I have now received Anna’s book… I had a quick read of the introduction, which covers the history of Volume Price Analysis, and I will wait until the weekend to start reading the rest, slowly and attentively… I feel like I am on the cusp of discovering something that will change my trading, or at least my thinking around trading, in the near future… It is exciting but also frightening to think that what I have been doing all along, profitable as it may have been, may be based on superficial and, potentially, flawed thinking… I will report back in due course… Cheers.
I have been watching her vid’s. I use VSA in my analysis and based on her vids I have learned quite a bit. I too am ordering her book.
Well, I am at page forty (40) of Coulling’s book and she is very clear… There is no gimmick, no fancy colouring: a no-nonsense
introduction to VPA (Volume Price Analysis)…
I also like the historical background, which has led me to one of Emeraldorc’s oft-quoted traders, namely Jesse Livermore…
I found the book ‘Reminiscences of a Stock Operator’ freely online, here: http://astrocycle.net/PDF/Livermore.pdf …
The work was written in 1923 by Edwin Lefèvre, and it is essentially a biography of Jesse Livermore, which makes it
a compelling read…
Enjoy!
I am on page 70 of Lefevre’s book, where Livermore is making it big…
Earlier in the book was a classic quote:
“The tyro [=beginner] knows nothing, and everybody, including himself,
knows it. But the next, or second, grade thinks he knows a great
deal and makes others feel that way too. He is the experienced
sucker, who has studied not the market itself but a few remarks
about the market made by a still higher grade of suckers. The
second-grade sucker knows how to keep from losing his money in
some of the ways that get the raw beginner. It is this
semisucker rather than the 100 per cent article who is the real
all-the-year-round support of the commission houses. He lasts
about three and a half years on an average, as compared with a
single season of from three to thirty weeks, which is the usual
Wall Street life of a first offender. It is naturally the
semisucker who is always quoting the famous trading aphorisms
and the various rules of the game. He knows all the don’ts that
ever fell from the oracular lips of the old stagers excepting
the principal one, which is: Don’t be a sucker!”
As per Coulling’s book, I am now on Chaper 5, and I am absorbing every word…
Went onto the FXCM trading station and turned on the Tick Volume for the first time on my charts…
A new world has opened to me…
Here is another quote from Livermore… more than one hundred years old, but one which speaks to all traders, each one of us:
"I studied the situation in 1906 and I thought that the
money outlook was particularly serious. Much actual wealth the
world over had been destroyed. Everybody must sooner or later
feel the pinch, and therefore nobody would be in position to
help anybody. It would not be the kind of hard times that comes
from the swapping of a house worth ten thousand dollars for a
carload of racehorses worth eight thousand dollars. It was the
complete destruction of the house by fire and of most of the
horses by a railroad wreck. It was good hard cash that went up
in cannon smoke in the Boer War, and the millions spent for
feeding nonproducing soldiery in South Africa meant no help from
British investors as in the past. Also, the earthquake and the
fire in San Francisco and other disasters touched everybody –
manufacturers, farmers, merchants, labourers and millionaires.
The railroads must suffer greatly. I figured that nothing could
stave off one peach of a smash. Such being the case there was
but one thing to do sell stocks!
I told you I had already observed that my initial
transaction, after I made up my mind which way I was going to
trade, was apt to show me a profit. And now when I decided to
sell I plunged. Since we undoubtedly were entering upon a
genuine bear market I was sure I should make the biggest killing
of my career.
The market went off. Then it came back. It shaded off and
then it began to advance steadily. My paper profits vanished and
my paper losses grew. One day it looked as if not a bear would
be left to tell the tale of the strictly genuine bear market. I
couldn’t stand the gaff. I covered. It was just as well. If I
hadn’t I wouldn’t have had enough left to buy a postal card. I
lost most of my fur, but it was better to live to fight another
day.
I had made a mistake. But where? I was bearish in a bear
market. That was wise. I had sold stocks short. That was proper.
I had sold them too soon. That was costly. My position was right
but my play was wrong. However, every day brought the market
nearer to the inevitable smash. So I waited and when the rally
began to falter and pause I let them have as much stock as my
sadly diminished margins permitted. I was right this time for
exactly one whole day, for on the next there was another rally.
Another big bite out of yours truly! So I read the tape and
covered and waited. In due course I sold again and again they
went down promisingly and then they rudely rallied.
It looked as if the market were doing its best to make me
go back to my old and simple ways of bucket-shop trading. It was
the first time I had worked with a definite forward looking plan
embracing the entire market instead of one or two stocks. I
figured that I must win if I held out. Of course at that time I
had not developed my system of placing my bets or I would have
put out my short line on a declining market, as I explained to
you the last time. I would not then have lost so much of my
margin. I would have been wrong but not hurt. You see, I had
observed certain facts but had not learned to co-ordinate them.
