(VSA) Volume Spread Analysis

VSA stands for Volume Spread Analysis, here spread means the range of the bar (distance
from high to low). It is a methodology, not Strategy so within this methodology you can
create your own strategies or you can use the standard ones.

Markets moves when there is imbalance in Supply & Demand take place or created (in
imbalance when supply increases demand decreases and when supply decreases demand
increases). VSA helps in identifying these imbalances.

VSA general rule is that Strength appears on down bars & Weakness appears on up bars.
When Smart Money wants to buy something, they mark down the price (so they can buy
cheap) which creates down bar; when they buy, their buying reduces the supply which
increase the demand & this demand appears as strength on down bars. Similarly when Smart
Money wants to sell something, they mark up the prices (so they can sell it expensive & make
good profit), when they sell, their selling increases the supply which reduced the demand; this
reduction in demand appears as weakness on up bars.

The parameters we analyse in chart.

1. Bar Spread

2. Bar Closing position within the bar (7 places of Closing i.e. On the high, Off the high,
Towards middle, In the middle, Towards the low, Off the low & On the low)

3. Relative Volume Activity (7 Types of volume when compared with last 10 volume bars
relatively i.e. Ultra High, Very High, High, Above Average, Average, Below Average &
Lower than previous two Volume Bars).

4. Next Bar Close (SOW confirms if next bar closes as a down, if not then it fails & becomes
SOS. SOS confirms when next bar closes as an up bar, if not then its fails & becomes SOW.)

5. Immediate Background (last 25 bars)

Advanced Level

6. Distance between closes of every bar & Volume activity as a waves on them.

7. Current Bar Spread, Close & Volume is compared to Previous Bar Spread, Close &
Volume

VSA General Concept of Accumulation & Distribution

In falling market whenever Ultra High or Very High Volume appears (high activity) & prices
stops going down, it shows buying (demand) appeared, prices starts making a bowl shape.
Similarly in rising market when Ultra High or Very High Volume appears (high activity) &
prices stops going up, its shows selling (supply) appeared, prices starts making a mushroom
shape.
 Chart Reading Master Classes Notes
SOW SOS

1. End of Rising Market 1. Bag Holding

2. Buying Climax 2. Selling Climax

3. Top Reversal 3. Bottom Reversal

4. No Result from Effort 4. Stopping Volume

5. Widespread down bar through previous Support 5. Absorption Volume

6. Up-thrust 6. Shake-out

7. No Demand at Market Top 7. The Test & Type of Tests

8. No Demand in Down Trend 8. No Supply / Test in a Rising

Market

Signs of Weakness (SOW)

• Up bars, narrow spread, close middle or higher

• Volume can be high or low
• Narrow spread indicates no professional buying.
• This selling prevents any attempt to move up.
• Ultra high volume up bars (the classic trap of “Smart Money!!)
• Professionals have no interest to the upside – low volume.
• Professionals are selling into the public buying – Higher volume.
• High + volume show supply – public buying – smart money selling.
• Low – volume shows no interest to the upside from “Smart Money” so prices will not
go higher.
• High volume down bar with next bar up in uptrend is BULLISH.

SOW 1 - End of Rising Market

• Bar Description: It’s a narrow spread gapped up bar on Ultra High/Very High volume
closing in middle or off the high having a strong bull run in the background.
• It is opposite of “Bag Holding” & the strongest SOW, it’s often on good news.
• If the market is gapped up and approaching at previous resistance then this is an even
stronger sign of weakness.
• If End of Rising Market is on fresh new ground nothing on the left in 200 – 300 bars
then it’s almost a guarantee of market top. Market may rise up a little instead of falling
immediately so it’s safer to wait for Up-thrust or No Demand.
• Trade No Demand or Up-thrust short with market order, after the End of Rising
Market & place the stop loss at the previous resistance / old top (if you have one).
SOW 2 – Buying Climax

• Bar Description: It’s a widespread up bar closing off the high, in middle or on the low
on Ultra High Volume with next bar down after a substantial up move.
• It’s normally on good news. Very strong SOW if there are no old tops to the left.
• Often Buying Climax marks the market top but sometimes it doesn’t & price
continues uptrend with Test & Absorption volume (keeping in mind that there are
many professional groups & syndicates are involved in the market) as one or more
professional groups may decide to take profit (which forms Buying Climax) & start
distribution while others may absorb the supply from their distribution and may take
price further up (which forms Absorption Volume) for distribution to make more
profit.
• After Buying Climax if No Demand is not preceded by an Up-Thrust then be cautious,
Up-Thrust is likely to appear after No Demand, before price starts falling.
• It’s always safe to wait for price to mushroom over, change in behaviour (At least 7
Red Diamonds) & Break the Ice (see Wyckoff logic diagram) then short Up-Thrust or
No Demand.

