Bob Volman Price Action Scalping

[Kalp]

Hi Guys,

I'm starting a new thread here to post trades using the method of Bob Volman.

His method/set ups use the 70 tick chart on the EUR/USD.

Please feel free to post, it'd be nice to get a few traders together posting on this method.

-Kalpesh

PS This is the old thread which contained a mix of EUR/USD scalping methods
http://www.trade2win.com/boards/forex-strategies-systems/150178-eurusd-19.html

 

[BLS]

If anyone is interested in learning more about this method, you can find some notes here (I did not write these).

You can also find some excerpts of Volman's book here.

 

[Omoh101]

Thanks for adding the links BLS

 

[Kalp]

I did not take this trade, but to get the posts started here's a range break trade from today. Times in chart are GMT

 

[BLS]

No trades for me today but there were some skipped ones.

S1: Skipped IRB setup. The chart starts off with a slight downtrend, after which bulls enter 4 pip above the 80 level. After a false break of the 20EMA, the bulls manage to bring prices within 3 pip of the 1.2300 level. They try three times to attack the 00 zone (1,2,3), but they fail. We can draw a line with this three tops but we don't have much of bottom barrier yet. After that triple top, the bears start to flex their muscles. The bring prices down the 80 level, taking out earlier support. The bulls aren't done yet and they serve the bears a false break (4). The bears keep shorting at lower and lower levels while the bulls buy at the same level of support (5 and 6). Something's got to give. Either the bulls realize they are losing of the bears get cold feet and fail at break the bottom barrier. I was rather surprised when the bulls managed to get themselves out of that squeeze. I was ready to trade the break of the bottom barrier. But after the bulls managed to escape the grip of the bears, I quickly switched to a neutral view. I wasn't sure who was winning, so by the time this setup formed I chose to skip it.


S2 and S3: If this range had formed anywhere else I probably would have taken these trades. I skipped this perfectly good range break because I find trading right under a 00 level to be tricky. I been burned a few times before. Judging by the slow price action earlier, I didn't think the bulls would be able to break the 00 level successfully.


Would it be easier for you guys/gals to read if I had my analysis on the charts themselves like what Kalp does?

 

[Kalp]

Some good analysis there BLS, I too am cautious at the round number levels and prefer to wait to see whether there is any follow through /further confirmation before putting a trade on.

I personally like your commentary separate to the charts as you write a bit like Bob (which is great) and it may get cluttered if you put it all on a chart.

 

[BLS]

E1: This Second Break setup just didn't work out. The trend was bearish and the pullback retraced about 60% of the last swing down. Prices stalled under the 20EMA perfectly. The only thing to worry about was possible support at the 60 area but since it was not visible on the chart I chose to ignore it.

S1: This BB setup was nice but since it was a countertrend trade I chose to skip it. I could not see any convincing clues in the chart that suggested the trend was reversing (no clear reversal patterns).

S2 & S3: This SB setup itself if fine but the conditions seem unfavorable to me. Prices retrace about 46% of the last swing of the first pullback, right into the former support turned resistance from the block at S1. The unfavorable part of this trade was visible chart support (green line). My concerns were reinforced when prices broke through the green line and immediately pulled back, leading me to skip S3 as well (a DD setup).

M1: Prices bounced off a level of support after 40+ pip downward move (1) and proceeded to form a mini double top (2 and 3). There's not much to make of this price action until a second bottom formed (4). This is a very noticeable double bottom; things are getting interesting. I immediately start looking for counter trend opportunities after that false break (F). If prices can stay around the 80 level and slowly make a squeeze we'll have a good countertrend RB setup. Things didn't work out that way but I was still looking for a long trade even after prices started to move away from the 80 level. I started to get distracted because prices weren't going my way; I was bored. I did not notice that the bulls failed to testing the 80 level to the pip (5) and I did not notice this IRB setup form. Given the failure of the bulls to keep the pressure up on the bears, I think taking this break was the right thing to do, despite that prominent double bottom (we have the trend on our side). I think this example illustrates one of Volman's points very well; we should not expect anything from the market. All expectations do is cloud your judgment and blind you to other possibilities. We should keep an open mind while trading because anything can happen.

-5.5 pip for me today.

One thing that I'd like to make a note of is that I do not always elaborate this much while I am trading, though I am trying. Most of my analysis is done in hindsight, which reflects my boredom and distraction from the market at the time of trading (bad!). I think trying to create a narrative of current and overall price action helps keep me focused and helps me see the entire picture more clearly. What sometimes may look like aimless price action will actually have a lot of helpful clues in terms of possible direction if I just take to time to look for them.