My incomplete observation not only did not help but actually
hindered.
I have always found it profitable to study my mistakes.
Thus I eventually discovered that it was all very well not to
lose your bear position in a bear market, but that at all times
the tape should be read to determine the propitiousness of the
time for operating. If you begin right you will not see your
profitable position seriously menaced; and then you will find no
trouble in sitting tight.
Of course today I have greater confidence in the accuracy
of my observations in which neither hopes nor hobbies play any
part and also I have greater facilities for verifying my facts
as well as 'for variously testing the correctness of my views.
But in i9o6 the succession of rallies dangerously impaired my
margins.
I was nearly twenty-seven years old. I had been at the game
twelve years. But the first time I traded because of a crisis
that was still to come I found that I had been using a
telescope. Between my first glimpse of the storm cloud and the
time for cashing in on the big break the stretch was evidently
so much greater than I had thought that I began to wonder
whether I really saw what I thought I saw so clearly. We had had
many warnings and sensational ascensions in call money rates.
Still some of the great financiers talked hopefully at least to
newspaper reporters and the ensuing rallies in the stock market
gave the lie to the calamity howlers. Was I fundamentally wrong
in being bearish or merely temporarily wrong in having begun to
sell short too soon?
I decided that I began too soon, but that I really couldn’t
help it. Then the market began to sell off. That was my
opportunity. I sold all I could, and then stocks rallied again,
to quite a high level.
It cleaned me out.
There I was – right and busted!
I tell you it was remarkable. What happened was this I
looked ahead and saw a big pile of dollars. Out of it stuck a
sign. It had “Help yourself,” on it, in huge letters. Beside it
stood a cart with "Lawrence Livermore Trucking Corporation"
painted on its side. I had a brand-new shovel in my hand. There
was not another soul in sight, so I had no competition in the
gold-shoveling, which is one beauty of seeing the dollar-heap
ahead of others. The people who might have seen it if they had
stopped to look were just then looking at baseball games
instead, or motoring or buying houses to be paid for with the
very dollars that I saw. That was the first time that I had seen
big money ahead, and I naturally started toward it on the run.
Before I could reach the dollar-pile my wind went back on me and
I fell to the ground. The pile of dollars was still there, but I
had lost the shovel, and the wagon was gone. So much for
sprinting too soon ! I was too eager to prove to myself that I
had seen real dollars and not a mirage. I saw, and knew that I
saw. Thinking about the reward for my excellent sight kept me
from considering the distance to the dollar-heap. I should have
walked and not sprinted.
That is what happened. I didn’t wait to determine whether or not
the time was right for plunging on the bear side. On the one
occasion when I should have invoked the aid of my tape-reading I
didn’t do it. That is how I came to learn that even when one is
properly bearish at the very beginning of a bear market it is
well not to begin selling in bulk until there is no danger of
the engine back-firing. "
Mr Jesse Livermore - one of two of the most fascinating characters ever to come to Wall St, the other being Richard A Wyckoff.
The Lefevre work comes from a series of interviews that Mr Livermore gave under the pseudonym of Lawrence Livingstone.
Mr Livermore lived for a further 17 years, during these years he became the legend that he remains.
I have learned much from what Mr Livermore wrote in the final year of his life, perhaps the most pertinent is:
“Never buy a stock on reactions” (today we call those pull backs or reversals) “and never short a stock on rallies”.
An example of this approach was at the outbreak of WW2 in 1939, initially the market fell, then rallied.
Strangely, he noted, that Steel refused to rally. Many of us would see that as an opportunity to buy early - at “wholesale prices” being the current in-vogue term, after all everything else is rallying and common sense tells us that steel will be needed.
Mr Livermore reasoned that the market is always right, if Steel stocks are refusing to rise there is a reason.
He wrote that in early 1940 it emerged that the UK and Canada governments had been selling large holding of steel stocks.
On a final note on Mr Livermore’s legacy to the trading world.
I have read that he was a ‘failure’, or that he ‘lost’ all his fortunes etc, etc.
It is true that he lost and then re-gained fortunes, many of his time felt that he lost the will to live because he had ‘beaten’ the market insofar that he could trade his way out of any loss situation.
The thinking was that Jesse Jnr encouraged his father to write his thoughts in 1939/40 as a means of creating a new challenge for his father.
The reality is that WW2 took over and his writings were either scorned or disregarded.
Note the last paragraph of this, then for those who say he died ‘broke’ maybe should figure the current value of $5m.
