Predict “The NEXT Candle” Using VSA | Price Action & Volume Spread Analysis Trading Course

Summary

This video introduces Volume Spread Analysis (VSA), a leading strategy used by banks and professional traders to anticipate market movements. VSA studies price in relation to volume to identify market behavior, focusing on smart money activity. It's applicable across various markets and timeframes, offering a non-subjective approach to understand market psychology. The script covers the basics of VSA, including its components and stages based on Wyckoff's theory, and discusses the application of VSA in detecting signs of market strength and weakness.

Takeaways

• 📈 Volume Spread Analysis (VSA) is a leading trading strategy used by banks and professional traders to understand market psychology and sentiments.
• 🔍 VSA studies price in relation to volume to identify the reasons behind market movements, focusing on the activity of 'smart money' such as big banks and hedge funds.
• 🛡 Volume Spread Analysis eliminates subjectivity from trading as volumes cannot be manipulated like prices can by professional activity.
• 🌐 VSA can be applied to various markets including forex, stocks, indices, commodities, and futures, even utilizing tick volumes in the decentralized forex market.
• 📊 The four stages of VSA based on Wyckoff theory are Accumulation, Mark Up, Distribution, and Mark Down, each representing a phase in the market cycle.
• 💪 Two major applications of VSA are tracking Signs of Strength (SOS) and Signs of Weakness (SOW), which indicate shifts in supply and demand dynamics.
• 📊 SOS occurs when supply is exhausted and demand increases, causing the market to rise, while SOW happens when demand is exhausted and supply increases, leading to a market fall.
• 📌 Types of Signs of Strength include Down Thrust, Selling Climax, and various scenarios where bearish effort does not match the result, indicating an upcoming price rise.
• 📉 Types of SOW include Up Thrust, Buying Climax, and situations where bullish effort does not match the result, signaling a potential price drop.
• 🔑 VSA is a powerful technique for revealing true market sentiment and order flow, offering insights into the underlying reasons for market movements.
• 👍 The video encourages viewers to engage with the content by liking and subscribing to support the channel and receive more advanced strategies in future videos.

Q & A

What is Volume Spread Analysis (VSA) and why is it significant for traders?

Volume Spread Analysis (VSA) is the study of price in relation to its corresponding volume. It is significant for traders because it identifies the underlying reasons behind market behavior or movement, tracks professional activity, and eliminates subjectivity from trading by focusing on volume, which cannot be manipulated like price.

Who is considered as 'Smart Money' in the context of Volume Spread Analysis?

'Smart Money' in the context of VSA refers to Big Banks, Hedge Funds, and Large Financial Institutions that have the financial power to influence the market direction.

How does VSA eliminate subjectivity from trading?

VSA eliminates subjectivity from trading because it relies on the relationship between price and volume. While prices can be manipulated by professional activity, volumes cannot, providing a more objective analysis of market sentiment and psychology.

In which markets can Volume Spread Analysis be applied?

VSA can be applied in various markets including forex, stocks, indices, commodities, and futures.

What is the difference between Tick Volumes and actual volumes in the context of forex trading?

In forex, which is a decentralized market, Tick Volumes serve as a proxy to real volumes and correlate with them about 90% of the time, since actual volumes are not readily available.

What are the four stages of VSA based on Wyckoff theory?

The four stages of VSA based on Wyckoff theory are: 1) Accumulation, where supply and demand are in balance after a mark down move. 2) Mark Up, where demand exceeds supply, causing an upward rally. 3) Distribution, where supply and demand are balanced after an exhausted mark-up move. 4) Mark Down, where supply exceeds demand, leading to a downward drop.

What are the two major applications of VSA?

The two major applications of VSA are tracking of SOW (Sign of Weakness) and tracking of SOS (Sign of Strength), which help identify when demand or supply is exhausted and anticipate potential market movements.

What is a Down Thrust in VSA and what does it signify?

A Down Thrust in VSA is a bullish pin bar or doji bar with an ultra-high volume or above average high volume and an extremely low spread. It signifies a divergence between spread and volume, indicating more demand than supply and suggesting a potential price rise in the near future.