SOW 3 – Top Reversal

• Bar Description: it’s a two bar SOW. First bar is widespread up bar closing on/off the
high with high volume (supply swamping demand) or low volume (no demand). The
high and the close are higher than the previous few bars. The second bar is widespread
down bar closing on/off the low on higher or lower volume than the first bar.
• It’s like a two bar Up-Thrust (if you add both bars to make a larger time frame this
indication would appear as Up-Thrust).
• It’s a very powerful SOW if there is bull market in the background.
• In top reversal
o If the second bar close is higher than the first bar low then the lower volume on
second bar is an advantage which will have No Demand in the body of first
bar.
o If second bar close & low are lower than the first bar low, on volume higher
than the first bar volume, it shows effort to go down is successful (if second
bar high is higher than the first bar high it shows additional weakness). It
shows immediate weakness (Effort vs Result) & can be traded immediately on
first No Demand / Up-thrust.
o If second bar close is lower than the first bar low but volume is lower than the
volume of first bar, it’s a fake reversal (No Effort from Result) which will act
like two bar Up-thrust to catch the stops.
• After this SOW, wait for three lower highs bars (Price Action makes a low) & then
look for Up-Thrust, No Demand or Failed Test on swing high in supply area to trade
short.
• Sometimes market is so bearish that it doesn’t give No Demand or Up-Thrust signal
after the Top Reversal.
SOW 4 – No Result from Effort

• Bar Description: It’s a two bar signal. First bar is a widespread up bar on high/ultra-
high volume & second bar is a normal spread or widespread down bar (rarely an up
bar) closing near its low.
• If the second bar’s low & close are lower than the first bar low then it’s a strong SOW.
• Had the first bar was genuine strong bar the next bar should have closed up not lower?
• This may appear in an uptrend but is a far more powerful short in a downtrend.
• Do not short in an uptrend, if the market is weak it will roll over and you will see
further signs of weakness.
• This is a powerful short when there is a downtrend in place and you may also see this
at the TOP of the downtrend channel.

SOW 5 – Widespread Down Bar through Previous Support

• Bar Description: It’s a widespread down bar closing on the low on increased volume
(not excessive/ultra-high) through previous support (possible range) with next bar
down, after an up move.
• Its opposite of Absorption Volume.
• If next bar is up then it must be a No Demand bar which should be traded short
immediately.
• If the bar is closing off the low on Very high volume with next bar up closing off the
high is bearish. If the third bar is up closing in the middle or towards the high on
increasing volume then price will move sideways a bit before going down as this next
bar shows some buying on it.
• If the bar closes towards the middle or in the middle it might not be a “Widespread
Down bar through previous Support”, instead it will be a strong bar with lot of buying
present. In this case the area (the body of the bar) will not give No Demand/Up-Thrust
• If Widespread Down bar through previous Support” bar doesn’t take out previous low
then it can be a very strong signal, possibly “Shake-out”.
• Wait for at least two bars which lows are higher.
• Short Up-Thrust or No Demand after this SOW.

SOW 6 – The Up-thrust

• Bar Description: It’s a widespread or average spread bar closes near the low on higher
or lower volume. The high of the bar is higher than the previous high of the bar. Up
bar is called regular Up-thrust & Down bar is called hidden Up-thrust.
• It is used by Smart Money to catch the stop losses of traders who are already short,
panic them to exit as price rises quickly & encourage the traders (who are not in the
market) to go long in the weak market.
• High volume Up-Thrust means quick buying & then selling from Smart Money (to
trigger the stop loss in weak market) while Low volume Up-Thrust means no interest
to the upside from Smart Money.
 • Low volume Up-Thrusts bring down price quickly while High/Average/Above
Average volume Up-Thrusts cause price drift up to “No Demand”.
• Up-Thrusts in distribution (supply) areas should be traded short immediately.
• The only genuine Up-Thrusts are the ones which are in right place (means preceded by
SOW; not SOS).
• Up-Thrust are commonly seen at the top of the channel in downtrend.
• Up-Thrusts in down trend are very strong sell signal but it’s better to wait for No
Demand to place short order

