Hello traders welcome to GTTE, I am Dean and I am going to take you through my trading journey and how I came across Volume Spread Analysis aka VSA…
I promise you will learn how you can use Volume Spread Analysis in your trading by the end of this post!
Listen to this cool little story, a friend of mine who is a broker tells me about what traders talk about in the trading rooms, here are few of the oft-repeated things…
“The moment I buy market turns down, as if, the market was waiting for me to buy. The market is trying to get me every time I put on a trade!”
“Whenever I try to catch a trend, it just stalls and goes sideways. I mostly buy options and that is not a good thing for me as the time value just evaporates.”
“No matter how hard I backtest the moment I spot a pattern developing and put on a trade, that is the exact instance when the pattern fails!”
My friend tells me they come in day in and day out and their discussions also remain the same. So what is wrong with this picture? Is it really so that market is waiting for traders to enter and then get their stop losses?
Well if you ask me I would say, markets don’t give a damn about what you are doing. It actually should be the other way round. “But these guys never learn.”, as my friend would say.
You may wonder…
Why is it that despite losing trade after trade, these traders cannot make a change. Even after seeing one system failure after another, they still chase the latest fad in town. Or is it possible they don’t know what they are doing wrong?
Well, this is not the problem for a few traders almost every trader has gone through this phase. Trust me I went through it too.
So what did I do to come out of this rut?
You might think I would have taken one of the following routes,
- Kept detailed records of my trades.
- Kept a trading journal.
- Controlled my emotions.
- Made a list of rules for entry and exit, and on and on…
Well, none of that, sometimes the most proffered solution won’t work. In fact, I had tried all these things and still failed. So what changed my trading around? It was a simple question actually…
Listen to this…
One day after seeing my stop loss getting hit, completely frustrated I asked myself, actually I shouted out of agony – “Who the fuck is taking the other side of my trades?”
Well, I asked the question and gave the answer as well. A light bulb went on in my head and I found something to dedicate my efforts towards. I set out to find who was taking the other side of my trades, all this time?
Volume Spread Analysis the saviour!
And that led me to the works of legendary trader Tom Williams, the founder of Volume Spread Analysis!
He always talks about the smart money. He says they are always trying to get you out of good positions or trap you into bad ones. Suddenly I could see all my bad trades moving in front of my eyes like a movie.
As I went deeper into his works I found that Smart Money or SM thrives on traders like me and they count on traders like me making every single mistake, that I made in my trading.
So was there a way out? Definitely! Although what I share below is only a part of the total solution that I use it will help you put things into perspective.
The way out was trying to figure out what SM was doing and I started out exploring this possibility using VSA.
So what is VSA, as you all know its Volume Spread Analysis and we use the range of the bar, the associated volume and the position of the close to understanding what the SM is doing. Still, it is not only about the “signals” as Tom would call it, as much as it is about understanding the markets!
So let’s look at an example of how VSA charts can help us out in finding what the SM is actually trying to do. Just go through this small video on how the SM uses various tricks to trap the gullible traders like me, well not anymore, as I am now using the same principles to find my trades.
Volume Spread Analysis [VSA] – Video Example
Ok, a cool video wasn’t it… don’t forget to share it with your friends! Go back right now if you have not done so already!
How do you go about trading with SM with VSA?
So how can you use this way of analyzing the markets? How can you take trades like the legendary trader Tom Williams would have? Can you really trade alongside the Smart Money?
We are coming out with a detailed course on VSA pretty soon. If you want me to ping you when it is ready for release, just early bird list below to show your interest!
That is not all since you have read all the way to the end I am going to give a small gift. If you use Amibroker (most popular technical analysis software) then you can use the AFL below to plot these awesome VSA signals.
Now, these signals are not all that there is to Volume Spread Analysis, but these are the ones I use most of the times in my trading.
Alright then, I hope you have got a fair idea as to what Volume Spread Analysis is all about. You will get much more through the VSA course we are coming out with.
In the next part, you will see how I took the next step in this journey and came across Market Profile!