What is a Selling Climax and what does it indicate about the market?

A Selling Climax is a high spread bearish candle with a noticeable downward rejection wick, projected on ultra-high or above average high volume. It indicates that there is more demand than supply, suggesting that the market is likely to rise.

What is the difference between a No Supply Bar and a Pseudo Down Thrust in VSA?

A No Supply Bar is a low spread bearish candle with a downward wick and volume lower than the previous two candles, indicating a lack of supply and a potential price rise. A Pseudo Down Thrust is a bullish pin bar or doji bar with low spreads and volume lower than the previous two candles, also suggesting a lack of supply and a potential price rise, but it is specifically a continuation signal after bullish momentum or a Sign of Strength.

How can a Failed Effort Selling Climax be identified and what does it imply for the market?

A Failed Effort Selling Climax is identified by a high spread and volume greater than the previous candle without a downward rejection wick. It shows a disagreement between volume and price compared to previous candles. However, if the next candle is bullish, absorbing the entire bearish effort, it implies a potential market rise.

What is the significance of the Inverse Down Thrust in VSA and how does it differ from a regular Down Thrust?

An Inverse Down Thrust in VSA is an inverse bullish pin bar or doji bar with low spreads and projected on ultra-high or above average high volume. Unlike a regular Down Thrust, which has a low spread with high volume, the Inverse Down Thrust shows a disagreement between spread and volume, indicating more demand than supply and a potential price rise in the near future.

What are the key takeaways from the script regarding the importance of volume in understanding market movements?

The key takeaways are that volume is a crucial indicator of market sentiment and order flow, it cannot be manipulated, and it provides objective insights into market psychology. Analyzing volume in conjunction with price movements can help traders anticipate market trends and make informed trading decisions.

Outlines

00:00

📈 Anticipating Price Movements with Volume Spread Analysis

This video introduces Volume Spread Analysis (VSA), a method used by banks and professional traders to anticipate price movements in various markets, including forex, stocks, indices, commodities, and futures. The script explains that VSA identifies underlying reasons behind market behavior by analyzing price in relation to its volume, focusing on the activities of 'smart money' such as big banks and hedge funds. VSA is praised for its objectivity, applicability across timeframes, and its ability to detect market psychology and sentiments, despite some skepticism about its use in decentralized forex markets.

05:00

📉 Key Components and Concepts of Volume Spread Analysis

The script outlines the components of Volume Spread Analysis, including Spread, Volume, Bearish and Bullish Volume, Above Average High Volume, and Ultra-High Volume. It explains Wyckoff's VSA theory stages: Accumulation, Mark Up, Distribution, and Mark Down, detailing how these stages represent the balance and imbalance of supply and demand in the market. The script also introduces the major applications of VSA, focusing on tracking Signs of Weakness (SOW) and Signs of Strength (SOS), and provides examples of different types of Sign of Strength, such as Down Thrust, Selling Climax, Bearish Effort < Bearish Result, and more.

10:03

🔍 Identifying Signs of Weakness in Market Trends

The script explains various Signs of Weakness (SOW) in market trends using Volume Spread Analysis. It details different types of SOW such as Up Thrust, Buying Climax, Bullish Effort < Bullish Result, Bullish Effort > Bullish Result, No Demand Bar, Pseudo Up Thrust, Inverse Pseudo Up Thrust, and Inverse Up Thrust. Each type is described with its characteristics, indicating how divergences between price and volume suggest an impending decrease in price due to supply overpowering demand.

15:07

💡 Final Insights on Volume Spread Analysis and Further Learning

The final part of the script emphasizes the power of Volume Spread Analysis in revealing true market sentiment and order flow. It discusses the Failed Buying Climax and its implications, reiterating the effectiveness of VSA in predicting market movements. The video encourages viewers to engage with more content on Wyckoff and VSA methodologies, promising deeper insights and advanced strategies for day trading and swing trading in future videos.