SOW 7 – No Demand at Market Top

• Bar Description: it’s an up bar on volume lower than previous two volume bars,
generally spread is narrow but it can be wider. Close can be anywhere but must be
higher than the previous bar close to qualify as an up bar.
• A TRUE no demand bar has to have the majority of its body higher than the previous
bar close.
• No Demand rarely can be on down bar but price action must be going up or most of
the body of No Demand must be higher than the previous bar close. If there is a No
Demand on down bar then going on lower TFs will show the No Demand on up bar (it
means the weakness appeared on up bar {No Demand} in lower TF which moved the
price lower & became a down bar on bigger TF). No Demand on down bar means then
market is so weak that it closed lower.
• Occasionally No Demand can occur on high volume up bar but spread must be
narrower closing in middle with next bar down, it’s kind of an Up-Thrust which is
often on bad news.
• Strong No Demand closing price doesn't breach the closing price of previous bar.
• To be a high probability entry, there MUST BE weakness in the background.
• No Demand carries less value/no value in uptrend as trend may move sideways before
continuing up.
• Even if there is no VSA signal on a confirmed No Demand on low volume (lower than
the previous two volume bars) in the previous high volume bar/Supply area, the logic
works & bar can be an entry point.
• If there is serious SOS in the background & No Demand fails then it is a strong sign of
additional strength.
• If No Demand is not preceded by an Up-Thrust, then be cautious Up-Thrust is likely
to appear after No Demand before price starts falling.
• It’s not a sell signal in isolation, what brings it to life is serious SOW in the
background, resistance levels & triggers numbers.
• In distribution, No Demand before “Breaking the Ice” is vulnerable to the upside (if
traded with lowest risk, stop loss should be trailed tightly or exit the trade when
strength creeps in).
• Having distribution in the background with Supply coming in & Up Thrust if price
clears the distribution phase (Breaking the Ice), short order can be placed without No
Demand signal on retesting the resistance level of low of climactic action bar.
 • It’s also a high probability entry with strong SOW in background e.g. Climactic
Action, Top Reversal, Widespread down bar through previous Support, End of Rising
Market & Buying Climax.

SOW 8 – No Demand in a Down Trend

• Bar Description: it’s an up bar on volume lower than previous two volume bars,
generally spread is narrow but it can be wider. Close can be anywhere but must be
higher than the previous bar close to qualify as an up bar.
• A TRUE no demand bar has to have the majority of its body higher than the previous
bar’s close.
• Its high probability short opportunity in downtrend.
• Often you can find it when price action hits the top of a downtrend channel.
• Short it with Sell Stop Order instead of selling at market price.
• TEST with wide spread or high volume means is that it's a pause in downtrend &
market may continue to fall.

Before Taking Short Position:

• Have you seen a rollover and is the market in early stages of downtrend or still in an
uptrend?
• Is the market falling with no professional support?
• Is the low of each bar lower than the previous bar? (you may allow 1 up bar for every
2 down bars for a downtrend)
• Are you into fresh high ground when distribution starts?
• Is there a trading range to the left?
• Is there lots of GOOD NEWS about this particular market?
• Is the market in an overbought area of the trend channel?
• Are there End Of A Rising Market / Buying Climax in the background?
• Are you entering on a down bar – remember weakness appears on up bars?

Tom William Simple Trending System to Short Trading

• Identify a serious sign of weakness first, such as End of a Rising Market, Buying
Climax or Ultra High Volume or Low Volume Up-thrusts. These should be followed
by NO DEMAND.
• Wait for at least 10 BARS IN ANY TIMEFRAME to see the result of the weakness.
• In a strong downtrend we should see increasing volume (not excessive or ultra-high)
on down bars and decreasing volume on up bars.
• In a downtrend you can allow for 2 up bars if they are on low volume. Ignore level
bars or near level bars, that is a bar that has closed at or near the same price as
previous bar.
• The end of the downtrend is often seen by two consecutive up bars followed by a Test
or No Supply down bar.
General SOW points:

