Volume spread analysis is a good start to becoming smart money. Unlike fundamental analysis VSA seeks to find the cause of price movement. In any business where there is money involved and profits to be made, there are professionals. Medical practitioners are collectively known as professionals, but specialize in certain areas of medicine. Financial markets are no different, they have professionals that specialize in certain instruments e.g stocks, grains, forex e.t.c. The activity of these professional operators and most importantly their true intentions are clearly shown on a price chart. Volume is the major indicator for the professional trader.
The ’cause’ is the imbalance between supply and demand in the market, which is created by activity of professional traders (Smart money). VSA looks at the relationship between three variables on the chart in order to determine the balance of supply & demand as well as the probable near term trend direction of the market. Volume always indicates the amount of activity going on and the corresponding price spread shows the price movement on that volume.
The effect is either a bullish or bearish move according to the prevailing market condition (Most indicators lead most market participants to trade the effect). Smart money operating in the markets are very much aware of the emotion that drive novice.
Advance your current method of analysis by reading VSA created by Tom Williams. Leave us a reply and let us know what you think.