Keywords

💡Volume Spread Analysis (VSA)

Volume Spread Analysis is a trading strategy that focuses on the relationship between price and volume in the market. It is central to the video's theme, which is to teach viewers how to anticipate price movements by understanding the underlying market behavior. The script explains that VSA tracks the activity of 'Smart Money', such as Big Banks and Hedge Funds, and eliminates subjectivity in trading because volumes cannot be manipulated like prices can. It is used to gauge market psychology and sentiment across various financial markets.

💡Smart Money

In the context of the video, 'Smart Money' refers to large financial entities like Big Banks, Hedge Funds, and Large Financial Institutions that have the power to influence market movements due to their substantial financial resources. The video emphasizes that VSA helps in identifying the moves of Smart Money, which is crucial for anticipating market trends and making informed trading decisions.

💡Bearish Movement

A bearish movement in the video script indicates a market trend where prices are expected to fall. It is an important concept because Volume Spread Analysis aims to identify such movements by analyzing the relationship between price and volume. For instance, the script mentions that if a trader anticipates a bearish movement, there must be an underlying reason, which VSA seeks to uncover.

💡Bullish Movement

Conversely, a bullish movement suggests a market trend where prices are expected to rise. The video script uses this term to illustrate the positive side of market predictions, which is also a key focus of VSA. Bullish movements are identified by analyzing volume patterns that indicate increased demand and potential price appreciation.

💡Tick Volumes

Tick Volumes, as mentioned in the script, serve as a proxy for real trading volumes in the forex market, which is decentralized and does not have centralized volume data. This concept is important because it allows traders to apply VSA methodology in forex markets by using tick data to infer volume-related information, which correlates with real volumes about 90% of the time.

💡Wyckoff’s VSA

Wyckoff’s VSA is a specific method of Volume Spread Analysis highlighted in the video for its effectiveness in market analysis. It is non-subjective and resistant to manipulation by Smart Money, as it is designed to detect their activity. The script positions Wyckoff’s VSA as a superior method for understanding the causes of market movements and the imbalance between supply and demand.

💡Accumulation

In the context of Wyckoff theory presented in the video, 'Accumulation' is the first stage of VSA where supply and demand reach a balance after a mark down move. It is a key concept as it signifies the beginning of a potential bullish phase, indicating that sellers are exhausted, and buyers may start to take control of the market.

💡Distribution

Distribution is another stage of the Wyckoff theory described in the script, occurring when supply and demand are balanced after an exhausted mark-up move. This stage is significant as it often precedes a bearish phase, suggesting that buyers are exhausted, and sellers may start to dominate the market.

💡Sign of Weakness (SOW)

The 'Sign of Weakness' or SOW is a term used in the script to denote situations where demand is exhausted, and supply increases, leading to a market decline. It is a critical concept in VSA as it helps traders identify potential turning points in an uptrend, signaling a shift from bullish to bearish sentiment.

💡Sign of Strength (SOS)

The 'Sign of Strength' or SOS in the video script refers to moments when supply is exhausted, and demand increases, causing the market to rise. This concept is vital for traders as it indicates a potential reversal from a downtrend to an uptrend, suggesting that buyers are taking control of the market.

💡No Supply Bar

A 'No Supply Bar' is a specific type of candlestick pattern discussed in the script, characterized by a low spread and lower volume than the previous two candles, indicating a lack of selling pressure. It is a continuation signal in VSA, suggesting that the current trend, if bullish, is likely to continue due to the overpowering demand.

💡No Demand Bar

Similarly, a 'No Demand Bar' is a candlestick pattern with a low spread and lower volume, signifying a lack of buying interest. It is used as a continuation signal in VSA, indicating that if the current trend is bearish, it is likely to persist due to the dominance of supply over demand.

💡Failed Effort

The term 'Failed Effort' in the script refers to a situation where there is a divergence between price action and volume. For instance, 'Failed Effort Selling Climax' is when a bearish candle has a higher spread and volume than the previous candles but is followed by a bullish candle, indicating that the bearish effort failed to drive the price down, potentially signaling a reversal.