• Every unusual activity should be cross checked with Forex Factory or Dailyfx News
Calendar BECAUSE not every UHV starts a new campaign, it can be just news
volatility & previous campaign may carry over.
• Not every single bar has SOW/SOS (but every bar can read/analysed in Order Flow
language)
• Always check your chart with Futures Chart to confirm your analysis (if Future charts
are not available or you feel they are too hard to configure ...... then install 2 – 3
difference high liquidity brokers terminals for cross checking your charts as every
Forex broker has slight different pricing & spread so next bar close may or may not
confirm the SOW.
• PLAN THE TRADE IN ADVANCE: Always analyse the biggest TFs first, Scale
down to execution TF, Analyse the background & wait for price to bounce off/retest
from analysed level (with expected VSA signal), rather than finding the trade on
execution TF in isolation (Single TF trading).
• Analyses of current bar’s spread & close on volume, with previous bar or bars show
accurate imbalance of Supply & Demand. If the activity (volume) is very high on
current bar then it needs following bar or bars to analyse & confirm the imbalance
created by Smart Money.
• In a (look like) distribution phase, if there is no selling pressure on all the bar in the
phase with some testing then probably market is preparing for breakout to the upside
following by possible Absorption volume which is not seen very often unless in the
strong bull market.
• If price action is coming down (when comparing current bar with the previous bar) on
increasing volume and bar closes in the middle or towards the high then its bullish (no
selling pressure).
• Any demand/buying (sufficient enough to stop down move) in the downtrend will give
No Demand bar immediately. If it fails then it’s a SOS which will move the market
sideways before continuing down.
• After having a climactic action (Distribution), mark the SR levels on the bar (high,
low & close).
o To break the high SR level successfully price needs to go up on as high
volume (or higher volume) as seen in climactic action, if volume is lower
price, will give No Demand/Up-thrust bar on new high ground before coming
down.
o To break the low SR level successfully price needs to go down on increased
volume, if not, price will come up for more No Demand/Up-Thrust bars.
(Same applies to a successful No Demand bar, price needs to go down on
increased volume after the successful No Demand bar, if not then price will
come up for more No Demand bars).

• In a downtrend, bars closing in the middle or above on increasing volume is bullish

but if volume is decreasing then it’s opposite to that so down move may continue.
• In downtrend if the volume is increasing on up bars it’s a bullish sign but if the bars
spread is narrow on increased/high volume, closing in middle with next bar closing
down shows weakness as effort to rise fails due to hitting of immediate supply.
Another position can be added to already a short trade with trailing of stop loss.
• Stay in short trade by allowing 2 consecutive up bars ideally on low volume (ignore
the level/near level bars). Exit the short position on third consecutive up bar OR high
volume up bars.

• The difference between Ultra High/Very High volume Narrow spread gapped up
bar & Ultra High/Very High volume widespread up bar:
Ultra High/Very High narrow spread gapped up bar means that supply is overcoming
demand immediately (means there is a sell order for every buy order by Smart Money,
often on good news, so the price gaps up & almost marks the top as the narrow spread
on Ultra High/Very High volume is the key). In this scenario price goes down shortly
after Up-Thrust or No Demand as Smart Money completed Distribution phase quickly.
While Ultra High/Very High volume widespread up bar means supply is overcoming
demand lately by Smart Money as they want higher prices to take profits, that’s why
spread of the bar is wide.
• Using Elliot Wave Analysis with VSA is quite powerful (Wyckoff used to do it).
• Always use Fibonacci Retracement to measure the pull backs.
• Always use Point & Figure chart and Fibonacci extensions to project the targets.
• Take of the signals from any Chart in any time frame & try to read the VSA principles
with volume on that naked chart. Re-enter the signals & compare you understanding
with actual signals. It will improve the naked chart reading skills.
 Sign of Strengths (SOS)

• Down bars, narrow spread, close middle or off the low

• Volume can be high or low
• Narrow spread indicates no professional selling
• This buying prevents any attempt to move down.
• Ultra high volume down bars (the classic trap of “Smart Money!!)
• Professionals have no interest in the downside – low volume.
• Professionals are buying into the public selling – Higher volume.
• High + volume show demand – public selling – smart money buying.
• Low – volume shows no interest to the downside from “Smart Money” so prices will
not go lower.
• High volume up bar with next bar down in downtrend is BEARISH.

