http://www.tradeguider.com/freestuff.asp

Follow the links


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## Bobby (13 February 2007)

tech/a said:
			
		

> Bobby.
> 
> I'm going through my experience with Tradeguider VSA software here.
> 
> http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=4;t=000327



 Thanks Tech for the link, please keep us informed of your thoughts.

Regards Bob.


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## pavilion103 (22 April 2011)

I am unable to idenfity the difference between:
a) stopping volume and 
b) selling climax

Both appear to be high volume down days closing at or near the high of the bar. 

Followed by a low volume down day means no more selling. An up day is a good sign of strength (unless it is low volume).

Both of these also seem similar to a "reverse up-thrust" 

Can someone please clarify any differences?


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## pavilion103 (25 April 2011)

Ok I've had a look in the book "Master the Markets" for the definition of a 'Selling Climax.' I've found what appear to be two contradictory definitions in the same book. Can someone please help me determine why this would be? Or which definition below is right?


Page 22 says: It is a high volume down day with a narrow spread entering new low ground, closing in middle or low of the bar
Page 81 says: A selling climax is indicated by ultra-wide spreads down, with exceptionally high volume, usually closing on or near the highs of the day.


Is this contradictory? One with a narrow spread closing on the low or middle of the bar and one with an ultra-wide spread closing near the high of the bar.

Thanks,
Matt


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## skyQuake (25 April 2011)

pavilion103 said:


> Ok I've had a look in the book "Master the Markets" for the definition of a 'Selling Climax.' I've found what appear to be two contradictory definitions in the same book. Can someone please help me determine why this would be? Or which definition below is right?
> 
> 
> Page 22 says: It is a high volume down day with a narrow spread entering new low ground, closing in middle or low of the bar
> ...





Would agree with the page 81 definition.
Low range would not indicate any change of mindset


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## tech/a (25 April 2011)

Think about it a bit
Selling climaxes are at the top of moves
Stopping volume at the bottom of moves


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## Lone Wolf (25 April 2011)

skyQuake said:


> Would agree with the page 81 definition.
> Low range would not indicate any change of mindset




If price had previously been falling and you suddenly saw very high volume on a narrow spread, doesn't that indicate some amount of support has come in?

A large amount of activity was recorded but it resulted in very little movement, so any selling was met by buyers. By itself I'm not sure it it tells you much, but if I saw it I'd be interested to see what happens next.


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## motorway (25 April 2011)

Selling Climax to be a SC must end the trend

The differences in appearance are due to whether it falls over one or two or more bars

I will quote Richard Wyckoff 



> However, you must allow for variations. That is, do not expect one selling
> climax to look exactly like another. The same basic characteristics may be
> observed; but the time and magnitude of price movement and volume, and the
> extent and sequence of price movements almost invariably will differ.
> ...




And again as to what is key ( as stated by LW demand emerges that meets and then is seen to overcome supply )



> The phenomenon of the Selling Climax is caused by the panicky unloading
> of stocks (supply) by the public and other weak holders which is matched against
> buying (demand) of (l) experienced operators; (2) the large interests and sponsors
> of various stocks who now either see an excellent opportunity to replace at low
> ...




This  technical rally (and then secondary test)is key

It can all take place in one bar ( widespread closing on the high )
Or over two or more bars 

So at first you might just see==>  Page 22 says: It is a high volume down day with a narrow spread entering new low ground, closing in middle or low of the bar.

A significant SC ends the trend and takes the action through the trend channel
Stopping Volume might be the start of a SC.. or might just be a pause in the downtrend ( WHICH SHOULD BE SEEN to be IN PLACE )

Wyckoff again==>



> If buying on the break (i.e., during the Selling Climax) was principally for
> the purpose of supporting prices temporarily and checking a panic, or relieving a
> panicky situation, this support stock will be thrown back on the market at the
> first favorable opportunity, usually on the technical rebound which customarily
> ...







> it should be noted that the same principles which apply
> to the large swings also apply to the smaller moves and to the day-to-day buying
> and selling waves.




Always think in terms of what has been happening
1 Supply overcoming Demand
2 Demand Meeting Supply ( what do you expect to see ? Volume ? Spread ? )
3 DEMAND OVERCOMING SUPPLY..


Motorway


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## Mistagear (25 April 2011)

pavilion103 said:


> Ok I've had a look in the book "Master the Markets" for the definition of a 'Selling Climax.' I've found what appear to be two contradictory definitions in the same book. Can someone please help me determine why this would be? Or which definition below is right?
> 
> 
> Page 22 says: It is a high volume down day with a narrow spread entering new low ground, closing in middle or low of the bar
> ...




