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    This document provides an overview of volume-spread analysis (VSA), a discretionary trading strategy. It describes the key elements of the VSA matrix and signals, including wide spreads, increasing slopes, and declining volume not accompanied by price advances. It discusses testing the strategy using historical data to quantify elements like spread, price pulse, and their ratio. Testing also involves measuring metrics like maximum adverse excursion and maximum favorable excursion over time. The goal is to optimize trading clusters based on stop losses and profit targets to achieve positive expected value. References for further reading on related topics are also provided.

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    This document provides an overview of volume-spread analysis (VSA), a discretionary trading strategy. It describes the key elements of the VSA matrix and signals, including wide spreads, increasing slopes, and declining volume not accompanied by price advances. It discusses testing the strategy using historical data to quantify elements like spread, price pulse, and their ratio. Testing also involves measuring metrics like maximum adverse excursion and maximum favorable excursion over time. The goal is to optimize trading clusters based on stop losses and profit targets to achieve positive expected value. References for further reading on related topics are also provided.

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    This document provides an overview of volume-spread analysis (VSA), a discretionary trading strategy. It describes the key elements of the VSA matrix and signals, including wide spreads, increasing slopes, and declining volume not accompanied by price advances. It discusses testing the strategy using historical data to quantify elements like spread, price pulse, and their ratio. Testing also involves measuring metrics like maximum adverse excursion and maximum favorable excursion over time. The goal is to optimize trading clusters based on stop losses and profit targets to achieve positive expected value. References for further reading on related topics are also provided.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    133 views21 pages

    PDF

    Uploaded by

    kaushik
    This document provides an overview of volume-spread analysis (VSA), a discretionary trading strategy. It describes the key elements of the VSA matrix and signals, including wide spreads, increasing slopes, and declining volume not accompanied by price advances. It discusses testing the strategy using historical data to quantify elements like spread, price pulse, and their ratio. Testing also involves measuring metrics like maximum adverse excursion and maximum favorable excursion over time. The goal is to optimize trading clusters based on stop losses and profit targets to achieve positive expected value. References for further reading on related topics are also provided.

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    of 21

    Volume-Spread Analysis

    (VSA)

    Charles Buttermore
    July 31, 2018
    Disclaimer
    Disclaimer: Neither TradersMeetup.net nor its organizers, hosts or presenters are licensed financial advisors,
    registered investment advisors, registered broker-dealer nor FINRA | SIPC | NFA-member firm. In accordance to the
    policies of TradersMeetup.net, this presentation does not provide investment or financial advice or make investment
    recommendations. TradersMeetup.net is not in the business of transacting trades, nor does TradersMeetup.net agree
    to direct your brokerage accounts or give trading advice tailored to your particular situation. The content of today’s
    presentation does not constitutes a solicitation, recommendation, promotion or endorsement of any particular
    security, other investment product, transaction or investment.

    Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk
    of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light
    of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment.
    Opinions, market data, and recommendations are subject to change at any time.

    All rights reserved. This Material may not be reproduced or distributed, in whole or in part, any other reproduction in
    whatever form and by whatever media, is expressly prohibited without the prior written consent of TradersMeetup.

    No Soliciting. No Recording. No Photography.


    Self Introduction

    MBA in Finance & International Business. Worked as an analyst


    and portfolio manager for RIA firms.

    A member of TradersMeetup of Spokane.

    Proprietary trader with Patak Trading Partners (via


    TopStepTrader) for 2.5 years.

    Currently a fulltime trader with 10+ years experience. Specializing in Crude Oil
    futures. Before that, traded long term equity options from a fundamental perspective.

    I enjoy sports/fitness, permaculture farming/gardening, autos & racing.


    Agenda

    ● VSA Matrix

    ● Strategy, Signal Logic

    ● Discretionary

    ● Testing & Automation


    VSA Matrix
    Discretionary Strategy: Signal Logic
    1. Wide-spread bar

    2. Increase in ‘slope’

    3. Volume decreases significantly AND


    price fails to advance
    Discretionary Strategy: Considerations
    1. Bar color does not matter!

    2. Build context -- Stay out of the middle!

    3. Match your SL/PT and frequency to


    the time frame!
    Discretionary Strategy: Gold
    Discretionary Strategy: Gold
    Discretionary Strategy: Crude Oil
    Discretionary Strategy: Crude Oil
    Testing: Isolate Phenomenon from Historical Sample
    Rising Volume Rising Volume Falling Volume Equal Volume
    SHAPE
    Narrower Spread Wider Spread Narrower Spread Narrower Spread

    ‘SLOPE’

    VOLUME
    DECLINE %
    Testing: Quantify Sequence Range

    SR
    Testing: Quantify Price Pulse

    PP
    Testing: Quantify Range / Pulse

    SR ÷ PP = (%)
    Testing: Multi-Dimensional Coordinates

    Shape Volume Decline ‘slope’ Coefficient Energy Proxy

    A1 vd1 vsc1 v1 v2 v3 v4 (Volume)

    A2 vd2 vsc2 vr1 vr2 vr3 vr4 (Range)

    B1 vd3 vsc3 vp1 vp2 vp3 vp4 (Pulse)

    C1 vd4 vsc4 vrp1 vrp2 vrp3 vrp4 (Range ÷ Pulse)

    4 x 4 x 4 x 42 = 1,024 Four-Element Sets


    { _____ , _____ , _____ , _____ }

    Examples:
    {A1, vd2, vsc3, vp3} {B1, vd4, vsc1, vr2}
    Testing: Tetrahedron Geometry

    Volume-Decline

    4
    vd
    3
    vd
    2
    vd

    Energy
    Volume
    1
    vd

    Shape
    vsc1
    vsc2
    vsc3
    vsc4
    Volume-Spread
    Coefficient
    Testing: Measure MAE & MFE

    MAEt3
    MAEt2

    Stop Loss
    MAEt1

    Time

    MFEt1

    MFEt2 tn

    Profit Target
    MFEt3
    t1 t2 t3
    Testing: Optimize Clusters
    {Α1, vd1, vsc2, vr3}

    Stop Loss IF: Stop Loss > MAE


    AND
    Profit Target ≤ MFE

    True False

    Winner Loser
    Profit Target * Stop Loss *
    Contract Size - Contract Size -
    Commission Commission

    Profit Target {Total Profit} = (# Winners * Profit) – (# Losers * Loss)


    References

    NOTE: These are not investment recommendations sources,


    but rather source of reference for you to check (ie. get
    to know what is out there)

    The Undeclared Secrets that Drive the Stock Market


    -- Tom Williams
    Making it in the Market & The Wall Street Gang
    -- Richard Ney
    The Psychology of Technical Analysis
    -- Tony Plummer
    How the Market Makers Extract Millions of Dollars a Day
    -- Martin Cole

    YOUTUBE
    Mark Chapman -- “Trapped Traders”
    THANK YOU

    Contact Info:

    Charles Buttermore

    [email protected]

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