The method of analysis VSA (Volume Spread Analysis)

We also offer read the article "VSA indicator and volume on Forex", which is a direct continuation of the current.

Advantages of VSA analysis

1. It works well in stocks (stock market is the United States, in particular the NYSE).

2. Also good to use on commodity futures.

3. Good use on oil and currency futures, large volumes are traded outside the American session. Also works on the market Forex.

4. And, most importantly, the analysis of VSA can not only follow the market "on the heels", but also quickly notice the change trends.

The essence of the analysis of Volume Spread Analysis

In the VSA, we analyze:

1. spread, ie length of the bar (candle) from High to Low.
2. closing.
3. volumes in the histogram below the chart + + Spradley closing the candle.
4. background or history, ie what was with spreads and volumes in the recent past.

In fact, the purpose of the analysis is to establish the causes of VSA price movement. The reason - the imbalance between supply and demand in the market, which is created by professional market operators. These operators specialize in specific instruments: it stocks, futures or currencies.
The activities of these operators, as well as their true intentions, are well represented on the chart, you need only to be able to read it. In the analysis of the relationship VSA used 3 variables that help determine the demand, supply and the possible direction of market movements on the short period of time. These variables include:
1. trading volumes in this candle (bar).
2. range of candles (price spread).
3. closing price of the candle.

 

Fig.1

These variables give experienced players a clear vision of market phase. Total market are 4 phases:

? accumulation (professionals buy the asset at wholesale prices).
? price increase.
? distribution (professional selling assets at retail prices).
? lowering the price.
Attempt to interpret a price chart without taking into account the volume of like buying a car without a gas tank. And remember that the histogram is only part of the required information to us. We look at the rest of the chart (the spread).
Only an analysis of VSA (Volume Spread Analysis) provides the most visually assess the imbalance between market supply and demand.

Versatility analysis VSA

Forex, unlike futures or stocks, there are no real numbers traded volume - because the Forex market has no centralized location. But this does not mean that we can not analyze the trading volumes of the currency market.

Volumes give us information about how active market operators on each candle. If the volumes are growing, you can be sure that the market will be a major player (operator, they also market makers). If the volumes are small, it means that transactions take place between traders with little capital, and the operators are now available.

Versatility analysis VSA is also evident in the fact that it works equally well on all timeframes.

Why work analysis Volume Spread Analysis?

Price move two forces - supply and demand coming from professional operators. If the volume of purchases exceed sales, the price goes up. If on the contrary - down. The outward simplicity hides deeper moments, because supply and demand will behave differently in the market. In an uptrend, the purchase exceed sales, but their volumes are not the most important factor in this background. More important is the absence of large volumes of sales (proposal) that would swipe at the price. Only in the above case, the market will continue upward movement.

Many traders forget about the fact that buying large quantities have already taken place in the first stage - that is, at a lower price, which is part of the accumulation phase. This is done by professional operators in the downstream candlelight with the growth of large volumes. According to the principles of VSA, the power price (market) define precisely the descending candles (bars), and weakness - rising. This is the opposite to the majority of traders.

At this downtrend should appear lack purchases (demand) to support the price. The only players who can provide such large amounts of purchases - this statement, but they sold the asset earlier at a higher price, when there was a large increase in trading volumes. When professionals are starting to make sales on candles and rising trade volumes grow, the market does turn down, because too few purchases. Similarly, shopping - professionals buying in a falling market after the release of bad news. Last encourage the majority of traders (eg, herd or weak players) to sell, often at a loss. It always has been and remains to this day.

Let's sum up. Analysis VSA (Volume Spread Analysis) - The only way to really understand why and what happens in the market. Just understanding the basics of this method is capable at times to increase the efficiency of your trade as a professional trader. Trade together major players and not against them - and you'll always be at a profit! Good luck and remember that the gains from trade is highly dependent on you have chosen a broker!