Trading with Volume Spread Analysis (VSA)

[bunny]

Biocon chart

I am posting below the BIOCON-EQ-NSE chart. The chart plots two volumes - total traded volume and deliverable volume. This is the first time I am using such a combination of total and deliverable as I am keen to see whether or not deliverable volume provides any edge over total volume.

On 28 JAN 2010, we have a down bar, high volume and narrower spread that also manages to close above lows. This bar represents professional buying. They have absorbed all the supply in the market. Due to this, there is an acute imbalance between supply-demand and so the next bar is able to close up and on its high with low volume. By conventional definition, this low volume up bar should be treated as "no demand from professionals", however, since the professionals have already fulfilled their demand in the down bar of 28 JAN 2010, we will make an exception to the low volume up bar. A similar price-volume pattern is also highlighted on the same chart(extreme left) where we have signs of professional buying followed by a low-volume rally which was sustainable.

Also, observe the bar on 22 JAN 2010. The bar is a down bar that closes on the high. The total volume is lower than previous day's volume(so by rules it becomes a "shakeout") but the deliverable volume is higher(thus it denotes that supply is "still present").

 

[bunny]

On 29 jan it is up day with closing high on low volume with wide spread
Comparing it with last 2-3 days bar last 3 bars were down days with increasing volume
If it were selling ie from 25 to 28 jan on high volumes then how comw with limited volume
spread is so up that too closing above last 2 days close
IMO on 28 jan bar their is more buying than selling as prices are at new high ground
Bar on 29 jan imply strength but it will not go very far as their is no strength in background
Regards

The down bar on 28 JAN 2010 had narrow spread and higher volume. Such a bar is called as a Squat bar. This term is not used by Tom Williams, but I think by Todd Krueger or some other famed VSA analyst, may be Bill Williams. The observation is that the direction changes either immediately after the squat bar, or one bar after it. It is true for up leg as well as down legs.

The spread is narrow because the professional are buying or selling without marking down or marking up the prices. They cannot mark the prices because either the market is weak or strong.

 

[bunny]

Re: Biocon chart

{Biocon chart analysis}

There is one concern or anomaly on the chart. Lemme see if others can find it.

Hint: It on the down bar of 28 JAN 2010.

 

[Pchartis]

Re: Biocon chart

There is one concern or anomaly on the chart. Lemme see if others can find it.

Hint: It on the down bar of 28 JAN 2010.

Let me give a try
I think more volume of 28 jan dawn bar is concern
comparing this volume with same price range previously(27 oct, 19 nov,
26 nov) volume on 28 jan is very high
Regards

 

[bunny]

Re: Biocon chart

Let me give a try
I think more volume of 28 jan dawn bar is concern
comparing this volume with same price range previously(27 oct, 19 nov,
26 nov) volume on 28 jan is very high
Regards

No, this is not my concern. My concern lies within the previous bars of 28 JAN 2010.

You are correct in your observation, but what about the spreads?

 

[adultvish]

Re: Biocon chart

I am posting below the BIOCON-EQ-NSE chart. The chart plots two volumes - total traded volume and deliverable volume. This is the first time I am using such a combination of total and deliverable as I am keen to see whether or not deliverable volume provides any edge over total volume.

On 28 JAN 2010, we have a down bar, high volume and narrower spread that also manages to close above lows. This bar represents professional buying. They have absorbed all the supply in the market. Due to this, there is an acute imbalance between supply-demand and so the next bar is able to close up and on its high with low volume. By conventional definition, this low volume up bar should be treated as "no demand from professionals", however, since the professionals have already fulfilled their demand in the down bar of 28 JAN 2010, we will make an exception to the low volume up bar. A similar price-volume pattern is also highlighted on the same chart(extreme left) where we have signs of professional buying followed by a low-volume rally which was sustainable.

Also, observe the bar on 22 JAN 2010. The bar is a down bar that closes on the high. The total volume is lower than previous day's volume(so by rules it becomes a "shakeout") but the deliverable volume is higher(thus it denotes that supply is "still present").

Sir,
Thanks a lot for your kind attention towards my query?
Though, I still have some doubts which I would like to clear, if you so permit.

On 28 JAN 2010, we have a down bar, high volume and narrower spread that also manages to close above lows. This bar represents professional buying. They have absorbed all the supply in the market.By conventional definition, this low volume up bar should be treated as "no demand from professionals", however, since the professionals have already fulfilled their demand in the down bar of 28 JAN 2010, we will make an exception to the low volume up bar.

If all the supply has been absorbed, than does it not indicate that people are not willing to sell it at low price? And, if the supply has been absorbed on 28 Jan within the range of 258.70 - 270.50; what made the price go below previous day low? Can we not assume that the upmovement in the script, which came after 1 PM only on 29 Jan 2010, could be the result of short-covering done due to following factors:
First, it was Friday and usually people like to square off their trade on this day so as to avoid the volatility in Indian markets due to influence of many outside factors.
Second, there were some positive news from RBI?
Third, Dow future was in green; though laterOn, the Dow after a gap up opening, closed flat.
Fourth, On 21st Jan 2010, there was a good selling with high volumes; and that was Thursday. On 22nd Jan, there is somewhat similar candle pattern with more volumes as on 29th Jan; indicating the same thing that the supply has been absorbed. But after Monday i.e. 25th Jan, the price again started going down till Friday; when it made the candle of positive reference.

