I realized that many users of VPA afl are not keeping the Interpretation window open. Please keep the Interpretation window open. We have tried to provide some commentary on the various signals being generated by the VPA afl. This commentary will help you understand the signals better.
22 May 2009
25 March 2009
VPA1.1
There have been many requests for VPA 1.6. The truth is that there is no real version 1.6. The version number 1.6 you see in some of the charts posted here was an internal trial version. The attempt was to create a mechanical system out of VPA. However we did not really succeed and further attempts were put on the backburner. Any we are presented the next version VPA1.1. We have included facility to plot support and resistance lines which are play a good role in volume spread analysis. Also included is the strength meter scan. Hope the new version will be helpful. Here is a screen shot of VPA 1.1.
30 September 2008
TRADABLE BASES
Accumulation bases can be found in various shapes and sizes. The most common recognizable one is the one where the stock moves sideways in a narrow range and the volume has dried up.. However we will also find rectangular bases where the stock moves up and down but restricted within a wider range. You will find weakness coming in at the top of the range and strength at the bottom of the range.
Many of the ranges are easily tradable. For a trader or investor with longer term view the idle time to get in would be when the stock bounces back from the support line. This way it the stock breakout he would have the idle entry point. He also has the option to quit at the stock fails to cross the resistance at the range top, For a short term trader who is adapt in trading the long and short this kind of base provides good opportunities to go long at the support line and go short at the top of the range.
Just like the Trend channels described before we can find a zone in the middle of the range which I call the conflict zone where many reactions take place.
Here is just an example of tradable base. More tradable bases will be Posted later.
Many of the ranges are easily tradable. For a trader or investor with longer term view the idle time to get in would be when the stock bounces back from the support line. This way it the stock breakout he would have the idle entry point. He also has the option to quit at the stock fails to cross the resistance at the range top, For a short term trader who is adapt in trading the long and short this kind of base provides good opportunities to go long at the support line and go short at the top of the range.
Just like the Trend channels described before we can find a zone in the middle of the range which I call the conflict zone where many reactions take place.
Here is just an example of tradable base. More tradable bases will be Posted later.
28 September 2008
TREND CHANNELS
Next I will touch on the concept of trend channels. Tom Williams briefly mentions this in his book. He calls then Trading Ranges though I prefer the term Trend channels as in we will find the stock is actually trending up or down when we look at from a wider view. This is actually different form the horizontal trading ranges where the stock movement is sideways. Of course I have taken some deviation from his concepts.
Many times you will find a stock moving in a upward or downward channel. We can draw upper trend lines and lower trend lines and they would almost be parallel. Tom Williams divides this channel into upper quarter and lower quarter and most reactions happen in these quarter. He also calls area above the upper trend line( or supply line) as over bought zone and the area below the lower trend line as over sold zone. The middle area is where we can expect the stock to move anywhere.
But I go a step further and I draw a middle line. The interesting observation here is that it is around this middle or mean line where most we see a conflict or tug of war between the bulls and bears happen and many reactions happen around this line. I call this the “Conflict Zone”.
From a VSA perspective we will find support or strength coming near the bottom trend line. We will also see weakness creeping in in terms of upthurst bars or pseudo upthrust bars near the upper trend line. In most cases the Trend channel is wide enough to give some nice trade opportunities.
Here is n example of downward trend channel
Many times you will find a stock moving in a upward or downward channel. We can draw upper trend lines and lower trend lines and they would almost be parallel. Tom Williams divides this channel into upper quarter and lower quarter and most reactions happen in these quarter. He also calls area above the upper trend line( or supply line) as over bought zone and the area below the lower trend line as over sold zone. The middle area is where we can expect the stock to move anywhere.
But I go a step further and I draw a middle line. The interesting observation here is that it is around this middle or mean line where most we see a conflict or tug of war between the bulls and bears happen and many reactions happen around this line. I call this the “Conflict Zone”.
From a VSA perspective we will find support or strength coming near the bottom trend line. We will also see weakness creeping in in terms of upthurst bars or pseudo upthrust bars near the upper trend line. In most cases the Trend channel is wide enough to give some nice trade opportunities.
Here is n example of downward trend channel
17 September 2008
Reversal and Retracement
Reversal and Retracement
One of the difficulties we face when analyze prices is determining whether the stock is going through a reversal or just a retracement. If we assume that a retracement is in progress and it turns out to be a reversal we end up giving away too much. At the same time if we assume a reversal then we would be out of the trade too soon. These apply specially for positional traders.
So how do we get a clue whether it is retracement or a reversal? Following are the basic things one should look at.
RETRACEMENT
1. Lack of volatility
2. Small spreads
3. Decreased Volume
REVERSAL
1. Increased Volatility
2. Large spreads. Especially Effort to Fall bars.
3. Increasing volume.
[ Just enclosing an example ]
The simplest thing we can do is to draw arrows for the stock movement and the volume. In retracements you will the arrows are in the same direction. And in case of reversal the arrows will be in opposite directions.
One of the difficulties we face when analyze prices is determining whether the stock is going through a reversal or just a retracement. If we assume that a retracement is in progress and it turns out to be a reversal we end up giving away too much. At the same time if we assume a reversal then we would be out of the trade too soon. These apply specially for positional traders.
So how do we get a clue whether it is retracement or a reversal? Following are the basic things one should look at.
RETRACEMENT
1. Lack of volatility
2. Small spreads
3. Decreased Volume
REVERSAL
1. Increased Volatility
2. Large spreads. Especially Effort to Fall bars.
3. Increasing volume.
[ Just enclosing an example ]
The simplest thing we can do is to draw arrows for the stock movement and the volume. In retracements you will the arrows are in the same direction. And in case of reversal the arrows will be in opposite directions.
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