 

[Kalp]

A tricky day today for EUR/USD with many set ups being skipped due to earlier price action potentially acting as imminent support or resistance in the way of our 10.

I've attached a AUD/USD chart to illustrate a non EUR/USD application of the method.

 

[BLS]

A tricky day today for EUR/USD with many set ups being skipped due to earlier price action potentially acting as imminent support or resistance in the way of our 10.

I've attached a AUD/USD chart to illustrate a non EUR/USD application of the method.

While Kalp is right that Bob's principles are universal, if you are relatively new to trading like I am it is advised that you stick with one currency pair when trading.

On with today's trades:

S1: Skipped Range Break setup. The overall pressure favors a short trade but the break itself was of the tease variety (prices bounce off the 20EMA and break without much buildup). After prices dropped a bit below the 60 level, sideline bulls entered and deployed their longs. The bears decide to push back the 1.2269 level. The bulls, ever keen to defend the 60 area, buy prices back up at a higher support level than (1). But all they could muster was a lower high (3). We can't count the bulls out yet as they fall back and defend their earlier support level (4). Yet again they are served with a lower high (5). The bears are shorting at lower and lower levels while the bulls are trying to defend the same support level). The mistake the bears made was to break the bottom barrier without buildup; they are quickly countered by the bulls. I would have liked to see prices test the 20EMA/60 level again before taking a break of the range to the downside; this would have given us a proper squeeze the could lead to double pressure (bulls bail and bears enter, pushing prices down).

E1: Prices continued to range around the 60 area for a good hour after S1. The top and bottom barriers aren't too well defined; the bottom barrier wasn't final until (6) had occurred. The overall pressure supported a short trade. We still have that downtrend on our chart from earlier. We also have a series of lower highs (2, 3, 4,5), leading up to a squeeze (prices bounce off 6, test the 20EMA, then proceed to break). It would have been preferable to see more buildup with prices bouncing between the bottom barrier and 20EMA a bit more but I felt that the big bearish doji that broke the range was enough push me over the edge to take a short. Unfortunately prices have trouble following through with the break and stall a bit before testing the 20EMA again. Prices pierced the 20EMA a bit, which is usually normal, but with a lack of follow through and prices crawling back inside the range, I thought it best to use this as my next tipping point should prices break through the lows of (1). Prices again stall, luring countertrend traders in, and I am stopped out for a 4.1 pip loss (0.7 pip from commission).

S2: Will have to comment on this later

S3: You could think of this as an Advanced Range Break. This was skipped because of unfavorable conditions; there was visible chart resistance from the dotted box to the left.

S4: Possible Block Break setup. The setup stands 3 pip tall but given the recent bearish move, this could be a good setup. But it still suffers from the same chart resistance as S3. If there wasn't visible chart resistance, I probably would've taken S4 if not already in S3.

S5: I could not argue against a more aggressive scalper from taken this DD setup. My only issue is that the pullback did not touch the 20EMA, so it's possible the prices may pullback even more (which would take out my stop)

4.1 pip loss for me today.

 

[BLS]

Sorry, I don't have time to write up all of my trades but I'll write up the best one from today.

E3: After that tease break at (E1), the bulls took over the show. They did not foolishly try to make a large run upwards. They carefully built a base of support above the 80 level (dotted box), keeping prices above the 20EMA, before trying to move on and attack the upper area of the range. Prices bounced off my initial barrier (lowest dotted line) and printed 12 dojis under the barrier. That's a lot of tension but it wasn't enough to crack the highs of (1). The bulls are to be discounted for they created a second base of support with that group of dojis (orange line). Prices dipped below this support and proceeded to test the first base of support (2). Prices promptly bounced off and hit the second dotted line, leading me to redraw my barrier line one pip higher. Prices drop and test the second base of support (3). From there they printed yet another high so I redraw my barrier line to match the cluster at (1). Prices again test the second base of support (4) and make yet another high, matching the highs of the cluster (1). At this point prices are moving quite fast; there's a lot of action and I can see it in the price bars as their levels fluctuate. The bulls test the new high (1.2194) yet again, which pretty much confirms the newest barrier line. We see a test of the 20EMA and another bounce to the upper barrier, leading to the classic two doji pre-breakout tension. These are all very bullish signs. I immediately take the break of the range and reach target in less than a minute.

 

[UnderstandingContext]

Kalp and BLS,

It's good to find some others pursuing Volman's scalping style.
Your analysis looks a little stronger than mine. Which will be good for me learn along side of you.

