Volume Spread Analysis (VSA)
Reading Smart Money Through Volume, Spread, and Close
Introduction & History
Most traders stare at price and wonder, "Where is this going?" They draw lines, add indicators, and hope for the best. Volume Spread Analysis offers something fundamentally different: instead of asking where price is going, it asks who is driving it — and what they are doing right now.
VSA is the art and science of reading the footprints of smart money through three simple variables: volume, price spread, and closing position. Every bar on your chart contains a story. The volume tells you how much activity occurred. The spread tells you how much ground price covered. The close tells you who won the battle — buyers or sellers. When you learn to read all three together, you can see what the institutions are doing before the move happens.
Richard Wyckoff — The Foundation
Volume Spread Analysis traces its intellectual lineage to Richard D. Wyckoff (1873-1934), one of the most influential market analysts in history. Wyckoff spent decades studying the tape — the raw stream of price and volume data that flowed through ticker machines on Wall Street. He observed that markets do not move randomly. They move because of the actions of large, well-informed operators who accumulate positions quietly, mark up prices, distribute their holdings to the public, and then step aside as prices collapse.
Wyckoff formalized these observations into his three laws:
- The Law of Supply and Demand — Price moves because of imbalances between buying and selling pressure.
- The Law of Cause and Effect — A period of accumulation (cause) produces a markup (effect). A period of distribution (cause) produces a markdown (effect).
- The Law of Effort vs Result — If heavy volume (effort) does not produce proportional price movement (result), something is wrong. Smart money is likely operating against the visible direction.
Wyckoff never called his method "VSA." He called it reading the tape. But the principles he identified — that volume reveals intent, that spread reveals ease of movement, and that the close reveals who is in control — became the bedrock upon which VSA was built.
Tom Williams — The Refinement
Tom Williams (1929-2012) was a former syndicate trader who spent years operating within the institutional world before retiring and turning educator. Williams recognized that Wyckoff's tape-reading principles were as valid as ever, but they needed to be adapted for modern charting. In 1993, he published "Master the Markets", the definitive text on Volume Spread Analysis.
Williams made several key contributions:
- He systematized Wyckoff's observations into specific, identifiable bar patterns
- He introduced precise terminology: No Demand, No Supply, Stopping Volume, Climactic Action, Tests, Up-thrusts
- He built TradeGuider, the first software to automate VSA signal detection
- He made the method accessible to retail traders who could not read the raw tape
Williams' core insight was deceptively simple: volume is the fuel, spread is the distance traveled, and the close reveals who drove. When these three variables tell conflicting stories — such as high volume with no progress — something important is happening beneath the surface. That "something" is almost always smart money operating against the crowd.
What VSA Tells You That Price Alone Cannot
Price charts without volume are like watching a movie on mute. You can see what happens, but you miss the dialogue, the emotion, and the subtext. Volume answers the critical questions:
| Question | What Price Shows | What VSA Reveals |
|---|---|---|
| Is this breakout real? | Price broke the level | Was there volume to support it, or is it a trap? |
| Is the trend healthy? | Price is making new highs | Is volume confirming, or is smart money distributing? |
| Is this pullback a buying opportunity? | Price dropped to support | Is volume drying up (good) or surging (bad)? |
| Is this rally sustainable? | Price is going up | Are bars wide with strong closes, or narrow with weak volume? |
| Is the bottom in? | Price stopped falling | Did stopping volume appear? Did the test succeed? |
VSA does not predict. It diagnoses. It tells you the current condition of the market — whether supply is dominant, whether demand is absorbing selling, whether smart money is accumulating or distributing. From that diagnosis, you build a trading plan.
The Three Variables
Every bar on your chart contains exactly three pieces of information that VSA cares about. Everything else — moving averages, oscillators, Fibonacci levels — is secondary. Master these three variables and you have the foundation of the entire method.
Variable 1: Volume (Activity Level)
Volume measures the amount of activity that took place during the bar's time period. It tells you how many participants engaged in trading during that bar — how much energy was expended.
VOLUME BARS (below price chart):
High Volume Medium Volume Low Volume
████
████ ███
████ ███ █
████ ███ █
────████──────────────────────────────────────
What volume tells you:
| Volume Level | What It Means | Implication |
|---|---|---|
| Ultra-high | Massive participation, often climactic | Transfer of ownership; trend may be ending |
| High | Strong interest, significant activity | Confirms moves OR signals absorption |
| Average | Normal participation | Business as usual; trend continuation |
| Low | Little interest, few participants | No commitment; potential vacuum |
| Ultra-low | Market is empty, nobody cares | Ideal for tests; no opposition |
Key principle: Volume alone means nothing. A high-volume bar can be bullish OR bearish depending on the spread and close. Volume must always be read in context with the other two variables.
Variable 2: Spread (High-Low Range)
Spread is the distance between the high and the low of the bar. It measures how much ground price covered — the range of the battle between buyers and sellers.
SPREAD COMPARISON:
Wide Spread Medium Spread Narrow Spread
┌─── High ┌─── High ┌─── High
│ │ │
│ Large │ Normal │ Small
│ range │ range │ range
│ │ │
└─── Low └─── Low └─── Low
What spread tells you:
| Spread | What It Means | Implication |
|---|---|---|
| Wide | Price moved a lot; one side dominated | Strong conviction; easy movement |
| Average | Normal range for this instrument | Nothing unusual |
| Narrow | Price was contained; tight battle | Disagreement, absorption, or lack of interest |
Critical insight: Spread reveals ease of movement. If smart money is buying and there is little supply to overcome, the spread will be wide (price moves easily). If smart money is buying but sellers are flooding the market, the spread will be narrow (price barely moves despite activity).
Variable 3: Close Position (Where Price Settles)
The close position tells you who won the bar — buyers or sellers. It is measured as where the closing price falls relative to the bar's total range.
