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Price Volume Analysis Trading with the Essentials

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Old 27-05-2013, 01:16 AM
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^ So basically, the effort index is a correlation of spread to volume. Correct?

Additional observations that may be helpful are that such distribution days seems to appear consecutively without having down days between them. Seems like its done to keep the sentiment positive and entice the weak money to "hurry up and buy quickly before the price makes another big move"
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Old 27-05-2013, 01:21 AM
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I do not have Amibroker, so I cannot use any of your AFL or indicators. I use a custom hand-made application for drawing simple high-low-close-volume charts.

Can you please analyse equities with the same code and post their charts here? I ask because in the NIFTY, the volume seem to be more or less the same. There are only few stark changes in volume(such as 50% increase or loss) compared to equities.

I would also like to see how this code indicates "falling pressure".
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  #683 (permalink)  
Old 27-05-2013, 01:38 AM
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Originally Posted by karthikmarar View Post
I am going to talk about identifying hidden weakness in the bars. Many times we see up bars closing near the top with good volumes. Most would naturally assume there is strength in those bars as it is an up bar, closing in the top and has good volume, all traits of strength. However there could be hidden weakness in these bars. Obviously the question is why and how we identify these.
Let us take the nifty chart as example. In the chart I have plotted the chart in one pane, the volume in another. The third pane consists of a new indicator which I call as the Effort index. This chart plots the effort (in effect volume) as bars below the middle line. The result is plotted above the middle line as bars. Now let is look at the charts and focus on the three bars marked 1, 2 and 3. In the Bar marked 1 we can see a wide spread “Effort to Move up Bar” with good volume. In the pane three we can see that the effort was high and the result was also equally high. In other words the effort produced the required result. Now look at the bars marked 2 and 3. These are up bars closing near the top and volume was high almost equal to the previous day’s volume. So it is natural to consider that there is strength in these bars as well. But when we look at the pane 3 we see that the effort was high but the result was poor. So there is a mismatch between the effort and the corresponding result which indicates weakness. The reason could be that the smart money has been distributing without bothering for higher prices. So these two bars (marked 2 and 3) really indicates weakness rather than strength. As you can see the weakness manifested from the very next bar the market came down. So looking at the effort and the results can tell us more about the bars. This is helpful in bar to bar analysis.


Good to see your post after quite a while. Hope your keeping with good health.
Last 2 bars repeating the same pattern but opposite in direction?
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Old 27-05-2013, 11:09 AM
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Originally Posted by karthikmarar View Post
I am going to talk about identifying hidden weakness in the bars. Many times we see up bars closing near the top with good volumes. Most would naturally assume there is strength in those bars as it is an up bar, closing in the top and has good volume, all traits of strength. However there could be hidden weakness in these bars. Obviously the question is why and how we identify these.
Let us take the nifty chart as example. In the chart I have plotted the chart in one pane, the volume in another. The third pane consists of a new indicator which I call as the Effort index. This chart plots the effort (in effect volume) as bars below the middle line. The result is plotted above the middle line as bars. Now let is look at the charts and focus on the three bars marked 1, 2 and 3. In the Bar marked 1 we can see a wide spread “Effort to Move up Bar” with good volume. In the pane three we can see that the effort was high and the result was also equally high. In other words the effort produced the required result. Now look at the bars marked 2 and 3. These are up bars closing near the top and volume was high almost equal to the previous day’s volume. So it is natural to consider that there is strength in these bars as well. But when we look at the pane 3 we see that the effort was high but the result was poor. So there is a mismatch between the effort and the corresponding result which indicates weakness. The reason could be that the smart money has been distributing without bothering for higher prices. So these two bars (marked 2 and 3) really indicates weakness rather than strength. As you can see the weakness manifested from the very next bar the market came down. So looking at the effort and the results can tell us more about the bars. This is helpful in bar to bar analysis.

hi,

hope you are in good health!

bar 2 and 3 from vsa perceptive were no demand bars. bar 2 didnt get confirm as bar 3 was and upbar. bar 3 no demand was confirmed by bar 4 or the upthrust on top, indicating mild weakness or some short of correction.

regading effort vs. result i have distinct opinion than yours, both bars 2 and 3 were narrow spread bars on volume less than previous two bars. since effort (volume) was not there on these 2 bars, result was also less (narrow spread). on these bars, results was in proportion to efforts.

regds,
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Old 27-05-2013, 11:13 AM
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Originally Posted by alex View Post
Last 2 bars repeating the same pattern but opposite in direction?

yes, from price point of view they are more or less same. but from structure and volume point of views they differ.

currently it looks like that its on a spring board. and the friday bar was a test or in wyckoff term a spring. thursday bar was stopping volume, which got tested by friday bar.

volume on both days were high, spring on high volume will be retested in future which if happens will be a gud place to go long.

regds,
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Old 27-05-2013, 09:27 PM
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My scheme of things similar to Karthik's only I try to get the picture thru color coding the bars themselves rather than a separate indi. Also don't feel the need for all of the VSA jargon & hair-splitting over which bar is what (that too for each bar!). Just a bit of separate marking for the upthrusts & 'down-thrusts' (which i guess covers the shakeout & also - with some observation- the Test).
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Last edited by kkseal; 27-05-2013 at 09:32 PM.
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