I am writing something about VSA after a long
time. The last time I posted the buying
and selling pressure indicator which is a good add on indicator for VSA. Now I am
going to talk about indentifying hidden weakness in the bars. Many times we see up bars closing near the
top with good volumes. Most would
naturally assume there is strength in those bars as it is an up bar, closing in
the top and has good volume, all traits of strength. However there could be
hidden weakness in these bars. Obviously the question is why and how we
identify these.
Let us take the nifty chart as example. In the
chart I have plotted the chart in one pane, the volume in another. The third
pane consists of a new indicator which I call as the Effort index. This chart plots the effort (in effect
volume) as bars below the middle line. The result is plotted above the middle
line as bars. Now let is look at the
charts and focus on the three bars marked 1, 2 and 3. In the Bar marked 1 we can see a wide spread “Effort
to Move up Bar” with good volume. In the pane three we can see that the effort
was high and the result was also equally high. In other words the effort
produced the required result. Now look at the bars marked 2 and 3. These are up
bars closing near the top and volume was high almost equal to the previous day’s
volume. So it is natural to consider that there is strength in these bars as
well. But when we look at the pane 3 we see that the effort was high but the
result was poor. So there is a mismatch
between the effort and the corresponding result which indicates weakness. The
reason could be that the smart money has been distributing without bothering
for higher prices. So these two bars (marked 2 and 3) really indicates weakness
rather than strength. As you can see the weakness manifested from the very next
bar the market came down. So looking at the effort and the results can tell us
more about the bars. This is helpful in bar to bar analysis.
I am planning to release the new indicator “Effort
Index” soon. More about is soon.
Eagerly waiting for the indicator Karthik Sir
ReplyDeleteno one can beat this indicator,,, if anyone know sits25 % how to read its,,, enough to determine the trend of nifty,,,,and i am on way still,,,and trust me its very easy
ReplyDeletesir,,
ReplyDeletethe way u have described the net effort even when the nifty was moving up with vol in green,,
similarly if we go back,, around mid april as shoing in this above chart when nifty was falling with vol,,, the effort seen to move it southwards was less , hence,, it wsa considered weakness in falling hence buying triggered,,, point me if i am wrong
Dear Sir,
ReplyDeletePlease provide interpretation for weakness and strength for EFFORT Indicator along with buying and selling signals,so that we can trade by using this good indicator.Waiting for your kind reply
Regards
Vishnu
Email id:-sic996@gmail.com
from where i get vsa afl
ReplyDeleteKindly share your number
ReplyDelete