Highlights

Volume Spread Analysis (VSA) is a leading trading strategy used by banks and professional traders to understand market psychology and sentiments.

VSA studies price in relation to volume to identify the reasons behind market behavior.

Smart Money, including Big Banks and Hedge Funds, cannot manipulate volumes, making VSA a reliable tool for market analysis.

VSA can be applied to various markets such as forex, stocks, indices, commodities, and futures.

Forex markets use Tick Volumes as a proxy for real volumes, which correlates with actual volumes 90% of the time.

VSA is based on Wyckoff's theory, which is non-subjective and resistant to smart money manipulation.

The four stages of VSA are Accumulation, Mark Up, Distribution, and Mark Down, reflecting changes in supply and demand balance.

Signs of Strength (SOS) and Signs of Weakness (SOW) in VSA indicate market reversals based on supply and demand imbalances.

Down thrust and Selling Climax are types of SOS, indicating potential market rises due to increased demand.

No Supply Bar is a continuation signal in VSA, showing a lack of supply and potential for price rise.

Pseudo down thrust is a continuation signal indicating a lack of supply and potential for a price rise.

Up thrust and Buying Climax are types of SOW, signaling potential market falls due to increased supply.

No Demand Bar is a continuation signal in VSA, indicating a lack of demand and potential for price fall.

Pseudo up thrust is a continuation signal showing a lack of demand and potential for a price fall.

Failed Buying Climax in VSA indicates a divergence between price and spread, with a subsequent bearish candle absorbing the bullish effort.

VSA is a powerful technique for understanding true market sentiment and order flow.

Transcripts

Do you want to learn to anticipate a price movement like this one?

You’re in luck because this is the video that will change how you see and trade the

market.

Today I’m showing you how banks and professional traders use Volume Spread Analysis, one of

the best leading strategies you could use for trading.

And if you want to show your support, please leave a like to help us with Youtube algorithm

and turn on the bell, so you don’t miss when new videos are released.

Volume Spread Analysis is the study of Price in relation to its corresponding volume.

It basically identifies the underlying reasons behind the market behavior or movement.

If a trader anticipates a bearish or bullish movement then there must be an underlying

reason behind it.

Volume Spread Analysis tracks down the professional activity or the moves of the smart money.

Smart Money in this context is the Big Banks, Hedge Funds and Large Financial Institutions

having hefty pockets to move the market the way they want.

Volume Spread Analysis eliminates subjectivity from trading because while price can be manipulated

by professional activity, volumes can’t.

Thereby, Volume Spread Analysis is one of the best way to understand market psychology

and sentiments.

VSA can be used in any market like forex, stocks, Indices, commodities, and Futures.

Many people might argue that in forex Volumes are useless as it is decentralized market

having no real volumes.

However, Forex has Tick Volumes which is proxy to real volumes and correlates it 90% of the

time.

And yes, VSA methodology can also be applied to any timeframe.

Wyckoff’s VSA is one of the best methods to analyze a market because:

• It is non subjective • It is not prone to smart money manipulation

as the method itself is used for detecting smart money activity.

• It figures out the underlying reasons behind the market movements and also understands

the cause of imbalance between supply and demand.

First, let’s see the components of volume Spread Analysis:

1.

Spread: Spread is the difference between Opening and closing of the price.

2.

Volume is the frequency of transaction of the price change during a specified period

of time 3.

Bearish and Bullish Volume: Bearish Volume is marked in Red and it shows bearish activity.

Bullish Volume is marked in green and it shows bullish activity.

4.

Above Average High Volume: Above Average High Volume is the Highest Volume in the current

session which is higher than the average volume.

Average Volume is the volume that coincides with Moving Average 20 of the volume indicator.

5.

Ultra-High Volume: Ultra High Volume is the Highest Volume in the current session.

It is higher than the previous peak volume.

There are 4 stages of VSA, based on Wyckoff theory.

1) Accumulation: This Occurs when Supply and Demand are in balance to each other after

a mark down move.

