Thread by @chemletters

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@PAVLeader @sanstocktrader @Abhishekkar_ @RajarshitaS @rajenvyas @scorpiomanojFRM

VOLUME SPREAD ANALYSIS

is a school of thought that believes volume plays a crucial role in understanding moves of prices in financial markets

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CONCEPT IS BASED ON FOLLOWING IDEAS

1 Volume is activity. Hence tick volume can be used where actual contract volume is not available
2 Two ways of looking at volume
* relative volume: volume in relation to the previous bar or bars.

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* actual volume: the amount of volume an individual bar represents
3 Strength comes in on down-bars and weakness comes in on up-bars
4 Markets do not like high volume up bars with wide spreads? Why because there is a possibility of Pro Selling into such a bar

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5....... Professional Money deals in large amounts and thus sells into up bars so as not to be hurt by their own selling. The converse would also be true.
6....... 85% of a volume histogram represents Smart Money activity.

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7....... Smart Money is active on all time frames. Various time frames are used to hide their actions from those that can read a chart and each other.

OPEN VALUES TO BE IGNORED AND ITS CLOSE , WE HAVE TO LOOK FOR

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Pure' VSA as described by Williams does not pay any attention to the open. Williams does look at the previous close in comparison to the current close. In fact this is the basis used to determine an up bar / down bar.

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He also looks at net change (last close -> current close) but thats a fairly secondary thing and not written about anywhere. Most of the information is there with HLC bars though perhaps not in as visually accesible form as a candle.

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Of course the only time that it is not is when there is a gap i.e. last bar close <> this bar open. Intraday not likely to be much of a problem. When there are gaps VSA may concider a bar an upbar where a traditional candle may concider it a downbar.

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The thinking is that the close is the most imortant price point as it represents the result of the struggle between the bulls and the bears for the particular interval you are looking at.

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MAJOR SIGNALS IN VSA

tests (successful and unsuccessful)
shakeouts
no demand
stopping volume
pushing through supply
upthrust
selling/buying climax

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climactic action
support/weakness coming in
trap up/down move
no result after strong effort
selling/buying pressure
bottom reversal
end of a rising market

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Volume Spread Analysis was previously known as Wyckoff Volume Spread Analysis and has been in existence for over 20 years. Tom Williams, the inventor of VSA, is a former syndicate trader.

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VSA is an improvement upon the teachings of Richard D. Wyckoff, who began stock trading in 1888 at the age of 15. Wyckoff was at odds with market analysts whose trading was based on chart formations.

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He believed that mechanical or mathematical analysis techniques had no chance of competing with proper training and experienced judgement. Tom Williams, improved upon the work that Wyckoff started. using the importance of price spreads w.r.t. volume and the close.

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most part of the thread is copy paste from various sources including traders laboratory site. use the info abv for educational purpose only. no commercial mkting stuff is incorporated. thanks to all. pls RT, if its worth doing so