CLOSE POSITIONS:
Close on High Close in Middle Close on Low
┌───┐ ┌───┐ ┌───┐
│███│ ← Close │ │ │ │
│███│ │███│ ← Close │ │
│ │ │ │ │███│ ← Close
└───┘ └───┘ └───┘
Buyers won Neither won Sellers won
Detailed close interpretation:
| Close Position | Location | Meaning |
|---|---|---|
| Upper third | Top 33% of bar | Buyers were dominant; demand overcame supply |
| Middle | Central 33% of bar | Neither side won; indecision or absorption |
| Lower third | Bottom 33% of bar | Sellers were dominant; supply overcame demand |
| On the high | At or very near the high | Total buyer control; maximum strength |
| On the low | At or very near the low | Total seller control; maximum weakness |
How the Three Interact — The VSA Matrix
The real power of VSA emerges when you combine all three variables. Here is the complete interaction matrix:
| Volume | Spread | Close | Signal Name | Interpretation |
|---|---|---|---|---|
| High | Wide | On high | Strength | Genuine demand; bullish |
| High | Wide | On low | Weakness | Genuine supply; bearish |
| High | Wide | Middle | Churning | Transfer of ownership; reversal likely |
| High | Narrow | On high | Absorption demand | Buyers absorbing sellers; bullish |
| High | Narrow | On low | Absorption supply | Sellers absorbing buyers; bearish |
| High | Narrow | Middle | Squat / Transfer | Heavy activity, no progress; reversal zone |
| Low | Wide | On high | Ease of movement up | No opposition; bullish continuation |
| Low | Wide | On low | Ease of movement down | No opposition; bearish continuation |
| Low | Narrow | On high | No supply | Sellers absent; bullish |
| Low | Narrow | On low | No demand | Buyers absent; bearish |
| Low | Narrow | Middle | Dead market | No interest; wait |
THE VSA READING PROCESS:
┌──────────────┐
│ Read Volume │ ── How much activity?
└──────┬───────┘
│
▼
┌──────────────┐
│ Read Spread │ ── How much did price move?
└──────┬───────┘
│
▼
┌──────────────┐
│ Read Close │ ── Who won the battle?
└──────┬───────┘
│
▼
┌──────────────┐
│ Read Context │ ── What happened on prior bars?
└──────┬───────┘ Where are we in the trend?
│
▼
┌──────────────┐
│ DIAGNOSIS │ ── Strength, weakness, or neutral?
└──────────────┘
Understanding Smart Money vs Weak Hands
VSA is built on one fundamental truth: markets are not a level playing field. Some participants have vastly more information, capital, and skill than others. Understanding the dynamic between these two groups is essential to reading volume correctly.
Who Are "Smart Money"?
Smart money is Tom Williams' term for the well-informed, well-capitalized operators who move markets. This includes:
| Type | Who They Are | Their Advantage |
|---|---|---|
| Institutional investors | Hedge funds, mutual funds, pension funds | Billions in capital, teams of analysts |
| Market makers | Firms providing liquidity on exchanges | See order flow, profit from spread |
| Proprietary traders | Firms trading their own capital | Advanced technology, speed, information |
| The "Composite Operator" | Wyckoff's term for the aggregate of all large players | Acts as if one mind because they see the same data |
Smart money has one critical problem: size. When a fund needs to buy $500 million worth of stock, it cannot simply click "buy." That order would spike the price against them. They must accumulate gradually, hiding their purchases within the noise of normal trading. This is why accumulation takes time, happens in ranges, and looks boring on the chart.
Who Are "Weak Hands"?
Weak hands are participants who trade on emotion, react to news, follow the herd, and are consistently on the wrong side at turning points. This includes:
| Type | Behavior | Why They Lose |
|---|---|---|
| Retail traders | Buy breakouts, sell breakdowns | Enter after the move is over |
| Emotional traders | Panic sell at lows, FOMO buy at highs | Controlled by fear and greed |
| Headline followers | Trade based on news | News is already priced in by smart money |
| Indicator chasers | Over-rely on lagging signals | Signals confirm moves that are already ending |
The uncomfortable truth: Weak hands provide the liquidity that smart money needs. When institutions want to accumulate at low prices, they need someone willing to sell at those low prices. Retail panic provides exactly that. When institutions want to distribute at high prices, they need someone willing to buy at those high prices. Retail FOMO provides exactly that.
How Smart Money Accumulates Without Moving Price
Smart money faces a paradox: they want to buy, but buying pushes price up. Their solution is to accumulate during periods of fear, pessimism, and declining prices — when the public is selling, not buying.
HOW ACCUMULATION WORKS:
Visible (what you see): Hidden (what is happening):
Price trending down Institutions placing buy orders
Bad news everywhere at lower and lower prices
Retail traders selling
Volume spikes on down moves Smart money is ON THE OTHER SIDE
of every panicked retail sell
╲ ╲ ← Retail sells (visible)
╲ ╱╲ ╲ ╱╲
╲╱ ╲ ╲╱ ╲ ← Smart money buys (hidden)
╲╱╲ ╲╱╲
╲╱ ← "Everyone is selling" ╲╱ ← Institutions loaded
Then suddenly: Price rallies with no warning
Reality: Smart money finished accumulating
The telltale signs on your chart:
- Volume spikes on down bars, but price makes little new low ground — absorption
- Bars narrow despite high volume — smart money is buying everything being offered
- Tests on low volume — smart money checking if sellers are exhausted
- Price refuses to break down despite bearish-looking price action
How Smart Money Distributes Into Retail Buying
Distribution is the mirror image. Smart money sells their accumulated positions into strength, optimism, and rising prices — when the public is eagerly buying.
HOW DISTRIBUTION WORKS:
Visible (what you see): Hidden (what is happening):
Price trending up Institutions placing sell orders
Good news everywhere into every retail buy
Retail traders buying
"This time is different" Smart money UNLOADING positions
╱╲ ╱╲ ← Retail buys (visible)
╱╱ ╲╱╲ ╱╱ ╲╱╲
╱╱ ╲ ╱╱ ╲ ← Smart money sells
╱╱ ╱╱ (hidden)
"New all-time highs!" Institutions are almost done selling
Then suddenly: Price collapses with no warning
Reality: Smart money finished distributing
The telltale signs on your chart:
- Volume spikes on up bars, but price makes little new high ground — supply entering
- Wide-spread up bars closing in the middle — smart money selling into strength
- No demand bars on pullback rallies — nobody wants to buy anymore
- Price fails to make progress despite bullish-looking news
Key VSA Signals — Bullish (Accumulation Signs)
These signals indicate that smart money is buying, supply is being absorbed, and a move to the upside is likely. Each signal must be read in context — where it appears in the trend matters enormously.
Stopping Volume
What it is: The first major sign that a downtrend is ending. After a sustained decline, a bar appears with high volume, a narrow-to-average spread, and a close in the middle or upper portion of the bar.
What it means: Smart money has stepped in to absorb the selling. Despite heavy trading, price did not go much lower — the effort to push price down was met by equal or greater buying effort.
Where to look for it: At the end of a downtrend, near support levels, after a waterfall decline.
