Been reading up on Volume Spread Analysis lately and thought it was worth a discussion post here rather than just another indicator thread.
The core idea is simpler than the name suggests: for any bar, compare how far price traveled and where it closed against how much volume was behind it. If a wide bar closes on its high on heavy volume, that is just effort matching result - nothing interesting. But a wide bar closing on its high on light volume means price moved because nobody was there to stop it, not because buyers actually committed. The more useful case is the reverse: very heavy volume producing a narrow bar means big orders got absorbed without price going anywhere. That is invisible on the candle itself but obvious in the volume column.
The method goes back to Richard Wyckoff in the 1920s-30s (effort should be proportional to result, and a cause has to build before an effect shows up), and Tom Williams gave it its current name and bar patterns decades later after watching how large positions were actually built from inside a trading room.
Where this gets tricky for anyone trading spot FX specifically: there is no central exchange, so "volume" on your MT4/MT5 chart is tick count from your broker's own feed, not actual contracts traded. It is a proxy, and a different proxy per broker. Futures traders reading real exchange volume (like ES or 6E) are working with a much cleaner signal than someone reading tick volume on EURUSD. That mismatch is probably the biggest reason VSA "doesn't work" for some people - they are applying rules built for real volume to a proxy that behaves differently.
Curious if anyone here has actually back-tested effort-vs-result type signals using broker tick volume on FX pairs and gotten anything consistent out of it, or whether it only really holds up once you move to an instrument with real traded volume behind it.
(Background on the three ideas VSA rests on, if useful:
https://icf-market.net/blog/what-is-volume-spread-analysis)
Linkback: https://www.forex.zone/forex-education/29/vsa-why-effort-vs-result-still-holds-up-and-breaks-on-fx/5131/
