VSA - only useful for the bigger boys?

[Pronto]

Someone once said that only half of his huge advertising budget ever worked. The problem was that he never knew which half.

I suspect that trading methods, including VSA, are similar. They are valid in some circumstances, but not in others. The problem is in knowing when.

The difficulty comes when they are seen by their devotees as something aproaching infallibility all of the time (c.f. Dow, Gann, Elliott as well as the hundreds of individual indicators that are slavishly followed).

My principal objection to VSA as espoused by TradeGuider is the paranoia which apparently underpins its validity as a system. These are the claims of consistent and continuing manipulation of the market in the company's marketing efforts, which are reinforced by Gavin's screaming e-mails and in his presentations.

Market manipulation is a reality but I very much doubt that it is as all-pervasive as TradeGuider would have us believe.

The degree of manipulation on which TradeGuider seems to be premised may have had some validity in the days of Wyckoff or even for Tom Williams when he was younger, and to some extent it may still be the case today in the US. However, to my mind, the villain is less the Smart Money (whatever that means) than the actions of market makers.

However, the ASX is order-driven (rather than quote-driven as the US exchanges are) and does not use market makers in its equities market. Also, the actions in the ASX of any Smart Money (however defined) does not mean that their influence is necessarily detectable by VSA in the major indices on a day by day basis.

I like to keep an eye on volume and I find that a ten period SMA and a 20 period Bollinger Band (the 2 standard deviations upper band) applied to volume (as Nick Radge suggests) is a useful guide as to when a particular day's trading can be associated with higher than average or exceptionally high volume. With some simple knowlege of VSA interpretation, I find that this can occasionally be helpful. This is more acceptable to me than paying c. $2000 for TradeGuider (or listening to Gavin again ) .

 

[It's Snake Pliskin]

Someone once said that only half of his huge advertising budget ever worked. The problem was that he never knew which half.

I suspect that trading methods, including VSA, are similar. They are valid in some circumstances, but not in others. The problem is in knowing when.

The difficulty comes when they are seen by their devotees as something aproaching infallibility all of the time (c.f. Dow, Gann, Elliott as well as the hundreds of individual indicators that are slavishly followed).

My principal objection to VSA as espoused by TradeGuider is the paranoia which apparently underpins its validity as a system. These are the claims of consistent and continuing manipulation of the market in the company's marketing efforts, which are reinforced by Gavin's screaming e-mails and in his presentations.

Market manipulation is a reality but I very much doubt that it is as all-pervasive as TradeGuider would have us believe.

The degree of manipulation on which TradeGuider seems to be premised may have had some validity in the days of Wyckoff or even for Tom Williams when he was younger, and to some extent it may still be the case today in the US. However, to my mind, the villain is less the Smart Money (whatever that means) than the actions of market makers.

However, the ASX is order-driven (rather than quote-driven as the US exchanges are) and does not use market makers in its equities market. Also, the actions in the ASX of any Smart Money (however defined) does not mean that their influence is necessarily detectable by VSA in the major indices on a day by day basis.

I like to keep an eye on volume and I find that a ten period SMA and a 20 period Bollinger Band (the 2 standard deviations upper band) applied to volume (as Nick Radge suggests) is a useful guide as to when a particular day's trading can be associated with higher than average or exceptionally high volume. With some simple knowlege of VSA interpretation, I find that this can occasionally be helpful. This is more acceptable to me than paying c. $2000 for TradeGuider (or listening to Gavin again ) .

Pronto,

An interesting post.

Simple VSA knowledge and less noise analysis suits me.

 

[tcoates]

The concepts (stopping volume, weakness, etc.) of VSA can be programmed into other software like Metastock (?) and Amibroker so you don't necessarily have to pay anything. see

http://www.thechartist.com.au/forum/ubbthreads.php?ubb=showflat&Number=80115#Post80115

Tim

 

[tech/a]

The concepts (stopping volume, weakness, etc.) of VSA can be programmed into other software like Metastock (?) and Amibroker so you don't necessarily have to pay anything. see

http://www.thechartist.com.au/forum/ubbthreads.php?ubb=showflat&Number=80115#Post80115

Tim

Great job Tim.

True but application is everything.
You gain access to many webinars and people who are very conversant with VSA.
You will however lose a great deal on understanding without the software.
I picked up the cost of the software on the first couple of trades.

 

[tcoates]

Tech,

Agree with you to point...

1. you don't have to have the software in order to understand VSA. But having the software would make it easier.

2. whether you have the software or not, you can still access VSA forums (tradeguider) and read the threads relate to VSA.

3. there is also the "master the markets" book.

You need to understand what the concepts mean before tackling the software - relying on software without understanding is a recipe for disaster. (The last point is more generally related to software, for stocks or otherwise... )

Tim

 

[tech/a]

Tech,

Agree with you to point...

1. you don't have to have the software in order to understand VSA. But having the software would make it easier.

2. whether you have the software or not, you can still access VSA forums (tradeguider) and read the threads relate to VSA.

3. there is also the "master the markets" book.

You need to understand what the concepts mean before tackling the software - relying on software without understanding is a recipe for disaster. (The last point is more generally related to software, for stocks or otherwise... )

Tim

I guess having the software both R/T and EOD for 2 yrs has made it easier for me to apply VSA to other software.Sure there are short comings in T/G and I as you know intend to use other software to enhance certain aspects not available in T/G.

I could build my home or buy a built one.
The first option will take longer and possibly wont have the finish of the last one (If of course I wasnt a builder).

 

[white_goodman]

i have the EOD version and only trade the ASX200 because there needs to be a fair amount of liquidity and movement in the price otherwise it doesnt really work... and similar to tech/a ive paid for the software within my first week of trading and i have very little capital at my disposal, of course i may have had some luck...

