While it is true that volume in the Forex market is different compared to the Futures and Stock market it still is very useful if you understand the basics of VSA principles. I have used Trade Guider and Smart VSA and find both very usefull. I now only use Smart VSA.
The use of volume in Forex is still very useful. It gives a better perspective on market strength or weakness than any indicator in your platform because all other indicators or oscillators are lagging. While tick volume in forex may not be perfect it is Real Time and that alone beats a lagging indicator hands down.
To use VSA in the forex all you need to know are signs of weakness and signs of strength and where to expect these signs. Signs of weakness occur while price is advancing (Upthrusts, No Demand and Falling Pressure). Signs of strength occur when price is declining (Stopping Volume, Reverse Upthrusts, Testing and Demand).
As this is my first post I hope it contributes to the conversation.
The following 2 users say Thank You to VSA Trader for this post:
While not a trade guider subscriber, I am a VSA practitioner. In my mind VSA is a great tool that gets you to focus heavily on PA as it is happening. From here it's a matter of owning it, and making it work for you. I like the principals a lot, and the study of VSA is what lead me to Wyckoff. My only problem with VSA is that it can lead you to finding meaning is every bar, when at times the market is just ambling.
There is a lot of info out there for sure. The undeclared secret of the stock market by Tom Willians is a great place to start. MTM without all the tradeguider stuff!
"Train yourself to let go of everything you fear to lose."
-Yoda, Star Wars Episode III Revenge of the Sith
The VSA method relies on the trader making judgements about the current price action in relation to the previous price action. For example, if the market has fallen and it is coming back to the previous high the trader should be looking for signs of weakness (SOW) or signs of strength (SOS) in the volume, the spread and the close of the current bars.
The price level of the old top will often have trapped traders who went long before the fall. Those traders holding onto loosing positions will want to exit at brake even if possible, so supply is expected at the retest. Additionally, some traders will see a double top and go short, which adds to the supply.
For these reasons, it normally takes effort to go past an old top and that effort should be seen in high volume up bars near the old top, but not excessive volume, and expanding volume on up bars following a breakout. If low volume is seen as price comes back to the old top then there is not enough demand to sustain a breakout, so the path of least resistance is down. The trader would look for shorts.
The trader needs to make judgements like these and it would be difficult to automate as computers cant emulate human thinking.
The next issues is that the VSA indicators for NinjaTrader from TradeGuider do not provide a way for other other indicators to inspect when a signal is given and this prohibits automation. And, it the signals were available, they are not intended to be used as black and white buy here or sell here signals. They are intended to show the trader where the market is strong or weak on a bar by bar basis, but the trader is responsible for assessing what that means in terms of the overall context of the market (was is weak at this level previously or strong?).
The following 3 users say Thank You to pawnbroker for this post:
I though the key thing with FX trading and VSA is that the absolute number or volume was irrelevant it is simply an indicator of activity, just as with the volume indictators you get with the futures for example.
I just did the traderguide T Williams course and they make this point several times that people get stuck on the volume question in FX when it is simply activity you are really looking for.