3 Principles Without Which You Can't Trade in VSA

Every Forex trader strives to find their unique trading strategy, but the concept of success remains the same for everyone: consistent profits and confidence in their trades. Among the many trading systems, a strategy based on three simple yet effective principles is especially popular. These principles form the foundation of numerous trading approaches, including intraday strategies. Even if you're already familiar with the basics of VSA (Volume Spread Analysis), this material will help you see familiar concepts from a new perspective and extract maximum value.

Three Key Principles of VSA Analysis

1. Supply and Demand

Every market, including Forex, operates under the laws of supply and demand. Without sellers, there’s nothing to buy, and without buyers, nothing can be sold. However, VSA goes further, helping to identify the actions of large market participants — market makers. They set the tone for the market, creating zones of demand (buying) and supply (selling).

Key takeaways:

• Demand increases when major players accumulate assets, pushing prices upward.
• Supply grows when they begin distributing assets, pressuring the market downward.

For example, if the volume of selling (supply) significantly exceeds the volume of buying, the market will decline, entering a bearish phase. Conversely, increased demand triggers bullish momentum.

2. Cause and Effect

In financial markets, as in life, every action has consequences. When market makers inject significant volumes into the market, it signals the potential for a major price movement — either upward or downward.

The golden rule: Volume is the cause, and price movement is the effect.
If a surge in volume is not followed by a substantial price change, it’s a red flag: the market may be manipulated or on the verge of a trend reversal. A true breakout of a level is always confirmed by corresponding volume. Ignoring this rule often leads to losses.

3. Effort and Result

This principle is based on the idea that every market movement should be justified. If you observe a strong movement on the chart accompanied by high volumes, this is the effort. The expected result of such effort is the continuation of the trend in the same direction.

But what happens if volumes increase and the price doesn’t move? This is a clear signal of market weakness. For example:

• Significant buying without a price increase may indicate resistance.
• Heavy selling without a price drop may point to support.

When effort is not followed by the expected result, it’s a clear sign of shifting market sentiment.

---

Practical Application of the Principles

How can you use these principles in trading?

• Analyze volumes. This is the cornerstone of VSA. Use tick volumes on Forex or real data on stock and cryptocurrency markets.
• Identify key levels. Volume accumulation often occurs near strong support or resistance levels.
• Monitor the effort-result relationship. Declining volumes in an uptrend may signal an approaching correction or reversal.

In the Forex Market

Although tick volumes don’t provide precise data, their dynamics allow traders to identify areas of heightened activity and uncover the hidden intentions of large players.

In the Stock Market

Access to real volume data makes VSA particularly powerful. It allows traders to assess not only price movement but also trend confirmations in stocks, ETFs, and futures.

In Cryptocurrency Markets

Cryptocurrency exchanges provide real volumes and order book data. This simplifies the identification of supply and demand, especially in highly volatile markets.

---

Why Is It Important to Remember These Principles?

These three simple rules are the foundation of any successful strategy. Without understanding them, even the most sophisticated trading system will not deliver consistent results. Many traders make the mistake of relying on luck or a single strategy, forgetting the key factors that drive the market.

Remember: success in Forex comes to those who are ready to learn and analyze.

 

If you want to understand when the market is weak or identify who is setting the rules of the game, focus on volumes and their interaction with price. This simple yet powerful tool can become a decisive advantage in the hands of a skilled trader.