Forex Volume Spread Analysis (VSA) Strategy - Simple Guide
What is Volume Spread Analysis (VSA)?
VSA is a method of analyzing the relationship between price, volume, and the spread (range) of a candlestick
to understand what the smart money (big players like banks and institutions) are doing.
The core idea:
"Volume shows interest, and price spread shows result. Combine them, and you know the markets intention."
The 3 Key Elements of VSA
1. Volume How much activity there is (number of trades or tick volume).
2. Spread The difference between the high and low of a candle (not the broker spread).
3. Close Position Where the candle closed (top, middle, or bottom).
Core VSA Concepts (Made Simple)
1. No Demand (ND) Weakness is coming
- What it means: Buyers are not interested anymore.
- Volume: Low
- Candle spread: Narrow (small)
- Close: Near the middle or bottom
Signal: If this happens after an uptrend, smart money is exiting sell signal.
Example:
Price was going up, then you see a small candle with low volume and no push up a clue buyers are gone.
Action: Wait for confirmation, then consider shorting (selling).
Forex Volume Spread Analysis (VSA) Strategy - Simple Guide
2. No Supply (NS) Strength is building
- What it means: Sellers are not interested anymore.
- Volume: Low
- Spread: Narrow
- Close: Near the middle or top
Signal: If this shows after a downtrend, smart money is likely buying quietly buy signal.
Example:
After falling prices, you see a small down candle with low volume sellers drying up.
Action: Look for confirmation, then prepare to buy.
3. Buying Climax (BC) End of an uptrend
- Volume: Very High
- Spread: Wide
- Close: Off the highs (price closed lower)
Signal: Smart money is dumping their buys while others are still buying.
Example:
Strong up candle on big volume, but price closes off the high institutions are selling to retail buyers.
Action: Prepare to short trend might reverse.
Forex Volume Spread Analysis (VSA) Strategy - Simple Guide
4. Stopping Volume End of a downtrend
- Volume: Very High
- Spread: Wide
- Close: Near the top
Signal: Smart money is absorbing all the selling theyre buying from panic sellers.
Example:
Strong down move, then wide candle with high volume closing strong buyers stepping in.
Action: Watch for reversal patterns or bullish confirmation.
How to Use VSA Step-by-Step
1. Identify the trend Uptrend or downtrend?
2. Watch volume + spread + close Look at 23 candles together.
3. Look for clues:
- Are buyers/sellers active?
- Is volume rising or falling?
- Is price moving with or against volume?
4. Confirm with support/resistance Signals work better near key levels.
5. Enter trade only after confirmation (e.g., engulfing candle, breakout).
Real-World Example (Gold / XAUUSD)
Lets say you're looking at a 15-minute chart.
Forex Volume Spread Analysis (VSA) Strategy - Simple Guide
- Price is rising with increasing volume and large green candles = Smart money buying
- Then a small candle appears with low volume and no push up = No Demand
- Next candle is red = confirms buyers are gone
You enter a sell trade with stop loss above the high. Take profit at the last demand zone.
Summary Table
| VSA Signal | Volume | Spread | Close | What it Means |
|------------------|------------|--------|-----------|--------------------------|
| No Demand | Low | Narrow | Mid/Low | Weak buying |
| No Supply | Low | Narrow | Mid/High | Weak selling |
| Buying Climax | Very High | Wide | Off Highs | Smart money exiting buys |
| Stopping Volume | Very High | Wide | Near Top | Smart money absorbing |
Tips for Beginners
- Start on higher timeframes (1H or 4H) to see clean signals.
- Dont rely on just one candle always look for confirmation.
- Combine with basic price action (support/resistance, trendlines).
- Use Volume indicators (like Tick Volume on MT5 or TradingView).
