Learning VSA(Volume Spread Analysis)

Discussion in 'Trading' started by nyse1982, Apr 11, 2009.

  1. nyse1982


    For the correct analysis of volume, one needs to realise that the recorded volume information contains only half of the meaning required to arrive at a correct analysis. The other half of the meaning is found in the price spread. Volume always indicates the amount of activity going on, the corresponding price spread
    shows the price movement on that volume.

    Volume Spread Analysis seeks to establish the cause of price movements, and from the cause, predict the future direction of prices. The ‘cause’ is quite simply the imbalance between Supply and Demand in the market, which is created by the activity of professional operators.

    The significance and importance of volume appears little understood by most non-professional traders.
    Perhaps this is because there is very little information and limited teaching available on this vital part of
    technical analysis.

    Volume shows the activity of trading during a specific period. If the volume is taken in isolation it means
    very little – volume should be looked at in relative terms. Therefore, if you compare today's volume with
    volume during the previous thirty days (or bars) it is easy to see if today's volume is high, low or average
    compared to the volume seen in the past.