VSA Analysis this is a unique algorithm for analyzing the financial market (with the same success it is used in stocks, as well as for trading binary options). The uniqueness of this method lies in the fact that, along with standard technical analysis tools (candlestick analysis, trend indicators, etc.), the volumes of trading operations are analyzed.
If technical indicators, such as, for example, the candle spread indicator, allow you to objectively analyze the current state of the market, i.e. answer the question - "What is happening in the market?", then VSA (volumespreadanalysis) gives an answer to the sacred "Who is to blame?". Only vsa patterns make it possible to assess the qualitative composition of market players at any particular moment in time.
vsa indicators give an idea of the psychological component, or rather of the current prevailing market sentiment. Large volumes of trading operations clearly indicate the presence of large players on the market, which is a reliable confirmation of the powerful potential of the existing trend, since. it is these players that “make the weather” in the market. A decrease in volumes is a signal of a decrease in the interest of large players in this trading instrument.
Volume spread analysis is an indicator that differs significantly from each other in the stock market and in the Forex market. The global financial market is decentralized, and it is very difficult to accurately determine the volume of transactions for a specific trading instrument for a certain period of time. For these purposes, algorithms for indirect assessment of trading volumes were developed, and it is on their basis that the better volume indicator functions.
Among such algorithms, the analysis of tick price behavior deserves attention. A tick is the minimum delta of the price of a trading instrument (fourth decimal place in the quote).
The volumes indicator, based on the analysis of the frequency of changes in ticks over equal periods of time, allows you to estimate trading volumes with a high level of accuracy.
The boxchart 1 6 volume indicator, which can be downloaded from any specialized resource, is based on the analysis of currency futures. This algorithm can hardly be called simple. Setting up this indicator will require a good knowledge of technical analysis from the trader. The candle spread indicator, like many other candlestick analysis patterns, is easy to use, but in terms of the reliability of the generated trading signals, the melon indicator is noticeably inferior to the above-mentioned technical indicators.
VSA analysis. better volume indicator
On the indicator, the volumes are displayed as multi-colored bars of various lengths.
- A red bar indicates an increase in trading volume on an uptrend. Informs about a deep correction of a downtrend, or even about the emergence of an uptrend with great potential, which gives a good signal to buy a binary option up.
- The white column is formed under diametrically opposite conditions;
- Green bar - a large trading volume with minor price changes. Powerful rotary model;
- A yellow bar signals the end of a trend and the beginning of a correction, and sometimes, the beginning of a sideways movement.
Conclusions:
In conclusion, I would like to note that using this indicator as the only trading signal generator is very risky. For binary options trading, it is better to combine the binary options signals of this indicator with other technical indicators.
Beginners often find it unclear how to determine the tick volume of Forex trading, and the VSA indicator can help them with this. What are the features of the tool, and how to use it correctly?
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However, it is possible to analyze the so-called tick volume. This term should be understood as a simple indicator of the number of trading operations calculated per unit of time. The value of the tick volume cannot be expressed as a clear amount and have a specific focus, therefore, the assessment is possible only on the basis of an analysis of the mutual dynamics of the price bars. For this purpose, the VSA indicator has been developed, colloquially referred to as "sonic VSA".
It is not in the list of indicators of the MT4 trading platform, so you need to download it from the Internet. If you need to analyze trading tick volumes using an informational histogram indicator, download for free and install this tool in the MT4 terminal using the usual algorithm for third-party indicators.
Strong market movements occur when the balance between supply and demand shifts under the pressure of technical and fundamental market factors. Volume data can show the strength of the market movement, or its weakening. A strong market impulse arises on the basis of increased interest in the market on the part of professional players and is accompanied by an increase in tick trading volumes, while their decrease means a weakening of such interest, an equalization of the balance between supply and demand, accompanied by the market entering a flat.
Important! The VSA algorithm allows you to see a trend movement in an increase in volume, allowing you to obtain information about the potential of the current market movement based on its indicators.
Theoretically, there should be a coincidence of supply and demand volumes, otherwise it becomes impossible to execute market orders due to the lack of counterparties. The higher the demand, the faster the execution of sell orders at low prices will be when the volume of buy transactions increases, that is, the market will receive a bullish momentum.
