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Volume Spread Analysis Abcs Of Vsa BETTER


Volume Spread Analysis (VSA): The Abcs of Trading with Supply and Demand






Volume Spread Analysis Abcs Of Vsa


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Volume Spread Analysis (VSA) is a powerful method of technical analysis that can help you understand the market movements and trade with the smart money. VSA is based on the concept of supply and demand, and it analyzes the relationship between volume, price and range of each price bar.


In this article, you will learn the basics of VSA, how to identify the signs of professional activity, and how to apply VSA to your own trading.


What is Volume Spread Analysis (VSA)?




Volume Spread Analysis (VSA) is a method of technical analysis that was developed by Tom Williams, a former professional trader. VSA is also known as Wyckoff VSA, as it is based on the ideas of Richard Wyckoff, who studied the market behavior of large institutional traders.


VSA is based on three main elements:


  • Volume: The amount of trading activity in a market. Volume shows the level of interest and participation in a market.



  • Spread: The difference between the high and low of a price bar. Spread shows the range of price movement in a market.



  • Closing Price: The final price of a price bar. Closing price shows where the market closed relative to the spread.



VSA analyzes these three elements together to determine the balance between supply and demand in a market. Supply and demand are the forces that drive the market prices up and down. When supply exceeds demand, prices fall. When demand exceeds supply, prices rise.


VSA assumes that there are two types of traders in the market: professionals and amateurs. Professionals are large institutional traders who have access to more information and resources than amateurs. They can manipulate the market prices to their advantage by creating false signals and traps for amateurs. Amateurs are retail traders who follow the crowd and react to price movements without understanding the underlying causes.


VSA aims to identify the signs of professional activity in the market by looking at volume, spread and closing price. By doing so, VSA traders can follow the footsteps of the smart money and trade in harmony with them.


How to Identify Professional Activity with VSA?




VSA uses various terms and concepts to describe different types of volume patterns and price bars that indicate professional activity. Some of the most common ones are:


  • No Demand Bar: A narrow spread bar with low volume that closes near its low. It shows that there is no buying interest in the market and that professionals are not supporting higher prices.



  • No Supply Bar: A narrow spread bar with low volume that closes near its high. It shows that there is no selling pressure in the market and that professionals are not pushing lower prices.



  • Effort to Rise/Fall: A wide spread bar with high volume that closes near its high/low. It shows that there is a lot of buying/selling activity in the market and that professionals are trying to move the prices up/down.



  • Stopping Volume: A wide spread bar with high volume that closes near its low/high after a downtrend/uptrend. It shows that there is a lot of buying/selling activity in the market and that professionals are stopping the prices from falling/rising further.



  • Test: A narrow spread bar with low volume that closes near its high/low after a downtrend/uptrend. It shows that there is a lack of selling/buying activity in the market and that professionals are testing the strength of demand/supply before moving the prices up/down.



  • Reversal Bar: A wide spread bar with high volume that closes near its high/low after a test or a stopping volume. It shows that there is a lot of buying/selling activity in the market and that professionals are reversing the prices up/down.



The following chart shows some examples of these VSA patterns:


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