 

[It's Snake Pliskin]

Great job Tim.

True but application is everything.
You gain access to many webinars and people who are very conversant with VSA.
You will however lose a great deal on understanding without the software.
I picked up the cost of the software on the first couple of trades.

Tech,

Do you find yourself focussing on more noise looking for signs?

 

[tech/a]

No.
They are there in all timeframes.
However crossing timeframes will kill you with noise.
Its got me a few times.

 

[Timmy]

... and similar to tech/a ive paid for the software within my first week of trading and i have very little capital at my disposal, of course i may have had some luck...

Sounds like you are making your own luck White, nicely done.

 

[white_goodman]

Sounds like you are making your own luck White, nicely done.

thanks but im running with a 70% success rate atm, ive been lucky in my first 2 weeks with cfd's, i know itll come down to around 50ish soon, so not counting any chickens before their hatched...

but yeh im really liking it atm, i got in on Macquarie yesterday, i think my analysis is good to go long, and i only focus on highly liquid stocks cos they give a fair indication of perceived 'smart money' with the volume information and activity is more reliable so to speak..

gapped down out of trading range on increased volume, then i think it found stopping volume, then theres some strong volume/effort to get back up in the trading range...

i probably shouldnt have got back in till it goes through the resistance(old support) but i thought it was worth a go and im only playing around with peanuts... might look to get out if the volume and weakness appears before breaking the resistance

heres the chart, hope my newbie analysis is ok or remotely logical..

 

[MRC & Co]

Yeh, definately would have waited white. That is an entire resistance band up above and that high volume shows some sellers are still in the market. Could well form a pattern (double bottom perhaps), with the second low forming on decreasing volume. That would be a decent base to move on up from, but a bit too risky ATM with resistance so close and quite a large stop ($5?).

Cheers

 

[white_goodman]

Yeh, definately would have waited white. That is an entire resistance band up above and that high volume shows some sellers are still in the market. Could well form a pattern (double bottom perhaps), with the second low forming on decreasing volume. That would be a decent base to move on up from, but a bit too risky ATM with resistance so close and quite a large stop ($5?).

Cheers

yeh ill get out if it starts to show a lack of effort approaching the old trading range...

i have my stop loss originally around $41.20, was indicated on the trend cluster thing in tradeguider, but yeh i move it up to reduce margin so its up from that now.. all part of the learning process

 

[MRC & Co]

Yeh, great start for you!

Volume moves markets, price tells the story. IMHO, by far the critical two things to learn and you learning them off the bat, a fantastic start!

Yeh, on closer inspection, the stop is not overly large. The thing is, if you move it up, any retest of that low will take you out, and odds are, that low will be retested but the volume shows it could well hold.

 

[white_goodman]

Yeh, great start for you!

Volume moves markets, price tells the story. IMHO, by far the critical two things to learn and you learning them off the bat, a fantastic start!

Yeh, on closer inspection, the stop is not overly large. The thing is, if you move it up, any retest of that low will take you out, and odds are, that low will be retested but the volume shows it could well hold.

yeh i know but i try and move up my GSL to breakeven as soon as possible, but i see what your saying, ive been stopped out on tests recently..

maby just change my stop only when it becomes exactly the breakeven, so the trend is sorta confirmed.. ill keep an eye out tomorrow, i think it will give quite a fair indication of whether its gonna retest or breakthrough resistance, my uneducated guess reckons itll be an upbar on low volume which will let me get out, but only time will tell...

 

[white_goodman]

speaking of VSA theres a chart that im having difficulty reading atm, its the Stockland one with lower highs and higher lows forming a pincer...

i believe it will go down but you could sorta argue either way perhaps...
what would you more experienced VSA people read when you saw this chart?

 

[MRC & Co]

Larger trend looks down (haven't looked further back?), volume fading off as the triangle forms, looks more likely down. I wouldn't take a long set-up like that personally.

 

[Kauri]

speaking of VSA theres a chart that im having difficulty reading atm, its the Stockland one with lower highs and higher lows forming a pincer...

i believe it will go down but you could sorta argue either way perhaps...
what would you more experienced VSA people read when you saw this chart?

To rasky for me... but hey I is wrong more oft than i'm right.. so take dis chart with a pinch etc....

Cheers
..............Kauri

 

[nomore4s]

I think it could end up in a trading range for a while as it looks like it will need a lot of effort to go either up through $5.80 or down through $4.00. I have marked the chart with Wyckoff terms but the ideas are the same as VSA.

You can see where I have marked the chart with PS (Preliminary support) and SC (Selling climax) that huge volume (stopping volume) has come in and stopped the descent, we have then seen a very strong AR (Automatic rally) indicating the selling (supply) at those levels has run out of steam.

Some resistance is now appearing at the $5.40 - $5.80 area (around the PS area). Look at the last bar - high volume but a tight range and a weak close.

I would now like to see another test of the $4.00 area on reduced volume compared to the SC to confirm the lack of supply at those areas. But we also may not get that low again as there apeears to be some support at $4.40 - $4.60 area now (this indicates some strength in the stock).

This stock could well be building a base but it looks like it needs a bit more work yet - one to watch perhaps.
You could trade the swings perhaps but for me it doesn't really offer many opportunities atm.

 

[MRC & Co]

Yes, the stopping volume is the best sign here. Could well be basing and the MQG chart you posted above may well trace out in a similar form of pattern.

If the broader markets turn down though, that stopping volume will evaporate very quickly. A low volume retest would be best to see here IMO, because there is not much buying demand ATM.