powerful tool for forex market analysis
VSA-analysis - a powerful tool for forex market analysis
VSA volume spread analysis is a patented technique for analyzing market volumes with a range of candlesticks (their size and shape). The method was developed by stock market legend Richard Weikoff in the late 80's. The modern interpretation of the method was obtained thanks to Tom Williams, who has been testing the FSA analysis for 15 years.
Beginning traders underestimate the importance and importance of market volume, but it is a very important factor if you want to make successful deals in the forex market (forex trading). Volume is the primary value at any market, not just in the foreign exchange market. It is the ratio of demand (buyers) and supply (sellers) that determines price fluctuations and growth. The biggest influence on the difference between supply and demand is exerted by such major players in the forex market as: large financial institutions, national banks, professional traders - they are called market makers in another way. To understand the importance of knowledge of market volumes, let us give a clear example.
Imagine that only a dozen traders trade in the market (training in forex trading). Each of them applies their own accumulated trading strategy and strives to get the maximum profit (forex strategies). Let's assume that nine traders have a deposit of 100 euros. And one trader out of ten has exactly enough dollars to buy 900 euros from nine traders. And this only trader buys 900 euros through a broker NPBFX (go to the site). As a result, it turns out that 9 traders have opened a deal to sell, and 1 trader - to buy. The volume window displays the value of the deal in dollars at the current rate, which will correspond to the cost of 900 euros bought.
And as a result it turns out that all the money that was in the market was at the disposal of one trader, and now he can manage their market value as he wishes - to sell to whomever he wants and at whatever price he wants. Thus, one big deal has more influence in the currency market and can manage it one way or another than nine small deals. This is why market volumes are important, not the number of deals concluded. This is what the VSA-analysis is based on.
VSA analysis is the basis and method of trade
The purpose of the VSA analysis is to determine the cause of price fluctuations, to understand the behavior of market makers and to open a trading position in the same direction as they did, without giving an opportunity to "squeeze" themselves out of the market on a false correction or reversal of prices.
Indicators for vsa-analysis
Spread (distance between high and low candle levels);
In which area the candlestick closes (top/bottom, middle or maximum/minimum);
The volume that corresponds to this candle.
It is important to understand that the method of vsa-analysis should not be perceived as a ready-made trading strategy for making deals. The VSA base analysis and method gives an understanding of the causes of price chart fluctuations. As for the first indicator, there are no clear criteria by which you can determine whether the spread is wide or narrow. You should always consider the size of spreads of adjacent candlesticks.
As a rule, at the beginning of each trend movement you can notice a phase in which the spread begins to gradually expand in the direction of the trend. This can be regarded as additional proof that the trend is true, and we should wait for the growth of volumes. The second aspect - in which area the closing of the candlestick will occur, you can determine by eye, additional constructions are not required. If on several up-candlesticks the price of clouse is located in the upper third, it is very likely that the volume will grow further.
Up-bar - when the bar close price is higher than the previous one;
Down-bar - when the bar close price is lower than the previous one.
Bullish volume increases in up-candlesticks, bearish - in down-candlesticks.