One bar, three questions

Question one: how wide is the spread?

Spread is the range from high to low. Judge it against the last ten to twenty bars, never against a fixed number, because gold's ranges triple between Asia and New York and again around news.

A wide spread means price travelled. Someone got a result. A narrow spread means price was held in a small box, either because nobody cared or because one side was quietly absorbing the other. Which of those two it was is the job of the next two questions.

Question two: where did it close?

The close is the verdict. A bar that ranged widely but closed on its high was won by buyers regardless of how ugly the middle looked. A bar that closed in the middle of its range was a draw. A bar that closed on its low was won by sellers.

Here are three bars with identical spread and identical volume. Only the close moves.

Same effort, same range, three different meanings. The first is buyers finishing the bar in control. The second is a fight that nobody won, which after a rise is a warning. The third is a bar where the entire range was given back, which on heavy volume means the buying at the top was met by sellers who wanted out.

Question three: what was the volume, relative to recent bars?

Volume is read as a rank, not a number. Ultra high is the largest of the last twenty or so bars. High is clearly above the average. Average is the crowd of ordinary bars. Low is the quiet minority, and the very lowest bars are the ones VSA cares about most in tests, because they show an absence.

The dashed average line in every drawing here is the same reference you should draw in your head on a live chart: is this bar above it, below it, or the biggest thing in view?

Four bars, four stories

Now the three questions together. Four drawn bars, each outlined.

• A: wide spread, close on the high, high volume. Heavy effort, full result, buyers won. Healthy inside an uptrend. At the end of a long rise it is the classic shape of a buying climax, so background decides.
• B: narrow spread, low volume. Nobody turned up. After strength this is a no supply bar and it is bullish. After weakness it is a no demand bar and it is bearish. The bar is identical; the background is the whole meaning.
• C: wide down spread, close on the low, high volume. Heavy effort, full result, sellers won. Ordinary in a markdown. At the end of one, on the widest spread yet, it is the selling climax bar.
• D: wide down spread, close on the HIGH, highest volume. This is the one that pays for the whole course. Sellers pushed price down through the bar, the volume says they pushed hard, and the close says they lost. Something absorbed all of it. In VSA this is stopping volume, and it is the first sign that a decline has met the other side.

The two bars beginners misread

Bar D above is one. The other is a narrow spread bar on very high volume. Effort with no result. Price tried to move and could not, which means every order that pushed was matched by an order that absorbed. Inside a rise, that is supply capping the move. Inside a fall, that is demand holding it. Traders who read volume as a strength meter see "high volume" and assume continuation. The spread says the opposite.

Part 7 goes deeper on spread. For now, hold the rule: heavy volume plus a narrow spread means absorption, and absorption means the move is being fought.

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