SOS 1 – Bag Holding

• Bar Description: it’s a narrow spread gapped down bar on Ultra High/Very High
volume closing in middle or off the low having a strong downtrend in the background.
• It is opposite of “End of the Rising Market” & the strongest SOS, its often on bad
news.
• If the market is gapped down and approaching or at previous support then this is an
even stronger sign of strength.
• If Bag Holding is on fresh new ground (nothing on the left in 200 – 300 bars then
often (not always) it marks the bottom. Market may go down slightly (if Smart Money
feels that they can accumulate more on cheaper price) instead of rising up immediately
so it’s safer to wait for No Supply/Test to place long order.
• Trade No Supply / Test long with market order, after Bag Holding & place the stop
loss below the previous support / old bottom (if you have one).

SOS 2 – Selling Climax

• Bar Description: it’s a widespread down bar closing off the low, in the middle or on
the high on Ultra High Volume with next bar up after a substantial down move.
• Often Selling Climax marks the market bottom but sometimes it doesn’t & price
continues downtrend with No Demand & Widespread down bar through previous
Support”(keeping in mind that there are many professional groups & syndicates are
involved in the market) as one or more professional groups may decide to absorb all
the selling (which forms Selling Climax) & start Accumulation while others may
increase the supply in their Accumulation and may take price further down (which
forms Widespread down bar through previous Support) for Re-accumulation to buy
more cheaply.
• It’s always safe to wait for price to make a saucer shape, change in behaviour (At least
7 Green Diamonds) & Jump on the Creek (see Wyckoff logic diagram) then place
long order above on No Supply / Test.
 • After Selling Climax, if trading the first test then it must be in the lower half of selling
climax bar area (Supply area), otherwise test is vulnerable to be taken out to downside
either by Shake-out or another test near bottom level.

SOS 3 – Bottom Reversal

• Bar Description: it’s a two bar SOS. Generally first bar is widespread down bar
closing on/off the low with high volume (demand swamping supply) or low volume
(no supply). The low and the close of first bar are lower than the previous few bars.
The second bar is widespread up bar closing on/off the high on higher or lower
volume than the first bar.
• It’s like a two bar Shake-out (if you add both bars to make a larger time frame this
indication would appear as Shake-out).
• It’s a very powerful SOS if there is bear market in the background.
• In bottom reversal
o If the second bar close is lower than the first bar high then the lower volume on
second bar is an advantage which will be tested in the body of first bar.
o If second bar close & high are higher than the first bar high and volume on
second bar is higher than the first bar volume, it shows effort to rise is
successful (if second bar low is lower than the first bar low it shows additional
strength). It shows immediate strength (Effort vs Result) & can be traded
immediately on first No Supply / Test.
o If second bar close is higher than the first bar high but volume is lower than the
first bar volume, it’s a fake reversal (Result without Effort) which will act like
two bar Shake-out to catch the stops.
• After this SOS, wait for three lower highs bars (Price Action makes a low) & then
look for No Supply/Test, Test in a Rising Market on swing low in supply area to trade
long.
• Sometimes market is so bullish that it doesn’t give Test after the Bottom Reversal.

SOS 4 – Stopping Volume

• Bar Description: it’s an average spread down bar closing off the low or in middle on
Ultra High/Very High volume with the next bar closing higher with less volume than
first bar (Second bar close is higher than fist bar high).
• Market may go down further after having stopping volume which show that some of
groups started accumulation while other wants to take it further down to buy it more
cheaply; there will be some testing before a rally.
• It’s much stronger if there is uptrend in the background.
• It gives an excellent opportunity when it appears in some where middle in the rally
(before a test) which could be on bad news. Smart Money absorbs all the supply on
bad news & supports the market because they will be bullish.
• Wait for two bar with higher lows within 25 bar & then look for No Supply/Test or
Test in Rising Market to long order above it.
 • If market is so strong it might not give test in supply area.
SOS 5 – Absorption Volume

• Bar Description: it’s a widespread up bar closing on/off the high on increased volume
(not excessive or Ultra High) pushing thorough an old top to the left, taking out
previous resistance. Even if it doesn't clears previous highs make sure that previous
high top bars didn't close as high as Absorption volume.
• Its opposite to “Widespread down bar thorough previous support”.
• If the bar is closing off the high on Very high volume with next bar down closing off
the low is bullish. If the third bar is down but closes in the middle or towards the high
on increasing volume then price will move sideways a bit before going up as this next
bar shows supply on it.
• If the bar closes towards the middle or in the middle it might not be an Absorption
volume, instead it will be a weak bar with lot of supply present. In this case supply
area (the body of the bar) will not be tested.
• If Absorption Volume bar doesn’t take out previous high then it can be a very weak
signal.
• Market will test in the area of absorption volume bar within 3-4 bars; go long with buy
order on No Supply/Test bar.

