I place a small dot on all bars that have volume less than the previous two bars. I also place an diamond on bars with narrow ranges and increased volume.
Trade I took today using VSA techniques. Notice when price reached the weekly pivot that we had a wider than average spread and a LOT of volume and then price closed right near the highs of that bar. About 10 seconds before that 5min bar closed I went long at 148 and was out for a 10 point gain (my personal strategy right now...it ended up going for much more I know.
The first green rectangle is "Strength coming in" signal. The bar has very wide spread, ultra high volume, it closed in the middle part of the bar and made new low. Basicaly, I think, the most nervous sellers started fixing their profits.
The next red triangle was identified as "No Demand" signal. The bar has narrow spread and low volume. It signals the end of retracement. You may disregard that signal in ranging market as not really important.
The next green rectangle is called "Climactic action". You see it has ultra wide spread and ultra high volume. In fact it's the widest and highest by volume bar of the day. When you see a bar like this you should think if it's a selling or stopping volume. You may anticipate it knowing about strong support at 12190, or waiting for the confirmation which happened on the next bar. In Drummond Geometry a bar like that is called an exhaust.
The second red triangle is a "No Demand" bar again.
Next signal is missed here but you already should see that if you combine two bars in 10 min bar it will be the same signal as the first one.
And the last red rectangle is Upthrust. The volume is not so high, spread is wide, high is higher than previous several bars and the close is in low part of the bar. They describe it as stop hunting designed by market makers to mislead traders.
So...as you were saying...in the down trend with a spike in volume followed by some demand but nothing trend changing would be shown as smaller, narrow range bars. Such as those circled here. This of course is remaining in tact with the overall trend, just letting you know this where the good bounce is to get in.
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One note on stopping volume. Tom Williams, the father of VSA, would enter on the close of that bar. TG, however would not place a sign of strength until the next bar closes and is an up close. (2 bar pattern).
Getting in at the very bottom or top is not the most important thing. Here the best entry is after the test. Why? Because we have seen the strength come in on the stopping volume. Then we see a No Supply indication followed by a test for supply.
The Smart Money wants to make sure that there are no sellers out there to impede the mark up phase. That is why they test the market. Of course, the mark aggressive you are as a trader the earlier you would enter. But you should be looking for the bar after the volume spike
(stopping volume) to confirm before entry. Reply:
The No Buying pressure is a bar that closes up from the previous bar and closes on its high but has volume less than the previous two bars (and ideally volume less than average). Although price is moving up, the Smart Money is not involved in the push. Remember, 85% of the volume histogram represents Professional Money. So no buying pressure is coming form the pros.
The next bar is down. But here too we see a lack of Smart Money activity. Thus when we say, No Supply, we mean no supply (selling) from the Professional Money.
What is happening is this: the market is moving up, but the Pros are not yet fully interested. Why? After such a move down they want to make sure there are no more sellers left in the way of an up move. As they wait to see what happens the market moves up but then stops. The next bar is down on even less volume. The Pros did not step in and start selling (no supply).
Just to be sure there are no sellers, the Smart Money now Tests the market on the next bar. They take it even lower and find no sellers (volume is low) and thus take price back up to close on or near the high.
Once we see the Stopping Volume we should begin to look for a No Supply or Test bar. When we see the No Demand, we do not automatically look to go short. So our bias isn't changed. We see strength in the form of the Stopping volume and are looking to go long. The No Demand helps set up the subsequent No Supply and test formation.
Perfect today. Note the HUGE action happening here in the circled bar right at VAH (VAH refers to the term value high. This is a market profile term used to describe the upper range pivot of the value area.)...you can also see a diverging delta, showing selling waning, and then BAM!!! You could also notice the increasing volume coming into that VAH. While this may lead some to think that we will go lower...VSA makes you wait for confirmation
Good thing...that abnormally large volume spike with closing price in the middle of the bar is showing you right there that professional activity has come into the market.
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Nice observations.
A wide spread down bar (close lower then previous bar) that has ultra high volume and closes in the middle of its range is a telltale sign of a transfer of ownership.
The fact that this is happening at the VAH is of no real surprise either. These areas tend to be where Professional Money will show itself. That is why Gavin talked about the importance of (1) volume (2) support/resistance.
PAYS ATTENTION TO PRICE at these areas. That is, going long as price trades down to these levels makes little sense no matter how "proven" the support area may be. Paying closer attention to what price is doing at this time, however, does make sense.
