Volume Spread Analysis (VSA): How to Read Institutional Footprints in Every Candle

Every candle on your chart is a compressed story. Open, high, low, close -- four data points that summarize everything that happened during that period. Most traders look at the color and move on. Green is good. Red is bad. That is the extent of their analysis.

But here is what that approach misses: a wide green candle on low volume and a wide green candle on high volume are telling you completely different things. One is a legitimate move backed by conviction. The other is a trap waiting to snap shut.

Volume Spread Analysis is the discipline of reading those differences. It was developed by Richard Wyckoff in the early 20th century and later refined by Tom Williams in his book "Master the Markets." The core idea is straightforward: smart money -- banks, hedge funds, institutions -- cannot hide their activity. They can manipulate price, but they cannot manipulate volume. And when you learn to read the relationship between price spread and volume, their footprints become visible on every chart you open.

The Three Components of VSA

VSA boils every candle down to three variables. Master these, and you have the foundation for reading institutional intent.

1. Spread

The spread is the range of the candle -- the distance from high to low. Not just the body (open to close), but the full range including wicks. A wide spread means price covered a lot of ground during that period. A narrow spread means it did not.

Crucially, "wide" and "narrow" are relative terms. A 30-pip candle on EUR/USD during London session is normal. The same candle during the Asian session is massive. Always compare the current candle's spread to the surrounding candles. The 20-period average of candle ranges makes a reasonable benchmark.

2. Volume

Volume is the total number of contracts or shares traded during the candle's duration. In forex, tick volume serves as a reliable proxy -- it correlates with actual volume roughly 90% of the time.

Again, volume is relative. Use the 20-period moving average of volume as your baseline. "High volume" means significantly above that average. "Low volume" means significantly below it. "Ultra-high volume" means it dwarfs everything around it -- the tallest bar on the screen.

3. Close Position

Where the candle closes within its range matters enormously. A candle that closes near its high shows buyers won the fight. A candle that closes near its low shows sellers dominated. A close in the middle indicates indecision.

The close position is what turns a simple wide-range candle into a specific VSA signal. The same spread and volume combination tells a very different story depending on whether the candle closes at its top, middle, or bottom.

The Core Principle: Effort vs. Result

VSA rests on one foundational law from Wyckoff: every effort should produce a proportional result. Volume is the effort. Price movement is the result. When they align, the market is behaving normally. When they diverge, something is happening beneath the surface.

Validation occurs when price movement matches volume. A wide-range bullish candle on high volume? That is healthy demand. A wide-range bearish candle on high volume? That is real selling pressure. These are continuation signals. The side driving the move has the firepower to sustain it.

Divergence is where VSA earns its keep. When the effort does not match the result -- when volume is high but the spread is narrow, or the spread is wide but volume is absent -- institutional players are doing something they do not want you to see. These divergences are the earliest warning signals you will find on any chart.

If you have read about cumulative volume delta, you already understand the concept of separating buying from selling pressure. VSA takes a complementary approach: instead of splitting volume into buy and sell, it examines volume relative to candle spread to reveal absorption, exhaustion, and manipulation.

The Four VSA Scenarios

Every candle falls into one of four categories based on the spread-volume relationship. Learn these, and you have a framework for evaluating any candle on any chart.

Wide Spread + High Volume: Continuation

This is the high volume continuation candle. There is genuine supply and demand activity, but one side is winning. In a bullish candle, demand exceeds supply. In a bearish candle, supply exceeds demand. Neither side's liquidity is shallow -- there is a real fight happening, and the winner has earned the move.

When this candle appears approaching a support or resistance level, it often has enough momentum to break through. The volume behind it represents real institutional commitment.

What to do: Trade in the direction of the candle. If a wide bullish candle with high volume breaks above resistance, the breakout is more likely to hold.

Wide Spread + Low Volume: Reversal Warning

This is the low volume reversal candle, and it is counterintuitive. A big move happened, but nobody was really behind it. How? Shallow liquidity. One side of the order book was empty, allowing price to travel a wide distance without much volume being exchanged.

