Volume Spread Analysis

[Bobby]

Comments or detail on this subject please.

 

[It's Snake Pliskin]

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

 

[Bobby]

Hi Bob,

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

Take care
Snake

Greeting Snake,

Thanks.

I think there maybe a book on it ?

Have fun
Bob.

 

[It's Snake Pliskin]

Greeting Snake,

Thanks.

I think there maybe a book on it ?

Have fun
Bob.

Bob,

I'll PM you.

 

[tech/a]

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

 

[theasxgorilla]

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?

 

[tech/a]

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

 

[Bobby]

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.

 

[pavilion103]

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?

 

[pavilion103]

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

 

[skyQuake]

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

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

 

[tech/a]

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

 

[Lone Wolf]

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.

 

[motorway]

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.

For example, the abnormal volume may last either one or several days; or
the abnormal volume may precede the recording of the extreme low point one or
more days. In other words, a selling climax may be completed in one day or be
spread over a few days, and volume may reach unusual proportions on the day
the low point is made or some days ahead of the final low.

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
prices the stocks they sold higher up, or wish to prevent further demoralization by
giving the market support temporarily; and (3) short covering by the bears who
sense a turn.


Stocks thus become either temporarily or more lastingly lodged in strong
hands. An abnormal increase in volume is one of the characteristic symptoms of a
selling climax, since supply and demand must both expand sharply under these
conditions. But the supply is now of poor, and the demand of good quality; and
since the force of supply now will have been exhausted, a technical rally ensues.

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
follows a selling climax.

This, and other selling on the rebound, may increase
supply sufficiently to drive prices through the lows of the climax day and bring
about a new decline, that is, a resumption of liquidation.

On the other hand, should a secondary reaction occur after the technical
rally above referred to, and prices hold around or above the climax lows while
volume at the same time shrinks appreciably, we have an indication that liquidation
was completed and, support is again coming into the market. Therefore, the
market's behavior on these secondary reactions is usually indicative of the next
important move.

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

 

[Mistagear]

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.

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

 

[pavilion103]

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.

 

[tech/a]

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.

 

[Mistagear]

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

 

[tech/a]

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.

 

[pavilion103]

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) ?