Support/Resistance areas can not always hold. Otherwise there would be no such thing as a trend. Hence what we really want is to force the Professional Money to show itself in these "expected" areas. Their intentions-to go thru or to respect the area(s) can be seen on the chart.
Excellent thread, very interesting. I recently read Tom Williams' book (the older edition not master the markets).
I was wondering what you thought about the stock indexes. Looking at the dow I would think that there is background strength, but still a lot of supply. Now bear with me, the concepts of
VSA are new to me so this might be totally off, but here is what I see:
1st arrow) We had that down day on a wide spread and high volume the day before. This bar is an up bar on even higher volume. Does this indicate 'hidden' buying on the wide spread down day?
2nd arrow) We make new lows but close near the highs. Is this a stop bar or a test bar? The volume is still high so if it is a test bar does this indicate there is still supply?
3rd arrow and 4rth arrows) These bars look like no demand which would make sense if professionals want more stock at lower prices.
5th arrow) Is this a stop bar, test bar, or down thrust bar? either way I take it to be bullish since we closed on the highs (and found support @ 200 ema). Since we took out the lows from the previous move down it looks like a giant stop run on the daily time frame.
I'm probably off on my analysis, but it looks like all the market needs is a shakeout move and then it should rally. I would be very interested in your guys comments.
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I wanted to redress this nice post. I have taken another screen shot that is more up to date. Admittedly, this is after the fact as well as hard right edge analysis.
First, Todd Kreuger still sees weakness in the market and is calling for prices to fall this week. Note that the last black double arrow points to Fridays action. This bar is a NO DEMAND bar: it closes up from previous bar, closes in its middle and has volume less than the previous two bars.
I will begin at the beginning.
The first thing we see is a wide spread down bar on ultra high volume. This bar is also a WRB. WRB analysis tells us that changes/shifts in supply/demand occur in bars such as these. From a VSA perspective, we have a large range bar that closes down from the previous bar, but closes off its low with ultra high volume. THERE MUST BE DEMAND (BUYING) IN THIS BAR. If this bar was weak, then the close should be on the low.
The next bar is key. This bar closes up. Truly if the previous bar was selling, then this bar should NOT be up. However, we need to take a look at this up bar. Note that the volume is even higher than the previous bar, but the range is narrow. Something is keeping the range down: Supply (Selling Pressure).
The next bar is a High Volume Test. It closes on or near its high, makes a lower low and closes below the previous bar. Again the volume here is high for a test. Which is why the next bar is down and what we actually have is a FAILED TEST.
Now jump to the next bar with the double arrow. This bar closes lower than the previous bar, closes on or near its lows and has volume less than the previous two bars. THIS IS NO SUPPLY.
We do indeed move up a bit from this point. Price moves up and then comes back down. At this point, our secondary method (Japanese Candlestick patterns) is traversing into a valid bullish white hammer pattern.
Note the Hammer. THIS IS ANOTHER TEST. The bar makes a lower low, closes on or near its high and closes up with high volume. If the volume was ultra high, we might call this a SHAKE OUT and see strength, but as a high volume test we see weakness. The Professional Money is testing for sellers and they are finding some. In other words, there is supply
underneath this market. Still, price moves up.
We do expect a move back into the WRB support/resistance zone. The reason is beyond the scope of this thread.
Which brings up back to the NO DEMAND sign on Friday. If you use the WRB's as profit target signals there was two so far. It may be time to move the stop just below the last WRB.
ere is an interesting chart from today’s session. Notice new lows with lower volume. Hopefully some of you YM traders were able to capture the reversal movement.
First we see a dark WRB followed by a GAP in price. Note the first candle with a double arrow. Notice that the volume is ultra high and the bar closes lower than the previous bar and off of its low. VSA teaches that this is a bar that may have buying within it. Now the next bar is key. It turns out to be a WRB, but the fact that the bar is up means the prior bar MUST of had some buying contained within it.
Now we move to the white WRB itself. Note that this bar creates a zone or range where we get a change in the supply/demand dynamic. We also know that the market does not like wide spread up bars on ultra high volume because of the possibility of hidden selling. In this case, however, the volume actually fell from the previous bar and is not ultra high.
We move to the next candle with a double arrow below. This is a doji that closes equal to the previous bar and in the upper portion of its range. Volume on this bar is Ultra high. There is SUPPLY in the market at this stage. Price moves down from here.
