What Is Volume Spread Analysis?
๐ก Definition
VSA studies the relationship between a barโs volume (โeffortโ), its spread (highโlow range), and the close location to infer underlying supply vs demand and the activity of informed participants. It focuses on effort vs result, background context, and confirmation on the next bars.
Big volume with weak progress hints at absorption/supply; small volume with strong progress signals lack of opposition. VSA is most powerful when combined with structure (S/R, trends, ranges) and risk rules.
Visual Overview
Key VSA Signals on a Simplified Chart
Interpret bars by effort vs result: wide spread + high volume but poor progress โ supply/absorption; narrow spread + low volume on rallies โ no demand.
Core Elements of VSA
๐ Spread
High โ Low. Wide spreads show strong effort; narrow spreads show little price result.
๐ฆ Volume (Effort)
Compare to recent bars (relative/percentile). Abnormally high or ultra-low is most informative.
๐ Close Location
Close relative to range (CLV). Closes near high with high vol after decline โ demand; near low with high vol โ supply.
๐งญ Background
Read prior action first (trend, S/R, climactic bars). Signals make sense within context.
Common VSA Signals
โคด๏ธ Upthrust
Wide up-bar through resistance on high vol, close near low โ supply overcame demand; watch for bearish follow-through.
๐งฑ Stopping Volume
Very high volume down-bar closing mid/high in a decline โ demand absorbing supply; expect test/markup if confirmed.
๐ No Demand
Narrow up-bar, low vol, close mid/high into resistance โ weak buying interest; bearish if followed by down-bar.
๐ช Shakeout / Spring
Down-bar pierces support on high vol but closes strong โ weak hands shaken; bullish on successful test.
๐งช Tests
Low-volume dip into prior supply zone. If next bar is up (no selling), continuation long is favored.
Quick Metrics & Checks
Calculations
S = High โ LowCLV = (Close โ Low) / max(S, ฮต)RV = Vol / median(Volโ) (e.g., n=20)RV + Narrow S โ absorption; Low RV + Wide S โ little oppositionSignal Validation
Why VSA Works (Practically)
- Effort vs Result: When big effort produces little result, strong hands are absorbing.
- Liquidity Footprints: Climax, absorption, and tests leave consistent volume patterns.
- Behavioral Edges: Shakeouts and upthrusts exploit crowd stops and fear/greed swings.
- Context-First: Signals near key levels carry more information than in the middle of ranges.
Practical VSA Playbook
Step-by-Step
1) Mark HTF S/R, trend, ranges. Identify background (accumulation/distribution).
2) Scan for climactic bars (ultra-high vol, wide spreads) and subsequent tests.
3) Wait for a signal at location: upthrust at resistance, spring at support, no-demand at prior supply.
4) Confirm on next bar (direction + volume qualifier). Place stop beyond signal bar.
5) Manage to MTF levels (previous swing/POC/VAH-VAL). Trail under/over tests.
Common Mistakes
โ ๏ธ Avoid These Errors
- Trading signals without background context or next-bar confirmation.
- Using fixed volume thresholds across sessions/instruments (normalize first).
- Ignoring time-of-day/news effects on volume (opens, closes, events).
- Forcing VSA labels on random bars in the middle of ranges.
- Stops inside signal bar (too tight for noisy retests).
Advanced Concepts & Integrations
๐๏ธ Wyckoff Phases
Map PSY/SC/AR/ST/Spring/TEST/LPS/BU to structure; trade tests and last points of support/resistance.
๐ Volume Profile + VSA
Read absorption at HVNs/POC; look for springs at LVNs/edges of value (VAL/VAH).
๐งฎ Relative Volume Z-Scores
Standardize volume by session (z = (V โ ฮผ)/ฯ) to define โultra-high/lowโ objectively.
๐งญ Event-Aware Filters
Exclude/flag bars around earnings/FOMC where volume regimes differ.
The Bottom Line
VSA decodes the tug-of-war between supply and demand by comparing effort (volume) to result (spread/close) in context. Focus on climaxes, tests, and signals at key levels, confirm on the next bar, and manage risk beyond the signal bar. Used with structure, it offers precise, high-quality entries.