STOPPING VOLUME:
Price
│
│ ╲
│ ╲
│ ╲
│ ╲
│ ╲
│ ╲
│ ├───┤ ← Narrow spread, close in upper half
│ │ █ │ Despite heavy selling, price
│ └───┘ barely dropped further
│
│
Volume
│ ████
│ ████ ████
│ ████ ████ ████
│ ████ ████ ████
└────────────────────────
↑
Stopping Volume:
High volume, narrow spread,
close on mid-to-high
Key points:
- Stopping volume does NOT mean "buy now" — it means "the decline is being absorbed"
- It is the first warning sign that accumulation may begin
- Needs confirmation from subsequent bars (tests, no supply)
- Often appears as a cluster of 2-5 bars, not just one single bar
No Supply Bar
What it is: A bar with a narrow spread, low volume, and a close near the high, appearing during a downtrend or pullback. It tells you that sellers have dried up — there is simply no supply left.
What it means: Nobody wants to sell anymore. The downward pressure has exhausted itself. Smart money has already accumulated, and weak hands have already sold everything they had.
NO SUPPLY BAR:
Price
│
│ ╲
│ ╲
│ ╲ ╱╲
│ ╲╱ ╲
│ ├─┤ ← Narrow spread, close on high
│ │█│ Very low volume
│ └─┘ Sellers are GONE
│
│
Volume
│
│ ████
│ ████ ███
│ ████ ███ █ ← Very low volume
└───────────────────
↑
No Supply:
Low volume, narrow spread,
close on high
Key points:
- No supply is a confirmation signal, not an entry signal on its own
- Best when it appears after stopping volume and within a range
- Multiple no supply bars in sequence = very bullish
- If no supply appears and then is followed by high-volume down bars, the signal failed
Test
What it is: A bar that dips into a previous area of supply (where selling occurred before) on low volume, then closes back up near the high. The market is "testing" whether sellers are still present in that zone.
What it means: Smart money is probing. They push price down into the old supply zone to see if anyone is left to sell. If volume is low, it means the sellers are gone — the test is successful. If volume is high, sellers are still there — the test has failed.
SUCCESSFUL TEST: FAILED TEST:
Price Price
│ │
│ ─── Supply zone ─── │ ─── Supply zone ───
│ │ │ │ │ │
│ │ ┌─┤ │ │ │ ┌───┐ │
│ │ │ │ ← Close │ │ │ │ │ │
│ │ │ │ on high │ │ │ │ │ ← Wide │
│ │ │ │ │ │ │ │ │ spread │
│ │ └─┘ │ │ │ │ │ │
│ │ │ │ │ │ └───┘ │
│ │ │← Wick │ │ │ │ │
│ │ │ into zone│ │ │ │← Deep │
│ ───────────────── │ ─────────────────
│ │
Volume Volume
│ │
│ │ ████
│ █ ← Low volume │ ████ ████ ← HIGH volume
└────────── └────────────
SUCCESS FAILURE
(sellers gone) (sellers still present)
Successful test characteristics:
- Volume is LOW (ideally the lowest in recent bars)
- Spread is narrow
- Close is in the upper half, ideally near the high
- Wick dips into the previous supply zone but closes back above it
Failed test characteristics:
- Volume is HIGH (comparable to or higher than the original supply bars)
- Spread may be wide
- Close may be in the lower half
- Indicates more selling ahead — be cautious
Spring / Shakeout
What it is: A quick dip below a support level (often the low of a trading range) that immediately reverses. Volume is typically moderate-to-high on the breakdown, but the reversal is swift and decisive.
What it means: Smart money engineered a liquidity grab. By pushing price below support, they triggered stop losses from traders who were long, forcing those traders to sell. Smart money bought those forced-sell orders at bargain prices. The spring is the ultimate accumulation move — violent, scary, and incredibly effective.
SPRING / SHAKEOUT:
Price
│
│ ━━━━━━━━━━━━━━━━━━━━━━━ Support / Range Low
│ │
│ │
│ ├───┐
│ │ │ ← Quick dip below
│ │ │ support on volume
│ │ █ │
│ │ █ │ ← Sharp reversal
│ └─┬─┘ back INSIDE range
│ │
│ │ ← Wick = the "spring"
│ │ Liquidity grab
│
│ ━━━━━━━━━━━━━━━━━━━━━━━ Support / Range Low
│
│
Volume
│
│ ████
│ ██ ████ ████
│ ██ ████ ████
└──────────────────────
↑
Volume spikes on
the breakdown AND the
recovery
Spring characteristics:
- Price briefly penetrates below established support
- Recovery is fast — within 1-3 bars
- Volume is moderate-to-high (showing participation, not vacuum)
- Close of the reversal bar is back inside or above the support level
- Most powerful when followed by immediate sign of strength
Effort vs Result — Bullish
What it is: Heavy volume (effort) on down bars that produces little downward price progress (result). The spread is narrow or price fails to make a meaningful new low despite significant volume.
What it means: There is a mismatch between activity and outcome. Someone is absorbing all the selling. That "someone" is smart money, buying everything that weak hands are throwing at them. The effort to drive price down is being counteracted by equal or greater buying effort.
EFFORT VS RESULT (Bullish):
Price
│
│ ╲
│ ╲
│ ├──┤ ← Bar 1: High volume, drops some
│ └──┘
│ ├─┤ ← Bar 2: HIGHER volume, barely drops
│ └─┘
│ ├┤ ← Bar 3: High volume, FLAT
│ └┘
│ Result: enormous effort,
│ almost no downward progress
│
Volume
│ ████
│ ████ ████
│ ████ ████ ████
└──────────────────
Bar1 Bar2 Bar3
Effort INCREASING, Result DECREASING
= Smart money absorbing supply
Key VSA Signals — Bearish (Distribution Signs)
These signals indicate that smart money is selling, demand is being overwhelmed by supply, and a move to the downside is likely.
Climactic Action (Buying Climax)
What it is: After a sustained uptrend, a bar (or cluster of bars) appears with ultra-high volume, wide spread, and a close off the highs — often closing in the middle or lower portion of the bar.
What it means: This is the euphoria peak. Retail traders are FOMO-buying in droves, and smart money is selling everything they own into that demand. The ultra-high volume is the sound of massive transfer of ownership — from strong hands to weak hands.