Next candle, closes in the upper portion of its range and higher than its open. Volume again is extreme. Here we have Demand showing itself. In other words, Demand is swamping Supply on this bar. SOMETHING HAS CHANGED. Notice that the next bar closes in its middle, has an equal close and volume drops off.
The Last bar closes on its high on volume that is less than the previous two bars. Although it does not make a lower low, this is a 'test' bar. The Smart Money is testing for supply and finds none. Now price is poised to go up and fill that gap.
Nice Bullish White Hammer pattern.
Note that the white hammer line is inside the range of the Ultra Wide Spread Ultra High Volume candle.
When we take a look at the WRB, we see a down candle that has an ultra wide spread and closes on its low. There would appear to be heavy selling pressure in this bar. BUT THE NEXT BAR IS UP. If that bar was true selling, then the next bar would not be up. In fact, if one looks at what price did after that bar it moved up. Clearly, the Professional demand created an upward drift in price. Simply, that WRB must of been a shift/change in the Supply/Demand dynamics of the market.
Now note the large dark Candle just prior to the shaded area. This candle closes on its low , closes lower than the previous bar and has volume less than the previous two bars. This is No Selling pressure. The close on the low fools the retail trader into seeing weakness. The lack of volume, however, is the real clue.
Price does move down a bit and create the bullish hammer pattern. Note that the hammer line itself is a VSA shakeout/test bar.
This is the "ideal" set-up. We see strength come in using our primary methods (VSA and WRB) and then we get a buy signal via our secondary method (Japanese candlestick patterns).
First, let's start at the left side. The first bar with the double arrow points to a bar where SUPPLY entered the market. The bar is wide, closes up from the previous bar, closes near the low of its range, and has ultra high volume.
If this bar was buying, then why did it close near its low? Many people will see up volume and up close and think demand. VSA, however, tells us that Weakness comes in on strength and strength comes in on weakness.
Next skip to the next double arrow. Here we have an UP THRUST. This bar makes a higher high, closes higher than the previous bar, closes in the middle of its range and has high volume. The Professional Money is trying to get traders to go Long, when the next likely direction is down. They are trying to trick the retail trader into a bad position. So an UP THRUST is a sign of weakness.
Now we come to the bar in question. We have a narrow range bar that closes up from the previous bar, closes in the middle of its range and has volume less than the previous two bars. YES, THIS IS NO DEMAND. If the Smart Money was interested in higher prices, then the volume should not be so small. The narrow range also tells us that the Smart Money is not interested in higher prices. They keep the range narrow because they know the market is weak. The retail trader thinks he is getting a good fill, and then the floor drops out... The last two arrows point to Stopping Volume/climatic action. Wide spread bar with Ultra High volume that closes in the upper portion of it range and lower than the previous day. BUT THE NEXT BAR IS UP. If all that volume represented selling, then the next bar could not be down. Moreover, if all that volume was selling, then the close should be on the low of the bar, not in the upper portion.
On an aside, without seeing the open of the bars, It looks like we have a valid white hammer pattern setting up there. Or at least a Long Shadow that we need to take a closer look at. WRB analysis also tells us about the change/shift in supply that is happening at this key bar.
Chart Examples Part 2
The first thing to note is the wide spread ultra high volume bar. You labeled it stopping volume. I think it is either stopping volume or a volume climax. More important than the name, however, is the fact that a change in the supply/demand dynamic happened on that bar. The bar is wide with ultra high volume, closed lower than the previous bar, and closed near the high of its range. CLEARLY THERE WAS BUYING (DEMAND) ON THIS BAR. This created a gap which was filled.
I veer off the VSA path a bit to mention that this is a Wide Range Body. Note where the open is (not looked at in VSA, but so telling). Ironically, I think this is an advanced VSA concept despite that they do not look at the open. In other words, if they did look at it, they would logically come to the conclusion WRB analysis comes to. Not to get too far into this, but what I like to see is a set-up (entry signal) happen within the range of the body or the total range of the bar of this ultra wide spread bar. I believe Todd, and Tom would agree with the total range aspect and thus it is more advanced VSA, and not talked about in public forums (webinars) by Todd.
At any rate, we then get a No Supply bar. The bar closes near its low, has a narrow range as compared to the previous bar, closes lower than the previous bar and has volume less than the previous two bars.
You are correct about the test. That is indeed a test of supply that closes in the middle of its range, makes a lower low than previous bar, closes lower than the previous bar. Volume is