High volume VSA spike Part 2

As this was such a good setup I want to take a closer look.

For me, I love it when we get a break to new highs or lows, breaking an important prior high or low. And I particularly like it after a long choppy period when most amateur traders are frustrated. A sharp move to new highs or lows then occurs on high volume. BUT (and this is the important part) this break immediately fails, and usually fails right at our DP zone.

This failure to continue the move to new highs or lows is a classic “fake out” by the professional traders. It works best on horrible days like yesterday when it catches out all the amateur traders in the wrong direction.

The reversal from this failure usually results in a nice quick profit as the market quickly moves in the opposite direction trapping all the suckers who took the break. That is why it is often called a “fake out” or “sucker play”.

Thanks

Steve

High volume VSA spike

Hi Everybody,

After a very choppy and frustrating day on the 3min ES we got a perfect example of our high vol, VSA, spike trade setup late in the day. As you can see from the chart the high unfolded at 2 DP’s (as well as a 15min DP, not shown), on nice stochastic divergence. As such this was a great example.

The ES then declined nicely into the close for a +6R Profit (ignoring slippage and commission)

It just goes to show how patience and discipline is needed in trading. It would have been so easy to get frustrated as the ES was just chopping sideways in a narrow range for most of the day, so you could have given up and gone home. But if you had then you would have missed this good profit at the end of the day.

Thanks

Steve