Murray Math and Volume Spread Analysis

Here is a chart which was put up by a great visitor of my thread in FF
to explain a different concept. I am posting this here as it is a
great example of how MM and VSA work together. In case anyone is
wondering what VSA is, it is Volume Spread Analysis. It is a study
which tries to predict SR points and PA based on the volume and the
spread of price bars/candles.

Rather than going into details of VSA, which is rather complicated,
let me try and explain the chart in very simple terms.

On the EU chart, in the first circle, price has broken thru the 2/8
support level and you can see that the candle that broke thru the
support has a very wide spread. This shows that there have been lot of
sellers right through the candle. This selling started at the top of
the swing at around 1.3380 but the big sellers came in only in this
bar and it is this huge selling that pushed the price through the
support and make the support break possible….So any candle with a
wide spread breaking through a support is a sure confirmation that the
support has been broken. So you can surely expect some more follow
through selling after the bar as well.

As you can see the follow through selling continued and in the second
circle, there is another wide spread candle/bar which broke thru the
support at 1/8 MM level. This also points to big sellers at those
prices who managed to break support. Again, this confirms the break of
support and leads to some more follow through selling.

The body of these wide spread bars/candles has a lot of sellers
residing in them. So next time, if and when price manages to come back
to the level (into the body of the bar/candle), you can expect the
same sellers to be waiting there once again. This is what is happening
in the third circle where the price has come back to the body of the
wide spread candle and is faced with a lot of sellers who had
initially pushed the price down in the wide spread bar/candle (second
circle). The same sellers again start selling in the third circle and
u can see how price struggles to go through the body of the bar/candle
in the second circle. It needs a lot of buying to absorb all the
selling made by the sellers at the body of the bar/candle in the
second circle. Finally, after 3-4 hrs, all the selling has been
absorbed and the price breaks thru support turned resistance and goes
through.

Now the same situation happens in the fourth circle. This time the
fight is between the sellers who were residing in the body of another
wide spread bar/candle (first circle). You can see that price is
struggling to break through and buyers are trying to absorb all the
selling. But this time, all the buyers are simply not able to absorb
all the selling and they lose the fight. The sellers residing there
win the battle and price goes down again.

After this, you can see some more wide spread bars/candles to break
through support. It is because of the above explanation that we can
expect to find resistance (or a lot of sellers) at the last 2 circles
in 1.3184 and 1.3245).

In all this, you can see how MM managed to pick all the SR points
correctly. So, it is not that there is SR cos the MM levels are there.
It is just that the SR levels have been picked out superbly by MM. You
can see similar things in the other chart on USDCHF as well.

See how beautifully MM and VSA work together.

By Karthik Subramanian Follow Karthik on Twitter.

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  • kussy

    hi is kussy you people have a different way of motivating amature thank for your greatness.

  • Hetaughttotrade

    Too many things in the chart!!