Richard Wyckoff studied markets about a hundred years ago and saw that large operators cannot buy or sell everything at once. They build positions slowly inside a range. Volume Spread Analysis (VSA) grew out of his work: it uses the volume and range of each bar to see that building happen. Read together, the two give a simple map of where the market is in its cycle.
The four phases of the cycle
- Accumulation: after a fall, price moves sideways while strong hands buy from those who are giving up.
- Markup: supply is used up and price trends higher.
- Distribution: after a rise, price moves sideways while strong hands sell to late buyers.
- Markdown: demand is used up and price trends lower.
Accumulation, step by step
- Selling climax: a wide down bar on very high volume at the end of the fall. In VSA terms, stopping volume: the selling is being absorbed.
- Automatic rally: a bounce that sets the top of the range.
- Secondary test: price comes back toward the low on much lower volume. Sellers are fading.
- Spring: a short drop below the range low that is quickly bought back. It is a sweep of sell-side liquidity, the same idea as an ICT Judas swing.
- No supply test: a narrow down bar on low volume after the spring. VSA reads it as "no sellers left".
- Sign of strength: a wide up bar on rising volume that breaks the range high.
Distribution is the mirror
A buying climax ends the rise, an upthrust pokes above the range high and fails, no demand bars appear on low volume, and a wide down bar on rising volume breaks the range low (the sign of weakness).
Why volume is the key
Price alone shows the shape of the range; volume shows who is in control inside it. A test on low volume means the other side has gone quiet. A break on high volume means real participation. A break on low volume is suspect. The VSA basics article explains each of these bars in more detail.
In ICC Charts
The VSA tools colour each volume bar by its meaning and label climax, test, no supply and no demand bars, and the VSA models (end of a rising or falling market, false break, no-supply test and more) are scanned live. Open the terminal and add the VSA volume pane to try it.
Education only. Trading involves risk; practise on a demo account first.
Open ICC Charts in your browser, free, with the ICT and VSA layers and the model scanner.
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