Volume Spread Analysis Indicator for Amibroker

The idea of volume spread analysis was originated by Richard Wyckoff, a famous personality at the wall street. Though he is not the only developer of VSA, there are others two, Jesse Livermore and Tom Williams. The core point of the analysis is the relationship between volume and price. The main idea of the analysis is to follow the demand and supply of trading. Here, you will have a basic guide on the topic Volume Spread Analysis Indicator for Amibroker.

I am not claiming that the VSA indicator is easy to master. There are various concepts on VSA from the different analysts. It’s not an overnight learning process. In order to be a master in VSA, years of practice and market observation required. However, by knowing the basic VSA concept traders can improve their analytical ability. Hence, this article will provide you the simple as well as basic VSA concept.

 Volume Spread Analysis

The first and foremost topic you need to understand is what is meant by the term “spread”. Spread is nothing but the difference between high and low. Broadly, there are three types of spread we can observe in the market, Widespread, Narrow Spread, Average Spread. When the spread is high, considers as the widespread and low as the narrow spread. In VSA analysis there are three main points in which you have to pay attention:

  • Volume
  • Closing Price
  • Spread/Range

The VSA fits in almost all the financial market segments like stock, futures, forex etc. Here is the list of basic data regarding VSA, taken from Tom William’s book Master the Markets.

Volume Spread Analysis Basic Concept

First, the demonstration is given, after that, we will move on to the examples.

No Demand Bar: When the market shows a contracting relationship between spread and volume, it suggests the demand is low. This means it is not likely to rise. To find demand bar, some points have to be confirmed such as,

  • The Price close higher than the previous candle bar.
  • Volume is lower in comparison to the previous two bars.
  • Narrow Range

no demand bars

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No Selling Pressure: When the market falls with decreasing volume and spread range, the market is less interested in selling activity. The selling pressure is low here. Thus, it is not likely to continue falling. Like no demand, no selling also certain points:

  • Price close lower than the previous bars.
  • Volume is lower in comparison to the previous two bars.
  • Narrow Spread range.

no selling bar

So this was the basic of VSA. Karthik Marar has done a lot of experiments on VSA and has published the Volume Spread Analysis indicator for AmiBroker. Marar has created quite a few versions of his indicators and the current version is version 4. Check the image below to understand how the indicator works.

Volume Spread Analysis Indicator for Amibroker

You can download the Volume Spread Analysis indicator for AmiBroker from here. Use this indicator as an insider’s guide on what the smart money is doing in the market.

Categories: Amibroker, Trading Strategy

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