will edit it by tomorrow afternoon, space given in front of each rule to construct them in solid statistical rule.

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Originally Posted by alex

Goal of the project is back testing on various markets, and prerequisite for it is to compile logic in some sort of rules instead of discretionary approach, so stats will reveal itself at the end ( i knw that will lack the flexibility of a master discretionary trader but least we will get to know the concept transparently). I am sure something fruitful will emerge as logic itself in volume-price action is in sync with market generated information and attempt wd be always towards market unlike EWT where attempt is away from the market IMHO ( due respect to ewt traders, that subject need another thread )

You need the rules before the backtest, don't you? Problem lies in formulating the rules All/Most of them are context dependent & the contexts themselves are mostly discretionary in nature (How does one define 'resistance' for example? Can there be any singular definition? If something cannot be clearly defined how can one code it?)

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Originally Posted by kkseal

You need the rules before the backtest, don't you? Problem lies in formulating the rules All/Most of them are context dependent & the contexts themselves are mostly discretionary in nature (How does one define 'resistance' for example? Can there be any singular definition? If something cannot be clearly defined how can one code it?)

Yes i realized that today afternoon on that particular rule, what i used for resistance is highest high of last x number of bars and for support lowest low of last y number of bars, but yes end rules will tend to get very personal and may vary with great difference, as few traders time frame will also affect the set up where as i intend to use VSA on 30 min time frame as my standard market profile time frame.

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You want to be yourself, idiosyncratic; the collective (school, rules, jobs) wants you generic to the point of castration - Nassim Nicholas Taleb

Look at this post made by RSI yesterday (where the move in HOEC has been analysed in the light of VSA) where he makes some very valid points
http://inditraders.com/showpost.php?...3&postcount=23

The code correctly identified the upThrust bar (the one following the high vol, high spread bar) A pullback, retest of the congestion top was expected (smart-money testing supply/business left blah blah ) but it didn't happen (doesn't happen so many times in so many stocks after a flat top kinda brk out)
Here the context (breakout from consolidation) was all-important IMO.

What's more blasphemous is price kept moving up & up on lower & lower volumes - so much for the rule

Quote:

up bar with low volume means mark-down can begin (time to short)

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The past is a bucket of ashes if it says nothing about the future

Originally Posted by RSI

up bar with low volume means mark-down can begin (time to short)

This is true more frequently at the top. Often, other signs of weakness such as low spreads and opening gaps will be observed.

However, under the following condition, it can actually indicate exactly opposite and in many cases is the exact bottom! The following is frequent when:

1. There is a bear move in the background (or determined selling pressure denoted by high volume, wide spread down bars)
2. After the above said bear move, there is evidence of reducing selling pressure (denoted by falling volume on falling price for atleast 2 bars.)

Originally Posted by kkseal

What's more blasphemous is price kept moving up & up on lower & lower volumes - so much for the rule

Yes, such a deviation is also more common. In such cases where the expected action is delayed or prolonged, I have observed that a opening gap ups and drastic reduction in the OPEN-CLOSE spread could be significant clues of exact top.


Its variation, i.e. price falls on reducing volumes and this continues for more than 2 bars is also common.

In this case, I have seen that very-high volume often comes in the play just a couple of sessions before the reversal. The picture usually looks something like:

1. From day 1 to 5, the price is continuously falling and the price is also falling. The spreads of these days do not provide any significant clues.
2. On Day 6, there is a spurt in volume, say 5 to 8 times the average volume but it is still a down day.
3. Day 7 is a also a down day, and it typically opens with gaps down. The volume on this day may or not be excessive, but usually is less than that on day 6
4. Day 8 is a up day and the price has reversed.

Originally Posted by kkseal

Look at this post made by RSI yesterday (where the move in HOEC has been analysed in the light of VSA)

My observation is that stocks that have circuits or are illiquid do not give as desirable results. VSA failures occur with other stocks too, but there is often a new sign that says "Discard the previous sign and follow the new sign". Such discarding signs are often found on a combination of EOD and intraday charts.

Originally Posted by Daienkyochi

IMHO,a test of supply should be observed once the down bar on wide spread is seen before it can be considered as bullish instead of seeing only the close of that bar.

Yes, something similar is observed. But the term used is "Shakeout" instead of "Test of supply".

Anyways, I think, technically speaking, every down bar is an subtle effort to go down. Some of the bars recover from their lows. It is only after this that the downbar is metamorphosed into a "test of supply" bar. Rather than just supply testing, it would also be a bar of "test of demand".

In a actively traded stock, any markup or markdown is difficult to achieve by a single operator. I think, a markup or markdown is the language of communication among the multiple operators who trade that stock. For ex, consider the below:

• Five operator - A, B, C, D and E are involved in trading SCRIP.
• The SCRIP has made a new 1 month high. Operator B is not sure if the price will still go higher or reverse from here. So he starts selling at market price and this marks the beginning of the markdown.
• The other operators are however still bullish. So they absorb all the shares sold by B and the price recovers from its lows.
• This is how the bar will look as a test of supply.

The above could also be the reason why illiquid stocks do not conform with VSA principles. Since there are only one or two operators, they enjoy the monopoly and can decide the share price at their whims! There is nobody sitting on the other side to absorb or resist selling.

Very Right...

Most of the time especially during the mark up and mark down phases the groups work in tandem... At certain point of time they would have conflicting interests.. then the classical concept of Bulls and Bears come into picture...the more powerful group usually wins... the loser would eventually join the winner in further moves ...

The challenge for us is to identify the winner and swim with them...

Originally Posted by bunny

Yes, something similar is observed. But the term used is "Shakeout" instead of "Test of supply". Anyways, I think, technically speaking, every down bar is an subtle effort to go down. Some of the bars recover from their lows. It is only after this that the downbar is metamorphosed into a "test of supply" bar. Rather than just supply testing, it would also be a bar of "test of demand".

Shakeout also serves the purpose of keeping the price in check before accumulation is complete since operators need to gather shares at low prices,any weak hands are driven out during shakeout before markup begins else operators need to gather those same shares at higher prices.

Thanks for the VSA explanation .I don't use it to the T but is indeed very helpful.

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