workshop session 10 volume spread analysis
TRANSCRIPT
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Technical Analysis Workshop Series
Volume Spread Analysis (VSA)
13th
February 2014
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Profile
Year 2 Business Administration
Started trading since 2012
FX Pipsology – fxpipsology.com
Written blog articles for eToro
Open to learn and connect
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DISCLOSURES & DISCLAIMERS
This research material has been prepared by NUS Invest.
NUS Invest specifically prohibits the redistribution of this material in whole or in part without the
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No representation or warranty, either expressed or implied, is provided in relation to the
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Any opinions expressed in this research material are subject to change without notice.
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Outline
1. Introduction
2. Market Makers
3. Effort vs Results4. Sign of Weakness / Strength
5. Trade Examples
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Introduction
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Introduction
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Market Makers
Who are the
Market Makers?
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Market Makers
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Demand & Supply
Who are the
Market Makers?
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Support & Resistance
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Market Manipulation
The market manipulation benefit the bears MMs by:
1. Drawing in retail buyers by putting a bullish PA;
2. The demand from the buyers pushes prices higher;
3. MMs now able to sell their orders to these buyers
without causing prices to fall;
4. This is the distribution phase where the bears MMs
are selling to the buyers.
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Market Manipulation
The market manipulation benefit the bears MMs by:
1. Catching orders and stop losses (SL) of retail tradersby whipsawing prices;
2. MMs first push prices down to trigger the shortorders from retail traders;
3. Then whipsaw prices up to hit on the SL* of theseshort trades;
4. And trigger the long orders at the top;
5. MMs can now sell their orders to these retailtraders.
*SL of a short trade is equivalent to buying into the market.
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Effort vs Results
Volume indicator -> trading activities -> ‘Effort’
Price action -> ‘Results’ of the effort
Buying effort will result price to increase
Selling effort will result price to decrease
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Effort vs Results
When there is an Effort to move,
there should be a Result.
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Effort vs Results
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Effort vs Results
Wide spread up-bar
Closing on the highs with increased volume
Volume not excessive
Effort to go up
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Effort vs Results
What if Effort
doesn’t show Results?
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Effort vs Results
The high volume must have
contained more Sellingthan Buying.
This is a
Sign of Weakness (SOW)
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Sign of Weakness (SOW)
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Sign of Weakness / Strength
How do we know
if it is SOW or SOS?
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Up-trend -> look for SOW
Down-trend -> look for SOS
Sign of Weakness / Strength
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Sign of Weakness / Strength
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Sign of Weakness / Strength
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Sign of Confirmation
When to
enter the market?
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Sign of Confirmation
Narrow spread up-bar with low volume
MMs have no interest buying into the market
Indicates temporary weakness
Lack of Demand (No Demand)
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Sign of Confirmation
Opposite of no demand
Prices close down with narrow spread
Declining volume
Indicates temporary strength
No Selling Pressure
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Sign of Confirmation
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Sign of Confirmation
No demand -> weakness -> SELL?
No selling pressure -> strength -> BUY?
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Sign of Confirmation
Wait for a SUCCESSFUL test
of confirmation.
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Sign of Confirmation
Up-trend -> look for SOW -> no demand
Down-trend -> look for SOS -> no selling pressure
Test of Confirmation
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Test of Supply
Rallies will meet resistance when there is supply
Floating supply needs be removed
Rapidly mark prices down to test sellers
Market Scenario
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Test of Supply
Supply is present
Usually results in a temporary up-move
Subject to a re-test
Forms a ‘W’ shape or a ‘Double Bottom’
High Volume Mark Down
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Test of Supply
Little selling / low supply
Catch any SL below the market
Buying at still lower prices (springboard)
Successful test of supply
Market ready to rally
Low Volume Mark Down
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Test of Supply
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Conclusion
Wyckoff Logic
Effort vs Results
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Conclusion
MMs will choose the path of least resistance
Demand & supply often act as resistance
Accumulation phase to reduce supply
Distribution phase to reduce demand
MMs
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Conclusion
Look for SOW -> effort doesn’t show results
No demand -> buying decreased on up-move
Market will want to fall
Up-trend
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Conclusion
Look for SOS -> effort doesn’t show results
No supply -> selling decreased on down-move
Market will want to rise
Down-trend
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Conclusion
Low volume -> reduced trading
Little interest in that direction
Path of least resistance is generally the opposite
direction
Market Movement
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Conclusion
Conceptual market analysis
Understanding the market movement
Complimentary with other strategies
Volume Spread Analysis
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Conclusion
To be a competent trader
and make moneyis a skill you can learn.
- Michael Marcus
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Trade Examples