I’ve recently adopted VSA as my primary method of trading and it looks like I’ll be sticking with it. Let me tell you beforehand that I don’t have the method down 100% but I’ve got a good grasp and I wanted to open up discussions with other people interested in VSA as well to learn together.
I’ll post up some charts and try to analyze them in the morning… need me some zzzzzzz’s…
But before I go… heres something from wiki to wet your beak if you don’t know of VSA
[B]Volume Spread Analysis (VSA)[/B] is a form of technical analysis which attempts to look into price action in relation to volume.
VSA is the study of the market forces of supply and demand and the manipulation of those forces through the psychology of crowd behavior. VSA is the result of Tom Williams experience and discoveries applied to Richard Wyckoff’s Methods. Richard Wyckoff’s Methods are based on his extensive experience and studies which rely heavily on Jesse Livermore’s (The Reminiscences of A Stock Operator) discoveries.
These three traders came to understand the underlying mechanics of the markets and developed methods to trade them and, later, to teach others how to trade effectively.
Jesse Livermore discovered how the markets are manipulated and developed methods to profit from these manipulations. Richard Wyckoff codified Livermore’s discoveries and methods and applied them to chart reading. Tom Williams added VSA to Wyckoff’s work to reveal the specific tactics used to manipulate crowd behavior and expose the footprints of the Smart Money manipulators.
In the final analysis, VSA uses three components on the chart to determine the balance of supply and demand as well as the probable near term direction of the market. These components are the amount of volume affecting the price, the price spread or range of the price (not the bid/ask spread), and where price closes. VSA analyses volume and what the price did as a result and relative to the preceding bars on a chart.
But there is much more involved in how and why price moves. There are periods of consolidation when supply and demand in a market is in relative equilibrium and trending periods when the market is in a phase of accumulation or distribution and the forces of supply and demand are out of balance. It is during these phases of accumulation or distribution that the markets are purposefully manipulated.
Everyone who really wants to learn FX needs to add this to their repertoire unless they like pigeon-holed ideas and prefer things to be automated or mechanical.
The only thing that stops me looking at this method closer are the very major differences in volume between different broker platforms. Its not even true volume really, but maybe its a reasonable proxy.
Advocates of VSA for forex usually claim that something like an e-signal feed aggragated from multiple sources is probably the way to go. Out of interest, what data feed are you using ?
ps. excuse me if you have trouble understanding me sometimes as I sometimes have trouble writing down things that sound much better in my head LOL
When discussing volume… you want to think of it as in relative volume, not just what happened on the last bar. Just like you would read the candlesticks leading up to the one you’re looking at right now to get a feel for going on, you would do the same with volume. Its all about background information. Looks just take a simple look at yesterdays action on the e/u (30 min chart) and decipher what was going on and look at possible entry and exit points.
After the first X, theres an indecesion upbar (close higher than the previous close) with vol higher than the previous bar and small range (difference between high and low of bar)… This might indicate some strength to the upside. On the 2nd X, theres a downthrust with an increase in vol. The idea here is to wait for a test of the low with lower volume but the next bar has slightly more vol than the previous bar and its an upbar. Its showing strength to the upside and I would’ve got in here. My exit point would’ve been the 3rd X which is a downbar with lower vol… this is indicating weakness to the upside. This would’ve been a conservative exit for me. The 4th X was developing into a downthrust on the 4hr. Vol is nearly the same as the wide spread move down. Again, we have a similar situation with a test of the low with about the same amount of vol and is an up bar. If the vol was much higher and the range was small, I would be real cautious here as price might start to turn around. 5th X is exit after downbar and decreasing overall volume.
Luckily, I had IBFX before I got into VSA and I’ve read that their get their feed from multiple banks as oppose to just through the broker. But even still, I wouldn’t foresee a problem using VSA if your broker is a popular one.
At the first X, you see demand coming into the picture, pushing the close back near the middle with an increase in volume. So now we wait and see how the next bar develops. Its an downbar with volume lower than the previous bar. It had a small downthrust but it was contained in the previous bar making it an IB (possible reversal). There was no test for supply so you could take this entry or wait for a low volume test of the upthrust low. Volume was slightly lower when it made the test and this would of been an excellent price to go long on (this is about timing, I don’t wait for the close and if I do, I wouldn’t go long unless it was a small range). Volume decreased on the next bar and the following bar was about the same range with an increase in volume indicating weakness. My exit would’ve been the break of the previous bar low. (excuse the 3rd red X)
ps. sorry about the would’ve beens, I wasn’t home to trade these yesterday.
I can see you’re pretty jazzed about this stuff & it obviously floats your boat judging by your enthusiasm, which is cool. But I hardly think I’ll drop through the failure trapdoor if I choose not to accept & adopt VSA into my trading life.