BUYING CLIMAX:
Price
│
│ ┌───┐
│ │ │ ← Wide spread
│ │ │ Close OFF the high
│ │ █ │ ← Close in the middle
│ │ │ Despite bullish-looking
│ └───┘ bar, smart money sold
│ ╱ into the euphoria
│ ╱
│ ╱
│ ╱
│
Volume
│
│ ████████ ← ULTRA-HIGH volume
│ ████ ████████ Climactic = extreme
│ ████ ████ ████████
└────────────────────────
↑
Buying Climax:
Ultra-high volume, wide spread,
close off the highs
Key characteristics:
- Volume is the highest in the recent swing — this is climactic, extreme
- Spread is wide — looks like a "healthy" bullish bar to untrained eyes
- Close is NOT on the high — it closes in the middle or lower third
- Often appears after a steep, accelerating rally
- May be a single bar or a cluster of 2-4 bars
Why the close position matters so much here: If the bar closes on the high with ultra-high volume, it could simply be strong demand. But when the close is off the high — when buyers pushed price up but couldn't hold it — it reveals that sellers (smart money) are meeting every buy order with sell orders. The battle is being won by supply.
Up-Thrust (False Breakout Above Resistance)
What it is: Price spikes above a resistance level or recent high, then reverses and closes below the resistance level or in the lower portion of the bar. Volume is typically high-to-ultra-high.
What it means: Smart money engineered a breakout trap. They pushed price above resistance to trigger buy orders from breakout traders. Those buy orders provided the liquidity smart money needed to sell into. Price then collapsed back below resistance, trapping the breakout buyers.
UP-THRUST:
Price
│
│ ━━━━━━━━━━━━━━━━━━━━━━━ Resistance
│ │
│ │ ← Wick above resistance
│ │ (the "thrust")
│ ┌──┤
│ ━━━━━━━━━│━━│━━━━━━━━━━ Resistance
│ │██│ ← Close BELOW resistance
│ │██│ on high volume
│ │██│
│ └──┘ Smart money sold
│ into the breakout buyers
│
Volume
│
│ ████
│ ████ ████
│ ████ ████ ████
└──────────────────
↑
Up-thrust:
Spike above resistance,
close below, high volume
Up-thrust vs legitimate breakout:
| Feature | Up-Thrust (Trap) | Real Breakout |
|---|---|---|
| Volume | High but close is weak | High with close on high |
| Close | Below resistance or in lower half | Above resistance, near high |
| Next bars | Immediate weakness, lower closes | Continuation, pullback holds |
| Context | Late in an uptrend or at range high | After accumulation or re-accumulation |
No Demand
What it is: A narrow-spread up bar on low volume, appearing during an uptrend or rally. Despite being an up bar, the low volume reveals that nobody is interested in buying at these levels.
What it means: The fuel has run out. Whatever was pushing price higher has lost interest. Without demand, price cannot sustain the advance and will likely reverse or consolidate.
NO DEMAND:
Price
│
│ ╱
│ ╱
│ ╱
│ ╱ ├─┤ ← Narrow spread UP bar
│ ╱ │█│ Low volume
│╱ └─┘ Close can be anywhere
│ The KEY is low volume
│ on an up bar = no buyers
│
Volume
│
│ ████
│ ████ ███
│ ████ ███ █ ← Very low volume
└───────────────────
↑
No Demand:
Low volume up bar
in an uptrend = bearish
Key points:
- No demand is a warning signal, not an immediate short trigger
- Multiple no demand bars = very bearish
- Strongest when appearing after a buying climax or up-thrust
- Weakest when appearing in a strong uptrend with no other weakness signs
Effort vs Result — Bearish
What it is: Heavy volume (effort) on up bars that produces little upward price progress (result). Despite strong buying activity, price cannot advance meaningfully.
What it means: Supply is overwhelming demand. For every buyer, there is an even stronger seller. Smart money is distributing — selling into every rally attempt.
EFFORT VS RESULT (Bearish):
Price
│
│ ┌┐ ← Bar 3: High volume, FLAT
│ └ ┘
│ ├─┤ ← Bar 2: HIGHER volume, barely rises
│ └─┘
│ ├──┤ ← Bar 1: High volume, rises some
│ └──┘
│ ╱
│ ╱
│
Volume
│ ████
│ ████ ████
│ ████ ████ ████
└──────────────────
Bar1 Bar2 Bar3
Effort INCREASING, Result DECREASING
= Smart money distributing (selling)
Supply Entering
What it is: A high-volume up bar that closes in the middle of its range. The bar looks bullish at first glance — price went up on heavy volume. But the close in the middle reveals that sellers met the buyers head-on and fought them to a standstill.
What it means: Smart money is selling into the rally. They are using the upward price action as cover to distribute their positions. The close in the middle proves that despite all the buying pressure, supply was equal to demand.
SUPPLY ENTERING:
Price
│
│ ╱
│ ╱
│ ╱ ┌───┐
│ ╱ │ │ ← Wide spread up bar
│╱ │ █ │ ← Close in the MIDDLE
│ │ │ Not on the high!
│ └───┘ Sellers are present
│
Volume
│
│ ████ ← High volume
│ ████ ████
│ ████ ████
└────────────────
↑
Supply Entering:
High volume up bar closing
in the middle = bearish
The VSA Bar Analysis Framework
This section provides a comprehensive reference for reading individual bars. Use it as a lookup table when you encounter a bar you need to diagnose.
Complete Bar Analysis Reference
| Volume | Spread | Close | On Up Bar | On Down Bar |
|---|---|---|---|---|
| High | Wide | High | Strength — genuine buying, bullish | Unlikely pattern |
| High | Wide | Mid | Supply entering — smart money selling into rally | Stopping volume — smart money absorbing selling |
| High | Wide | Low | Unlikely pattern | Weakness — genuine selling, bearish |
| High | Narrow | High | Absorption — buying despite opposition, bullish | Unlikely pattern |
| High | Narrow | Mid | Squat — transfer of ownership | Squat — transfer of ownership |
| High | Narrow | Low | Unlikely pattern | Absorption — selling despite opposition, bearish |
| Low | Wide | High | Ease of movement up — no sellers, bullish | Unlikely pattern |
| Low | Wide | Low | Unlikely pattern | Ease of movement down — no buyers, bearish |
| Low | Narrow | High | No demand if down-trend; No supply if up-bar in range | No supply — sellers absent, bullish |
| Low | Narrow | Low | No demand — buyers absent, bearish | Insignificant |
| Low | Narrow | Mid | Dead market — no interest | Dead market — no interest |
Quick Diagnosis Flowchart
START: Look at the bar
│
▼
Is volume HIGH or LOW?
│
┌────┴────┐
HIGH LOW
│ │
▼ ▼
Is spread Is spread
WIDE or WIDE or
NARROW? NARROW?