I repeat the words of Smitten:
“Thank you Jesse Livermore, for your wisdom, hard work, and your high intelligence”.
Jesse Lauriston Livermore - Wikipedia, the free encyclopedia
Along with Market Wizards, they are my favourite books. Glad you find Anna Coulling great. A refreshing read when I read it. While her prognosis is nothing new it is well presented. It’s roots are firmly in stock trading it is her combination of price action and tick volume is what is special. Most professional institutional traders don’t worry about this as they create the volume on their insider buying and selling.
So it is a book for independent small retail traders. Swing traders may still stick to tools seeing they will buy at various perceived tops and bottoms. Trend followers will no doubt like this but it means regular position sizing to accommodate wide stops. Most small scalpers are trend followers looking for breakouts so VPA will mean more breakout catches earlier.
I am a swing trader and have modified volume for my swing trades. I have caught some nice trends on volume since it is the only analysis I do I have worked hard to map accumulation price areas.
Anyway you are on the right track… Let me know how you fair trading volumes. Got to say if you move to stocks volume is a must.
Thank you, Emeraldorc… I started looking at the Tick Volume on my charts yesterday, for the first time, and tried to manually back-test my reading of candles+trend against volume bars, according to what I have been learning from Coulling’s book… It is like opening up a car engine bay after reading the manufacturer’s repair book: those neat diagrams are nothing like the complex, grimy reality in front of you… I will need to read her book further to see examples of how the theory of the introductory chapters applies in the various situations seen in the charts…
As for the Livermore biography, here is another quote (from page 123 of the .pdf link I referred to further up):
"There isn’t a man in Wall Street
who has not lost money trying to make the market pay for an
automobile or a bracelet or a motor boat or a painting. I could
build a huge hospital with the birthday presents that the
tight-fisted stock market has refused to pay for. In fact, of
all hoodoos [=something that brings bad luck] in Wall Street
I think the resolve to induce the stock market to act as a fairy
godmother is the busiest and most persistent.
Like all well-authenticated hoodoos this has its reason for
being. What does a man do when he sets out to make the stock
market pay for a sudden need? Why, he merely hopes. He gambles.
He therefore runs much greater risks than he would if he were
speculating intelligently, in accordance with opinions or
beliefs logically arrived at after a dispassionate study of
underlying conditions. To begin with, he is after an immediate
profit. He cannot afford to wait. The market must be nice to him
at once if at all. He flatters himself that he is not asking
more than to place an even-money bet. Because he is prepared to
run quick – say, stop his loss at two points when all he hopes
to make is two points – he hugs the fallacy that he is merely
taking a fifty-fifty chance. Why, I’ve known men to lose
thousands of dollars on such trades, particularly on purchases
made at the height of a bull market just before a moderate
reaction. It certainly is no way to trade. "
It is incredible to think that this was written more than one hundred
years ago, and yet it is so immediately connected to what traders
still face today… Greed, hope, and impatience: the Great Three, which
line up the traders’ graveyards six fathom deep…
Hello Emeraldorc…
It is too early to ask questions on this, as I am just at the beginning… but, generally, when you look at the tick volume bars, do you, say, divide them up with horizontal lines? To help me see where relatively higher volume bars are, I put a line through, say the 50,000K level, and one through the 100,000K level… Again, I would have to post a chart and be specific, but, generally, I wanted to know if this is a good way to go about ‘measuring’ the tick volume to more readily identify volume change in relation to the general tick volume context/history for that pair (within a given time frame).
Cheers
I have also applying Volume Spread analysis on tick charts. Much better constant, cleaner signals. Good Luck with it my friend
Gp
As Coulling says, Volume Price Analysis (or Volume Spread Analysis) is an ‘art, not a science’… Just like Livermore said,
the Ticker (tape) does not tell you what to do: you have to relate it to price, to the context, and to what came before, which is a discretionary, not mechanical skill…and it has to be, because it has to be adapted to your trading style, your preferred time-frames, and your risk management, among other things.
And, like any art, it is not a simple thing, because experience and practice take time and effort, so I will probably only really see the benefits of VPA once I have really mastered it. . . At the moment, I will not be using it in my trading - I am nowhere near ready!
Keep at it; definetlt worth the time. But like every thing . . .learn practice; learn practice; more learning more practice 
Agreed!! I will keep doing just that… Good luck with it too, gp00053! Did you get the book?
Hi Pip… Interesting question, that was my first logic when I started with tick volume but then I decided to put all the prices on an xl sheet. I did a test for 3 days recording the volume every hour only stopping to sleep and the average pip movement corresponding to each volume bar.
The first thing I learned was certain prices always attracted huge volumes over the session this was centered around the session lows and highs.
