Volume Spread Analysis: Understanding Market Intentions through the Interpretation of Volume and

Price Movements.

█ Simple Explanation:

The Volume Spread Analysis (VSA) indicator is a comprehensive tool that helps traders identify key
market patterns and trends based on volume and spread data. This indicator highlights significant VSA
patterns and provides insights into market behavior through color-coded volume/spread bars and
identification of bars indicating strength, weakness, and neutrality between buyers and sellers. It also
includes powerful volume and spread forecasting capabilities.

█ Laws of Volume Spread Analysis (VSA):

The origin of VSA begins with Richard Wyckoff, a pivotal figure in its development. Wyckoff made
significant contributions to trading theory, including the formulation of three basic laws:

1. The Law of Supply and Demand: This fundamental law states that supply and demand balance
each other over time. High demand and low supply lead to rising prices until demand falls to a
level where supply can meet it. Conversely, low demand and high supply cause prices to fall until
demand increases enough to absorb the excess supply.

2. The Law of Cause and Effect: This law assumes that a 'cause' will result in an 'effect' proportional
to the 'cause'. A strong 'cause' will lead to a strong trend (effect), while a weak 'cause' will lead
to a weak trend.

3. The Law of Effort vs. Result: This law asserts that the result should reflect the effort exerted. In
trading terms, a large volume should result in a significant price move (spread). If the spread is
small, the volume should also be small. Any deviation from this pattern is considered an
anomaly.

█ Volume and Spread Analysis Bars:

Display: Volume and/or spread bars that consist of color coded levels. If both of these are displayed, the
number of spread bars can be limited for visual appeal and understanding, with the spread bars scaled to
match the volume bars. While automatic calculation of the number of visual bars for auto scaling is
possible, it is avoided to prevent the indicator from reloading whenever the number of visual price bars
on the chart is adjusted, ensuring uninterrupted analysis. A displayable table (Legend) of bar colors and
levels can give context and clarify to each volume/spread bar.

Calculation: Levels are calculated using multipliers applied to moving averages to represent key levels
based on historical data: low, normal, high, ultra. This method smooths out short-term fluctuations and
focuses on longer-term trends.
  Low Level: Indicates reduced volatility and market interest.

 Normal Level: Reflects typical market activity and volatility.

 High Level: Indicates increased activity and volatility.

 Ultra Level: Identifies extreme levels of activity and volatility.

This illustrates the appearance of Volume and Spread bars when scaled and plotted together:
https://www.tradingview.com/x/VqFLABPt/

█ Forecasting Capabilities:

Display: Forecasted volume and spread levels using predictive models.

Calculation: Volume and Spread prediction calculations differ as volume is linear and spread is non-
linear.

 Volume Forecast (Linear Forecasting): Predicts future volume based on current volume rate and
bar time till close.

 Spread Forecast (Non-Linear Dynamic Forecasting): Predicts future spread using a dynamic
multiplier, less near midpoint (consolidation) and more near low or high (trending), reflecting
non-linear expansion.

 Moving Averages: In forecasting, moving averages utilize forecasted levels instead of actual
levels to ensure the correct level is forecasted (low, normal, high, or ultra).

The following compares forecasted volume with actual resulting volume, highlighting the power of early
identifying increased volume through forecasted levels:
https://www.tradingview.com/x/r6EAlr3K/

█ VSA Patterns:

Criteria and descriptions for each VSA pattern are available as tooltips beside them within the indicator’s
settings. These tooltips provide explanations of potential developments based on the volume and spread
data.

Signs of Strength (🟢): Patterns indicating strong buying pressure and potential market upturns.

 Down Thrust

 Selling Climax
  No Effort → Bearish Result

 Bearish Effort → No Result

 Inverse Down Thrust

 Failed Selling Climax

 Bull Outside Reversal

 End of Falling Market (Bag Holder)

 Pseudo Down Thrust

 No Supply

Signs of Weakness (🔴): Patterns indicating strong selling pressure and potential market downturns.

 Up Thrust

 Buying Climax

 No Effort → Bullish Result

 Bullish Effort → No Result

 Inverse Up Thrust

 Failed Buying Climax

 Bear Outside Reversal

 End of Rising Market (Bag Seller)

 Pseudo Up Thrust

 No Demand

Neutral Patterns (🔵): Patterns indicating market indecision and potential for continuation or reversal.

 Quiet Doji

 Balanced Doji

 Strong Doji

 Quiet Spinning Top

 Balanced Spinning Top

 Strong Spinning Top

 Balanced High Wave

 Strong High Wave

 Consolidation

Bar Patterns (🟡): Common candlestick patterns that offer insights into market sentiment. These are
required in some VSA patterns and can also be displayed independently.

 Bull Pin Bar

 Bear Pin Bar

 Doji

 Spinning Top

 High Wave

 Consolidation

This demonstrates the acronym and descriptive options for displaying bar patterns, with the ability to
hover over text to reveal the descriptive text along with what type of pattern:
https://www.tradingview.com/x/OD7Jkohz/

█ Alerts:

 VSA Pattern Alerts: Notifications for identified VSA patterns at bar close.

 Volume and Spread Alerts: Alerts for confirmed and forecasted volume/spread levels (Low, High,
Ultra).

 Forecasted Volume and Spread Alerts: Alerts for forecasted volume/spread levels (High, Ultra)
include a minimum percent time elapsed input to reduce false early signals by ensuring sufficient
bar time has passed.
█ Inputs and Settings:

 Display Volume and/or Spread: Choose between displaying volume bars, spread bars, or both
with different lookback periods.

 Indicator Bar Color: Select color schemes for bars (Normal, Detail, Levels).

 Indicator Moving Average Color: Select schemes for bars (Fill, Lines, None).

 Price Bar Colors: Options to color price bars based on VSA patterns and volume levels.

 Legend: Display a table of bar colors and levels for context and clarity of volume/spread bars.

 Forecast: Configure forecast display and prediction details for volume and spread.

 Average Multipliers: Define multipliers for different levels (Low, High, Ultra) to refine the
analysis.

 Moving Average: Set volume and spread moving average settings.

 VSA: Select the VSA patterns to be calculated and displayed (Strength, Weakness, Neutral).

 Bar Patterns: Criteria for bar patterns used in VSA (Doji, Bull Pin Bar, Bear Pin Bar, Spinning Top,
Consolidation, High Wave).

 Colors: Set exact colors used for indicator bars, indicator moving averages, and price bars.

 More Display Options: Specify how VSA pattern text is displayed (Acronym, Descriptive),
positioning, and sizes.

 Alerts: Configure alerts for VSA patterns, volume, and spread levels, including forecasted levels.

█ Usage:

The Volume Spread Analysis indicator is a helpful tool for leveraging volume spread analysis to make
informed trading decisions. It offers comprehensive visual and textual cues on the chart, making it easier
to identify market conditions, potential reversals, and continuations. Whether analyzing historical data
or forecasting future trends, this indicator provides insights into the underlying factors driving market
movements.