│ │
┌─┴─┐ ┌─┴─┐
W N W N
│ │ │ │
▼ ▼ ▼ ▼
Close Close Close Close
│ │ │ │
▼ ▼ ▼ ▼
H: Str H:Abs H:EoM H:NoS/NoD
M: Churn M:Squat M:--- M:Dead
L: Weak L:Abs L:EoM L:NoD
Legend:
- Str = Strength
- Abs = Absorption
- EoM = Ease of Movement
- Churn = Churning / Supply entering
- Squat = Squat bar / Transfer
- NoS = No Supply
- NoD = No Demand
Background vs Foreground Activity
One of the most subtle and important concepts in VSA is the distinction between what is visible on the chart (foreground) and what is actually happening beneath the surface (background). Smart money operates in the background. The foreground is often a deception.
How Accumulation Hides in the Background
During accumulation, the visible chart often looks bearish. Price is falling or moving sideways. News is bad. Indicators are oversold. Everything screams "sell." But in the background, smart money is quietly buying.
Signs of background accumulation:
| What You See (Foreground) | What Is Happening (Background) |
|---|---|
| Price falling toward support | Smart money placing buy orders at support |
| High-volume down bars | Absorption — selling is being soaked up |
| Narrow spreads on down bars after selling | Sellers running out of ammunition |
| Low-volume pullbacks after bounces | No supply — nobody left to sell |
| Price holding above a level despite bearish sentiment | Demand is silently present |
BACKGROUND ACCUMULATION:
Visible bars (foreground):
╱╲ ╱╲ ╱╲ ╱╲
╱ ╲ ╱ ╲ ╱ ╲ ╱ ╲ ← Price looks "stuck"
╱ ╲╱ ╲╱ ╲╱ ╲ going nowhere, boring
Volume below:
██ ██ ██ ██ ██ ██
██ ██ ██ ██ ██ ██ ← Volume declining over time
██ ██ ██ ██ = Selling is drying up
██ ██ = Background accumulation
What retail thinks: "Nothing happening, boring, move on"
What VSA reads: "Supply is being absorbed. Demand building."
How Distribution Hides Behind Bullish-Looking Bars
Distribution is even more deceptive. The chart looks bullish — price is rising, volume is high, candles are green. But the details reveal that smart money is selling into the strength.
Signs of background distribution:
| What You See (Foreground) | What Is Happening (Background) |
|---|---|
| Price making new highs | Smart money selling into euphoric buying |
| High-volume up bars | Close in middle = supply entering |
| Wide spreads up | Effort without proportional follow-through |
| News is great, sentiment is bullish | Smart money uses good news as cover to sell |
| Price advance stalling despite volume | Demand is being overwhelmed by supply |
Multi-Bar Analysis — Sequence Matters
A single bar is a data point. A sequence of bars is a story.
VSA analysis becomes most powerful when you read bars in sequences of 3-7 bars. The narrative that unfolds across multiple bars reveals the true condition of the market.
Bullish sequence (accumulation completing):
Bar 1: High volume, wide spread down, close off low = Stopping volume
Bar 2: Lower volume, narrow spread, close mid = Selling drying up
Bar 3: Low volume, narrow spread, close on high = No supply
Bar 4: Low volume dip into old supply, close high = Successful test
Bar 5: Average volume, wide spread up, close on high = Sign of strength
┌──┐
│ │ ┌─┤ ├─┐ ┌─┤ ┌───┐
│ │ │ │ │ │ │ │ │███│ ← Bar 5: SOS
│ █│ │ │ │█│ │ │ │███│
│ │ └─┘ └─┘ └─┘ └───┘
└──┘
Bar1 Bar2 Bar3 Bar4 Bar5
Vol: ████ ██ █ █ ███
Bearish sequence (distribution completing):
Bar 1: Ultra-high volume, wide spread up, close mid = Buying climax
Bar 2: Lower volume, narrow spread, close mid = Demand fading
Bar 3: Low volume, narrow spread up, close low = No demand
Bar 4: High volume spike above resistance, close below = Up-thrust
Bar 5: Average volume, wide spread down, close on low = Sign of weakness
┌───┐
│ │ ├─┐ ├┐ │ ┌───┐
│ █ │ │ │ ││ │├─┤ │ │
│ │ │ │ │█ ─┘│█│ │ │
└───┘ └─┘ └┘ └─┘ │ █ │ ← Bar 5: SOW
Bar1 Bar2 Bar3 Bar4 └───┘
Bar5
Vol: ████ ██ █ ███ ███
VSA Trading Strategy — Step by Step
This section provides a complete, actionable trading strategy built entirely on VSA principles. Follow these steps in order.
Step 1: Identify the Trend
Before analyzing individual bars, you must know the larger context. VSA signals are most powerful when they align with or signal a change in the dominant trend.
| Trend | How to Identify | VSA Focus |
|---|---|---|
| Uptrend | Higher highs and higher lows | Look for bullish VSA on pullbacks (no supply, tests) |
| Downtrend | Lower highs and lower lows | Look for bearish VSA on rallies (no demand, up-thrusts) |
| Range | Price bouncing between two levels | Look for accumulation/distribution within the range |
TREND IDENTIFICATION:
Uptrend: Downtrend: Range:
────── Resistance
/\ /\ \
/ \/ \ / \ /\ /\ /\
/ \/ \/ \ / \/ \
\ / /
\/ ────── Support
Focus: Bullish Focus: Bearish Focus: Accumulation
signals on signals on or distribution
pullbacks rallies at boundaries
Step 2: Watch for Climactic Stopping Action
The first sign that a trend is ending is climactic action. In a downtrend, watch for stopping volume. In an uptrend, watch for a buying climax.
Stopping action checklist:
| Check | Downtrend (Bullish Reversal) | Uptrend (Bearish Reversal) |
|---|---|---|
| ☐ Volume | Spike — highest in the move | Spike — highest in the move |
| ☐ Spread | May be wide but narrows quickly | May be wide but narrows quickly |
| ☐ Close | Off the lows (demand absorbing) | Off the highs (supply absorbing) |
| ☐ Follow-through | Next bars fail to make new low | Next bars fail to make new high |
Step 3: Wait for Test / No-Supply Confirmation
After climactic stopping action, you must wait for confirmation. Never trade the climax itself — it is the first warning, not the signal.
What to wait for:
- Test — A low-volume dip back into the area of the climax. If volume is low, sellers are gone. Bullish.