Also, observe the bar on 22 JAN 2010. The bar is a down bar that closes on the high. The total volume is lower than previous day's volume(so by rules it becomes a "shakeout") but the deliverable volume is higher(thus it denotes that supply is "still present")

I have not ever analysed the deliverable volumes; but that could be a great idea. But, I have one doubt in it too. What difference does it make to analyse the actual and deliverable volume; because, there are many brokers who provide 3-5 time to their clients for delivery. And, that means that the volume which described as deliverable, was not actually the delivery because they may be inclined to sell in next day.

Extremely sorry for the trouble and silly questions of mine; but I just want to clear my confusions regarding volumes. Since, last 2 years I have been trying my best to do it myself, but still not unable to have a crystal cut view about analysing volumes. When I first saw ur post regarding VSA, I immediately downloaded it and tried to comprehend as much as possible. But, still some confusions. Your patience and kindness may be of great help to me.

Thanks again

 

[bunny]

Re: Biocon chart

If all the supply has been absorbed, than does it not indicate that people are not willing to sell it at low price? And, if the supply has been absorbed on 28 Jan within the range of 258.70 - 270.50; what made the price go below previous day low?

Manipulation. Professionals can mark up or mark down the market. That is why volume is important. If the volume is not supporting the move, you know that professionals are not in agreement with the move.

Can we not assume that the upmovement in the script, which came after 1 PM only on 29 Jan 2010, could be the result of short-covering done due to following factors:

Let us speak only in the language of supply and demand. Short covering, long unwinding, etc. are words of media who don't have anything real to publish.

And even if I were to say that it was because of short-covering, then one must ask this question immediately - "What made the shorts cover their positions?" - obviously they had seen the strength setting in and knew that they could quickly be on the wrong side of the market.

First, it was Friday and usually people like to square off their trade on this day so as to avoid the volatility in Indian markets due to influence of many outside factors.
Second, there were some positive news from RBI?
Third, Dow future was in green; though laterOn, the Dow after a gap up opening, closed flat.
Fourth, On 21st Jan 2010, there was a good selling with high volumes; and that was Thursday. On 22nd Jan, there is somewhat similar candle pattern with more volumes as on 29th Jan; indicating the same thing that the supply has been absorbed. But after Monday i.e. 25th Jan, the price again started going down till Friday; when it made the candle of positive reference.

Let us keep all these factors out of VSA. The only thing we must be looking for is an climactic move on some important event. The Friday thing is again a toy of media. If the professionals really accumulated on monday and distributed on friday, who would not make money?

The media has a template of headlines. They just fill in the placeholders and we are obliged to pat the media.

What difference does it make to analyse the actual and deliverable volume; because, there are many brokers who provide 3-5 time to their clients for delivery.

It may be provided by a broker, but which or rather how many retail traders dare to take so much delivery when the markets are "spilling read all over his portfolio"? And even if they take, how much volume distortion are they going to cause? Only 5% turnover is from retail traders. Rest 95% is thorough professional activity. Of the 5% retail traders, many would already have been shake-out. They will be desperate to sell, not buy.

When I first saw ur post regarding VSA, I immediately downloaded it and tried to comprehend as much as possible. But, still some confusions. Your patience and kindness may be of great help to me.

I have spent last 4 months and still not satisfied with my skill. I have read the VSA ebook atleast 40 times in the last 4 months.

 

[bunny]

Deliverable volume versus total volume

Deliverable volume is the subset of total volume. Not all the volume results in delivery. A significant part of the total volume is intrday volume, where positions are opened and closed within the same session.

Intraday trading volume = Total volume - Deliverable Volume.

The intraday volume could be from: day traders, front-runners, professional manipulations, etc.

Professional manipulation: Ex: To get the price down, the professionals will sell stocks in small quantities. They will fill all the lower buying orders and push the price down. They may/can buy the same "sold" stocks at a lower price later during the session.

Thus, by buying back the sold shares, they did not "let the tank leak". If they really wanted to sell their shares, they would not have bought it back, thus resulting into deliverable shares.

 

[Pchartis]

Re: Biocon chart

What difference does it make to analyse the actual and deliverable volume;

"You should use the totals for the volume of business, not open inerest volume, since open intetest can be misleading."
pg 10 Tom williams - the undeclared secret that......
Here open interest for derivatives and can read deliverable for stocks
Suggestions are welcome

 

[trader.trends]

Re: Biocon chart

The Friday thing is again a toy of media. If the professionals really accumulated on monday and distributed on friday, who would not make money?

.

Bunny
Just a small study on the fly to support you

http://www.traderji.com/trading-psychology/37716-myth-friday-down-day.html#post406928