VSA method in the Crypto market is not very popular. But they are always highly appreciated for their reliability and effectiveness when used. A simple reason why this method is not popular is because it is difficult to access. They are often used by investors who have many years of experience in the Crypto market. Let’s join Crypto Trading to learn in detail about the concept of the VSA method!
Overview of VSA method in Crypto
VSA method helps investors answer questions about price differences in the market. They find the causes of problems that are happening in the market. And provide help to investors to predict the future.
What is the concept of the VSA method?
Tom Williams was the one who developed the VSA method. VSA is based on the Wyckoff model, which analyzes fluctuations in trading volume. According to Tom Williams, when investors can clearly understand the nature of the relationship between supply and demand, they will grasp the trend of the market.’
Volume Spread Analysis is also abbreviated as VSA. It is a method of analyzing price fluctuations based on market supply and demand. Investors can completely use this method to identify price trends. The main tools of this analysis method are price and trading volume. VSA relies on three variables: volume, candle length, and closing price to predict market trends.
What are the components of the VSA method?
As mentioned, VSA is based on three elements to form it.
Trading volume on Crypto trading
Nowadays in the Crypto market, new investors often do not understand the importance of volume. This is also the reason why they all make mistakes. Usually, there is only one indicator with price movement volume built into VSA. However, this will still have certain limitations.
Take an example where the indicator predicts a bullish market with high volume. However, the market price may still move sideways or fall with high volume. This shows that other factors are still at work in the chart.
There are two levels of volume that traders should consider when using VSA. The first is above-average volume. This is when the volume is negative above average but still lower than the previous high. The average is usually chosen as the 20 MA. The next is very high volume, which is also considered the highest peak in the observation period.
See more: Price action: surprisingly effective trading method
Price difference VSA method
The price difference represents the difference between the opening price and the closing price of the same session. In the Crypto market, this factor is also expressed through the length of the candle body. When investors combine it with the trading volume, the price difference will be reflected through the supply and demand of that trading session.
What is the closing price when trading VSA?
According to Mr. Tom Williams, the closing price is considered the most important information when investors apply the method. The closing price is the final price of the trading session. When using VSA, investors will be very effective if they apply the closing price along with one of the two above factors. This is also the factor for success when using VSA that Mr. Tom Williams has concluded.
How to chart pattern works in VSA
The working principle of chart pattern when using VSA is based on the close relationship between volume and amplitude. According to Mr. Tom Williams, volume and amplitude are in harmony during the trading session. Divergence occurs when there is a narrow candle body but a high volume during the trading session. If there is a sign of a wide candle body but low volume, this is a sign of an imbalance of supply and demand in the market.
Volume Spread Analysis also helps investors identify a falling market due to supply imbalance and a rising market due to demand imbalance. To have an uptrend market, investors must be more buyers than sellers. However, this is only a necessary and sufficient condition, there are still many factors that can affect the market.
There are two signs that VSA points out, which are the signs of strength and the signs of weakness. With the sign of strength, it will occur when the market shows signs of supply exhaustion after a downtrend. At this time, supply increases, leading to a possible increase in price. With the sign of weakness, it will occur when the market shows signs of demand exhaustion after an uptrend. At this time, supply appears, leading to an imbalance.
Crypto Trading with VSA Method
Through analyzing the price difference volume, investors can completely perceive the standards for signs in the market.
Bullish Signal VSA Method
A bullish sign will occur when the offering ends after a period of net selling. At this time, many investors bid reasonable prices and bought. This creates demand and is also a sign of rising prices. One arbitrage pattern that investors should pay attention to is the downthrust pattern.
This pattern will consist of a candlestick that shows signs of a bullish reversal; In case the demand in the market increases strongly. The closing price will reverse and increase with very high or above-average trading volume. This is a signal that predicts the coin price will increase. If you want to be sure, investors can wait for the price of the coin to increase throughout several sessions for confirmation.
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Crypto trading bearish signs
A bearish signal will appear when the market has bottomed out. At this time, many investors sell off and the buying volume will decrease significantly compared to previous sessions. At this time, the price of cryptocurrency pairs shows signs of decreasing due to the weakening demand. Some patterns that show signs of a bearish signal are Upthrust and Buying Climax.
Upthrust consists of a bearish reversal candle with a short body. It has a long upper center and is accompanied by high volume. This pattern shows a deviation when the candle body shows signs of shorting in the market and the volume is very high. The Buying Climax pattern consists of a bullish candle with a long body that creates a high. The upper center of the candle is quite long and is accompanied by a very high volume or higher than the average of the last 20 sessions.
Conclude
Applying the VSA method to the Crypto market requires investors to have solid experience. In addition, investors can also apply other methods to increase reliability when trading. Grasping basic and advanced knowledge will help investors participate in the market more safely. Hopefully, the information that Crypto Trading shares will be useful to investors when participating in trading. Don’t forget to follow Crypto Trading to strengthen your knowledge about the market.
FAQs
Is it risky to use VSA when trading in the market?
Investors when using any method have their advantages and disadvantages. No method guarantees 100% safety in the market.
What does the No Supply Bar pattern indicate about the market?
This is a sample model showing the price difference through VSA. At this time the chart shows the market has signs of bullishness.
What does the No Demand Bar pattern indicate about the market?
This is a bearish pattern through VSA. The market now shows signs of greater supply than demand.