Why not 2 types of selling climax ?

p22 
(high volume down) 
 ...a large number of sellers
( narrow spread entering new low ground) 
... despite exhaustion selling, a higher level of demand restricted the range.
(closing middle or low of bar) 
...demand at the lower level has already exhausted all supply but has not yet begun to chase retreating supply towards higher levels or price. Evident when the next session opens at or above the closing price and does not penetrate lower.

p81
(ultra-wide spreads down, with exceptionally high volume)
...panic, high volume selling which penetrates demand creating the wide spread.
( usually closing on or near the highs of the day.) High levels of demand not only exhausted supply but then the demand was forced to chase retreating supply, resulting reversal of price direction to close back near the highs.

I think both instances can contain a selling climax,the second example probably easier to identify. The difference in range is due to where the day opened in relation to the price point where demand overwhelmed supply and the timing of the climax in relation to the close of one bar. An exhaustion is a psychological event, VSA attempts to give understanding to such complicated events, therefore a single rule may not suffice 

My personal experience with VSA is, not to become bogged down with the name tags as such, but to concentrate on understanding the evolving forces being applied by both supply and demand.

Hope this has helped with your question.
Cheers, M


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## pavilion103 (3 May 2011)

I've been reading "Master the Markets" a fair bit recently and want to clarify a couple of points. 

As a beginner most of what I have read has said buy on break of resistance, sell on break of support etc...
I am trading a simulator at the moment and the only time I've bought is on breaks of support/resistance levels.

I'm not sure when to enter in other situations. For example if there has been an up-trend and then there are 3 high volume, low spread bars which struggle to go higher, that would suggest distribution is taking place. If the following day (the fourth day), price falls on a high volume widish spread down bar, closing near the low, is that the type of bar I could enter on? (obviously a lot depends on the rest of the background action). Would this tend to be enough confirmation that selling pressure if occuring and the trend is likely to now go down?

Apologies for my ignorance. I am just really not sure if I should enter on the first sign of weakness or how much confirmation to seek. I know all situations are different.


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## tech/a (3 May 2011)

> I'm not sure when to enter in other situations. For example if there has been an up-trend and then there are 3 high volume, low spread bars which struggle to go higher, that would suggest distribution is taking place. If the following day (the fourth day), price falls on a high volume widish spread down bar, closing near the low, is that the type of bar I could enter on? (obviously a lot depends on the rest of the background action). Would this tend to be enough confirmation that selling pressure if occuring and the trend is likely to now go down?




So youve identified weakness with high volume low spread bars
Then you have it confirmed by a high volume wide spread bar that goes lower.

Your looking straight at "Background"
I think its pretty clear as to what you'd do!

Change your thinking from trying to buy stock which is going in the OPPOSITE direction to what you want---.
If your looking at trading* pull backs *you need.
(1) VERY low volume tight range DOWN BARS even a single bar.
(2) Pull back should be no more than 50%--38% better.
(3) Buy the higher volume UP bar
(4) Tight stop.


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## Mistagear (3 May 2011)

tech/a said:


> If your looking at trading* pull backs *you need.
> (1) VERY low volume tight range DOWN BARS even a single bar.
> (2) Pull back should be no more than 50%--38% better.
> (3) Buy the higher volume UP bar
> (4) Tight stop.




Assuming you have the low supply down bar, the pullback has been within the acceptable range and you are ready to enter....

Tech, are you suggesting to buy at the break above the downbar high ? or 
the close of the high volume up bar ? because you cant know before you are well into the up bar whether it is going to end as a high volume and/or end as an up bar ?
Also,
Often a reversal on high volume will end as a wide range bar by end of session. Does this present difficulty in placing a tight stop on the initial entry ?
Hope you dont mind sharing your thoughs, I struggle with this scenario every day and could benefit fom another traders experience.

Cheers, M


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## tech/a (3 May 2011)

There are a number of ways to enter.

(1) If the next bar (after the very low volume down bar) opens up then buy that bar and place a stop at 1 tick below the LVBar---this is very aggressive and would suit day traders watching a stock correcting
(2) The high of the higher volume bar.
(3) The break of a NEW high in the move.
(4) Many more---

Here is a chart which I remember trading a while ago.
I like confirmation so used (3) plan. I did take an aggressive pyramid second trade (1)
I always sell pivots and watch for possible re entries.

Click to expand.




If I take aggressive trades Ill often risk .25% but the very close stop gives me a good position size on less risk.


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## pavilion103 (5 May 2011)

Having read Master the Markets a couple of times recently I am overwhelmed with information about VSA. I've learnt a lot but and trying to focus on applying it in a practical sense. 

I know after a lot of experience it will be easier to identify patterns immediately, but right now I have no structure as to how to analyze a chart! 

Does anyone have advice as to how I can approach this from a base level (e.g 1. Draw trend lines 2. Look for accumulation/distribution) ?