As simbafx touched on, volume in relation to the spot market is patchy at best. In fact if you care to dig a bit deeper into what you’re actually receiving on your volume ticker, you’d appreciate how much of a non-event it really is.
In order to get anything remotely worthwhile out of this VSA stuff you’re going to have to slide across to the currency futures market & lock into that food line.
Yea, I see most people involved in VSA are already in stocks, futures, etc. They especially like basket trades. I’d be lying if I said I don’t see myself getting involved into the same things a couple years down the road.
You’re right about feeds being patchy and an esignal is probably the best way to go but I like that my broker already has a feed from multiple sources so I am able to devour that action and I think using another signal would just distract me at this point in my trading.
This method has blended well into FX and it truly focuses on the basics of price action.
(image is missing first X - the first huge bullish move after the separator)
Its really a thing of beauty sometimes. If I could’ve managed this trade, 120+ could’ve easily been robbed from the FX pedestrians lol.
There was a widespread bull candle that went up followed by a slow move down that happened on the 3rd here. Price pretty much copied the same exact move at this point. Paitence is key here though. Wait for the result of the next candle. Lower volume and its a downbar, enter short. Price never made a break of its previous bars high until the 2nd X and that would’ve been my first exit. I don’t see any reason for me to get in on the 2nd X. Volume is pretty much stagnate here. Even though price does move up here nicely, it was probably just a markup of price to test the supply ao that move down. 3rd X is a dragonfly doji. I might of traded this just for the fact is a dragonfly and try to grab a few pips up to the resistance line.
At the 4th X, volume slightly increases as it approaches the resistance line (but doesn’t breakthrough indicating a long) now turned support. The follow candle is a low volume test of the that zone. Enter long here. Weakness was indicated with the stopping volume (upthrust and dramatic increase in volume) exit at the break of prices previous bar low.
Remember, paitence is key. Let the setups come to you.
I know what he saying about this issue. Since theres no centralized exchange… blah blah blah… My broker has [B]actual[/B] volume levels displayed on their end… blah blah blah and the only way to get over this is to get into things like futures because most fx volume is traded between banks that the broker never sees. Nonetheless, the volume that is displayed on my end is quite trade-able.
Sorry for my absence everyone. I’ve been quite busy these last few weeks. Hopefully now, I can start keeping this thread up to date. IBFX has an exceptional feed when it comes to VSA so if you have another broker, you can atleast use their demo platform to get your setups from or use something like esignal. Trust me, VSA is worthwhile in FX!
I grabbed this trade as I usually only trade the NY-London overlap. Starting Monday, I’ll post 'em as I trade 'em.
Background information. The friday before, price went up with increasing volume with no fight from the bears really. Volume decreased as price went down and then had an increase when demand started coming in. Soon after, price went sideways and had no clear direction (first X). This could’ve been just “end of the week” movements or the buyers were absorbing all the selling. When the market opened, price went up about 80 pips before turning around.
The key here was to wait till price returned to that support zone and let price/vsa tell you what to do. A high volume/low spread bar came into play followed by a nice price thrust into the previous buying zone. An aggressive entry would of been the close of the 2nd X. I took the conservative approach and took the close of the 3rd X. I wanted to see the momentum build first. I exited when price broke the low of the 4th X gaining me 20 pip and still allowing for a 1:2 ratio. (Conservative approaches usually allow me a 10 pip stop)
Pretty slow monday. Didn’t see anything I liked. Tuesday will pick up things. London had a nice move though on e/j which gave a very clear signal. The other yen pairs didn’t scream anything at all but followed along with the same movements. You may notice I wait for extremes to happen (price thrust) before getting interested. I like to see a change of direction at the opens of London and NY.
Again, you can see alot of buying power on the Friday before. Pretty sure this will carry over into Monday. And it did. Price was returning towards its previous buying zone with increasing volume and price refusing to go down. Aggressive entry at the close of 1st X. Conservative at the close of the next bar (15-20 pip stop based on the volatility). Price never broke the low of its previous bar by a couple pips until 40 pips later. VSA really is a “stupid simple” system. Overall, YOU CAN’T LOSE!
We went from a slow monday to a completely unpredictable tuesday. I was hesitant to jump in anywhere in fear of many stop outs before price took off in my direction. But once again, London gave out some good signals, especially on the a/u. Waiting for price to turn around like this (in confluence with background info) has allowed me to keep a great win-loss ratio on the trades I do take. If it ain’t broke, don’t fix it.
A nice price thrust off the 200MA was gold enough. I’ve been in buy mode since it broke .9470 area. Wait for price to break its previous low and you have a good 40+ pips.
