PVSRA trading strategy. Part 1. Introduction
PVSRA trading strategyPVSRA (Price, Volume, Support, Resistance Analysis) is based on three components: price, volumes and support/resistance levels. Let's look at each component in more detail.
Price
Some say, "Price is king of the market. On the other hand, we we cannot predict exactly where the market makers will move the price. There is a tendency for the price to consolidate above a key support/resistance level when market makers execute short orders with Smart Money (market makers' money) and long orders with Dumb Money (ordinary investors' money). If the price fixes below a key support/resistance level, the opposite happens.
Market makers often seek to increase the amount of smart money when the price moves after smart and dumb orders are executed so that stops on some of the smart orders are triggered, but more regular investors (or dumb money) enter the market. Such a situation gives market makers more liquidity and allows them to build up positions with smart money.
As you may have noticed, market makers act solely in their own interests. However, the main point is that price may not move away from a key support/resistance level as "planned," after which there is often a longer price consolidation.
Volume
An increase in market activity indicates an increase in interest. But what kind of interest is it, short-term or long-term? What is the big picture? Are the current highs/minimums local? If a bar with high volume has appeared, you should switch to a lower bar. timeframe and see where the largest volume appeared, at the minimum or at the maximum.
It is important to simultaneously monitor the relative changes in volume and the behavior of the price chart. Example: the market maker keeps the price inside a narrow range and we observe when the highest volumes appear, at highs or lows. Another example: we observe when significant volume appears when the market maker holds the price above or below a key level.
Support/resistance levels
It should be mentioned here that the most important levels in the market are .XX00, . XX25 and . XX50. But not because price stops, slows, breaks or reverses at these levels, but because usually above or below these levels the most important price consolidations occur (when market makers execute smart money orders). Once a long smart money order is executed, the market maker will close it at a higher price and move the price up accordingly. In the case of short orders, the opposite happens.
The basics of the PVSRA trading strategy
If we:
- Notice price consolidation above/below key levels.
- Examine the price chart at different timeframes.
- Let's pay attention to where the increase in volume occurs (at local highs or lows).
then we can draw a conclusion about the market maker's current plans. Whether he is working upwards by closing short or opening long orders; or downwards by closing long and opening short orders. Accordingly, we will be able to guess whether the market will be bullish or bearish in the short term. Usually such fluctuations are 100+, 150+, 200+ pips. And now you know why.
PVSRA trading strategy. Part 2. How the market really works