Volume spread analysis

Each course follows the same structure. A brief explanation of the concept followed by several tutorials from the live market. The idea is to make traders aware of the various tactics and create a better understanding for the daily/weekly analysis section.

Volume spread analysis  course

Volume and news are a powerful thing. And there are 2 give aways about volume in proportion to candlestick size that will give us a loud a clear signal about the integrity of the move.

Firstly, if price is rising on low volume the move cannot be real and prices are likely marked up by market maker(MM). Therefore are subject to collapse or a retest of the covered price range.

Secondly, if price has barely moved but volume is much higher than the closest candles then there is growing interest from smart money in the opposite direction.

We will use these two signals to our advantage. However like any decent move in the FX market we need a catalyst to push price around. Most of the time news are the catalyst and contrary to what most traders believe these announcements are opportunities for smart money to offload their holdings in large blocks from what they amassed in the accumulation phase.

Before we get to the charts there is 1 fact about news releases that is a scrupulous reality. Before data and news releases are announced they are passed on from the main source to the news wires. Stations receive data about 1hour to 45minutes prior to release, to accommodate their publishing process. Sometimes somehow data gets leaked and we see setups emerging prior to release, plotted by well informed traders that are pre positioning themselves for the feast.

Tutorial 1

Aud/Usd 4h chart. The Fed (federal reserve) interest rate decision is imminent and we have this clear setup appearing.

volume01

Where price moved up and created a lower volume but bigger candle body than the most recent candle. This anomaly stands out and sends a clear message that better informed traders are positioning in anticipation of a move lower.

volume02

Almost as soon as the news hit the wire and the low of the last 4h candle gets breached we see this pair tanking.

Tutorial 2

Cad/Jpy 1h chart. EIA crude inventories are due and we have another clear signal.

volume03

Price created a big bullish candle with increased volume but created another one right after it with higher volume but significant smaller bearish candle.

volume04

The low get’s breached on the back of the report and we see an instant reaction with a spike lower.

Tutorial 3

Gbp/Usd 1h chart. Britain’s referendum vote count is imminent yet another very clean-cut and obvious anomaly.

volume05

Price surged up on very low volume creating a massive up candle only to get reversed by a smaller down candle on increased volume.

volume06

As more votes came in the low of the last candle breached and price tanked.

Miad

If you’d like to understand market better and trade with the flow while you are full time employed contact me on twitter @ZFXtrading I offer support, or visit my YouTube channel Speculators Trading for Tutorials 

Miad

View posts by Miad
Currency&Commodity Trader

5 Comments

  1. alfahad
    December 31, 2016

    Very insightful, thanks miad

    Reply
  2. Nick d Stoic (@nicky_trader)
    January 02, 2017

    This is great stuff thanks

    Reply
  3. Karl Stepnazzi
    January 02, 2017

    VSA is cool, but how do you address the main issue of non-centralized volume in forex? Different brokers can create different volume profiles. And with 4hr candles some will print different candles and volume from different timezones. Just wondering if you have a recommended broker or timezone that tends to work for you?

    Reply
    1. Miad Kasravi
      Miad
      January 02, 2017

      Hi Karl,
      This very subject baffled me when I started out with volume analysis too. Until I came across other professional traders and they gave me a simple yet very precise answer which I like to pass on:
      Firstly, we are using tick volume and not transaction volume. These may differ from broker to broker but all vsa traders are dealing with the same issue, we are concerned about what we have at hand.
      On the closing chart note I use NY close charts

      Reply
  4. Leonardo Hermoso (@leohermoso)
    September 20, 2017

    Amazing stuff Miad! Tks

    Reply

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to top