I started a blog dedicated to mastering Volman's style. All trades shown are live trades using the smallest size possible. My hope is to show the effort/struggle needed to master any trading style, and the continual learning that takes place whatever you try to learn (learning guitar, soccer, poker, whatever).

My blog is at
Learning To Trade Like Bob Volman
The entire archive is here:
Learning To Trade Like Bob Volman: Archive

I've been surprised how much patience you need to properly trade Volman's style. But you do start to get a better feel for the rhythm and ebb and flow of the 70 tick chart with more and more screentime everyday.

I'm a little bummed to lose Mike from this forum, he had some great posts regarding this scalping style.

UnderstandingContext

 

[Kalp]

Hey UC,

It's good to have you on board! The idea of posting here was to post trades and to connect with others trading Bob's method, so I'll def check out your blog, thanks for the links!

I often chat with BLS on skype during the session to keep up both focussed on price action and ensuring we are patient.

If you want to join us, regularly or just the one off, it'll be good to have another to bounce the Volman method off in real time.

-Kalpesh

 

[BLS]

Skip/Miss: I was looking for a short trade before the bulls wriggled themselves out of that squeeze (3). After a nice uptrend, the bulls printed a double top (1 and 2) and were getting squeezed (3), but I guess it may have been too early, in hindsight, to even take a countertrend trade. Bob says that we need to see a convincing reversal pattern and if we don’t have it (11.9 I think), that we should wait for more price action to confirm that the indeed the bulls are losing. I was put off by that huge bullish candle (4) because I thought that was a terrible way for the bulls to make a break. I guess I'm still shocked, even after that pullback inside the range, that I hesitate to trade this ARB setup.


E1: Prices found support above the 60 level, right above that previous bulls flag (dotted box). This trade was perhaps a bit aggressive seeing at the test of the 20EMA and that test of the upper barrier occur in the same bar. The bulls were unable to follow through on the break after such a strong candle so I move my tipping point up to the level of the upper barrier after that bounce created a lower higher. I get stopped out for a total loss of 3.8 pip.

 

[BLS]

E1:

The formation at (1) creates a higher high but the bulls are unable to follow through. We can't count them out yet though as the 00 level is likely to bring in sideline bulls ready to enter at better prices. Price bounces off of the 00 level (2) but can't even test the 20EMA before falling under. Bullish support is faltering but the bulls aren't ready to give up yet as they fight it out with the bears right under the 00 level. It's clear that the bulls lost the 00 level when prices broke out of the dotted box (3).

All the bears have to do now is put the squeeze on the bears to create some double pressure. We can begin to consider a bottom barrier when the lows of (4) and (6) formed but the bottom barrier was rough any way you put it. The bulls find support and manage to test that earlier dotted block (5). All looks well for the bears until the bull print a higher high (7), where the test that dotted box to the pip.

The following drop is prices suggest there was some double pressure here; perhaps I missed the boat on this one. The bulls having tried to break through an earlier defense of the 00 level and failing led many to bail out and led some bears to enter. Prices drop 12 pip, straight through my barrier.

I chose to skip that ARB setup (S1) because the closest technical stop would be 1 pip above that last swing high, which exceeds my maximum 10 pip stop loss. I was also wondering at this point whether I was asking too much of the market to move another 10 pip or so having already moved 12 pip. I ignored this concern when I saw a more superior ARB setup of the clustering variety form. This setup gave me a technical stop within my reach since the bottom barrier held at the test of it.

The bears are unable to follow through past the 79 level so I move my tipping point 2 pip down when prices pulled back 1 pip beyond the 20EMA and proceed to break back down. I was stopped out shortly (9) for a loss of 3.2 pip.

 

[BLS]

S1: A rather aggressive BB setup but given that strong down move it was ok to take this trade. The problem I had with this was that the nearest technical stop would put your stop at about 9 pip away from entry. Given the speedy price action at the time I was likely to experience some negative slippage, which would have made managing my stop a bit harder.

DD: DD here could have been taken here but I find it rather aggressive on account of that disorderly pullback.

M1: Prices pulled back into support turned resistance and formed a BB setup. I was not expecting a break at the time so I missed this move. We don't even get a signal line until the second to last bar. Prices test the 20EMA and break out at the same bar. I wanted to see at least one doji before the break but I guess given the strength of the trend I should have been more alert.

E2: Classic DD setup. After that missed BB trade prices pulled back into the 20EMA in a mostly diagonal fashion and tested some former support at the lows of (1), formed two dojis, and broke to the downside. Prices found some support at the 1.2205 level which formed a BB setup. I am a bit emotional at this point because I am so close to my target (bad, I know) and I breath a sigh of relief when I hit target after the break of the block.

