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VSA for ThinkorSwim
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VSA for ThinkorSwim

  #121 (permalink)
Trading for Profit
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swimtrader,

I did notice that there is a code difference and display difference between the Better Volume code that you posted and the Better Volume code posted on the ThinkScripter forum under "User Contributions: Studies". The volume bar colors are different. Do you have a legend for the bar colors in the code you posted here?

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  #122 (permalink)
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snowcloud View Post
Thank you very much for this post and the next and for the attachments. Tomorrow I'll have time to check them out in detail and will post more then. Thanks!

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  #123 (permalink)
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swimtrader View Post
I frequently trade the Russell 2000 Futures. Its signals are nicer than ES, it has less event risk than ES, and it's efficient. So I'll show you how the 3 indicator systems we're discussing, in this thread, compared on today's opening trade for the Russell. I'm showing you my Position Sizing calculation based on Auction Market Entry/Exit targets. I took this trade ...but to show you all the indicator comparisons, this is necessarily retrospective.

Steve, I pulled up my chart on the /TF (5 d 15m) for 9/14/10 [see attached] so that we'll be talking apples-to-apples here and I found that they match quite well at the right edge but less well the further back in time I look. In particular, my chart shows Green Square strength signals at 6:45 and 7:15 and a Green Double-UpArrow with a Green Circle Effort-to-Rise at 7:30. Interestingly, it doesn't show the Effort-to-Fall on the 6:30 candle that your chart shows even though it's a huge down candle. The fact that some of the signals that appear on my chart don't appear on your thumbnail could be a result of resolution issues, the painting of the other indicators you have running or something to do with the fact that I'm calling up this chart in retrospect (but I doubt that's it). Please take a look at my attachment and let me know if you see what I see.

[EDIT] After initially posting this response I took a closer look at the Magenta Circle Effort-to-Fall on your chart and noticed a strange phenomenon indeed. My chart shows three 15-minute bars between the earlier Red DownArrow UpThrust confirmation and the Magenta Circle in question. Your chart shows one 15-min candle. Weird! Is this a ToS anomaly? Whatever it is it explains why my chart doesn't display the Magenta Circle - the tall down candle on my chart has a high higher than the previous bar making it ineligible to be an Effort-to-Fall according to the original code. Your chart's big down candle doesn't have a high higher than its previous bar so it does quality as an Effort-to-Fail. This is a conundrum indeed.

Attached Thumbnails
VSA for ThinkorSwim-2010-09-14-tf-tos_charts.png  

Last edited by snowcloud; September 15th, 2010 at 03:04 PM.
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  #124 (permalink)
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Big Mike View Post
Please remember to use the Thanks button!

Mike

Yep, will do!

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  #125 (permalink)
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Another day keeping an eye on VPA...

@ stockjock: the color code is Barry Taylors' ...and can be found on his emini-watch website. Someone in this thread posted the .pdf which describes his color scheme. I don't have a personal version of it ...it's his ...and can't take the time to create one. You'll get it!

Also ...to all: I'm increasing less impressed with this indicator's practical role in trading. It's asking me to mentally process stuff that I either already know ...or that I end of finding isn't all that helpful. Its signal:noise ratio is sort of high:high.

The biggest problem, I find, is the indicator doesn't and can't keep track of background. For example, a common test of supply has various implications ...depending upon the background ...which I don't think you can safely code for. Maybe you can ...but man, what a job that would be. Some things computers do well; others are better done by the brain!

For example, if - for multiple reasons - you believe large traders are bullish and the market is demonstrating strength, then a successful test will have good predictive value. If you are uncertain about large trader sentiment, or the volume response is somewhere between low and high ...your judgment comes into play ...and the indicator can't be trusted.

At this point, I'm not sure this is prudent way to go. What started my thinking on this is was when I saw a signal that ...I could tell how the code criteria were met (printed it out) ...but it didn't make sense, in context. You don't want to have to mentally process those signals.

So I'm leaning towards a sound understanding of the principles ...and taking the indicator off.

Sorry! (I thought I was going to like it!)

If you're lovin' it ...and it's working for you ...trade on!

Steve

PS
I'll attach a TradeGuider screenshot for the Russell showing its indications for Tests of Supply ...vs the same time period using VPA Indicator.

Attached Thumbnails
VSA for ThinkorSwim-tg_tests.png   VSA for ThinkorSwim-vpa_tests.png  
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  #126 (permalink)
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See what you mean...

@ snow: Yeah ...ehhhh???? See what you mean. Yours looks good.

Signals look a little better on the 4 Hour time-frame. Maybe it's a time-frame thing.

Steve

Attached Thumbnails
VSA for ThinkorSwim-tf_4h.png  
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  #127 (permalink)
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Quick Teaching Point

Since the indicator and this discussion addresses "tests" ...and since they are so key to understanding market dynamics, here's a simple explanation intended to make sure everybody knows what they're looking at:

What is a "Successful Test of Supply?"

Who?
Large traders who are bullish.

When?
A test of supply usually follows recent market weakness.
There is strength in the background - i.e. large traders anticipate higher prices in the future.

Why?
Large traders "test" to see if supply is exhausted. If it is, there will be no resistance to their buying, during Markup.

How?
A test for supply involves rapidly marking prices down and watching the response.
If supply is still present, small traders who are long will panic and liquidate their positions.
When small traders sell and large traders stand aside, relatively low volume is seen on the vertical axis.

If supply is exhausted, a low volume response (small speculators) will occur. A little value-buying pushes the close off of the low.