- No Supply — Narrow-spread, low-volume bars on pullbacks. Confirms sellers have exhausted themselves.
- No Demand (for shorts) — Narrow-spread, low-volume bars on rallies. Confirms buyers have exhausted themselves.
CONFIRMATION SEQUENCE:
Climactic Test / Entry
Action No Supply Signal
│ │ │
▼ ▼ ▼
┌────┐ ┌──┐ ┌─────┐
│ │ ··· Waiting ···│ │ ··· OK ···│█████│
│ ██ │ period │█ │ │█████│
│ │ (2-10 bars) └──┘ │█████│
└────┘ Low └─────┘
High vol vol Strength
"Something "Sellers "GO."
happened" are gone"
Step 4: Entry on Strength Signal
Your entry comes when the market shows a sign of strength (SOS) after the test has confirmed the condition. A sign of strength is a wide-spread up bar on increasing volume, closing on or near the high.
Entry criteria:
| Criteria | Requirement |
|---|---|
| ☐ Climactic stopping action identified | Background condition confirmed |
| ☐ Successful test or no-supply bar present | Sellers exhausted |
| ☐ Wide-spread bar in the direction of the trade | Strength visible |
| ☐ Volume supporting the move | Rising or above average |
| ☐ Close on the high (for longs) or low (for shorts) | Commitment |
Entry methods:
| Method | Entry Point | Pro | Con |
|---|---|---|---|
| Aggressive | On the close of the SOS bar | Best price | Less confirmation |
| Conservative | On a pullback after the SOS (LPS/LPSY) | More confirmation | May miss the move |
| Break-and-retest | After breakout of range, enter on retest | Highest confirmation | Worst price |
Step 5: Stop Loss Placement
Your stop loss goes below the most recent significant low for long trades, or above the most recent significant high for short trades.
| Setup | Stop Loss Location | Logic |
|---|---|---|
| Long after spring | Below the spring low | If the spring low breaks, the accumulation failed |
| Long after test | Below the test low | If the test level breaks, supply is still present |
| Short after up-thrust | Above the up-thrust high | If the up-thrust high breaks, it was a real breakout |
| Short after failed test | Above the most recent swing high | If highs break, distribution has failed |
Buffer: Add a small buffer (0.5 x ATR or 0.1-0.3%) to avoid being stopped by normal noise.
STOP LOSS PLACEMENT (Long after Test):
Price
│
│ Entry ──────────── Enter here
│ │
│ │
│ Test low ─────────── Significant low
│ │
│ Buffer ──── 0.5 x ATR
│ │
│ SL ─┴───────────── Stop loss here
│
│ If price reaches SL, the thesis
│ is INVALID — sellers are back.
│ Accept the loss and move on.
Step 6: Target Setting
VSA provides natural profit targets based on the structure it reveals:
| Target | Method | Logic |
|---|---|---|
| TP1 | Opposite side of the range | If accumulation, target the range high; if distribution, target the range low |
| TP2 | Measured move (1x range height) | Wyckoff's cause-and-effect: the range width predicts the move |
| TP3 | Trail with structure | After the measured move, trail stops below swing lows (longs) or above swing highs (shorts) |
TARGET SETTING (Long from Accumulation):
TP3 ─────────── Trail or 1.5x range
│
TP2 ─────────── Measured move (range height above breakout)
│
│ Range Height
│
TP1 / Range High ──── First target
│
│ Range Height
│
Range Low ──────────── Accumulation area
Entry near range low after spring/test
SL below spring/test low
Step 7: Exit Signals
Even before your targets are hit, VSA can tell you when to exit:
Exit a long position if:
- An up-thrust appears at resistance — smart money is selling at your target zone
- No demand bars appear after a rally — fuel is gone
- A buying climax appears — euphoria and distribution beginning
- Effort vs result (bearish) — heavy volume up but no progress
Exit a short position if:
- A spring appears at support — smart money is buying at your target zone
- No supply bars appear after a decline — fuel is gone
- Stopping volume appears — accumulation beginning
- Effort vs result (bullish) — heavy volume down but no progress
Risk Management
| Rule | Guideline | Rationale |
|---|---|---|
| Max risk per trade | 1-2% of account balance | Survive losing streaks |
| Minimum R:R ratio | 2:1 or better | Profitable even at 40% win rate |
| Max daily loss | 3-5% of account | Prevent revenge trading spirals |
| Max correlated positions | 2-3 | Avoid concentrated exposure |
| No trading without VSA confirmation | All three variables must align | Eliminates low-probability trades |
RISK MATH:
1% risk per trade, 2:1 R:R, 45% win rate:
100 trades:
45 winners x 2R = +90R
55 losers x 1R = -55R
─────────────────────
Net profit = +35R
That is +35% on your account risking 1% per trade.
Even losing MORE than you win is profitable with
proper risk management.
VSA Checklist
Use this checklist before every trade. Print it or keep it visible on your screen.
Pre-Trade VSA Checklist
| # | Check | Status |
|---|---|---|
| 1 | ☐ Identified the dominant trend (up / down / range) | |
| 2 | ☐ Located climactic stopping action (stopping volume or buying climax) | |
| 3 | ☐ Confirmed test or no-supply / no-demand bar present | |
| 4 | ☐ Test was on LOW volume (successful test confirmed) | |
| 5 | ☐ Sign of strength or sign of weakness bar appeared | |
| 6 | ☐ Volume supports the entry direction | |
| 7 | ☐ Close position confirms the entry direction | |
| 8 | ☐ No contradicting signals on higher timeframes | |
| 9 | ☐ Entry price identified | |
| 10 | ☐ Stop loss calculated (below/above key VSA level + buffer) | |
| 11 | ☐ TP1, TP2, TP3 levels marked | |
| 12 | ☐ R:R ratio is 2:1 or better | |
| 13 | ☐ Position size calculated (1-2% max risk) | |
| 14 | ☐ No major news events imminent | |
| 15 | ☐ Emotional state is calm and focused |
During-Trade VSA Checklist
| # | Check | Status |
|---|---|---|
| 1 | ☐ Stop loss is set in the platform (not just in your head) | |
| 2 | ☐ Monitoring for exit signals on current and higher timeframes | |
| 3 | ☐ When TP1 hit: moved stop to breakeven | |
| 4 | ☐ When TP2 hit: trailing stop or partial close | |
| 5 | ☐ No revenge trading if stopped out | |
| 6 | ☐ Journaling the trade with notes and screenshots |
Combining VSA with Other Methods
VSA is powerful on its own, but it becomes even more effective when combined with complementary methods. The key is to use VSA as the primary decision tool and other methods as confirmation.
