Wyckoff Volume Spread Analysis

Overview

FibAlgo - Wyckoff Volume Spread Analysis implements the core principle of Wyckoff methodology: the relationship between volume (effort) and price spread (result). Every bar tells a story — by analyzing the interplay of volume level, spread width, and close position, this indicator classifies bars into eight distinct VSA signal types: Demand Bars, Supply Bars, No Demand, No Supply, Stopping Volume, Absorption, Change of Character, and Effort vs Result Divergence. Each signal reveals the underlying balance of supply and demand that drives price action.

Key Concepts

• Volume Spread Analysis (VSA) — A methodology that examines the relationship between volume, price spread (high minus low), and close position within each bar to reveal the activity of informed participants (smart money).
• Effort vs Result — The foundational VSA principle. Effort is volume; result is price change (spread). When effort and result diverge, it signals hidden accumulation or distribution.
• Demand Bar (Sign of Strength) — Wide spread up bar on high volume with close near the high. Indicates strong buying pressure and institutional demand entering the market.
• Supply Bar (Sign of Weakness) — Wide spread down bar on high volume with close near the low. Indicates strong selling pressure and institutional supply being released.
• No Demand — Narrow spread up bar on low volume. The market attempted to rise but lacked buying conviction. Bearish implication, especially in a downtrend context.
• No Supply — Narrow spread down bar on low volume. The market attempted to fall but lacked selling conviction. Bullish implication, especially in an uptrend context.
• Stopping Volume — High volume bar at the end of a trend where price barely progresses in the trend direction. Close is opposite to trend: close near high in a downtrend (buyers stepping in) or close near low in an uptrend (sellers absorbing buying).
• Absorption — High volume yet narrow spread. The opposing side is absorbing all the effort without allowing price to move. Bullish absorption: high-volume narrow down bar (supply absorbed). Bearish absorption: high-volume narrow up bar (demand absorbed).
• Change of Character (CoC) — An extreme bar with the widest spread and highest volume in recent history, occurring in the opposite direction of the prevailing trend. Signals a potential phase transition from accumulation to markup or distribution to markdown.

How It Works

1. Volume and Spread Classification Each bar is classified along two axes:

• Volume Level: Low (below 0.7× average), Normal, High (above 1.5× average), Ultra (above 2.5× average) — thresholds are configurable
• Spread Level: Narrow (below 0.7× average), Normal, Wide (above 1.5× average) — thresholds are configurable

The volume moving average period and spread moving average period are independently adjustable. 2. Close Position Analysis The close position within each bar is measured as a ratio from 0 (close at low) to 1 (close at high). The Close Position Threshold (default 0.3) determines what counts as "near high" (above 0.7) or "near low" (below 0.3). This is critical for Wyckoff analysis — where price closes within the bar reveals who won the battle. 3. Signal Detection Logic Eight distinct signal types are detected simultaneously:

• Demand Bar — Up bar + wide spread + high/ultra volume + close near high
• Supply Bar — Down bar + wide spread + high/ultra volume + close near low
• No Demand — Up bar + narrow spread + low volume
• No Supply — Down bar + narrow spread + low volume
• Stopping Volume — High/ultra volume + close opposite to trend direction + in established trend
• Absorption — High/ultra volume + narrow spread (effort without result)
• Change of Character — Widest spread in 20 bars + near-highest volume + direction opposite to trend + close near extreme
• Effort vs Result Divergence — High effort (volume) with low result (spread), or low effort with high result

4. Signal Prioritization When multiple conditions overlap on a single bar, only the highest-priority signal is displayed. Priority order: Change of Character > Stopping Volume > Absorption > Demand/Supply > Effort vs Result > No Demand/No Supply. This prevents label clutter while preserving the most significant information. 5. Trend Context A 20-bar linear regression slope determines trend direction (up, down, or flat). Certain signals like Stopping Volume and Change of Character require trend context to be meaningful — stopping volume only fires in a trending market, and change of character requires an opposite-direction extreme bar. 6. Visual System

• Labels placed at bar highs (bearish signals) or lows (bullish signals) with descriptive tooltips showing volume data and close position
• Background coloring tints signal bars for quick scanning across the chart
• Bar coloring overrides default candle colors on signal bars for immediate identification
• All visual elements have individual toggles and configurable colors

Features

• Eight VSA Signal Types — Detects Demand, Supply, No Demand, No Supply, Stopping Volume, Absorption, Change of Character, and Effort vs Result Divergence
• Volume Classification — Classifies volume into Low, Normal, High, and Ultra levels using configurable multiplier thresholds against a moving average
• Spread Classification — Categorizes bar spread (range) as Narrow, Normal, or Wide relative to a spread moving average
• Close Position Analysis — Calculates where each bar closes within its range to determine buyer/seller control
• Signal Prioritization — When multiple signals overlap, only the highest-priority signal is shown to prevent label clutter
• Effort vs Result Divergence — Identifies bars where volume effort and price result diverge, revealing hidden accumulation or distribution
• Trend Context Integration — Uses 20-bar linear regression for trend detection, ensuring context-dependent signals like Stopping Volume and CoC fire appropriately
• Background Coloring — Tints the background on signal bars with configurable opacity for quick chart scanning
• Bar Coloring — Overrides candle colors on signal bars for immediate visual identification
• Volume Classification Panel — Real-time panel at bottom-left showing current bar's volume level, spread level, close position, direction, active signal, and trend
• Info Table — Displays running counts of all eight signal types detected on the chart
• Comprehensive Alert System — Individual alert toggles for each of the eight signal types with detailed alert messages including price and volume data
• Rich Tooltips — Every label includes a detailed tooltip with the signal explanation, volume data, spread, and close position
• Full Customization — 39 inputs across 6 groups covering detection thresholds, signal toggles, colors, display options, and alerts

How to Use

• Add the indicator to your chart. It works on all timeframes but is most effective on 5-minute to 1-hour charts where volume data is reliable.
• Watch for Demand Bars near support levels — they indicate strong buying pressure and potential reversals.
• Supply Bars near resistance signal institutional selling — be cautious about long positions.
• No Demand in a downtrend confirms weakness — the market lacks buyers to sustain a rally.
• No Supply in an uptrend confirms strength — sellers are absent and the trend can continue.
• Stopping Volume at the end of a sustained move suggests the trend is losing momentum — prepare for a potential reversal.
• Absorption bars (high volume, narrow spread) reveal a battle between buyers and sellers — the side absorbing the effort usually wins.
• Change of Character is the strongest signal — it suggests a potential phase transition and should be given high priority.
• Use the Volume Classification Panel to understand the current bar's characteristics in real time.
• Combine multiple VSA signals with Wyckoff phases and market structure for higher confidence analysis.
• Configure the classification thresholds to match your instrument's typical volume and spread behavior.

Limitations

• This indicator does not generate buy or sell signals. It classifies bars based on volume spread analysis principles for educational and analytical purposes.
• Volume data reliability varies by instrument and exchange. Forex spot volume is typically tick volume and may not represent actual traded volume.
• Signal classification depends heavily on the volume and spread moving average periods — different settings may produce different classifications.
• The trend context uses a simple 20-bar linear regression slope. Complex or choppy market conditions may produce ambiguous trend readings.
• Signal prioritization means only one signal is shown per bar. Lower-priority signals that overlap with higher-priority ones are suppressed.
• Past pattern detection does not guarantee future price behavior.
• Maximum 500 drawing objects (labels) are supported by Pine Script.