2) Mark Up: This occurs when Demand becomes more than supply causing an upward bullish

rally after accumulation process 3) Distribution: This occurs when Supply and

Demand are in balance after an exhausted mark-up move.

4) Mark Down: This occurs when Supply becomes more than Demand causing a downward drop after

distribution phase.

Watch this video if you want to know more details about Wyckoff method.

There are two major applications of VSA namely tracking of SOW (Sign of Weakness) and tracking

of SOS (Sign of Strength).

SOW Sign of Weakness occurs when the Demand is exhausted (Buyers Exhausted) after uptrend

and Supply increases (More Sellers come in).

This imbalance between supply and demand causes the market to fall.

SOS Sign of Strength occurs when Supply is exhausted (Sellers exhausted) after downtrend

and Demand increases (More Buyers come in).

This imbalance between supply and demand causes the market to rise.

Now let’s talk about the different types of Sign of Strength:

1) Down thrust: Down thrust is the bullish pin bar or the

Doji bar having an ultra-high volume or above average high volume.

The Spread of the down thrust bar is extremely low meanwhile the volume is relatively high.

VSA suggests that if the spread is low then the volume should also be low.

In this case there is a divergence between spread and volume which signifies that there

is more demand than the supply causing price to rise in near future.

2) Selling Climax: Selling Climax is the high spread bearish

candle closing well off the lows, having a noticeable downward rejection wick, projected

on ultra-high or above average high volume.

High spread rejection low volume anticipates that the market will rise because there is

more demand than supply.

Selling Climax has a downward wick whose size is approximately 25%-50% of the candle’s

body size.

3) Bearish Effort < Bearish Result: This is High Spread Bearish Candle whose spread

is larger than the previous candle’s spread but its volume is lower than the previous

candle’s volume.

VSA suggests that if there has been no effort made then there should not be any result.

This disagreement between Price and Volume increases demand and reduces supply causing

the market to rise in future.

An effort (volume) has not been made but there is a result (Spread).

4) Bearish Effort > Bearish Result: This is Low Spread Bearish Candle having spread

lower than the previous candle’s spread but its volume is higher than the previous

candle’s volume.

In this case there is a disagreement between volume and price resulting demand to become

more than the supply and causing price to rise in near future.

An effort (volume) has been made but there is no result (Spread).

5) No Supply Bar: This is a low spread bearish candle having

downward wick whose volume is lower than the previous two candles’ volumes.

No Supply bar means that there is lack of supply and demand is overpowering supply causing

price to rise in future.

Please note that No Supply Bar is a continuation signal not a reversal signal.

No supply bar is effective only if it is appears after bullish momentum or appears after Sign

of Strength in the direction of the trend.

6) Pseudo down thrust: Pseudo down thrust is the bullish pin bar

or doji bar having low spreads whose volume is lower than the previous two candles’

volumes.

This suggests that there is no supply or lack of supply.

Lack of supply means that demand will overpower supply causing price to rise in near future.

Please also note that Pseudo down thrust is a continuation signal not a reversal signal.

Pseudo down thrust is effective only if it is appears after bullish momentum or appears

after Sign of Strength in the direction of the trend.

7) Pseudo Inverse down thrust: Pseudo Inverse down thrust is an inverse bullish

pin bar (or doji bar) having low spreads and its volume is lower than the previous two

candles' volumes.

This suggests that there is no supply or lack of supply.

Lack of supply means that Demand will overpower supply causing price to rise in near future.

Again, Pseudo inverse down thrust is a continuation signal not a reversal signal.

Is effective only if it is appears after bullish momentum or appears after Sign of Strength

in the direction of the trend.

8) Inverse down thrust: Inverse down thrust is the inverse bullish

pin bar or doji bar having low spreads and projected on ultra-high or above average high

volume.

VSA suggests that if the spread is low then the volume should also be low.

In this case there is a disagreement between spread and volume which signifies that there

is more demand than the supply causing price to rise in near future.