SOS 6 – The Shake out

• Bar Description: It’s a widespread bar closing high or towards the high on High/Very
High volume. (If volume is Ultra High then it can be a climactic action). It can be over
two bars.
• Its opposite of an up-thrust & often on bad news.
• It can be classed as a violent test.
• Shake out in an accumulation is very powerful & creates a strong market because
Smart Money use it to shake out the weak holder, once it’s done, strong market
follows.
• If seen in an uptrend it’s a very strong buy signal, wait for a No Supply/Test to trade
long.
• After having 2-3 lower highs of the bar, trade No Supply/Test with long order.

SOS 7 – The Test and type of Tests

There are following five types of a Test:

• Regular Test: It’s a narrow/average spread down bar in a swing low (mark down),
closing higher/above the middle or at least in the middle on volume lower than
previous two or at least lower volume, testing Supply area in the background.
• No Supply/Test: It’s the same as Regular Test except the spread is preferably narrow
& close is below the middle or lower on volume lower than previous two volume bars.
 • Basic Test: In basic test lower volume is absent so volume can be average or even
higher sometimes. If volume is lower when testing the Supply area, its fine; otherwise
price may test this area again if there is still too much supply present. (If second test
has lower volume {lower than previous two} than the first test then it’s a strong buy
signal). High volume tests may be followed by a Shake-out.
• Other two tests are: Test After Shakeout & Test in a Rising Market
• A true Test has to have the majority of its body lower than the previous bar close.
• Tests rarely can be on up bar but price action must be going down or most of the body
of the test must be lower than the previous bar close. If there is a test on up bar then
going on lower TFs will show the test on down bar (it means the strength appeared on
down bar {test} in lower TF which moved the price higher & became an up bar on
bigger TF). Test on up bar means then market is so strong that it closed higher.
• Occasionally test can occur on high volume down bar but spread must be narrower
closing in middle with next bar up, it’s kind of shake out which is often on bad news.
• Strong test close price doesn't breach the closing price of previous bar.
• To be a high probability entry, there MUST BE strength in the background.
• Test carries less value/no value in down trend as trend may move sideways before
continuing down.
• Even if there is no VSA signal on a confirmed test on low volume (lower than the
previous two volume bars) in the previous high volume bar/Supply area, the logic
works & bar can be an entry point.
• If Test is not preceded by a Shake-out or Basic Test, then be cautious Shake-out or
Basic Test is likely to appear after Test before price starts rising.
• It’s not a buy signal in isolation, what brings it to life is serious SOS in the
background, support levels & trigger numbers.
• In accumulation, test before “Jump the Creek” is vulnerable to the downside (if traded
with lowest risk, stop loss should be trailed tightly or exit the trade on weakness).
• If there is serious SOW in the background & test fails then it is a strong sign of
additional weakness.
• Having Accumulation in the background with Strength coming in & Shake-out if price
clears the Accumulation phase (Jump the Creek), long order can be placed without
Test signal on bouncing the support level of the high of climactic action bar.
• It’s also a high probability entry with strong SOS in background e.g. Climactic Action,
Bottom Reversal, Absorption Volume, Bag Holding & Selling Climax.

SOS 8 – No Supply / Test in a Rising Market

• Bar Description: it’s down bar on volume lower than previous two volume bars,
generally spread is narrow but it can be wider. Close can be anywhere but must be
lower than the previous bar close to qualify as a down bar.
• Strong test’s close price doesn't breach the closing price of previous bar.
• Its high probability entry in an uptrend.
• Often you can find it when price action hits the bottom of an uptrend channel.
• Place long order instead of buying at market price.
 • NO DEMAND with wide spread or high volume means is that it's a pause in uptrend
& market may continue to rise.
Before Taking a Long Position

• Is the market in early stages of uptrend or still in a downtrend?

