VSA Volume & Candle Colors

Volume Spread Analysis (VSA) Overview:

Volume Spread Analysis (VSA) is a methodology used to interpret market dynamics by analyzing the relationship between volume, price spread (range), and closing levels. It identifies the presence of "professional money" (smart money) and market manipulation, helping traders anticipate potential reversals or continuations.

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IMPORTANT: WHEN APPLING TO YOU'RE LOADOUT, CLICK THE 'MORE BUTTON', SELECT 'MOVE TO' PANEL ABOVE/BELOW..... OPEN SETTINGS IN THE STYLE TAB, TURN OF VOLUME & AVG VOLUME.

Sorry for the inconvenience. Everything will work as I intented. I will fix this very minor issue with the display in the future.

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Key VSA Concepts

1. Volume:

• High volume indicates strong participation.
  
• Low volume suggests weak interest or consolidation.
  
• Spikes often signal climaxes or institutional activity.
  

2. Spread (Candle Range):

• Wide spreads show volatility and conviction.
  
• Narrow spreads suggest indecision.
  

3. Closing price:

• A close near the high/low signals bullish/bearish control.
  

VSA Signals:

• Strength: High volume + wide bullish spread = uptrend confirmation.
  
• Weakness: High volume + narrow spread = distribution/churning.
  
• Absorption: High volume with price rejection (e.g., wicks) = potential reversal.
  

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SCRIPT'S FUNCTIONS:
The provided code visualizes VSA principles by focusing on volume anomalies. Here’s how it works:

1. Inputs

• Volume Lookback Period: Sets the window (e.g., 20 bars) for calculating average volume.
  
• High/Low Multipliers: Defines thresholds for identifying unusually high/low volume (e.g., 1.5x avg = high volume).
  
• Color Candles: Toggles candle coloring based on volume.
  

2. Calculations

• Average Volume: A 20-period SMA of volume.
  
• Conditions:
  

• is_high_vol: Volume > (Avg Volume × 1.5).
  
• is_low_vol: Volume < (Avg Volume × 0.5).
  

3. Visualizations

Colored Candles:

• Green (High Volume): Potential institutional activity or trend strength.
  
• Red (Low Volume): Lack of participation or consolidation.
  
• Transparency ensures clarity on the chart.
  

Volume Histogram: Plots volume bars in a separate pane, colored to match high/low conditions.

Average Volume Line: Baseline for comparing current volume (hidden by default but accessible in the data window).

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How to Use This Script for VSA

1. Indentify Anomalies:

• High Volume: Look for green candles. Correlate with price action (e.g., breakouts or reversals).
  
• Low Volume: Red candles may signal weak trends or traps (e.g., false breakouts).
  

2. Contextual Analysis:

• Combine volume signals with candle spread and closing price.
  
• Example: A green (high-volume) candle with a long wick and narrow spread suggests selling pressure.
  

3. Divergences:

• Price making new highs with declining volume = weakening trend.
  

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Example Scenario

Bullish Signal:

• High volume (green candle) + wide spread + close near high = strong buying pressure.
  

Bearish Signal:

• High volume (green candle) + narrow spread + long upper wick = absorption (smart money selling).
  

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Enhancements for VSA

While this script focuses on volume, full VSA requires assessing:

• Candle Spread: Compare current range to recent bars.
  
• Closing Position: Use wicks/closing levels to confirm strength/weakness.
  
• Sequential Patterns: Multi-bar setups (e.g., climax → test → reversal).
  

This script provides a foundation for volume analysis, which can be paired with price action for robust VSA insights.