The lesson here today is that you should exercise some aggression in the face of a strong trend. There will be times when you get stopped out but the rewards for your aggression will outweigh them. I didn't really understand or accept this lesson until today.

 

[BLS]

E1: I got caught in an obvious tease break. According to Bob, a trader's main concern is to avoid the most classic and costliest mistakes because those are the biggest threats to profitability. I think I am ready to accept that now.

 

[BLS]

So I think I'll try something new. It seems there are a few lurkers on this thread and I want them to participate. I don't care what you have to post as long as it's related to trading Bob Volman's method. Post your questions, concerns, results of manual back testing, etc. You don't have to post actual trades you took. I understand some of you may be busy but just take a little time to post something. Maybe introduce yourself like UnderstandingContext has.

So here's what I want. I want somebody other than Kalp and UnderstandingContext to post in this thread. At least one person who can post on a somewhat regular basis, maybe 1-3 times a week. Until then I'm not going to post any (detailed analysis) of my trades.

 

[sonatine]

So I think I'll try something new. It seems there are a few lurkers on this thread and I want them to participate. I don't care what you have to post as long as it's related to trading Bob Volman's method. Post your questions, concerns, results of manual back testing, etc. You don't have to post actual trades you took. I understand some of you may be busy but just take a little time to post something. Maybe introduce yourself like UnderstandingContext has.

So here's what I want. I want somebody other than Kalp and UnderstandingContext to post in this thread. At least one person who can post on a somewhat regular basis, maybe 1-3 times a week. Until then I'm not going to post any (detailed analysis) of my trades.

Hi BLS, thanks for encouraging lurkers like me to participate. I'm new to trading, had a few months' demo experiences then stopped completely to study technical analysis and Volman's book. Right now I just finished the Second Break chapter.

I do have a few questions but was too timid to ask since I saw you guys posting advanced setups. Now that I've read your kind words, let me start with the following:

1. About ProRealTime. Volman mentioned that one should use a stand-alone package solely for charting purposes, and should not use the charts from the trading platform. I wonder why. What if the data feeds are quite different. Where does ProRealTime get the forex data? Are prices from ProRealTime similar to those from your broker? Do you use free access to ProRealTime (it mentions that smartphone can have real time data) or do you pay for the service?

2. One concern I have about tick chart is different brokers can have very different tick charts while time charts should be a lot more similar. What's your thoughts about this issue? Has anybody ever applied Volman's methods on 30 sec, M1 or M5 charts?

3. On FB. Is my understanding correct that "the first bar in a substantial pullback that gets taken out in the direction of the trend" (from page 61) means price should break at least 2 pip from the low or high of previous bar? This 2 pip thing was mentioned near the bottom of page 64 but never stated "officially" elsewhere.

4. In Figure 9.2 (page 86) why is the first break skipped? The only reason I can think of is because of the round number 1.2850 but it applies to SB as well, besides Volman said it's obvious one should skip FB before he mentioned the RN issue.

Thanks in advance!

 

[BLS]

Hi BLS, thanks for encouraging lurkers like me to participate. I'm new to trading, had a few months' demo experiences then stopped completely to study technical analysis and Volman's book. Right now I just finished the Second Break chapter.

I do have a few questions but was too timid to ask since I saw you guys posting advanced setups. Now that I've read your kind words, let me start with the following:

1. About ProRealTime. Volman mentioned that one should use a stand-alone package solely for charting purposes, and should not use the charts from the trading platform. I wonder why. What if the data feeds are quite different. Where does ProRealTime get the forex data? Are prices from ProRealTime similar to those from your broker? Do you use free access to ProRealTime (it mentions that smartphone can have real time data) or do you pay for the service?

2. One concern I have about tick chart is different brokers can have very different tick charts while time charts should be a lot more similar. What's your thoughts about this issue? Has anybody ever applied Volman's methods on 30 sec, M1 or M5 charts?

3. On FB. Is my understanding correct that "the first bar in a substantial pullback that gets taken out in the direction of the trend" (from page 61) means price should break at least 2 pip from the low or high of previous bar? This 2 pip thing was mentioned near the bottom of page 64 but never stated "officially" elsewhere.

4. In Figure 9.2 (page 86) why is the first break skipped? The only reason I can think of is because of the round number 1.2850 but it applies to SB as well, besides Volman said it's obvious one should skip FB before he mentioned the RN issue.

Thanks in advance!

Welcome to the thread sonatine!

