VSA Crib Sheet

The Master  The Markets Crib Sheet By  ppf with thanks to The BabyPips forum users of the  Supply/Demand, VSA, y!koff with Petefader   but most notably petefader" petefader"

#$irst %dition&

This is meant to be the hi'hli'hts of the most important aspe!ts of VSA and used as a referen!e, and by no means a repla!ement, a short!ut or a (ui!k way to learn VSA, to learn VSA properly you must read )Master the Markets) by Tom illiams" * also hi'hly re!ommend that you read +esse " i-ermore . eminis!en!es of a Sto!k Trader, and also y!koff S!hemati!s, all a-ailable for free on the internet in PD$ form" +esse " i-ermore was the ori'inal ti!ker tape reader, by readin' the pri!e and the  pri!e beha-iour he !ould understand what was 'oin' on in the market and take full ad-anta'e of it, ok he 'ot his fin'ers burnt on!e or twi!e, but that wasn)t really to do with his dire!t ability to trade" * 'uess there were no -olume indi!ators those days,  but then he !ould probably 'leen the -olume from the pri!e a!tion in the days of the tiny -olumes traded in those days !ompared to what we see now" *t won)t tea!h you anythin' really about a!tual tradin', but it)s a fas!inatin' read, and will 'i-e you the  ba!k'round to the VSA approa!h, it will show you how VSA works, that)s what i-ermore used e0!ept the phrase VSA had not been !oined in those days1 +ust a note about Ti!k Volume as opposed to real -olume, you may well !ome a!ross traders that say that VSA is not possible with $ore0 sin!e there is no !entralised market, the pri!e beha-iour is dire!tly related to Volume, the professional trades !annot hide their a!ti-ity, and with VSA we !an also learn how to read the market in a similar manner to how +esse i-ermore did all those years a'o" *t really is somethin' that at the be'innin' of the last !entury #23 th& that a trader learnt to read from pri!e a!tion what the professional traders that were manipulatin' the market did in (uiet smoke filled rooms1 *t)s -ery different today but market me!hani!s essentially ha-e not !han'ed" And so on to the hi'hli'hts of MTM, and hopefully what will be a -ery useful referen!e book for you to use in !on4un!tion with the thread and the other readin' materials"

The Buying Climax (Page 22) Explanation: If the volume is seen to be exceptionally high, accompanied by narrow spreads into new high ground, you can be assured that this is a ‘buying climax’.

The Selling Climax Explanation: This is the exact opposite of a buying climax. The volume will be extremely high on down-moves, accompanied by narrow spreads, with the price entering fresh low ground.  The only difference is that on the lows, just before the maret begins to turn, the price will be seen to close in the middle or low of the bar. !ote that the above principles seem to g o against your natural thining "i.e. maret strength actually appears on down-bars and weaness, in reality, appears on up-bars#. $nce you have learned to grasp this concept, you will be on your way to thining much more lie a professional trader.

55555A !lima0 must be on hi'h -olume, narrow spread and into new 'round"55555 But also look out for a wide spread !losin' well off the hi'hs" #thrust& A sellin' !lima0 is e0a!tly the opposite" This is (uite a defined setup, but to !apitalise on less definiti-e trades, you need to take the spike in -olume into a!!ount in the lo!al area and look at the !loses of those  bars in !onte0t, that sounds a bit -a'ue but in order to keep this ebook short and to the point * will let you study those kind of thin's yoursel-es, but 4ust mention it so that you know that there is somethin' you need to learn and take into a!!ount"

6ou need !onfirmation after a !lima01 7e-er trade a !lima0, trade after the !lima01

Is the Market Strong or Weak? (Page 28)  Their %&ro Traders# perceived value of the maret or stoc may be lower than yours because they expect prices to fall or at best go sideways. 'uch action, repeated many times across the floor, will tend to eep the spread of the day narrow, by limiting the upper end of the price spread, because they are not only giving you what appears to be a good price, but also every other buyer.

If, on the other hand, the maret-maer has a bullish view, because he does not have large sell orders on his boos, he will mar-up the price on your buy order, giving you what appears to be a poor price. This, repeated, maes the spread wider as the price is constantly mared up during the day.

'o by simple observation of the spread of the bar, we can read the sentiment of the maretmaers( the opinion of those who can see both sides of the market. )re*uently, you will find that there are days where the maret gaps up on weaness. This gapping up is far different from a wide spread up, where the maret-maers are maring the prices up against buying. The gapping up is done rapidly, usually very early in the day+s trading, and will certainly have emotional impact. This price action is usually designed to try to suc you into a potentially wea maret and into a poor trade, catching stop-losses on the short side, and generally panicing traders to do the wrong thing. ou will find that wea gapups are always into regions of new highs, when news is good and the bull maret loos as though it will last forever.

