The A’s of VSA · Previous area of resistance broken through – Bar A Up trend in place...

The ABC’s of VSA: Tops and Bottoms

By Lauren Snedeker

Objectives

To identify top or bottom reversals as they happen

To recognize a double top or bottom

To set up trade entries after a reversal

Top Reversal

• What does it look like?

• What does it mean?

• How do I trade it?

What does it look like?

• Bar 1 is an up bar Bar 2 is a down bar

• Bar 1 will be marked up usually on good news, especially in a stock

• Bar 2 will reverse this good news

Stronger SOW

What does it mean?

• Bar 1 – if the volume is high = supply has overcome demand

• Bar 1 – if the volume is low = no demand for higher prices

• Top reversals are strongest when an uptrend is in place

Example

Previous area of resistance broken through – Bar A Up trend in place Successful Test – Bar B Ultra High Volume Up Bar, closing off the high – Bar C Very High Volume Down Bar, closing lower than C – Bar D No Demand confirming a downtrend and reversal – Bar E

How do I trade it?

1. Identify the reversal

2. Wait for a downtrend (trend trade)

3. Look for a No Demand or UpThrust on lower volume

4. Enter on a down bar

5. Place your stop at high of ND or UT

Double Bottoms

• What do they look like?

• Why are they significant?

• How do I trade them?

What do they look like?

• Marked by Ultra High Volume

• Wide Spread Down Bar 1

• Wide Spread Up Bar 2 – closes higher than 1

• Breaks through previous areas of support

• Downtrend should be in place

Why are they significant

They are often marked down on bad news

They represent two strong signs of strength

They show a past history of rebounding or springing from there

How do I trade them?

• Identify Climactic Action bar – closing price

• Identify the low of the bottom reversal

• Find a second bottom reversal and you can go long (more aggressive/higher risk)

• If it then breaches the climactic action bar, go long after confirmation (higher probability/lower risk)

Going Long

1. Identify the double bottom

2. Use Climactic Action bar for trading range

3. When it springs up and tests on lower volume go long

4. Place stop at bottom of No Supply/Test bar

Recap

Can you identify reversals at market tops or bottoms?

Can you recognize the significance of Ultra High Volume at these reversals?

Can you identify the confirmation signals on lower volume for your trade entries?

Thank you!

• Phone: 312-373-6294

• Email: lauren@tradeguider.com

• Skype: lauren13sned

• VSA Club: www.vsaclub.com