With an increase in the number of proposals at current prices, the market begins to move towards a conditional equilibrium point, which is overcome at the moment supply begins to dominate demand. The result of this is an increase in supply volumes, that is, sales and an increase in bearish sentiment in the market.
In addition to the actual tick volumes, the indicator measures the spread, which means the difference between the high and low of the candle, that is, it evaluates the price range of the trading session as an indicator of volatility and the degree of trading activity for the period.
The indicator data is displayed on the chart as a colored bar graph:
- The blue color of the column which means there are no recommendations for a trading signal.
- If such a column is yellow and of sufficient height, then a bearish candle appeared on the chart with a large volume. Such signals appear at the end of the next trend, when non-professional players enter the market, acting under the influence of their own emotions, or during periods of massive “knocking out” of protective stop orders. The appearance of a yellow bar can also be a sign of the emergence of a new bearish trend.
- The red bar serves as a semantic antipode of the yellow bar of the BCA indicator histogram, as it corresponds to bullish sentiment at large volumes. The same frequency of occurrence of the two described patterns on the charts of currency pairs is observed at the beginning of the next trend and during its completion.
- The green bar of the indicator's histogram means that there is a large volume of trading during the sideways movement of the market, that is, in conditions of a low spread of the corresponding candles. This phenomenon can be explained by market chaos, which has no connection with the actions of large market speculators.
Knowing the interpretation of the signals, you can use the data to make deals.
Benefits for Forex trading
The VSA indicator is purely informational in nature and cannot be a tool for creating a trading strategy. The principles of volume analysis in connection with the market spread cannot serve as a starting point in making a decision to open a position, because there are strict rules for interpreting and interpreting volume-spread data.
Here, much is due to the general situation that has developed in the market over the past few days or even weeks. The MT4 terminal is intended for instruments that analyze volumes of tick data, therefore the bars of the VSA histogram, like Volumes, and other similar instruments, do not depict real amounts of money on transactions, but only a quantitative indicator of price changes.
Therefore, such indicators are not able to demonstrate the difference between transactions for several tens or hundreds of dollars and multimillion-dollar trading volumes. Forex volume analysis is simply meaningless, and any trading system can function perfectly without it.
VSA analysis (Volume Spread Analysis) is a way to analyze the market based on the volume of trades in combination with the size of the candles on the chart. In financial markets, volumes are usually understood as the total amount of funds directed both for the purchase and sale of an asset. It is important to analyze volumes, because they can be used to determine the interest of major players in the current situation on the market. It is the major players (banks, financial institutions, etc.) that are able to significantly influence the change in prices on the market due to the size of their assets. As a rule, they have the most up-to-date and high-quality information and, in the end, their forecasts turn out to be correct.
When analyzing volumes, it should be taken into account that there is a big difference between the volumes used on stock exchanges and volumes on. On stock exchanges, you can track the real volume of transactions - how many shares were bought or sold at a given time and at what price. However, the market is decentralized, so we cannot get accurate information. However, it also has its own volume analysis methods:
- Analyze tick price behavior. A tick is the minimum allowable price change in the Forex market (usually the fourth decimal place). Accordingly, by comparing the frequency of tick changes over equal periods of time, it is possible to determine whether there are high or low volumes in the market;
- Use currency futures (contracts for the purchase and sale of currency in the future) traded on the Chicago Mercantile Exchange. The presence of interest in contracts for the purchase of currency also shows the presence of high volumes in the market.
Because most traders, myself included, prefer to trade and still use the . I'll tell you how to use tick volumes using the better volume indicator as an example.
VSA analysis. better volume indicator
Volumes are represented by bars of different colors and lengths. It is very easy to interpret them: growing bars show an increase in volume, falling bars show a decrease.
Now for the colors:
- The red bar is a large volume on a large rising candle. As a rule, it is a signal for binary options to the beginning of a strong uptrend or the beginning of a downtrend correction;
- White column - a large volume on a large descending candle. As a rule, it is a signal for the beginning of a strong downtrend or the beginning of an uptrend correction;
- The green bar is a large volume on a small candle. It is a signal for the end of the trend;
- The yellow bar is a small volume. Signal for binary options about the end of a trend or the beginning of a correction.
Trading based only on VSA analysis is quite difficult, however, adding it to your