Short answer: volume spread analysis (VSA) reads each price bar through three facts. The first is the spread, high minus low. The second is where the close sits inside that spread. The third is whether volume was high or low against its recent average. Together they show whether a move had support from active participants or happened on thin air. VSA sorts bars into signs of strength and signs of weakness, then waits for the next bar to confirm.
Who is this page for? Traders of forex, index, metals and crypto CFDs who watch price action and want a repeatable way to infer market intent from the volume behind it. Trader experience levels vary, so each term is defined before it is used.
The three inputs and what each one measures
Every VSA read starts with the same three questions about a single bar.
- Spread: how wide is the bar against the last 20 bars? Wide means price travelled; narrow means it stalled.
- Close position: did the bar finish in its top third, middle or bottom third? The close shows who won the bar.
- Relative volume: was volume above or below its 20-bar average? The relative volume guide covers the ratio; VSA uses it as a blunt label, high, average or low.
When volume and spread agree, the bar is ordinary and mostly unremarkable. When they disagree, the bar is consequential. Heavy effort with little result means absorption. Light effort with a wide result means the other side has quietly stepped aside.
Signs of strength and signs of weakness
Signs of strength suggest demand is winning or supply is exhausted. Signs of weakness suggest the reverse. The table describes each bar by its inputs rather than by name alone.
| Bar | Spread | Close | Volume | Reads as |
|---|---|---|---|---|
| Stopping volume | Wide, down | Middle or top | Very high | Strength: selling absorbed |
| No supply | Narrow, down | Any | Low | Strength: sellers scarce |
| Test | Narrow, dips lower | Near high | Low | Strength: supply checked, absent |
| No demand | Narrow, up | Middle or low | Low | Weakness: buyers absent |
| Upthrust | Wide, above resistance | Near low | High | Weakness: breakout rejected |
| Buying climax | Wide, up | Off the high | Very high | Weakness: demand exhausted |
A sign of strength only counts after a downmove, and a sign of weakness only after an upmove. A no-demand bar inside a sluggish range is stale background, because nobody was expected to buy there.
A bar-by-bar reading checklist
Work through this in order, once per bar, before any trade decision.
- Fix the background: uptrend, downtrend or range on the timeframe above yours.
- Label the volume: high, average or low against the 20-bar mean.
- Label the spread and mark the close: wide or narrow, top or bottom third.
- Name the bar if it fits a family in the table; otherwise call it ordinary and move on.
- Wait for the next bar. Strength needs the following close to be higher; weakness needs it lower.
- Only then compare the read with your level or your Wyckoff method phase, and decide.
Step five is the one traders skip. Without the confirming bar, a stopping-volume bar is only a hypothesis.
A worked read on an index CFD
Picture an index CFD sliding from 18,400 to 18,000 on a one-hour chart, with average hourly volume of 10,000 units.
Bar one drops from 18,060 to 17,960, roughly double the recent spread, and closes at 18,030 in its top third. Volume prints 32,000, more than three times average. Heavy selling effort and a close near the high: stopping volume. Bar two closes higher at 18,045 on volume of 9,000, which confirms it.
After three sideways bars, bar six dips to 17,955, a few points under bar one's low, with a 30-point spread, and closes at 18,015 on volume of 4,000. Thin volume on a probe below support, closing near the high, is a test: sellers were offered a chance and scarcely showed up.
A long at 18,015 with a stop at 17,950 risks 65 points. A target near the last swing high at 18,200 offers 185 points, close to 2.8R before spread and commission cost are counted. Nothing is certain, but the entry waited for the test instead of chasing the climax.
VSA against other volume tools
VSA is one of several trading strategies built on volume, and it answers a different question from its neighbours in market analysis. Volume profile asks at which prices trade accumulated; VSA reads time bars, not levels. Relative volume asks how unusual one bar's volume is; VSA adds spread and close to that ratio. The Wyckoff method asks which phase of the cycle is in progress; VSA is the bar-level detail inside a phase. Technical indicators such as moving averages can supply the background trend for step one, but none of them replaces the read.
Limitations and common mistakes
Volume quality is the honest caveat. Spot forex and most CFDs show tick volume from one provider, not consolidated trade. Tick count tracks activity well in London and New York hours and poorly overnight, so a minor pair at 3 a.m. gives a patchy signal. Two trading platforms can print different volume on the same bar.
Market conditions matter too. During a disorderly news release, spreads widen violently and volume spikes on every bar, so the labels stop discriminating until the first calm bars arrive.
Common mistakes, plainly stated:
- Naming bars without a background. A test is only a test after stopping volume; on its own it is an ordinary low-volume bar.
- Using a fixed volume threshold. A "high" bar in a quiet week is average in a crowded one, so compare with a rolling mean.
- Demanding certainty. Many bars are ambiguous, and the method is more forgiving if you treat ambiguity as a pass.
Expect the first month to feel tedious. Labelling 50 bars a session by hand is slow, but it is how the patterns stop looking like noise.
VSA inside a prop-firm evaluation
An evaluation adds two numbers VSA does not know about: a daily loss cap and a maximum total drawdown. VSA gives its best signals near climaxes, where volatility is highest and stops get hit by wicks. Three impatient climax entries can squander a day's allowance before the real test bar appears.
The fix is to enter later, on the test or no-supply bar, and to halve size whenever the confirming bar is missing. Pivex runs its evaluation as a single stage with no deadline and no required count of active days, so waiting for a clean test costs only patience. Its daily loss allowance starts again each day, and the total drawdown does not trail, so one jittery session does not shrink the room for the next. The built-in assistant tracks those limits while you watch the bars.
Pick one liquid instrument and one timeframe, and label 20 bars by spread, close and relative volume after each session for a month. When the labels start predicting the next bar, a Pivex evaluation is a sensible place to apply the read against limits you already know.
Related guides: volume profile and relative volume.
Before participating, review Pivex's current program rules and decide whether a simulated proprietary trading evaluation fits your experience and risk limits. Participation does not guarantee a reward, income, or any particular trading result.