Volume indicator and Volume Spread Analysis technique

The VSA strategy is based on tracking the current psychological state of small and medium players and belongs to the group of non-indicator players . It does not have clear rules for entering the market, calculating Take Profit / Stop Loss , tactics for tracking positions, so it cannot be called a comprehensive trading strategy . It can only be used as a starting point for a deeper analysis and search for market makers’ entry points and points of rollbacks / corrections.

The main data in VSA is the spread (the difference between High and Low of the last closed bar), volume (market or tick) background (dynamics of changes in volume / spread). On any timeframe, at least 15-20 last periods are taken for analysis. Similarly to Chaos theory, market movement is divided into three periods.

The opening of a deal according to the VSA

The opening of a deal according to the VSA rules is subject to the following conditions:

1. The current balance between supply and demand is determined.

First of all, it is necessary to understand the ulterior motives behind the actions of large Forex players. When demand increases, the order of execution of buy orders goes from lower prices to higher prices – the quotation grows . Accordingly, in case of a fall, the most expensive sell orders will be executed first . At the same time, the data of tick volume indicators may not show obvious dynamics, you need to look at the structure of the price bar and possible divergences.

2. See the effect-cause combination.

According to the VSA, the key to any price change is rapid volume increases. If it is speculative, we have a short-term rollback or correction, otherwise the current trend will continue or the beginning of a new trend. You also need to constantly monitor the background so as not to fall into the “inertia” of a sharp and false movement, which usually ends with a Stop Loss triggering.

3. The result of the “effort-result” link.

Continuation of the previous point – an increase in supply / demand (efforts) on the part of market makers causes a trend development (result). If there is no corresponding reaction and an obvious indicator of volumes for MT4 does not give clear signals in front of us, it is better not to open ordinary speculations and deals .


Summing up

Any volume indicator is effective only for medium and long-term trading – many false signals appear during the day . At the moment, it is necessary to analyze any asset not only by the behavior of “smart money”, but also from the point of view of “smart liquidity”. An increasing part of the trade flow is beginning to be occupied by trades opened using high-frequency trading (HFT) . Thus, the true goals of market makers are masked, especially when approaching significant price levels.