-
The volume on each currency pair was different and it was hard to just divide the volume up to decide what was above average. So instead I used my 3 day check to determine what was low session volume and high session volume and just average.
-
I then realized that depending on the pair volume came in at specific times and tended to dictate the entire session and it didn’t matter whether it was 15 min, 1 hour or daily.
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I then started to group the bars to see if the position was worth holding into the longer time frames.
Now to answer your question sorry for the slight ramble. It never works as well to draw a line in the middle, I would read each bar individually as a 1st Step, so if in the 8 am London session we see volume of 1900 on your tick (average volume for me) volume with a 7 pip high to low and 5 pip open to close on a green bar after a series of 500/600 volume in the Tokyo and Sydney sessions then I assume this is an early bullish signal especially if the last day was bullish with at least a major green bar of 20 pip open to close this would form a degree of support so any bearish moves I likely not to last.
You can wait for further confirmation with a second green bar with 2100 volume as an example with maybe a similar pip movement. This is a morning session and you are seeing average rising volume on a green bars. The important thing here is deciding the volume that will move the market. At this point providing you are not faced with resistance close by I would take the buy trade.
Firstly, you have average volume in low volume period suggesting it is professional money starting an accumulation to get those good prices before everyone wakes up in London and also before the 9.30am economic releases.
Second it rising average volume so you know there is sufficient interest.
thirdly, you know that the previous day had a high volume move on the bullish side suggesting many people have a vested interest. Recording the lows and highs associated with high volume help you to locate prices of significance (note I said prices not levels, I think most traders are obsessed with levels and trend lines in fact it is the prices that matter).
It is not always full proof but it works.
On NFP days it is so volatile so I accumulate my positions before as the NFP never shakes off an overall bullish or bearish trend. I trade GBP/USD heavily and on occasionally GBP/JPY and AUD/USD so those USD releases tend to matter.
Lastly if you swing trade then watch out for the falling volume on falling prices and high volume Doji’s.
Today I took a trade today which in my mind I have doubts but it was pure volume analysis. GBP/USD, I noted some earlier buying volume a few days back that are propping the pair. Then the FED Dudley statement came out coupled with the CPI UK figures. Massive volume came in close the 200MA 1 hour session leaving a massive upper shadow at first sight it looks like selling volume but then we have buying volume and rising buying volume that breaks the 200MA so I buy at 1.6842 having already cashed in on my GBP/JPY trade I thought why not… Then I realize the FOMC minutes is due tomorrow and retail figures from the UK, volatility heaven…The daily however is bullish so I thought I’ll hold the trade if I am right the massive volume was buying and I would be in a great entry position to perhaps head for 1.6900 where there was high selling volume.
We’ll see… :21:
Emeraldorc, you are simply wonderful… I would have happily paid for the kind of training/tuition that you provided for free in this post… You spent time typing it all out, taking care to really explain things…
You are a great man.
One day, if we meet, I will definitely hope to buy you a drink.
Cheers!
Happy trading.
Thanks Pip. I may hold you to it one day
To bring back that point GBP leaped to 1.6907 the news is currently milking it so I expect some outsider buying before an inevitable correction. I see volume falling off on the retrace so perhaps a buying opportunity to 1.6930 where the last institutional selling came in.
That for me is the power of volume. Not a single indicator involved.
Absolutely right on the money. That’s why it’s so important to master the basic’s and keep building onward and up. I told a friend of mine who was having a bit of trouble planing his trades and he said he couldn’t understand how people trade with no indicators. I told him how you start is not how you finish. You need a strong understanding of the basics, and everyone is different so if you need to use indicators to help you with your planning, use them.
As well there is more to your trading method than planning the trade. Your plan has to have proper money management and worked with patience and discipline. I told him you didn’t blow up your account because you used or didn’t used indicators, it blew up cause you did have patience and discipline and were not using proper money management
Hello emeraldorc,
could you possibly help me understand this puzzle?
This is the Cable (GBP/USD) this morning, on a five-minute time-frame: in Coulling’s book, Volume Price Analysis, the
three red candles that you see in the chart from 8.30am, would be used as an example where volume changes
in a similar way, either increasing, or decreasing, but here the first two volume bars underneath are of the same
height (even though the candles are of different shape) and then the third and fourth show volume of opposite
magnitude to their shape… Even more confusingly, if you look to the end of the chart, the third and fourth
candles from the end are full candles (almost no wicks) and yet one has plenty of volume behind it but the
other has practically zero volume… Follow this with the last but one tiny doji candle but with a massive volume
spike, and the confusion in my head is now complete and total !!
Could you make any sense of this?
Cheers…