The problem is that the side driving this move will exhaust itself quickly. Once price hits a zone with deeper liquidity -- a genuine support or resistance level, a cluster of resting orders -- the move stalls and often reverses.

What to do: Be suspicious of the move. If a wide bullish candle on low volume runs into resistance, expect sellers to take control. This is not a candle to chase.

Narrow Spread + Low Volume: Rest

This is the low volume rest candle. The market has taken a break. Neither buyers nor sellers have much interest at the moment. It is the pause between rounds.

On its own, this candle is neutral. Context determines what happens next. If it appears during a pullback within a strong trend, the trend is likely to resume. If it appears at a key level after an extended move, the lack of interest from the dominant side may signal a reversal.

What to do: Wait. This candle does not give you an edge by itself. Look at where it appears and what comes next.

Narrow Spread + High Volume: Absorption

This is the most powerful scenario in VSA. High volume means there is a serious fight happening. But the narrow spread means neither side is winning. One side is aggressively attacking, and the other is absorbing every order thrown at them.

In an uptrend, a narrow-range candle with high volume means buyers are pushing hard but sellers are absorbing all the demand. The trend is likely exhausted. In a downtrend, it means sellers are dumping but buyers are absorbing everything. A reversal is brewing.

What to do: Prepare for a direction change. This candle is a wall. The absorbing side has deep pockets, and once the attacking side runs out of ammunition, price will move in the absorber's direction.

Key VSA Signals: Signs of Strength

These signals indicate that demand is overpowering supply and price is likely to rise.

Selling Climax

A wide-range bearish candle that closes well off its lows, with a noticeable downward wick, on ultra-high or above-average volume. This is the exhaustion point of a selloff. Sellers threw everything they had at the market, but buyers stepped in and pushed price back up from the lows. The long lower wick -- typically 25-50% of the candle body -- is the visual proof that demand emerged at those lower prices.

The selling climax often marks the end of a markdown phase and the beginning of accumulation. If you see one at a significant support level or after an extended downtrend, pay attention. It does not mean "buy immediately," but it means the selling pressure is running out of fuel.

Stopping Volume

A down candle with ultra-high volume that halts a decline. Unlike the selling climax, stopping volume does not necessarily show a dramatic wick. The key feature is that despite massive selling volume, price stops going down. The volume was absorbed by institutional buyers who are quietly accumulating positions.

Stopping volume often appears at the beginning of an accumulation phase. You will see it followed by a period of sideways price action as smart money continues to build their position before the markup begins.

Down Thrust (Bullish)

A pin bar or doji with an extremely narrow spread but ultra-high or above-average volume. The tiny spread tells you price barely moved. The high volume tells you there was enormous activity. The VSA interpretation: there is far more demand than supply. Buyers absorbed everything sellers threw at them and held the line.

The down thrust is one of the strongest bullish VSA signals, particularly when it appears after a decline or at a support level. The narrow spread on high volume is a direct manifestation of the effort-versus-result divergence -- massive effort, zero result from the sellers.

No Supply Bar

A narrow-range bearish candle with volume lower than the previous two candles. This is a continuation signal, not a reversal. It tells you that sellers have left the building. There is simply no supply available to push prices lower.

No supply bars are significant only after a sign of strength or during bullish momentum. In other words, the trend must already be up. The no supply bar confirms that the pullback within that trend is just a pause, not a reversal. If you see one during a pullback to a demand zone, it strengthens the case for a long entry.

Test

After accumulation, smart money will often let price drop back toward the lows to see if any sellers emerge. If the test bar shows low volume, it confirms that sellers are gone. The road is clear for markup. A successful test is a narrow-range bar on low volume that dips into a prior support zone and then closes near its high.

Tests can occur multiple times. Each successful low-volume test adds confidence that the accumulation phase is complete and the markup is about to begin. The key distinction between a test and a genuine bearish continuation is volume. If price dips on increasing volume, it is not a test -- it is new supply entering the market. If it dips on declining volume, the sellers are exhausted and the smart money's accumulation is being validated.

