medium · Volume Spread Analysis supply-demand-smart-money
How does the 'Negative Response' principle help a trader avoid a 'Bull Trap' when they see a technically perfect low-volume test?
- It suggests that if a test succeeds, the market must immediately gap upward to confirm real professional buying interest.
- A negative response occurs when the volume on a test bar is higher than the prior two bars, which invalidates the low-volume signal.
- If the market fails to move higher within 1 to 3 bars after the test, it suggests that background weakness is overriding the signal.
- The principle states that any test occurring within a downtrend is automatically a sign of weakness and should therefore be shorted immediately.
Sign up free to see the explanation and track your rank →
More Volume Spread Analysis supply-demand-smart-money practice
- When observing a 15-minute chart of a stock traded in London… — Why might a VSA practition
- Very bad news breaks for a major retail stock. Instead of th… — What is the likely objecti
- Why is the classification of 'Relative Volume' more important than 'Absolute Volume' when
- A 'No Demand' bar is identified by a narrow spread up-bar wi… — Why does this signal often
- The S&P $500 index drops 5% over a week. During this same pe… — What is this 'relative str
- Which of the following describes the behavior of 'Strong Holders'?
- An index has been rising for months. You identify a stock th… — What does this indicate?
- In the context of 'Smoke-Filled Room Syndrome,' why do multiple professional operators oft