1. Volman recommends a standalone package because he doesn't want a scalper to be distracted by his profits and losses. By using a standalone package, a scalper can hide his broker platform window,thus hiding his current P/L and account balance (this is assuming you can find a platform with a "always on top" ticket window). I don't know the source of ProRealTime's feed but I do know that the prices are pretty close to my broker's (I am using Trader's Way) because I took the time to compare them. Volman suggests either using a different charting package/data feed or a different broker if you see (noticeable) differences between the two. ProRealTime's mobile package doesn't include the tick chart so you'd have to have a subscription. They do offer a one week free trial (no need to give them any credit card details).

2. This might be a reason why Volman suggests using a standalone charting package. While the price action principles are universal, his setups are less so. His setups typically require a signal line to trade off of, which is harder to determine when you don't have a charting platform that only shows candles in 1 pip increments. It is possible to use the 30 second chart but it's not ideal. You can check out the posts from Mike in this thread where he uses the 30 second chart to trade (sorry, I don't know which broker he is using).

3. No. Prices just need to break the signal bar by one pip on the chart. The 2 pip break he mentions is about calculating the discretionary stop loss. Bob's method involves two stop. One is the 10 pip stop that is set when you enter a trade. Typically you won't need this 10 pip automatic stop, it's just there in case something goes wrong (computer crashes, loss of internet connection etc). What he was talking about on page 64 was calculating the desired stop loss, which is usually one pip below a signal bar (for a long trade). So if your signal bar is 5 pip tall, and you enter long on the break of it, your stop becomes 1 pip (for the break to the UPSIDE) + 5 pip (for the length of the candle) + 1 pip (for the break of the signal bar to the DOWNSIDE) = 7 pip. You don't have to worry much about this yet, he will explain this in greater detail in the Trade Management section.

4. The first break is skipped because it does not meet the requirement for a FB setup to come from the first pullback against a trend. The with trend move for the skipped first break came from an earlier pullback against the trend (from 3 to 4).

My advice to you, if you aren't already doing so, is to take notes as you read Bob's books. Try to summarize the conditions for each setup type that he lays out in the beginning of each chapter. Take note in the examples that he covers why it is sometimes okay to trade the less-than-ideal setups. There are many subtleties involved in reading the price action and Bob will explain these throughout the book so don't just skim over them. Those little clues he points out are very important in the determining what the direction of future price action is likely to be. Don't rely on the setups to tell you what direction to trade in. The setups should only be used to determine WHEN to enter.

When you are done with your first reading and taking notes, reread the book again. I didn't pick up on all the important points in the book on my first or second reading because I was too focused on the setups themselves. Read each example carefully. Try to write down the reasons that Bob gives for AND against taking a trade because this is what you'll have to do when trading. You will have to rationally defend your reasons for taking a particular trade if you want to be successful. Bob will reiterate many important points throughout the book so try your best to pick up on them.

Don't feel bad if you feel the need to reread the book several times more. I had to reread the book many times before I was ready to accept many of the points Bob tried to make because I wasn't ready to accept time until I had some trading under my belt. For example, Bob says on page 265 that the most important part of scalping is to understand the price action principles so that you can avoid the obvious bad trades. I didn't really "get" this point until this week and I've been trading live for almost two months now (I started reading the book in the middle of February). So don't feel discouraged if you feel confused. The learning process will take awhile but as you start to trade live (even on a micro account) you will start to understand more and more of what Bob is trying to teach you (I still have much to understand).

Or maybe I'm just a slow learner. :innocent:

 

[BLS]

Guess I'll post one trade from 7/19 (I took a total of four trades). I think there are a couple more lurkers in this thread.

Charts are in GMT.

E1: Prices near the beginning of the chart came up from an up trend but formed a head and shoulders pattern (1,2,3) under the 1.2320 level. The bears capitalize on this topping pattern by slamming prices back down below the 00 level. The bulls haven't given up yet. They form a small base of support (4) and bring prices back up past the 1.2310 level. This higher price brings in some sideline bears as price are sold back down, creating a lower high. The bulls are fighting to keep prices above the 00 level (6) but the bears are tightening the screws them with yet another lower high (7). We can draw a bottom barrier after (7) formed but it's a little rough. I kept my barrier here (1.2297) after prices broke with what looked like a tease at the time. Three tiny dojis cluster above the 1.2296 level, forming a signal line to trade an ARB. This entry is rather aggressive but I thought it was worth the risk to take this trade. We don't have the best looking squeeze, such as those found in Bob's book, but the context in which this setup appeared is very supportive of a short trade. If you decided to draw the barrier at the 1.2296 level (one pip below mine), you could enter at the white arrow as a pullback ARB, placing your stop at the 1.2297 level.