What's It Mean?
A "successful" test of supply means the mark-down ("test") found few shares left to be sold. This sets the stage for large traders to mark prices up (after they've accumulated sufficient supply) ...without fear that they'll have to buy their way up through additional selling (aka "resistance") during an up-move. The large traders are successful if they scare the shares out of the small traders.

This also allows the large traders to buy the supply at a discount. Once they've got the market cornered ...i.e. own the supply ...they can create demand by simply marking up. Small (breakout) traders see the rally taking off and fuel the up-move.

A "successful" test of supply is thus a sign of strength. (...when it follows recent weakness in a background of strength)

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  #128 (permalink)
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swimtrader View Post
@ snow: Yeah ...ehhhh???? See what you mean. Yours looks good.

Signals look a little better on the 4 Hour time-frame. Maybe it's a time-frame thing.

Steve

I pulled up my chart and the TradeGuider chart you posted in your initial evaluation. I maximized both of them so that I could see each clearly. My knowledge of the TradeGuider symbols is quite limited but as you noted on the chart there aren't many symbols on which to comment. Here's my read on the two in comparison starting with the the second candle from the left of the TradeGuider Chart.

1. VPA identifies the big down candle with the tall upper wick at 5:30 as a confirmed UpThrust. The next three candles (showing on both my chart and the TG chart) are identified by VPA as a Failed confirmed UpThrust, a Pseudo UpThrust, and a Pseudo UpThrust confirmation. Next comes the big down candle at 6:30 with no identification. Its lack of identification as an Effort-to-Fall even though it so obviously is suggests that in cases like these, huge volume and large downward movement should trump the original code's requirement that its high must be lower than the previous candle's. I'll put this one on my to-do list.

2. After the big down candle that should be an Effort-to-Fall come a Green Square Strength-in-Downtrend followed by another Green Square 2 candles later. Finally, a Green Double UpArrow Strength-in-Downtrend with a Green Circle Effort-to-Rise appears. All of these together seem to me to be a pretty strong indication that an UpTrend is starting. As you mention on the chart TG has offered minimal advice during all of this.

3. Three candles after the Double Green UpArrow a significant down candle is identified by VPA as a Red DownArrow confirmed UpThrust. The next bar is a Green Square Failed confirmed UpThrust, one of the symbols that I added to the original code. I added this symbol as a warning that a given UpTrend might not be ready to end even though an UpThrust has occurred. Five candles later, a Red Square UpThrust with a Magenta Circle Effort-to-Fall indicates the party is over. Interestingly, TG indicates none of this.

A big part of my motivation for going through every inch of code in the VPA is to give me an education in VSA to which I am fairly new. Going through the dissection above has provided me with some new insights into VSA. Gotta love it!

Attached Thumbnails
VSA for ThinkorSwim-2010-09-14-tf-tos_charts.png   VSA for ThinkorSwim-tg_entry_support.png  
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  #129 (permalink)
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Spot on Snow...

What you're loving is a Wyckoff-oriented understanding of how the market works. Tom Williams really did a fantastic job of translating Richard Wyckoff's work.

If all the great talent here was able to put Wyckoff principles onto a chart ...cleanly ...no noise ...just the principles ...aesthetically nice looking (like Apple Macintosh wrote the indicator) ...then I think you'd really have something. That's what TradeGuider tried to do ...but, frankly, it's okay.

If there were interest and commitment there, I'd try and make time to colloborate.

But remember, Wyckoff didn't have thinkscript ...and if you really understand his stuff ...and combine it with Auction Market Theory ...you're a Jedi Master ...you've got the force. You don't need anything but price bars and volume. CBOT traders traded off of the decibel level on the floor (volume).

So where's the better use of your precious time? Studying Wyckoff/Williams ...then looking for illustrative examples on your TOS chart ...or writing code?

That's a tough one. It gets into why you work hard and then share freely with others. You blog; you collaborate. All of that's a good thing ...but ...you decide.

There's merit, as you point out, in working through the examples and grinding through the code. I totally get that ...and you do too. Maybe that's enough reason to persevere.

But rather than modifying someone else's NinjaTrader code ...etc etc. ...maybe your idea to write a really clean Wyckoff-oriented TOS indicator - from the ground up - isn't such a bad idea. A lot of what you've gained here will port directly, efficiently. You've got some pretty cool programming skills ...and you're meticulous. Dude.

And honestly, the number of trade situations that repeat themselves over and over ...and trades can be safely taken based upon principals - ain't that many. There's like ...I don't know ...ten ...a dozen ...key principles. Not like a zillion.

Let me know.
Steve

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  #130 (permalink)
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swimtrader View Post
Since the indicator and this discussion addresses "tests" ...and since they are so key to understanding market dynamics, here's a simple explanation intended to make sure everybody knows what they're looking at:

What is a "Successful Test of Supply?"

Thanks for the very clear lesson on Supply Tests. It reminds me of a couple questions that I've had for a while that maybe you can answer.

1. Is there a fixed number of futures contracts for a given instrument like the TF, 6e, or ES? If so, does the CME set this number? Can retail traders know what this number is like in the stock world - A/S, O/S, and Float? My interest in this is purely academic.

2. Who is responsible for making the rapid mark-downs in a Supply Test? Is it the market maker setting the price wherever he feels like it or is it Big Money hitting the Bid to push the price down like in the stock world?

3. Is the CME the sole market maker for the ES, 6e. TF, etc?

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