Learning Volume Spread Analysis

I’ve been trading utilizing a method called VSA or volume spread analysis which I’ve learned from Tom Williams, a former syndicate trader, who resides in Europe. His main theology is based on 3 principles.

1. Following and understanding volume which shows the true activity of professionals, which matter the most because professionals move the market not retail traders.

2. Following the spread, which is the high/low of each occurring bar, this alerts a trader to the bullishness or bearishness of a particular price movement.

3. Following closing price, or price action which tells you how the price reacts to the volume and spread.

Using these 3 techniques you can successfully trade on the right side of the market, with the professionals. Once you learn to understand these principles you will see that your decisions to enter a trade are rationalized by what your actually seeing and not a phony indicator.

Tom Williams enhanced the studies of Wycoff another great trader to create a conventional software program which can be used to trade, called trade-guider. Which run for about 3K. However, I don’t suggest spending your money on this b/c you can take the principles you’ve learned and trade successfully without coming out your pockets.

I trade any pair based on what I gather from the daily charts, and I look at the spreads and volume when you me enter a trade it’s based on the fact that I either see a no demand bar which closed up on weak volume or no professional support on that move. Or a down move that has no professional support. As a way to better understand VSA, you can access the volume and your accelerator pedal to a car and your spread is the actual motion, the chart represents the hill your car must climb. You may have extremely high volume however your spread is low, which basically means that gas was stepped on a lot but the actual movement of your car didn’t move far.

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