5% - 10% profit per day trading
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$70
but be very careful. Everyone is bullish and every news and related factors (euro, equities) is bullish. That is exactly where big players love to short and drive down the market i.e. on 'apparently' bullish news and sentiments.
Solution?
use tight stop losses and follow your system.
Volume Spread Analysis VSA
First thing is of course to understand a little more about working of Smart Money (hereafter we will just use the term SM to indicate Smart money).
The SM basically moves the market in four phases as follows
1. Accumulation
2. Markup
3. Distribution
4. Mark Down
Most of you may be fully aware of these. Still we will look at these phases more in details as this would help us to understand the SM operation better which in turn would give a better perspective to VSA.
There will not be any demand for something when there is plenty of it available and nobody wants it. As the availability decreases and more people want it then the demand increases. So the first thing the SM does is find something that is available a plenty and cheap. The next step is to create a scarcity of the same and get people interested in it which in turn generates the demand. This is first phase which is Accumulation.
Accumulation is a process through which the SM acquires a large quantity of the stock at the lowest possible price. Accumulation is a subtle, sophisticated and sly process of cornering a huge quantity of the stock that makes the following phases possible and worthwhile. Once a large quantity has been absorbed the number of floating stock reduces and the demand increases. This makes possible the next phase Markup.
Accumulation normally takes place in congestion areas. Congestion area are mostly sideways range bound movements where the stock appears to have no interest to either move up or move down. The SM ensures that the stock is contained below a certain upper level which is the supply area. At the same time the SM also supports the prices above a certain lower line which is the support area. The stock moves within an upper resistance or supply area and a lower support area.
The congestion areas are characterized by Indecision. One of the most important characters of congestion areas is the Low Volume. When most traders are bullish or bearish the volume is high. Low volumes indicate indecision among the traders on bullishness and bearishness.
Ah.. Sounds easyâ¦â¦.. Well the problem is that congestion areas are seen in both accumulation areas as well as Distribution areas â¦â¦â¦ oh , Well that is not the only problemâ¦â¦â¦. There will be periods where no one seems to be interested in the stock⦠the pattern of price movement most of time very similar to the congestion patternâ¦..
First thing is of course to understand a little more about working of Smart Money (hereafter we will just use the term SM to indicate Smart money).
The SM basically moves the market in four phases as follows
1. Accumulation
2. Markup
3. Distribution
4. Mark Down
Most of you may be fully aware of these. Still we will look at these phases more in details as this would help us to understand the SM operation better which in turn would give a better perspective to VSA.
There will not be any demand for something when there is plenty of it available and nobody wants it. As the availability decreases and more people want it then the demand increases. So the first thing the SM does is find something that is available a plenty and cheap. The next step is to create a scarcity of the same and get people interested in it which in turn generates the demand. This is first phase which is Accumulation.
Accumulation is a process through which the SM acquires a large quantity of the stock at the lowest possible price. Accumulation is a subtle, sophisticated and sly process of cornering a huge quantity of the stock that makes the following phases possible and worthwhile. Once a large quantity has been absorbed the number of floating stock reduces and the demand increases. This makes possible the next phase Markup.
Accumulation normally takes place in congestion areas. Congestion area are mostly sideways range bound movements where the stock appears to have no interest to either move up or move down. The SM ensures that the stock is contained below a certain upper level which is the supply area. At the same time the SM also supports the prices above a certain lower line which is the support area. The stock moves within an upper resistance or supply area and a lower support area.
The congestion areas are characterized by Indecision. One of the most important characters of congestion areas is the Low Volume. When most traders are bullish or bearish the volume is high. Low volumes indicate indecision among the traders on bullishness and bearishness.
Ah.. Sounds easyâ¦â¦.. Well the problem is that congestion areas are seen in both accumulation areas as well as Distribution areas â¦â¦â¦ oh , Well that is not the only problemâ¦â¦â¦. There will be periods where no one seems to be interested in the stock⦠the pattern of price movement most of time very similar to the congestion patternâ¦..
VSA
The basic premise behind the volume spread analysis is that the market is basically moved by the âSmart Moneyâ. The smart money accumulates the stocks at low prices. Then begins process of marking up the price. Then the âDumb Moneyâ starts entering the smart slowly. The smart money starts passing the ownership of the stocks to the dumb money. This process is called Distribution.
