Volume Spread Analysis examines the relationship between price spread (the range of a candle), closing position within that spread, and the accompanying volume to determine the intentions of institutional market participants. Developed from the work of Richard Wyckoff and refined by Tom Williams, VSA identifies accumulation, distribution, and supply/demand imbalances by reading the story that volume and price action tell together.
Spread: the range from high to low of a price bar. Effort vs. result: high volume with narrow spread signals absorption. Closing position within the spread reveals who won the bar (buyers or sellers). No demand bars: narrow spread, low volume, closing near the low on an up bar. Stopping volume: very high volume on a down bar with a narrow spread, signalling institutional buying.
Enter long when stopping volume appears at a support level followed by a no-supply test bar. Enter short after an upthrust bar (wide spread up bar closing near the low on ultra-high volume) at resistance. Look for a spring (false break below support on low volume) followed by a sign-of-strength bar. Identify effort-to-rise bars: wide spread up bars on increasing volume confirming bullish intent.
Exit longs when an upthrust or no-demand bar appears at resistance with volume divergence. Exit shorts when a selling climax (ultra-high volume, wide spread down bar closing off lows) appears. Trail stops using VSA support bars. Monitor for distribution signals (high volume, narrow ranges) that suggest smart money is offloading.
15M, 1H, 4H, Daily
VSA is a skill that requires reading the context of each bar within the broader market structure — isolated bars mean little without context. Focus on mastering the core patterns: stopping volume, no demand, no supply, upthrust, and springs. Compare volume to recent averages rather than absolute numbers, as volume context changes over time.
On-Balance Volume is a cumulative volume indicator that adds volume on up days and subtracts it on down days, creating a running total that reveals whether volume is flowing into or out of an asset. Developed by Joe Granville, OBV often leads price — a rising OBV during a consolidation suggests accumulation, while a falling OBV during a hold signals distribution. The direction of OBV matters more than its absolute value.
The Accumulation/Distribution Line measures the cumulative flow of money into and out of an asset by examining where price closes within its range relative to volume. Unlike OBV, which only considers whether the close is up or down, the A/D Line weights volume by the close's position within the bar's range, giving a more nuanced picture of buying and selling pressure.
The Klinger Volume Oscillator (KVO) measures the long-term trend of money flow by comparing volume to price movement direction. It calculates a volume force based on the relationship between the high-low range, close, and volume, then applies two exponential moving averages to create an oscillator. The KVO is particularly useful for identifying divergences between volume flow and price, signalling potential reversals before they occur.
Elder's Force Index, developed by Dr Alexander Elder, measures the force behind price movements by combining three essential elements: direction of price change, magnitude of that change, and volume. The raw force index is smoothed with an exponential moving average to create a practical oscillator that identifies trend strength, potential reversals, and the best pullback entries during an established trend.