Chapter 1 History of Volume Spread Analysis
The history of VSA can be traced back to the early 20th century and the work of Richard Wyckoff, a stock trader and market analyst. Wyckoff developed a method of market analysis that focused on the relationship between price, volume, and market structure. He believed that the market was driven by the actions of professional traders and that these traders left behind clues in the form of price and volume data.
Wyckoff’s work laid the foundation for VSA, but it was Tom Williams who popularized the method and developed it further. In the late 1970s, Williams began to study the market using Wyckoff’s method and found that it was an effective way to identify buying and selling pressure. He also discovered that professional traders used volume, price, and spread to conceal their actions and that by analyzing these data, it was possible to uncover their intentions.
The principles of Volume Spread Analysis (VSA) were developed by Tom Williams, a former syndicate trader who observed that the markets were being manipulated and that the key to understanding the market’s true movements lay in the relationship between volume, the spread of the bar, and the closing price. Williams built on the work of Richard D Wyckoff, a well-known trader from the 1920s and 1930s, who created the Stock Market Institute in Phoenix, Arizona and wrote several books on trading the markets. Wyckoff’s work focused on analyzing trading ranges and determining when stocks were in basing, markdown, distribution, or mark-up phases and shifts between public ownership and “smart money” or professional traders. Williams then spent years studying and computerizing this system, which is now taught as a methodology
In 1985, Williams published his book, “The Undeclared Secrets That Drive the Stock Market,” in which he outlined his VSA method. The book became a best-seller and sparked widespread interest in VSA. Since then, Williams has continued to develop and refine the method, and today it is used by traders and investors around the world.
