Determine the market phase on higher timeframes (accumulation, mark-up, distribution, or mark-down). Identify key support and resistance levels. Calculate average volume for the past 20 periods as a baseline.
Volume Spread Analysis (VSA) is a methodology that interprets market supply and demand by analyzing the relationship between trading volume price spread (range), and the closing price . It was originally pioneered by Richard Wyckoff
The key to mastering VSA lies in patience. The Smart Money takes time to accumulate and distribute. By waiting for the specific VSA triggers—Tests, Upthrusts, and No Supply/Demand bars—a trader can enter the market alongside the "Composite Man" rather than being used as liquidity for his exits.
These operators possess capital large enough to move prices in order to fill their substantial orders. Because their order sizes are too large to execute without significantly moving the price against themselves, they must engineer price movements to induce the public to buy when they wish to sell (distribution) or sell when they wish to buy (accumulation).
VSA is an evolution of the pioneering work of Richard Wyckoff, who studied the markets in the early 20th century. In the 1970s, Tom Williams popularized and computerized these concepts, naming the methodology Volume Spread Analysis.
