What a test is
After a selling climax and a rally, price dips back toward the climax area. If the dip is on low volume, narrow spread, and closes off its low, sellers are absent. The area has been tested and passed. If the dip is on high volume with a wide spread and a low close, sellers are still there and the area needs testing again.
Left panel: bars 3 and 4 dip on the two lowest volumes in the sequence, spreads narrow, closes not on the lows. That is a successful test, and bars 5 and 6 confirm it with up closes on rising volume. Right panel: the same dip on rising volume with lower closes. That is a failed test. The strength was real but the supply was not finished, and the correct response is to wait for the next attempt.
The no supply bar
The no supply bar is the everyday test inside an uptrend. Down bar, narrow spread, volume lower than the previous two bars, ideally the lowest in view. It says that at this price nobody wants to sell, and if nobody wants to sell then even modest demand will lift the market.
Bars 3 and 4 are the no supply bars. The confirmation is bar 5: an up bar closing high on volume clearly above the test bars. Without that confirmation a no supply bar is only a hypothesis. With it, you have the smallest complete VSA sequence: strength, test, confirmation.
Where the test should happen
A test in the middle of nowhere means little. A test that returns into the climax bar's range, or into a demand zone that formed on the reaction, is the one worth waiting for. This is where VSA and structure trading meet: the zone says where to look, the volume says whether the visit found sellers.
On gold specifically, the best tests tend to arrive one session after the climax: a London climax tested in New York, or a New York climax tested in the next Asian session on very light volume. The sessions chapter explains why the Asian test is both the cleanest and the easiest to misread.
Reading a test that comes with volume
Not every high volume test is a failure. A test bar with high volume that still closes on its high has met supply and absorbed it on the spot. VSA calls this a test with supply, and it usually means one more test is coming before the move. Do not enter on it; note it and wait for the quieter one.
A test bar with high volume closing on its low is different. That is the failed test from the drawing above, and it can mean the whole strength reading was wrong. If a subsequent bar makes a new low on rising volume, the background has flipped and you start again.
The test as an entry trigger
The trade plan in part 10 uses this precisely: entry above the high of the test bar, stop below the climax low, target at the last supply before the decline. The test is what makes the stop small. Without it you are buying somewhere inside a wide climax bar with a stop that has to sit under the whole thing.
Course navigation. Previous: Part 4, Signs of strength. Course index: VSA course for gold. Next: Part 6, Signs of weakness.
FAQ
How many bars after the climax should the test come?
There is no fixed count. Typically two to ten bars on the timeframe you read the climax on. A test that comes much later, after price has already rallied a long way, is a different event: a pullback in a markup, read with the no supply bar rules.
What if the test goes below the climax low?
A test can undercut the climax low on light volume and still be valid; that is a spring in Wyckoff terms, and it is often the best entry of all. What invalidates it is volume: an undercut on heavy volume with a low close is a new leg down, not a test.
Do tests happen at tops too?
Yes. After a buying climax, a rally back into the area on low volume with a close off the high is a no demand test, and it confirms weakness the same way. Part 6 covers it.
Should I enter on the test bar or the next one?
The next one. A test bar is a hypothesis until an up bar closes above its high. Entering on the test itself saves a few dollars of price and costs you the confirmation, which is a bad trade.
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