Trading Volume Spread Analysis

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“Learn the lost art of VSA or volume spread analysis to help transform the way you trade the markets. Learn to follow price action to determine when to buy and sell. Most people when it comes to trading follow every indicator known to man such as MACD, Bollinger Band, M&S’s and RSI’s. I tell you it becomes a bit overwhelming at times. However, the fact is that back in the early days traders such as Jessie Livermore and Richard Wycoff, had none of the such. They read the charts following the price action and volume. It wasn’t until the late 70′-80’s that the notion that indicators where introduced as additional technical tools to help traders monitor prices activity. However, the fact it that indicators are lagging. The success with the VSA method is that your looking to follow the volume,whether tick volume or not is still a relevant substitute to utilize in determining when professional money is buying or selling. The spread of the bars also gives you insight into the bullishness and bearishness of the smart money. Finally, the closing price give you a look into what actually occurred on the previous bars. by analyzing all that activity you can determine the price direction of a particular currency pair.

Using volume spread analysis, actually originated from Richard Wycoff method of studying price action and further more developed by a guy named Tom Williams. When trading using the VSA method you aiming to determining the accumulation phase, which occurs whens occur a long bearish trend. Smart money in essences buy on lower levels, there in the business of making profit so they wait until supply has reached its exhaustion point. What happens next is they absorb the selling from the market, if the volume is high enough it actually knocks the market sideways. There strategy is then to accumulate at lower levels, which can be identified by low spread and low volume near oversold ares. After, they accumulate most of the pair, they naturally test the market to determine if any more supply exists in the market. If no is apparent, they then begin to mark the price of a pair up.One the pair is marked up, it begins to become oversold, the smart money is beginning to move out of the distribution phase. They then move to cap the market using a strategy called an upthrust. This is how they put a cap on the market and after an upthrust the pair usually lags around the overbought area before dropping on no demand.They begin to finish the distribution around the overbought area before a pair falls off because of no professional.”

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