Soon more and more dumb money starts rushing into the market not wanting to be left out of the big rally. Unfortunately the retail traders are the last to get in. Once the process of distribution is complete the smart money starts rapidly marking down the prices and the dumb money are left holding the stock which was bought at high prices. At the end the smart money is much richer and they can again start accumulating the stock at lower prices. The cycle continues.
This one way explains why the UP moves are slow and the DOWN moves are very rapid. The process of marking up the prices and distribution is a slow process. It takes some effort to get the dumb money interested in buying into the rally. The mark down process is very rapid as the smart moneyâs intention is to trap the dumb money. They have to give very little chances to dumb money which is generally slow in reacting to exit.
VSA attempts to read the moves of the smart money by looking at the price, volume and the spread of prices.
The basic premise behind the volume spread analysis is that the market is basically moved by the âSmart Moneyâ. The smart money accumulates the stocks at low prices. Then begins process of marking up the price. Then the âDumb Moneyâ starts entering the smart slowly. The smart money starts passing the ownership of the stocks to the dumb money. This process is called Distribution.
Soon more and more dumb money starts rushing into the market not wanting to be left out of the big rally. Unfortunately the retail traders are the last to get in. Once the process of distribution is complete the smart money starts rapidly marking down the prices and the dumb money are left holding the stock which was bought at high prices. At the end the smart money is much richer and they can again start accumulating the stock at lower prices. The cycle continues.
This one way explains why the UP moves are slow and the DOWN moves are very rapid. The process of marking up the prices and distribution is a slow process. It takes some effort to get the dumb money interested in buying into the rally. The mark down process is very rapid as the smart moneyâs intention is to trap the dumb money. They have to give very little chances to dumb money which is generally slow in reacting to exit.
VSA attempts to read the moves of the smart money by looking at the price, volume and the spread of prices.
thank you professor IV, that was informative... i'm still in the early stages of learning how to trade this oil stuff, last month was a wake-up call as i couldn't bring myself to long oil very often even though it went up day after day. mental block or something like xty said.
what phase do you think we're in now?
what phase do you think we're in now?
Ooooh i just looked at teh chart for oil now, and the steepness and extent of this upmove is just getting ridiculous!! :eek: 
I dont get my 1st pay cheque till the end of June though,
and so i have no money to put into my trading account,
but i really really wish i did, as i would love to plonk a big sell in at the 68.26 level,
with target of under $62.
Everything has moved so so fast over the last 1 t 2months though,
the lastime i made trades i was buying the dow at the 6400 level.
I looked now and its over 8600!! :eek:
So i wonder where all the fools on here bloomberg who kept shouting 5000 dow have now gone!
lol
But ive lost contact with the daily news flow and stuff,
so am not sure what numbers we have been getting that has kept oil rising to this extent,
But just looking at the chart i dont care what news there is i would sell instantly at 68.26 if i had a few hundred pounds in my bank acocunt that i could upload to my trading account and use.
Ive put chart to show what i mean by how overdone it is.
I dont get my 1st pay cheque till the end of June though,
and so i have no money to put into my trading account,
but i really really wish i did, as i would love to plonk a big sell in at the 68.26 level,
with target of under $62.
Everything has moved so so fast over the last 1 t 2months though,
the lastime i made trades i was buying the dow at the 6400 level.
I looked now and its over 8600!! :eek:
So i wonder where all the fools on here bloomberg who kept shouting 5000 dow have now gone!
lolBut ive lost contact with the daily news flow and stuff,
so am not sure what numbers we have been getting that has kept oil rising to this extent,
But just looking at the chart i dont care what news there is i would sell instantly at 68.26 if i had a few hundred pounds in my bank acocunt that i could upload to my trading account and use.
Ive put chart to show what i mean by how overdone it is.
nice to see ya span... i'm sure last month wiped out quite a few stubborn oil traders who thought "it's due for a pullback anytime now..."
ALoha mate, how you been??
Yea last month looks extremely grueling.
I made a sell on my virtual account at around $61, had target of $54 on that, havent looked at it since but the account is gna be seriously masged up!
Im gna do some more regulary virtual trades over the next few weeks though so i can try getting a fresh feel for how the markets moving.
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