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## tech/a (5 May 2011)

I think you have Amibroker?
Just concerntrate on a few setups.
Search for them and learn how to apply them.


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## pavilion103 (5 May 2011)

tech/a said:


> I think you have Amibroker?
> Just concerntrate on a few setups.
> Search for them and learn how to apply them.




Thanks mate. 
Yeh Amibroker.


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## village idiot (7 May 2011)

tech/a said:


> Bobby.
> 
> I'm going through my experience with Tradeguider VSA software here.
> 
> http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=4;t=000327




tech/a,  this link you posted 3 years ago is no longer valid. is the content still up on the web anywhere else? I would be interested to have a read.


thanks


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## tech/a (7 May 2011)

village idiot said:


> tech/a,  this link you posted 3 years ago is no longer valid. is the content still up on the web anywhere else? I would be interested to have a read.
> 
> 
> thanks




There is a fair bit over on The Chartist
You might find the original in the body of threads


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## village idiot (8 May 2011)

ok I found it , thanks. a lot to get through there. thanks for all your input, or should it be output,  on this subject.


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## pavilion103 (9 May 2011)

I'm trying to work out my exit strategy using VSA. Is it too early to exit a position if it doesn't behave the way I expected it to in the first couple of days. Eg if I enter on a break of resistance and then the next day it pulls back but on heavy volume and wide spread?


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## tech/a (9 May 2011)

pavilion103 said:


> I'm trying to work out my exit strategy using VSA. Is it too early to exit a position if it doesn't behave the way I expected it to in the first couple of days. Eg if I enter on a break of resistance and then the next day it pulls back but on heavy volume and wide spread?




I believe your talking about 2 different things here.
(1) an initial stop.
(2) an exit.

Your initial stop should be at a place where you can *clearly* see that your analysis is wrong. A single down day following a breakout may not be a true indication that your analysis is wrong!

Your exit can be any number of things depending on timeframe traded.
Your exit comes into play when your entry (initial stop) is no longer influencing the trade.

Both of these topics have books written on them----
Just test and test and test.


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## pavilion103 (9 May 2011)

Are there any books that you would recommend which are specific to this?

Thanks


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## tech/a (9 May 2011)

pavilion103 said:


> Are there any books that you would recommend which are specific to this?
> 
> Thanks




There are many. Nothing in particular stands out.

What you need is literature which shows specific application of analysis. So when browsing look for that.
Having said that I must admit that pretty well all I have seen is hypothetical.
Ive not seen anything I can remember which shows that applying analysis in a particulary way will give you a particular return---ie tested and proven.

There is plenty of buy setup stuff but nothing of proven methodology (Enter here/stop there/exit here) that I can clearly remember.
Advanced Get has 5 methods in its software all shown at length in the manual.
Tradeguider is all hypotheticals.(VSA).

Ive just found the title of my first book.
"Tested and Proven Practical Application of Technical Analysis"


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## pavilion103 (9 May 2011)

When does the book come out?


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## village idiot (16 May 2011)

the long green bar seventh from the end with the high volume; this is a buying climax bar right? rising volume culminating in a bar whose volume is third highest in last twelve months, ultrawide spread into new ground. it closes in top part of bar but not at the high (although one of the many definitions of a buying climax, on p77, requires it to close well off the highs?).   that bar is followed by 4 downbars of above average volume.  

this is hell bearish amirite?

but then today a bit of buying volume has come in at what could be a support line?

am i anywhere near on the right track here? would be grateful for feedback


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## tech/a (16 May 2011)

village idiot said:


> the long green bar seventh from the end with the high volume; this is a buying climax bar right? rising volume culminating in a bar whose volume is third highest in last twelve months, ultrawide spread into new ground. it closes in top part of bar but not at the high (although one of the many definitions of a buying climax, on p77, requires it to close well off the highs?).   that bar is followed by 4 downbars of above average volume.
> 
> this is hell bearish amirite?
> 
> ...




Your analysis is pretty right except perhaps for the last bar.
Cant be seen as buying volume---

I wouldnt call it hell bearish --just correcting.


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## village idiot (16 May 2011)

thanks tech. 

yes i see now today's bar cant be considered buying volume as it is technically a down bar (lower close) given that open is ignored in VSA. It does look a lot like an up bar though given that it rose steadily all day (from a gap down open) and finished in top third. 

I probably didnt mean 'hell bearish''; perhaps i meant 'this would be considered a bearish setup under VSA principles'. so as far as the scale of a correction, are we talking about the sort of correction that has already taken place over last 5 days or so , are are we talking about a bigger one we are only partially into, perhaps on the scale of the one a couple of months ago from 2650 down to around 2400?

i am not looking for a prediction here, just trying to get to grips with the sort of scale we should be applying this sort of analysis to

thanks


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