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Learning Price Action Through ObservationLearning Happens when you're open and curious and making observations from what you see. From there, you must be mentally balanced to take action on your observations. In this post, I focus on the price action that happens in the pivot portion of a swing cycle. If you make observations of this area you will see a certain kind of repeating behavior that can help you understand and design methods for trading swings. You will notice that the market likes to wash everybody out of their positions before pivoting to continue its swing. I have a look at two of the ways this shows up in the price action of a pivot. The first is an engulfing bar that expands and swallows at least 3 of the previous bars. The second is a Gap Swap where there will be a WRB Gap making an effort in one direction just to be followed by another WRB GAP that reverses that effort and direction and shows that the balance of power has shifted. This is just a small part of what makes up a swing but it factors into my overall methods and trade plan. You can make observations yourself on pivots and see what you can learn. Shane
NYSE:STNGEducation
by ShaneBlankenship
Tracking The Footprints of WRB GapsThis is the first in a series of posts on Gaps. Gaps are a sudden supply/demand imbalance that shows up in the price bars of a chart, It's the expansion that comes after a contraction. Gaps will show us a significant area of buyers/sellers that take control and when they lose that control. In the video, I discuss and define a Wide Range Bar (WRB) Gap and show how to mark it out on a chart. A WRB Gap is a bar larger than the last 3 bars with a space between the previous bar and the subsequent bar. We will be marking the base of the gap. If it's an up Gap, mark out the bottom 1/3 of the bar, if it's a down gap, mark out the upper 1/3 of the bar. We can then make observations about how price interacts with the base of this gap when or if it gets there. Then begin to notice where in the swing process the Gap is happening. Don't make conclusions, just observe and learn. There are many ways to trade Gaps but first, we must first lay out some foundations and then come up with objective ways to see them. For now, simply look for the biggest ugliest bars on your chart and mark them out and observe. These are footprints that we can follow and track. Shane
AMEX:ARKKEducation
by ShaneBlankenship
2
WRB And VSA PowertoolsCombining VSA with WRB (Wide Range Bar) analysis to be able to spot imbalances between supply and demand can be an extremely powerful tool. This is the highest priority entry rule I have when deciding to enter a trade or not. I am not going to discuss on how to use them for entries, but I will talk about this subject so you will get a clear understanding why WRB are so powerful when spotting Supply/Demand zones and how to look at them from a VSA point of view. First of all, let me say that we are not just looking at any WRB, we want the WRB's that have very high to ultra high volume. We are looking at the absolute high and the absolute low of this candle. WRB are usually far better respected support/resistance levels than any other form of SR level. Why are they interesting? Well for many reasons. WRB Combined with Fibonacci confluence in a trending phase can be very powerful. WRB Combined with VSA principles gives us even more confidence. However, it is VERY important that we ONLY use this to trade off the imbalance of supply and demand. This is where VSA comes in and guides us right. We do not want to trade any supply/demand zone. There will need to be strength when going long and weakness when going short. This is a bulletproof short. When a chart looks like this, it hardly goes wrong. I have drawn a green box, from the low to the high of the WRB candle, the highest volume one. This was an area of HEAVY demand. You see the volume? Look how it pushes price higher. When we come to highs of this chart, we see that volume turns climactic (the red volume) and starts falling. This was heavy selling/distribution at the top. Price moves back to our previous WRB Demand Zone and where is the volume now? No demand left here? On the way down to the demand zone, we had some high volume selling going on, and we go two very similar volume WRB's giving us a supply zone. The box is drawn on two bars instead of one because the volume is very high on both and action may look like buying first however it has a bearish result which is why the entire zone is drawn as supply. Prices moves down to our previous WRB Demand Zone and stops, but with no volume. We draw a fibonacci retracement and see that our Fib Zone (Fibonacci 50%-61.8%) drops right on our Supply Zone. What happenes when price comes up there? We get a nice upthrust on high volume, closing in the middles. This is now a very good sign of weakness by VSA. I shorted this one after the high volume rejection and it gave me a very nice profit. There are also situations where we fail. When looking at WRB it is important to follow a few rules - Never short if you had heavy accumulation right before you - Never long if you had heavy distribution before you - Keep in mind that stops should usually go above/below WRB Supply/Demand Zones and you should be ready to close trade and take profit when hitting the next zone. If volume is low and there is no action when price reaches that level, you can decide if you want to stay in the trade for another swing, aiming for the next WRB. - Remember that WRB's can create zones that will be valid for days/weeks in the future. - Trade the imbalance of supply/demand, just as the example picture. Do not trade when there is heavy buying in a zone followed by heavy selling in the next. There should be clear intent of direction. And for gods sake, do not use this article as your ONLY criteria for entry. Look at VSA principles, Accumulation/Distribution, trend direction, trend strength, VSA signals etc. Every single bar matter, every single second on a chart matter.
by naviafra
USDCHF Understanding the storyline with VSA and VolumeHere we are looking at USDCHF from late last year. This is the storyline 1. Price is in a clear downtrend 2. At new lower ground, volume suddenly picks up violently and further down move is absorbed by buyings. Are the Smart Money suddenly buying here? 3. Here we see a quick shakeout on high volume which is quickly marked up again, the bar closes in the middle range of the bar and the result of this was little higher prices. The shakeout was designed to trap traders into a short position. 4. At this point, we have a supply zone from before on high volume (the entire bar body where the arrow is pointing). This is where some traders previously went long, and the chances that they are locked in here are high. So we need to see if there is supply at this zone, traders who wish to breakeven or come out with a smaller loss. But there is not much activity here. We can assume that supply is starting to dry up. 5. At this point we can see that there is hardly any volume, some still exist and this must be removed as well. 6. Here we see a smaller downmove with no professional interest behind it. There is also not any pressure from the retail traders. We still need to test the remaining supply 7. Here we see a successful test. Very low volume down bar. This is our first possible entry point for a long position. 8. Here is our last successful test. Very low volume down bar closing on its highs. There is absolutely no selling pressure left. This is also a VERY powerful test, and the path of least resistance can only be up. This is a very high probability long entry. (this is also testing the previous high volume action we had on point 4) 9. Here we have a previous zone of locked in traders. This is very likely to provide resistance to higher prices and we can comfortably exit our position.
by naviafra