Key VSA Signals: Signs of Weakness

These signals indicate that supply is overpowering demand and price is likely to fall.

Buying Climax

The bearish mirror of the selling climax. A wide-range bullish candle that closes well off its highs, with a noticeable upward wick, on ultra-high volume. Buyers made one final push, but sellers overwhelmed them at the top. The long upper wick shows supply flooding in at those higher prices.

The buying climax often marks the end of a markup phase and the beginning of distribution. Combined with an approach into resistance or a prior supply zone, it is a strong signal that the trend is exhausted.

Up Thrust

The bearish counterpart to the down thrust. A pin bar or doji with a narrow spread on ultra-high or above-average volume, appearing during or after an uptrend. Despite massive activity, price went nowhere. Supply absorbed all the demand. The result: more supply than demand, and price is likely to fall.

Up thrusts frequently appear as false breakouts above resistance or above the range during a distribution phase. In Smart Money Concepts terminology, this is a liquidity sweep -- price sweeps the highs to trigger buy stops, then reverses as smart money distributes into that liquidity.

No Demand Bar

A narrow-range bullish candle with volume lower than the previous two candles. Buyers have disappeared. There is no demand to sustain higher prices. Like the no supply bar, this is a continuation signal -- it only matters after a sign of weakness or during bearish momentum.

No demand bars are effective during bearish pullbacks. Price bounces up on declining volume, confirming that the bounce is just weak retail buying, not institutional accumulation. The next move is likely back down.

Effort Greater Than Result (Bullish Effort, No Bullish Result)

A narrow-range bullish candle with volume higher than the previous candle. Buyers tried hard -- the volume proves it. But price barely moved. Sellers absorbed the effort. This divergence between effort and result signals that supply is winning, and price is likely to fall.

This pattern is subtle and easy to miss. It is the kind of signal that separates traders who just look at candle color from those who read the story inside each bar. When you see a cluster of these effort-greater-than-result candles forming at resistance, it paints a clear picture: institutional sellers are defending that level with limit orders, absorbing every wave of buying. The Reaction Zones indicator can help identify levels where this kind of absorption is most likely to occur.

The Wyckoff Market Cycle: VSA at Scale

Individual VSA signals are powerful, but they become transformative when you understand the larger cycle they belong to. Wyckoff identified four phases that repeat on every timeframe, in every market. These phases describe how institutional money enters, drives, exits, and profits from a move. Every chart you have ever looked at is somewhere in this cycle right now.

Accumulation

Smart money is quietly buying. Price moves sideways in a tight range. Volume is low. To the untrained eye, nothing is happening -- the market looks dead. In reality, institutions are absorbing every share and contract available without tipping their hand.

VSA clues during accumulation: stopping volume at the bottom, successful low-volume tests, no supply bars during minor dips within the range. The spring -- a brief dip below the range that quickly reverses -- is the final shakeout before markup begins. It is designed to trigger stop losses and create panic selling, which smart money buys.

Markup

The breakout. Price leaves the accumulation range on a wide-spread, high-volume bar. The markup unfolds in stages: advances on increasing volume, pullbacks on decreasing volume. Each advance makes a higher high. Each pullback makes a higher low. This is where trends are born.

VSA clues during markup: high volume continuation candles on advances, no supply bars on pullbacks, re-accumulation ranges (brief sideways pauses) before the next leg up.

Distribution

Smart money is offloading positions to retail traders at higher prices. Price moves sideways again, but this time at the top. The up thrust -- a false breakout above the range -- is the distribution equivalent of the spring. It sweeps buy-side liquidity and traps breakout traders.

VSA clues during distribution: buying climax bars, up thrusts on high volume, no demand bars on rallies within the range. Volume during up moves should be declining compared to the earlier markup phase.

