Volume Spread Analysis (VSA): Read Smart Money Through Volume
VSA reveals what smart money is doing by analyzing the relationship between volume and price spread. See the story behind the candles.
- VSA combines volume level + spread (candle range) + close position to reveal smart money intent.
- Climax bars (ultra-high volume, wicks) signal reversals. No demand/supply signals show weak moves.
- Thrive automatically identifies VSA signals and alerts on high-probability setups.
Explore VSA Signals
Click through key VSA signals:
Volume
Ultra-high volume
Spread
Wide spread, closes off high (upper wick)
Interpretation
Smart money distributing into retail buying frenzy. Despite high volume, price couldn't hold highs. Supply overwhelming demand. Top warning.
Don't buy. Prepare for reversal. Look for follow-through weakness. Can short on confirmation but risky—wait for secondary test.
What Is Volume Spread Analysis?
VSA reads the story that volume tells. It analyzes three elements: volume (how much activity), spread (candle range high to low), and close position (where in the range price closed). The combination reveals whether smart money is accumulating, distributing, or absent.
VSA was developed by Tom Williams based on Wyckoff principles. It's used by professional traders to see institutional activity hidden in price action.
Key VSA Signals
Climax Bars (Reversal Warnings)
Buying Climax: Ultra-high volume, wide spread, closes off high (upper wick). Smart money selling to retail. Top warning.
Selling Climax: Ultra-high volume, wide spread, closes off low (lower wick). Smart money buying panic. Bottom warning.
Weakness/Strength Signals
No Demand: Low volume, narrow up-bar, closes middle/low. Rally without professional participation. Weak—avoid buying.
No Supply: Low volume, narrow down-bar, closes middle/high. Dip without selling pressure. Strong—buying opportunity.
| Signal | Volume | Spread | Close | Meaning |
|---|---|---|---|---|
| Buying Climax | Ultra-high | Wide | Off high | Top warning |
| Selling Climax | Ultra-high | Wide | Off low | Bottom warning |
| No Demand | Low | Narrow up | Middle/low | Weak rally |
| No Supply | Low | Narrow down | Middle/high | Sellers absent |
Reading VSA
Volume Context
Volume alone means nothing—context matters. High volume on breakout is good. High volume at top with reversal is bad. Same volume, different meanings based on where and how it occurs.
Spread Context
Wide spread with high volume and close off extreme = something absorbed the volume. Narrow spread with high volume = opposing force meeting the move. Read the story.
Background
VSA signals mean different things based on what came before. No demand after sign of weakness is bearish. No demand in strong uptrend is minor pause. Context is everything.
Trading with VSA
- Climax bars: Don't trade with the climax. Wait for follow-through confirmation of reversal.
- No demand: Don't buy rallies. Look for short opportunity on next weakness.
- No supply: Buy opportunity. Look for entry on next strength after test.
- Always confirm: VSA signals need follow-through. One bar doesn't make a trade.
Common Mistakes
- Volume alone: High volume isn't always bullish. Context determines meaning.
- Ignoring spread: Volume + spread together tell the story.
- Single bar trading: VSA signals need confirmation and context.
- Wrong timeframe: Lower timeframes have more noise. Start with daily.
Frequently Asked Questions
What is Volume Spread Analysis?
VSA analyzes the relationship between volume and price spread (candle range) to understand smart money behavior. High volume with specific spread patterns reveals institutional intent.
What is a buying climax?
Ultra-high volume with wide spread that closes off the high (upper wick). Smart money selling into retail euphoria. Major top warning. Supply overwhelming demand.
What is a selling climax?
Ultra-high volume with wide spread that closes off the low (lower wick). Smart money buying retail panic. Major bottom warning. Demand overwhelming supply.
What is "no demand"?
Low volume on narrow up-bar closing in middle/low. Price rising but no professional interest. Weak move that often fails. Don't buy these rallies.
What is "no supply"?
Low volume on narrow down-bar closing in middle/high. Price dipping but no selling pressure. Sellers exhausted. Good buy opportunity on pullbacks.
How does VSA differ from regular volume analysis?
Regular analysis just looks at volume level. VSA combines volume with spread (candle range) and close position to interpret meaning. Context and relationships matter.
What timeframe works for VSA?
Higher timeframes (4H, daily) give cleaner signals. Lower TFs have more noise. Daily is traditional for VSA. Can use on any timeframe with experience.
Can VSA be used for crypto?
Yes, VSA works well for crypto. 24/7 trading creates continuous volume data. Retail-heavy market shows clear VSA patterns. Just use appropriate exchange volume data.