Volume Spread Analysis

Discussion in 'Advanced Trading Strategies' started by karthikmarar, Jul 26, 2008.

  1. karthikmarar

    karthikmarar Well-Known Member

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    Now let us define some Close positions.

    Up close : A close near the High would be termed as a Up close. (Upper 30% of the Bar)

    Down close: A close near the Low would be termed as Down close (Lower 30% of the Bar )

    Middle close: A close in the middle would be termed Mid close (between 30% to 70%)

    Please note that the values mentioned above could be controversial. But for this discussion we will take these values and move forward.

    Now we have some basic tools to analyze the bars. Next we will look at volume.

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    Last edited: Aug 4, 2008
  2. karthikmarar

    karthikmarar Well-Known Member

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    Next we come to topic of volume. CV had raised a valid question on this. How high is high and how low is low? For this we should have a reference volume which can used to compare with the daily/bar volume. The simplest way is to have 30 day/bar moving average of the volume. From the very little experience I have in VSA I feel that the 30 day/Bar simple moving average of volume serves the purpose quite well. We will take it as the stating point. Mike had pointed out another method. We can discuss these further in the thread later as points of refinement after we establish the basic indicators of VSA. Again as a starting point we will define any volume above 1.8 times the average as High volume. Volume above 3 times the average would be termed Ultra High volumes. Volume below 0.7 times the average volume will be low volume.

    With these basic definitions we are ready to look at some of frequent Indicators (do not confuse with the normal TA indicators, here we are talking about the various type of Bars related to VSA analysis)

    Some members felt that the thread looked too elementary in a Advanced Strategy section. Maybe it is true. I wanted the thread in this way since it should be easily understandable even for the newbee. Also, even more experienced people are not reluctant to look at the market in this way. The indicator trader would definitely find a Bar by Bar analysis a hard pill to swallow.

    A note of caution, before we proceed into the real VSA study. Please note that it will be difficult to build a mechanical trading system from VSA though not impossible. However knowledge of VSA will greatly help one to understand the market better and will be a great support tool complimenting their trading systems. Also VSA on its own provides some excellent entry and early exit points resulting is good profitable trades.
     
  3. uasish

    uasish Guest

    This is my Vol. Alert in MS.

    Vol. Alert.
    ..................................................................
    a:= Mov(VOLUME,20,E);
    b:= Std(a,200);
    a + b;
    .......................................................
     
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  4. uasish

    uasish Guest

    Karthik,

    I am fully in sync. with your view of developing it brick by brick,forget about Advanced,all New concept's BASIC is very imp. it should always be crystal clear.
    Later on we always can develop / debate / mix ; but until the base is established the latter part may drift away.
    Like as we have seen incase of the most simplest of pattern 'H & S' ;many just seeing a 3rd hump instantly label it as H & S.

    Asish
     
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  5. renu daga

    renu daga Well-Known Member

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    can asish das vol ... alert be analysed.her under this thread!!
    as how to use the vol alert.
    because many atimes vol alert goes against teh rules

    high vol on res means?
    low vol on support means?
    low vol on res means?
    high vol on support means?

    renu
     
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  6. karthikmarar

    karthikmarar Well-Known Member

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    Sure Renu, All your questions would be answered in this thread as we proceed....Volume patterns near supports, Resistance and trendlines..
     
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  7. karthikmarar

    karthikmarar Well-Known Member

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    Sorry for the pause in the posting.. Got busy with many other things...

    Finally…. we will step in the actual VSA. VSA measures the weakness and strength of individual bars. In addition it looks at the background strength/Weakness. So we have to always look out for Weakness in a uptrend and for strength in a down Trend.

    Each bar could be characterized to indicate Strength or Weakness based on the Spread and volume.

    We will start with looking out for weakness. First we will look into one of the most easily identifiable and strong indication of weakness which is commonly called the UPTHRUST Bar. And what a day to talk about Upthrust… The charts are full of them today…Even the nifty is showing a Upthrust…of course not a one of the ideal one. But distinct weakness shown on the nifty.

    What is an UPTHRUST BAR ?

    An Upthrust Bar is a wide range bar, with a high volume and closing down. It indicates that the prices were marked up during the day (for simplicity we use day, it is equally applicable on all time frames), the Trading activity was High as indicated by the High volume and the prices dropped to near the low (or to the low) towards the closing hours.

    Looking the SM perspective what happened was that the SM marked up the prices in early trading hours indicating strong bullishness. Enticed by this bullish move the weak money also rushed to acquire the stock. Shorts if any would also have rushed for cover. Meanwhile the SM is quietly distributing their holding to the weak money. In the later part of the day the SM drastically marks the price down trapping the weak money holding stocks at much higher prices.

    In order to make this ideal, the Upthrust normally appears after a wide range upbar with high volume. This makes it easy for the SM to markup the price and entice the weak money. Most of the time the Upthrust will be moving into new higher territory. The High of this bar will be much higher than the previous high.. High volume should be an important consideration.

    What are the Things to Look for in a Uptrust?

    1. High Volume and How high?
    2. Wide Spread?
    3. Close, near or on the Low?
    4. What was the previous bar action?
    5. Did the bar into new territory?
    6. Is the stock in an up trend?


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    Last edited: Aug 8, 2008
  8. karthikmarar

    karthikmarar Well-Known Member

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  9. uasish

    uasish Guest

    Will watch after Mkt,this knowledge can actually translate into money in intraday .
     
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  10. karthikmarar

    karthikmarar Well-Known Member

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    What are the Things to Looks for in a Uptrust?

    1. High Volume and How high?
    2. Wide Spread?
    3. Close, near or on the Low?
    4. What was the previous bar action?
    5. Did the bar into new territory?
    6. Is the stock in an up trend?

    The Answers for the above would decide how potent the Upthrust is.

    High volume Upthrust are a sure indication of weakness, higher the Volume the stronger the indication. It may be even wise to get out of the stock if the Upthrust has ultra high volume.

    Wider the spread more potent the Upthrust

    Lower the closer the stronger the indication of weakness. Ideally it should close should be the Low. If the close is towards the middle it would mean than the SM was not successful in marking the price down. There was too much demand.

    An ideal Upthrust will move into new territory. The High will be very much higher than the high of the previous bar. This means the SM was really successful in marking the price up and many traders get trapped into bad positions in the end of the day.

    Upthrusts are effective when the trend has been in force for some time. Sometime you would find weak up thrusts in early trends.

    Many times you will Upthrusts with low volume. I call them Pseudo Upthrusts. These are not effective as the Upthrust. But are still signs of weakness..

    [​IMG]
     
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