Markdown

The dump. Smart money has exited. Supply overwhelms demand. Price falls sharply with wide spreads and increasing volume. Panic selling accelerates the decline as trapped longs liquidate.

Understanding where you are in this cycle makes every individual VSA signal more meaningful. A no supply bar during accumulation is far more significant than the same signal in the middle of nowhere. A buying climax during distribution is a high-conviction short signal, not just a random candle.

One detail worth noting: these phases do not always play out in clean textbook form. Sometimes distribution happens during the markup itself, not in a separate sideways range. Sometimes accumulation is brief and violent rather than slow and quiet. The phases describe the function -- what smart money is doing -- not a rigid visual pattern. Use VSA signals to identify the function, and the chart structure will make more sense.

Combining VSA with Smart Money Concepts

If you already trade Smart Money Concepts -- order blocks, fair value gaps, liquidity sweeps -- VSA is the perfect companion. In fact, VSA predates modern SMC by decades, and the two frameworks describe the same underlying reality from different angles.

Order Blocks and Accumulation/Distribution

An order block is, at its core, an area where smart money placed large orders. VSA tells you whether those orders were genuine. An order block formed by a wide-spread candle on high volume is backed by real institutional commitment. An order block formed on low volume? Suspect. The volume behind the candle validates or invalidates the zone.

The Institutional Price Blocks indicator on GrandAlgo identifies these zones automatically, but understanding the VSA context behind each block helps you filter which ones deserve your attention and which ones are likely to fail.

Liquidity Sweeps and Springs/Up Thrusts

A Wyckoff spring is just an early name for what SMC traders call a liquidity sweep. Price dips below support to trigger stops, then reverses. VSA adds the volume layer: the spring should occur on low volume (confirming no real selling interest) and the reversal should occur on high volume (confirming demand stepping in).

Similarly, an up thrust above resistance is a sell-side liquidity sweep. If the volume on the thrust is low and the reversal is on high volume, the sweep is genuine. If the thrust itself is on high volume but price cannot close above resistance, that is absorption -- sellers are meeting the demand head-on.

Fair Value Gaps and Low-Volume Zones

Fair value gaps are price ranges where one side overwhelmed the other so aggressively that a gap was left in the price action. VSA expects these to form on high volume -- that is the effort that caused the imbalanced result. When price returns to fill a gap, the volume on the retest tells you whether the gap will hold as support or resistance. Low volume on the retest means no interest from the opposing side. The gap holds.

Using GrandAlgo Indicators with VSA

Several GrandAlgo indicators pair naturally with VSA analysis. The Supply Demand Pressure Cloud visualizes supply and demand imbalances that VSA patterns are designed to detect. The Candle Trap Zone indicator identifies exactly the kind of trapping behavior that VSA signals like up thrusts and springs describe. And the Liquidity Heatmap shows you where resting orders cluster -- the same liquidity depth that determines whether a candle will produce a wide or narrow spread.

For traders who want a volume-based confirmation layer, the Smarter Money Suite provides multi-factor confluence that complements manual VSA reads. Rather than eyeballing spread-volume relationships on every candle, you get a systematic overlay that flags the conditions VSA traders look for.

Practical VSA Workflow

Theory means nothing without a repeatable process. Here is how to put all of this together in real trading, step by step.

Step 1: Identify the Phase

Before you look at individual candles, zoom out. Are you in accumulation, markup, distribution, or markdown? The daily or 4-hour chart should answer this. If price is trending, you are in markup or markdown. If it is ranging after a trend, you are likely in accumulation or distribution.

Step 2: Read the Current Candle

On your trading timeframe, evaluate each candle against the three components: spread relative to recent candles, volume relative to recent candles, and close position within the range. Classify it into one of the four scenarios.

Step 3: Look for Divergence

Is the effort matching the result? Wide spread on low volume is suspicious. Narrow spread on high volume is a wall. Climax bars with extreme wicks are exhaustion signals. These divergences are your highest-probability setups.

