What is VSA - Understanding Volume Spread Analysis

BearMarketSunriser · 2026-02-12T10:07:50+00:00

VSA is a powerful analysis tool that helps traders understand the relationship between price movement and trading volume. It highlights major investors' actions and predicts potential market trends based on the principles of effort and results. Key signals, such as accumulation patterns, indicate market reversals, while distinguishing between true and false signals is essential for effective application.

BearMarketSunriser

2026-02-12 10:07:50

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What is VSA? It is a powerful analytical tool that helps traders discover the relationship between price movements and trading volume. Through VSA, you can identify the activities of large investors, thereby forecasting upcoming trend reversals.

Basic Principles: Effort and Result

The foundation of VSA is based on two inseparable concepts: Effort (Volume) and Result (Price).

Effort refers to the trading volume expended to push the price up or down. It is like the fuel needed to create market movement. Result is the distance the price moves. When effort is high but the result is low (or vice versa), these are signals that help you recognize the intentions of smart money in the market.

Recognizing Absorption Signals

One of the most important patterns is the accumulation sign—when the price drops but volume suddenly spikes, especially with small-bodied candles, long wicks, or candles closing above the open.

Typical scenario: The price drops sharply but volume surges, and the candle ends with a long lower wick and a small body. This indicates that strong buyers are withdrawing, absorbing all the selling pressure. It is a warning sign that a reversal may occur soon.

Practical Application in Trading

When using VSA, you need to distinguish between genuine signals and false signals. Not every increase in volume indicates absorption—observe the candle structure, closing levels, and the price position relative to support/resistance levels.

Regularly comparing the length of the candle body with trading volume will help you detect anomalies—that is the secret to effective VSA application. This way, you are not only monitoring price but also the true intentions of the market.

Note: The information provided is for educational and reference purposes only, not investment advice. Conduct thorough research and proper risk management before making trading decisions.

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