• Is the market rising with no professional support?
• Is the high of each bar higher than the previous bar? (you may allow 1 down bar for
every 2 up bars for an uptrend)
• Are you into fresh low ground when accumulation starts?
• Is there a trading range to the left?
• Is there lots of BAD NEWS about this particular instrument?
• Is the market in an oversold area of the trend channel?
• Is there a Buying Climax in the background?
• Are you entering on an up bar? (remember strength appears on down bars)

Tom William Simple Trending System to Long Trading

• Identify a serious sign of strength first, such as a Bottom Reversal, Selling Climax or
Ultra High Volume or Low Volume. Look out for Shakeouts. These should be
followed by a Test or No Supply.
• Wait for at least 10 BARS IN ANY TIMEFRAME to see the result of the strength.
• In a strong uptrend we should see decreasing volume (not excessive or ultra-high) on
down bars and increasing volume on up bars (again, not excessive or ultra-high).
• In a uptrend you can allow for 1 down bar if they are on low /average volume. Ignore
level bars or near level bars, that is a bar that has closed at or near the same price as
previous bar.
• The end of the uptrend is often seen by two consecutive down bars followed by a NO
DEMAND up bar.

General SOS points:

• Every unusual activity should be cross checked with Forex Factory or Dailyfx News
Calendar BECAUSE not every UHV starts a new campaign, it can be just news
volatility & previous campaign may carry over.
• Not every single bar has SOW/SOS (but every bar can read/analysed in Order Flow
language)
• Always check your chart with Futures Chart to confirm your analysis (if Future charts
are not available or you feel they are too hard to configure ...... then install 2 – 3
difference high liquidity brokers terminals for cross checking your charts as every
Forex broker has slight different pricing & spread so next bar close may or may not
confirm the SOS.
• PLAN THE TRADE IN ADVANCE: Always analyse the biggest TFs first, Scale
down to execution TF, Analyse the background & wait for price to bounce off/retest
from analysed level (with expected VSA signal), rather than finding the trade on
execution TF in isolation (Single TF trading).
• Analyses of current bar’s spread & close on volume, with previous bar or bars show
accurate imbalance of Supply & Demand. If the activity (volume) is very high on
current bar then it needs following bar or bars to analyse & confirm the imbalance
created by Smart Money.
• In a (look like) accumulation phase, if there is no testing or failed tests in all the bars
in the phase with some No Demand then probably market is preparing for breakout to
the downside following by possible Widespread down bar through previous support
which is not seen very often unless in the strong bear market and vice versa.
• If price action is coming up (when comparing current bar with the previous bar) on
increasing volume and bar closes in the middle or towards the low then its bearish (No
Demand ).
• Any supply/selling (sufficient enough to stop up move) in the uptrend will be tested
immediately. If test fails then it’s a SOW which will move the market sideways before
continuing up.
• After having a climactic action (Accumulation), mark the SR levels on the bar (high,
low & close).
o To break the low SR level successfully price needs to go down on as high
volume (or higher volume) as seen in climactic action, if volume is lower
price, will be testing on new low ground before coming up.
o To break the high SR level successfully price needs to go up on increased
volume, if not, price will come down for more testing. (Same applies to a
successful test, price needs to go up on increased volume after the successful
test, if not then price will come down for more testing)

• In an uptrend, bars closing in the middle or below on increasing volume is bearish but
if volume is decreasing then it’s opposite to that so up move may continue.
• In an uptrend if the volume is increasing on down bars it’s a bullish sign but if the
bar’s spread is narrow on increased/high volume, closing in middle with next bar
closing up shows strength as effort to go down fails due to hitting of immediate
demand. Another position can be added to already long trade with trailing of stop loss.
• Stay in long trade by allowing 1 down bar ideally on low volume for every two up
bars (ignore the level/near level bars). Exit the long position on second consecutive
down bars followed by No Demand up bar OR high volume down bar.
• The difference between Ultra High/Very High volume Narrow spread gapped
down bar & Ultra High/Very High volume Widespread down bar:
Ultra High/Very High volume narrow spread gapped down bar means that supply is
immediately being absorbed (means there is a buy order for every sell order by Smart
Money often on bad news, so price gaps down & almost marks the bottom as the
narrow spread on Ultra High/Very High volume is the key). In this scenario price goes
up shortly after testing as Smart Money completed Accumulation phase quickly.
 While Ultra High/Very High volume widespread down bar means supply is not being
absorbed immediately by Smart Money instead they let the price go down & then they
start Accumulation that’s why the spread of the bar is wide.
• Using Elliot Wave Analysis with VSA is quite powerful (Wyckoff used to do it).
• Always use Fibonacci Retracement to measure the pull backs.
• Always use Point & Figure chart and Fibonacci extensions to project the targets.
• Take of the signals from any Chart in any time frame & try to read the VSA principles
with volume on that naked chart. Re-enter the signals & compare you understanding
with actual signals. It will improve the naked chart reading skills.