VSA + Support and Resistance
Support and resistance levels tell you where to look. VSA tells you what is happening at those levels.
| Scenario | S/R Says | VSA Confirms | Action |
|---|---|---|---|
| Price at support | Potential bounce | Stopping volume + test on low volume | Buy — strong setup |
| Price at support | Potential bounce | High volume breakdown, close on low | Don't buy — support breaking |
| Price at resistance | Potential rejection | No demand + up-thrust | Sell — strong setup |
| Price at resistance | Potential rejection | Wide spread up bar, close on high, rising volume | Don't sell — resistance breaking |
VSA + SUPPORT/RESISTANCE:
Resistance ━━━━━━━━━━━━━━━━━━━━━━━━
│
│ ← Up-thrust + No demand
│ VSA says: "Smart money selling"
│ Action: SHORT
╱╲ │
╱ ╲ │
╱ ╲╱
╱
╱
Support ━━━━━━━━━━━━━━━━━━━━━━━━━━━
│
│ ← Stopping volume + successful test
│ VSA says: "Smart money buying"
│ Action: LONG
VSA + Moving Averages
Moving averages provide dynamic trend context. VSA provides the timing.
| Setup | How It Works |
|---|---|
| Pullback to EMA in uptrend | Wait for no-supply bar at the EMA. If present, buy with stop below the no-supply bar. |
| Rally to EMA in downtrend | Wait for no-demand bar at the EMA. If present, sell with stop above the no-demand bar. |
| Price crossing above EMA | Confirm with rising volume and wide-spread up bars closing on highs. If volume is low, it is a false break. |
| Price crossing below EMA | Confirm with rising volume and wide-spread down bars closing on lows. If volume is low, it is a false break. |
VSA + EMA PULLBACK:
╱╲
╱╱ ╲╲ ← Uptrend
╱╱ ╲
╱╱ ────────── EMA 21
╱╱ ╱ ├─┤
╱╱ ╱ │█│ ← No supply bar at EMA
╱ └─┘ Low volume, close on high
╱ ↑
│
Enter here
SL below no-supply bar
VSA + Wyckoff Method
VSA and Wyckoff are natural partners — VSA was born from Wyckoff's principles. Together they form a complete framework.
| Wyckoff Phase | VSA Signals to Watch |
|---|---|
| Selling Climax (SC) | Stopping volume — ultra-high volume, narrow spread, close off low |
| Automatic Rally (AR) | Wide spread up bars on moderate volume, close on high |
| Secondary Test (ST) | Test bars — low volume dip into SC area, close high |
| Spring | Spring bar — break below support, high volume, immediate reversal |
| Sign of Strength (SOS) | Wide spread up bars, rising volume, close on highs |
| Last Point of Support (LPS) | No supply bars on pullback — low volume, narrow spread, close high |
| Buying Climax (BC) | Climactic action — ultra-high volume, wide spread, close off high |
| Up-Thrust After Distribution (UTAD) | Up-thrust — spike above resistance, high volume, close below |
| Sign of Weakness (SOW) | Wide spread down bars, rising volume, close on lows |
| Last Point of Supply (LPSY) | No demand bars on rally — low volume, narrow spread, close low |
COMPLETE VSA + WYCKOFF ACCUMULATION:
AR ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Range High
│
│ SOS: Wide spread up,
│ ST: Test high volume, close
│ low vol ╱╲ on high
│ ╱╲ close hi ╱ ╲ ╱
│ ╱ ╲ ╱╲ ╱ ╲ ╱ LPS: No supply
│ ╱ ╲ ╱ ╲ ╱ ╲ ╱ low vol, close high
│ ╱ ╲╱ ╲╱ ╲
SC ━━━━━━━━━━━━━━━━━━━━━━━━━━╲━━━ Range Low
│ ╲
│ Stopping vol: Spring: Break below,
│ High vol, high vol, reversal
│ narrow spread,
│ close off low
Common Mistakes
Even experienced VSA practitioners fall into these traps. Study them carefully.
Mistake 1: Reading Volume in Isolation
The error: Seeing high volume and assuming it is bullish, or seeing low volume and assuming it is meaningless.
The truth: High volume can be bullish OR bearish. The spread and close determine which. Ultra-high volume on a wide-spread down bar closing on the low is extremely bearish. Ultra-high volume on a narrow spread bar closing on the high is extremely bullish (absorption).
The fix: Always read all three variables together. Volume is the "how much," spread is the "how far," close is the "who won."
Mistake 2: Trading the Climax Instead of Waiting for the Test
The error: Seeing stopping volume and immediately buying, or seeing a buying climax and immediately selling.
The truth: Climactic action is the first warning — not the signal. After a selling climax, price often drifts lower or sideways for days or weeks before the test confirms the bottom. Buying the climax means buying into an uncertain situation.
The fix: Stopping volume says "pay attention." The test says "get ready." The sign of strength says "go." Wait for the full sequence.
Mistake 3: Ignoring the Background
The error: Analyzing bars in isolation without considering what happened in the prior 20-50 bars.
The truth: A no-demand bar after a buying climax and multiple signs of weakness is a very strong short signal. A no-demand bar in the middle of a strong uptrend with no other weakness signs might just be a pause before continuation.
The fix: Always ask: "What happened before this bar? What is the background condition?" Read the story, not just the word.
Mistake 4: Expecting Every Signal to Work
The error: Abandoning VSA after a test fails or a spring is followed by further decline.
The truth: No method works 100% of the time. VSA provides probability, not certainty. A test can fail. A spring can be followed by a genuine breakdown. What matters is that your winners are bigger than your losers.
The fix: Use stop losses religiously. Accept that 40-50% of trades may lose. Focus on R:R and consistency, not individual trade outcomes.
Mistake 5: Using VSA on Low-Liquidity Markets
The error: Applying VSA to penny stocks, illiquid forex pairs, or thinly-traded crypto tokens.
The truth: VSA requires meaningful volume data. In illiquid markets, volume spikes can be caused by a single participant, not the aggregate of informed operators. The signals become unreliable.
The fix: Stick to liquid markets where volume represents broad institutional participation: major indices, large-cap stocks, major forex pairs, Bitcoin, Ethereum.
Mistake 6: Confusing Tick Volume with Real Volume
The error: Treating forex tick volume (number of price changes) as equivalent to real volume (number of contracts/shares traded).
The truth: Tick volume is a proxy for real volume. It correlates reasonably well on higher timeframes but can be misleading on very short timeframes. Futures volume and stock volume are real volume.
