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truechartist
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I'm a trader but I trade using a method called VSA or volume spread analysis.VSA aims to follow the movement of professional players in the markets. I follow volume,spread of the bar and the closing price to determine the price action. i could careless about news or fundamental analysis because... More
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TRADING VOLUME SPREAD ANALYSIS
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  • How to Decipher A Price Chart
    I'd like to speak in depth on how to decipher a stock chart, this article is tailored more towards the amateur investors or traders new to the game.Those who are trying to grasp the idea of what the hell is going on in the markets and how can you profit from it. I'd like to speak about a method,which is dear to my heart that has greatly improved my trading,its called VSA or volume spread analysis.This method was first coined by a man named Richard Wyckoff who was a trader/investor in the early 1900's who, was able to construct point and figure charts,which he then used to measure the volume in particular stock issues of his name.He was able to consistently decipher when professionals were accumulating a stock,marking it up,distributing it and marking it down,his indication was based on the volume within the issues or stocks.These became the 4 crucial phases an individual would have to understand to make sense of the markets and to be able to invest successful. 

    Within the later years of the 1990's a man name Tom Williams further explored and added to Wyckoff findings.He wrote a book called Master the Markets.The whole key behind success in the markets is understand a few things, which I'll list below.

    1.Supply & Demand
    2. Accumulation & Distribution
    3.Volume
    4.Analyzing the Spread of a bar
    5. Reading the background of a chart.
    6.News Manipulation

    When I speak of supply and demand, I'm speaking first about the demand for a stock by professionals or smart money.Anyime there is demand by the herd"the masses" the professional money begins to markup prices to fulfill the demand of the herd-buyers. Anytime there is supply or selling professional money commenses to markdown prices to reflect there disinterest to higher prices.However, to really grasp this concept you have to realize that professionals are always on the opposite side of the general market.In other words, they're selling into the demand and are buying into the supply. 

    Accumulation refers to the buying or attempt to acquire all of a stock at a certain price point,in other words professionals see it as a bargain and they want it.This means theyre bullish,the stock and will try to accumulate as much as possible.Distribution refers to selling or attempt to get rid of as much as stock as possible at higher prices. Which means professionals are bearish on the stock.

    Volume simply means the activity in a particular stock,the activity of market participants within a given time whether it be minute or hourly or daily etc.It tracks the activity.

    Analyzing the spread of a bar is crucial because it gives insight to how bullish or bearish professionals are in that given moment of time. Wide spread up bars shows they were very eager to participate in a move and a narrow spread bar means they were reluctant to participate.

    Reading the background of a chart this refers to looking at the history of price movement in the near background whether it be a few days or years.This is helpful in determining the probability that a movement will happen during key support or resistance areas.

    News Manipulation is one of the misunderstood phenomenoms in the stock market.It's quite simple the news is promoted and fed by professionals to encourage the herd or the general public to react in a certain way, it's the catalyst which allows professionals opportunity to reposition themselves in the markets. 

    I will speak of one example which actually happened today in the stock VZ.

    Hopefully, this helps the newbies.I will continue to post more informative education material

    Oh, as full disclosure, I've registered with profit.ly so users will be able to track my performance in the stock market. My user name is nyse1982, so people can actually see that when I buy or sell stocks that I write about.






    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 03 8:49 AM | Link | Comment!
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