VSA Trading Strategy

VSA (Volume Spread Analysis) Trading Strategy

In this article, I am going to discuss there VSA (Volume Spread Analysis) Trading Strategy in detail. Please read our previous article, where we discussed spring and upthrust trading strategy. At the end of this article, you will understand the following three VSA Trading strategies.

  1. The Shakeout
  2. Stop hunting
  3. Outside Reversal Pattern
Introduction to VSA trading strategy

Today we will discuss volume spread analysis intraday trading strategy. Basically volume spread analysis entry strategy based on reversal trading. That means finding turning point in trend either

  • Trend reversal or
  • Pullback reversal

Today will discuss pullback reversal. I mean how to take trade based on volume spread analysis in an existing trend

Note: – today we will discuss only finding entry in an uptrend . Exact opposite for down trend

Volume spread analysis that suggests sign of end of down trend or end of pullback in a exiting up trend these are

  1. Selling climax
  2. sopping out volume
  3. End of falling market

The above points are discussed in this article Volume Spread Analysis

4 step process for volume spread analysis entry
  1. Identify the trend
  2. identify the sign of weakness in a exiting up trend
  3. Wait for test the weakness for confirmation for continuation of up trend
  4. Look for any bullish reversal candlestick pattern for entry

In previous article we have discussed

  1. Firs identify the sign of weakness
  2. Wait for test the weakness for confirmation of trend cont..

Today we will discussed

  1. Look for any reversal candlestick pattern for entry
Bullish VOLUME PRICE SIGNAL CANDLESTICK PATTERN FOR ENTRY
  1. OUTSIDE/ ENGULFING
  2. STOP HUNTING
  3. SHAKEOUT
Outside Reversal Pattern

We have discussed this article here .so please go through this article for more information

Outside Reversal Pattern

BULLISH OUTSIDE REVERSAL PATTERN STRUCTURE
  1. First candle is a narrow range candle or doji
  2. The second candle completely engulf first candle and close above the first candle high.
  3. The second candle low below of the first candle low ,but the close must be above the first candle close and high above previous candle high
  4. The second candle should be accompanied by high volume

BULLISH OUTSIDE REVERSAL PATTERN STRUCTURE

VSA trading strategy

Background:

The background is extremely important. You should see strength in the background. You should see strength in the background with stopping volume or a selling climax OR end of falling market

Volume spread analysis trading strategy

Stop hunting

Also called pin bar or spring or up thrust

Go through below article for more information

Spring and Up thrust Trading Strategy

PIN BAR Trading Strategy

Logic

Smart money placed limit sell order above resistance and limit buy order below support to absorb panic buying or selling by retailers for breakout trading entry by placing stop loss buy order above resistance or stop loss sell order below support

VSA trading strategies

Why they do?

The main objectives are:

  1. To get volume
  2. Avoid Slippage due to  big order
  3. Smart money testing demand above old resistance before moving down or testing supply below support before moving up

A spring is an example of a “bear trap”. WHY? Because price drop below support appears to signal resumption of the downtrend. But In reality, the drop marks the end of the downtrend, thus “trapping” the late sellers, or bears.

The strength of the sellers can be judged by the depth of the price drive to new lows below the support and the relative level of volume on that penetration.

A spring involves the penetration of a well-defined support level on low or moderate volume .think if a stock going to break the support, it must break with high volume .the spring action shows that the stock trying to break down and failed. It is an important sign of strength

Background:

The background is extremely important. You should see strength in the background. You should see strength in the background with stopping volume or a selling climax OR end of falling market

Volume spread analysis trading strategies

The Shakeout

As the name suggest shaking out weak holder’s .in an existing up trend shaking out week buyers

CRITERIA for shakeout for long
  • FAILURE TO FOLLOW THROUGH AFTER BREAKING a well-defined SUPPORT or resistance
  • Wide spread down closing on the middle or low of the candle
  • Volume can be high or low.
  • Engineered to catch stops and induce selling

CRITERIA for shakeout for long

WHY shakeout ? FORM OF MANIPULATION

Lets discuss for an uptrend

  • If this is seen in an uptrend it is a very strong buy opportunity. Think of Smart Money, they have to buy at lower prices and will do anything to get the price down to buy more of the instrument they are accumulating.
  • Design to lock in weak shorts and shakeout early longs
  • SHAKEOUT, is a manoeuvre used to catch stops and trap breakout traders. Its is often observed right before the market is about to take off in a particular direction.
  • SHAKEOUT can be a sign of strength or a sign of weakness depending on the direction of the SHAKEOUT

WHY shakeout ? FORM OF MANIPULATION

Background:

The background is extremely important. You should see strength in the background. You should see strength in the background with stopping volume or a selling climax OR end of falling market

Future DIRECTION

A ‘Shakeout’ on low volume is really a violent test and has the same effect. It shows supply has disappeared and you would expect higher prices.

A ‘Shakeout’ on high volume shows demand was prepared to absorb the supply on that bar but they would likely want to test that supply in the future. Any low volume testing back into the area of the Shakeout would be strong SOS.

VSA trading strategy Volume spread analysis trading strategy

Where appear shakeout
  1. In a clear support or resistance level or
  2. In a Well-defined trading range

Where appear shakeout VSA trading strategies

Shorting AFTER you see a shakeout pattern
  • In a existing up trend you can buy above the shakeout candle
  • For trend reversal wait for no demand candle then buy above the candle

Shorting AFTER you see a shakeout pattern Volume spread analysis trading strategies VSA trading strategy

Please watch the following video if you want to learn and understand VSA Trading Strategy concept in a more better way.

Here, in this article, I try to explain VSA Trading Strategy. I hope you enjoy this VSA Trading Strategies article. Please join my Telegram Channel to learn more and clear your doubts. https://t.me/tradingwithsmartmoneyAny doubt or question please ask happy to help you.

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