The fix: For forex, use tick volume on 1H timeframes or higher, or reference the corresponding futures contract (e.g., 6E for EUR/USD). For stocks, indices, and crypto on exchanges with volume reporting, use real volume.
Mistake 7: Over-Relying on Software Signals
The error: Blindly following automated VSA software (such as TradeGuider) without understanding the underlying logic.
The truth: Software can flag potential signals, but it cannot read context. It does not know whether a "no demand" bar appears after a buying climax (significant) or during a strong uptrend (less significant). Context transforms a data point into a trading decision.
The fix: Use software as an assistant, not an oracle. Understand why each signal matters, what context makes it powerful, and what context makes it irrelevant.
Practice Exercises
The only way to internalize VSA is to practice reading bars in context. Work through these exercises on your own charts.
Exercise 1: The Three-Variable Drill
Objective: Train your eyes to read volume, spread, and close simultaneously.
Instructions:
- Open any liquid market chart (daily timeframe)
- Starting from the leftmost visible bar, analyze each bar by writing down:
- Volume: High / Average / Low
- Spread: Wide / Average / Narrow
- Close: High / Middle / Low
- Your diagnosis: What does this bar tell you?
- Do this for 30 consecutive bars
- Then look at what happened AFTER those 30 bars — did your diagnoses predict the direction?
EXERCISE 1 TEMPLATE:
Bar # | Volume | Spread | Close | Diagnosis
──────┼─────────┼─────────┼────────┼──────────────────
1 | High | Wide | High | Strength
2 | Average | Average | Mid | Neutral
3 | Low | Narrow | High | No supply (bullish)
4 | ... | ... | ... | ...
...
30 | ... | ... | ... | ...
Exercise 2: Find the Accumulation
Objective: Identify a complete accumulation sequence in historical data.
Instructions:
- Open a daily chart of any major stock, index, or crypto
- Scroll back to find a period where price was declining and then reversed into a rally
- Identify these VSA events in order:
- ☐ Stopping volume (the first sign)
- ☐ At least one successful test (low volume dip)
- ☐ At least one no supply bar
- ☐ A sign of strength bar (wide spread up, close on high, good volume)
- Mark each event on your chart with annotations
- Note: Where would you have entered? Where would you have placed your stop?
WHAT YOU ARE LOOKING FOR:
SOS
╱╲ ╱
Stopping Test ╱ ╲ ╱
Volume ╱╲ ╱ ╲╱
╲ ╱╲ ╱ ╲╱ No Supply bars
╲ ╱ ╲ ╱ scattered in here
╲ ╱ ╲ ╱
╲ ╲╱
Mark each event. Note the volume at each point.
Was volume HIGH at stopping action?
Was volume LOW at the test?
Was volume RISING at the SOS?
Exercise 3: Spot the Distribution
Objective: Identify a complete distribution sequence in historical data.
Instructions:
- Open a daily chart and scroll back to find a period where price was rising and then reversed into a decline
- Identify these VSA events in order:
- ☐ Buying climax (ultra-high volume, close off high)
- ☐ Supply entering (high volume up bars closing in the middle)
- ☐ At least one no demand bar (narrow spread up bar on low volume)
- ☐ An up-thrust (spike above resistance, close below)
- ☐ A sign of weakness bar (wide spread down, close on low, good volume)
- Mark each event on your chart
- Where would you have shorted? Where would your stop loss go?
Exercise 4: The Effort vs Result Scanner
Objective: Train yourself to spot mismatches between volume and price progress.
Instructions:
- Open a chart and look for 3-5 bar sequences where:
- Volume is increasing or staying high
- But price progress is decreasing (each bar makes less ground)
- Note what happened after each sequence:
- Did price reverse? (Effort vs result worked)
- Did price continue? (The mismatch was just a pause)
- In what context did effort vs result work best? (Near support/resistance? After climactic action? In what trend?)
WHAT YOU ARE LOOKING FOR:
Volume increasing: Price progress decreasing:
████ ├────────┤ Bar 1: Big move
████ ████ ├─────┤ Bar 2: Smaller move
████ ████ ████ ├──┤ Bar 3: Tiny move
████ ████ ████ ████ ├┤ Bar 4: Almost nothing
MISMATCH = Effort > Result
What happened next? ____________________
Exercise 5: Live Bar-by-Bar Narration
Objective: Practice reading VSA in real time.
Instructions:
- Open a live chart (15-minute or 1-hour timeframe)
- As each new bar forms and closes, write a one-sentence narrative:
- "High volume down bar closing on the low — sellers in control, weakness."
- "Low volume narrow bar closing on the high — no supply, bullish."
- "Ultra-high volume wide bar closing in the middle — churning, transfer of ownership."
- Do this for one full trading session (20-30 bars)
- At the end, review your narrations. Did the narrative tell a coherent story? Did you identify the turning points?
This exercise is the most important of all. It transforms VSA from an intellectual exercise into an instinct. When reading bars becomes as natural as reading words, you will see what the market is doing in real time — and you will see it before the crowd.
Summary — The VSA Mindset
Volume Spread Analysis is not a collection of patterns to memorize. It is a way of thinking about markets. At its core, VSA asks one question over and over: "What is the smart money doing right now?"
The answer is always hidden in three simple variables:
- Volume tells you how much energy was expended
- Spread tells you how far that energy moved price
- Close tells you who captured the bar — buyers or sellers
When these three variables tell a consistent story, the signal is clear. When they contradict each other — when volume is high but progress is small, when the bar looks bullish but the close is weak, when the trend looks strong but volume is fading — that is where the real information lives. That is where smart money leaves its footprints.
Learn to read those footprints, and you will never look at a chart the same way again.
Key Principles to Remember
| # | Principle |
|---|---|
| 1 | Volume is the fuel — No volume, no sustained move |
| 2 | Spread reveals ease — Wide spread = easy movement; Narrow spread = opposition or indifference |
| 3 | Close reveals the winner — Who controlled the bar at the end? |
| 4 | Context is everything — The same bar can be bullish or bearish depending on what came before |
| 5 | Smart money accumulates in weakness — They buy when you are afraid |
| 6 | Smart money distributes in strength — They sell when you are greedy |
| 7 | Climax first, test second, entry third — Always follow the sequence |
| 8 | Effort must match result — When it does not, something hidden is happening |
| 9 | Background matters more than foreground — What is happening beneath the visible bars? |
| 10 | Patience is the edge — Wait for the full VSA sequence before committing capital |