Volume Spread Analysis (VSA) is a technical analysis technique that interprets the relationship between price action, trading volume, and the bid-ask spread to determine market imbalances between supply and demand. It seeks to identify the actions of professional market participants.
Mechanism
The operational principle of VSA involves examining the range (spread) of a price bar, the volume traded within that bar, and the bar’s closing price. By analyzing these three variables in conjunction, traders infer whether institutional buying or selling pressure is dominant, detecting divergences or confirmations that precede significant price movements.
Methodology
The strategic application in crypto trading aims to identify periods of accumulation or distribution by larger players, validate trend strength or weakness, and anticipate reversals. This methodology provides insight into the underlying market sentiment by observing how volume supports or contradicts price movements, enabling more informed entry and exit decisions.
Identifying block trade activity is a systematic process of decoding institutional intent from the interplay of anomalous volume signatures and contextual price action.
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