Step 4: Confirm with Context

A VSA signal at a key level is worth ten times more than the same signal in the middle of a range. Check for confluence with support/resistance, order blocks, or volume profile nodes. If the signal aligns with the structure, it is actionable.

Step 5: Wait for Confirmation

VSA signals are warnings, not entry triggers by themselves. After a selling climax, wait for a successful test. After a no demand bar, wait for a break of the low. Let the market confirm the signal before committing capital. Combine with candlestick patterns at these levels for additional confluence.

Common VSA Mistakes

Treating volume in absolute terms. A volume bar of 50,000 contracts means nothing without context. Always compare to the 20-period average and to surrounding bars. What matters is whether volume is relatively high or low, not the absolute number.

Ignoring the close position. Two candles can have the same spread and volume but tell opposite stories based on where they close. A wide bearish candle closing at its low is continuation. The same candle closing in the middle or near its high is a selling climax. The close is the tiebreaker.

Using VSA in isolation. VSA is a reading method, not a complete trading system. It tells you what smart money is doing, but you still need structure, levels, and a plan. The best VSA traders combine it with market structure analysis, supply and demand zones, and price action patterns for entries and exits.

Applying continuation signals against the trend. No supply and no demand bars are continuation signals. A no supply bar during a downtrend is not bullish -- it is just a pause before more selling. These signals only matter when they confirm the existing trend direction.

Looking for perfection. Real charts are messy. Not every selling climax will have a textbook wick. Not every test will be on textbook low volume. VSA is about reading the probability story that each candle tells, not waiting for ideal textbook examples. If you only trade perfect setups, you will trade once a month.

Confusing high volume with bullish volume. High volume is not inherently bullish or bearish. A massive volume spike on a bearish candle at support could be a selling climax (bullish) or a genuine breakdown (bearish). The spread, close position, and context determine the interpretation. Volume without context is just noise.

VSA Across Timeframes

VSA works on every timeframe, from 1-minute scalping charts to weekly swing trading setups. The principles do not change -- a narrow-spread, high-volume candle means absorption whether it is a 1-minute bar or a daily bar.

However, higher timeframe VSA signals carry more weight. A selling climax on the daily chart is more significant than one on the 5-minute chart because the volume represents a full day of institutional activity, not just a few minutes. When you see VSA divergence on the daily or 4-hour chart, that signal can anchor your bias for days or weeks.

For intraday traders, VSA is especially useful around session opens. The London and New York opens tend to produce the highest volume of the day, and the VSA signals that form during the first 30-60 minutes of these sessions set the tone for the entire session. A buying climax at the London open followed by no demand bars tells you the session high is likely in. A selling climax at the New York open followed by a low-volume test tells you the session lows are likely being swept for accumulation.

The best approach is top-down. Read the Wyckoff phase on the daily chart, identify VSA signals on the 4-hour or 1-hour chart, and time entries on the 15-minute or 5-minute chart. This multi-timeframe approach ensures that your individual candle reads are aligned with the broader institutional narrative, much like using order flow analysis with a higher timeframe directional bias.

Where VSA Fits in Your Trading

VSA is not meant to replace your current strategy. It is meant to add a layer of intelligence that most traders do not have. When your price action setup fires at a key level and the VSA read confirms institutional activity behind the move, your conviction goes up. When the setup looks perfect but the volume tells a different story, you save yourself from a trap.

The traders who consistently extract money from the markets are the ones who see what others miss. Everyone can read candle color. Everyone can draw support and resistance lines. But reading the volume story inside each candle -- understanding whether the effort matches the result, whether the spread is genuine or hollow, whether smart money is accumulating or distributing -- that is the edge that separates professionals from the crowd.

Start with the four scenarios. Practice classifying candles into wide-high, wide-low, narrow-high, and narrow-low. After a few weeks, you will start seeing the market differently. You will notice when a breakout lacks volume conviction. You will spot exhaustion bars before the reversal happens. And you will understand why certain levels hold and others break -- not because of lines on a chart, but because of the volume behind the candles that created them.