Lack of Demand "ac of supply completely opposite# "&age /#

0olume is lower than previous two bars and following which there is a brea to the short side. !ote1 If, over the next few bars or more, the price closes down, on declining volume, with narrow spreads, then this indicates that there is no selling pressure. In which case, we have observed some temporary weaness,which has been overcome 2 the up-move may now continue. 3 mushroom shape also indicated weaness, especially on ow 0olume. 4emember that we need confirmation before shorting the maret following any sign of no demand. This sometimes appears as a narrow spread up-bar on greatly increased volume. In this instance, professional traders have started to transfer stoc to eager uninformed "or misinformed5# buyers. &rices are being ept low to encourage buying, which accounts for the narrow spread. These traders are completely unaware of the implications of volume activity and are probably buying on repeated ‘good news‘.

Teting (Page !"#!$) The most important thin' about testin' is to remember that S/ and trendlines are not !rossed on ow -olume indi!ates a re-ersal" Any down.mo-e dippin' into an area of pre-ious sellin' #pre-ious hi'h -olume le-el&, whi!h then re'ains to !lose on, or near the hi'h, on lower -olume, is a loud and !lear indi!ation to e0pe!t hi'her pri!es immediately" This is a su!!essful test" ower -olume shows that the amount of tradin' that took pla!e on the mark.down was redu!ed, that now there is little sellin', when pre-iously there had been sellin'" At this point, it is now important to see how the market.makers and spe!ialists respond to the apparent stren'th seen in the testin'" *f you are in a bearish or weak market, you may see at times, what appears to be a test" 8owe-er, if the market does not respond to what is normally an indi!ation of stren'th, then this shows further weakness" The spe!ialist or market.maker is ne-er 'oin' to fi'ht the market" *f, in his -iew, the market is still weak on these days, he will withdraw from tradin'" The market will then be relu!tant to 'o up, e-en if it looks as if it should 'o up, be!ause there was little or no sellin' on the 9test: day" Any testin' that does not respond immediately with hi'her pri!es, or !ertainly durin' the ne0t day or so, !an be !onsidered an indi!ation of weakness" *f it were a true si'n of stren'th, the spe!ialists or market makers would ha-e stepped in and would be  buyin' the market ; the result of this professional support would be the be'innin's of an upward trendin' market" Page (48) *t is no !oin!iden!e that market probes are often seen early in the mornin's or -ery late in the day)s tradin'" There are fewer traders around at these times" $und mana'ers and traders workin' for lar'e institutions #we shall refer to these people as 9non.professional: to distin'uish them from market.makers et al& like to work so !alled )normal hours) ; they like to settle down, ha-e a !up of !offee, or hold meetin's before !on!entratin' on market a!tion" Many traders who are tradin' other  people)s money, or who are on salaries, do not ha-e the dedi!ation to be alert -ery early in the mornin'" Similarly, by late afternoon, many are tired of tradin' and want to 'et home to their families" Trendlines (Page 64) *f the -olume is low as the market mo-es up to the underside of the trend line, it is not 'oin' to 'o up -ery far" 8owe-er, on!e the trend line is broken on the up.side to  be!ome o-erbou'ht, the same line now be!omes potential resistan!e to lower pri!es" This is !onfirmed by the obser-ation of low -olume on any subse(uent down.bar" Also note that the lon'er pri!es stay abo-e the line, the stron'er the resistan!e to a down.mo-e be!omes"

Thrusts! (Page 79)

Page (88) igh olu"e sho#s that selling has s#a"$ed an% de"and and tends to a$$ear at the &eginning o' an% distri&ution $hase •

•

o# olu"e sho#s that no de"and is $resent* and tends to a$$ear at the end o' a distri&ution $hase

T+ Shake ,ut -er% i"$ortant. "ore to /o"e! (Page 90)

1he/klist 'or longs (Page 2)  Is there persistent daily support6 The low of each day "or bar# should be higher than the previous day "or bar#. This is a sign of strength "the lows are being supported to encourage the rally#. 3re you chasing the maret6 7aution, in a strong maret, you should be buying on any reaction on low volume. 3re there signs of strength in the bacground6 3re there signs of weaness above you6 8e cautious. Is a selling climax going on today6 This is a rare occurrence 2 trade now only on any downmove with low volume Is there a narrow spread with high volume on a down-day6 "9ust close on lows#. This is a sign of strength. :here is your stop-loss order6 Is there a test with low volume today in a rising maret6 This is a sign of strength. 3re you in the middle of a trading range6 8e careful 2 only initiate a long trade if you are sure that the bacground action is strong. ;ave you drawn your own trend lines on the last two points of support or supply6 3re you trading in harmony with this trend6 3re you bucing the trend or trying to pic the turns6 8e cautious 2 this is only a good idea if you now what you’re doing, Is the maret over-bought6 "Indicated by the price moving above the top trend line in a trading channel#. If so, be cautious 2 the maret may now reverse direction bac into the trading channel.

1he/klist 3or shorts (Page 4) Is the maret constantly falling on no support6 The low of each day "or bar# should be lower than the previous day "or bar#. This is a sign of weaness "the maret is not being supported because there is no professional interest in the upside#. ?>