9) Failed Effort Selling Climax: Failed Effort Selling Climax is the variation

of Selling Climax having no downward rejection wick.

It has higher spread than the previous candles and its volume is also higher than the previous

candle.

There is a disagreement between Volume and Price as compared to previous candles.

However, the next candle is bullish, absorbing the entire bearish effort.

Now let’s talk about different Types of SOW Sign of Weakness:

1) Up thrust: Up thrust is the bearish pin bar or doji bar

having an ultra-high volume or above average high volume.

The Spread of the up thrust bar is extremely low meanwhile the volume is relatively high.

VSA suggests that if the spread is low then the volume should also be low.

In this case there is a disagreement between spread and volume which signifies that there

is more supply than demand causing price to fall in near future.

2) Buying Climax: Buying Climax is the high spread bullish candle

closing well off the highs, having noticeable upward rejection wick, projected on ultra-high

or above average high volume.

High spread rejection low volume anticipates that the market will decrease soon because

there is more Supply than Demand.

Buying Climax has an upward wick representing 25%-50% of the candle’s body size.

3) Bullish Effort < Bullish Result: This is a High Spread Bullish Candle whose

spread is larger than the previous candle’s spread but its volume is lower than the previous

candle’s volume.

VSA suggests that if there has been no effort made, then there should not be the result

(Spread).

This divergence between Price and Volume increases supply and reduces demand causing the market

to decrease in future.

4) Bullish Effort > Bullish Result: This is a Low Spread Bullish Candle having

spread lower than the previous candle’s spread but its volume is higher than the previous

candle’s volume.

VSA suggests that if an effort has been made then there must be a result (spread).

In this case there is a disagreement between volume and price resulting Supply to become

more than Demand and causing price to fall in near future.

5) No Demand Bar: This is a low spread bullish candle having

upward wick whose volume is lower than the previous two candles’ volumes.

No Demand bar means that there is lack of demand and supply is overpowering demand causing

price to fall in future.

Please note that No Demand is a continuation signal not a reversal signal.

No Demand is effective only if it is appears after bearish momentum or appears after SOW

Sign of Weakness in the direction of the trend.

6) Pseudo upthrust: Psuedo upthrust is the bearish pin bar or

doji bar having low spreads whose volume is lower than the previous two candles’ volumes.

This suggests that there is no demand or lack of demand.

Lack of demand means that supply will overpower demand causing price to fall in near future.

Also, Pseudo up thrust is a continuation signal and not a reversal signal.

So, is effective only if it is appears after bearish momentum or appears after SOW Sign

of Weakness in the direction of the trend.

7) Inverse Pseudo Up thrust: It is the inverse bearish pin bar (doji bar)

having low spreads.

Its volume is lower than the previous two candles' volumes..

This suggests that there is no demand or lack of demand.

Pseudo inverse upthrust is also a continuation signal and not a reversal signal.

Pseudo inverse up thrust is effective only if it is appears after bearish momentum

8) Inverse Up thrust: Inverse Up thrust is the inverse bearish pin

bar (or doji bar) having an ultra-high volume or above average high volume.

The Spread of the up thrust bar is extremely low meanwhile the volume is relatively high.

VSA suggests that if the spread is low then the volume should also be low.

In this case there is a disagreement between spread and volume which signifies that there

is more supply than the demand causing price to fall in near future.

9) Failed Buying Climax: Failed Effort Buying Climax is the variation

of Buying Climax having no upward rejection wick.

It has higher spread than the previous candle and its volume is also higher than the previous

candle.

There is a divergence between Price and Spread of the Failed Buying Climax as compared to

previous candles.

However, the next candle is bearish, absorbing the entire bullish effort.

I hope you realize that that the Volume Spread Analysis is a very powerful technique which

unfolds the true sentiment and order flow of the market.

If you enjoyed this type of content and want more Wyckoff and Volume Spread Analysis videos,

leave us a like to show your support and to help us with Youtube algorithm and in future

videos we’ll go even deeper with more advanced strategies that can be applied to day trading

and swing trading.

Until next time.