Volume Spread Analysis - Understanding Traps & ConfirmationDespite the fact that the so-called “Big Players” in the game of ups and downs we call the market have the power to manipulate it in ways some cannot even imagine, what they ultimately seek is a healthy market. I’ve mentioned in previous posts that the market behaves like a living organism — and like any organism, it must be healthy in order to grow.
In simple terms, the traps institutional players set are there because they need cash flow — liquidity — to achieve that growth. But why do they need to use traps at all? The answer lies in the numbers: one institutional player is equivalent to hundreds, if not thousands, of uninformed or poorly trained retail traders. So, to sustain growth, they are not just inclined but sometimes forced to create traps.
Now imagine this: in a market with enormous capital, one big player is equivalent to 100 retail traders. If 25% of those traders were skilled — truly good at the game — think of how much more cash flow would occur, and how much healthier and more stable that growth could be.
But don’t be fooled — while big players may benefit from a small portion of skilled retail participants, it’s not their actual goal. Still, it wouldn't hurt them either, as long as liquidity and volatility are preserved. In fact, a higher percentage of skilled players could deepen liquidity and reduce the need for extreme manipulation.
However, if too many retail traders become skilled, the game tightens. Profit margins shrink. The edge that institutions hold becomes harder to maintain. And in such a scenario, consistent profitability becomes more difficult — for everyone.
As I’ve emphasized in previous ideas, there is a way to understand institutional traps — and one of the keys is learning how to interpret the Relative Strength Index (RSI) properly. However, since RSI is by nature an oscillator, its signals require confirmation. And what better tool to use for confirmation than Volume — specifically through the lens of Volume Spread Analysis (VSA)?
In this post, we’ll partially explore how these traps are revealed, using basic tools available on TradingView. We'll also uncover a potential trap in the chart of AIXBT/USD Coin from Binance, using the 1-hour time-frame.
🔹 1. Pre-Top Volume Cluster
Let’s begin at the very top of the chart. Just before this top, we can spot a bullish volume cluster — four consecutive volume spikes with rising price. In VSA, such a cluster often suggests that the current trend is reaching exhaustion.
⚠️ Important Note: Not all clusters mark a reversal. Even if we see one or two bearish candlesticks after-ward — even if they are engulfing — that alone does not confirm the reversal. The real signs are already present in the volume indicator.
As I’ve said in the past, in previously posted ideas: Big Players always leave footprints. Learning to read those footprints is the language every serious retail trader must eventually understand. And one of the clearest footprints is what we’ll discuss next.
🔻 2. The Buying Climax
A Buying Climax is a tell-tale sign of professional distribution — it appears (in our case) as a large bullish volume spike accompanied by a bearish candlestick, signaling the potential end of a rally.
In our AIXBT/USD Coin chart, we observe two buying climaxes:
• The first comes at the end of the bullish volume cluster, followed by a bearish candle.
• The second follows right after, repeating the same bearish confirmation.
🧠 Even though price was making a new Higher High — these repeated climaxes on increasing volume suggest supply is entering the market, and the uptrend is likely unsustainable.
✅ Conclusion
This is just one piece of the larger puzzle, but even basic tools like RSI and Volume, when read in the context of structure and intent, can reveal traps set by institutional hands. The more we train ourselves to see these signs, the closer we get to trading in harmony with the market’s true rhythm — not against it.
Now let’s take a look at another signal that hints at a possible reversal. But before we continue, keep in mind: what I’m about to describe doesn’t always play out in the simplified way I’ll mention here. The market behaves differently at any given moment — so this kind of analysis always requires a careful and adaptive approach.
This time, I’m referring to a smaller bearish cluster, made up of three volume spikes, each of them clearly above the 20-period Moving Average — and appearing just before the bullish cluster I highlighted earlier.
• The fact that the first spike in this bearish group breaks above the MA is a strong signal that bearish pressure is stepping in.
• The fact that all three spikes remain above the MA adds weight to that signal.
However — and this is crucial — just like I mentioned before, this alone doesn't confirm a reversal. It still requires confirmation.
Even though this smaller bearish cluster forms a new low, and even though it aligns with a bearish RSI divergence marked with a dashed trend line, it’s not a signal to enter a trade. Why? Because volume confirmation is missing. And that's exactly why RSI alone isn't enough. It can point to weakness — but not confirm the turn.
True confirmation only comes with the next bullish volume spike, which:
• a) breaks above the MA,
• b) is higher than the first bearish spike in the previous cluster,
• c) appears with an engulfing candlestick, and
• d) is supported by an RSI plot that follows the move.
This collective behavior — the interaction between price, volume, and momentum — is not random. It’s one of the many harmonies that exist in the market’s structure. And learning to recognize these harmonies is key to understanding when the market is genuine — and when it's trying to trap you.
🔚 Conclusion
All of this leads me to one conclusion — based not just on theory, but on direct experience.
We’ve all seen the countless videos across platforms where retail traders explain things like RSI divergences as if they’re guaranteed signals. But the truth is: not all of these videos are made by successful traders — and blindly following them can be dangerous.
Early in my trading journey, I made that exact mistake. I followed those “educational” videos without question, and nearly blew my account in the process.
Can you imagine what would happen if someone entered a trade solely based on the divergence we discussed — without waiting for confirmation?
If you’ve followed this chart example to its end, you already know the answer.
Worse, this kind of psychological frustration often leads to even bigger mistakes — especially if you haven’t applied one of the simplest protective tools: the Stop Loss. And sadly, many traders skip it.
So let this be a reminder:
A divergence is not a signal. Confirmation is everything.
Let’s now take things a step deeper — by partially revealing something that remains known only to a small circle of elite traders.
Something that’s rarely discussed in public — yet sits hidden in plain sight.
Many traders know that Volume Spread Analysis (VSA) is based on the teachings of Richard Wyckoff and expanded through Tom Williams in Master the Markets. And yes — the most of VSA’s power comes from those principles.
But that’s only part of the story. What did these two big names revealing in secret code using multiple paragraphs and terminologies, but purposely do not reveal it in simple words in a few lines. And they are doing the right thing. Because if I said to myself that if everyone knew that then the market might crashed, then for sure they had that thought as well
What truly sets VSA apart, and what gives it its real power, is that it operates in two distinct languages.
🧩 The Hidden Language of VSA — What Most Don’t See
Let’s now go a step deeper — by partially revealing something known only to a few traders who’ve spent enough time observing the market beyond surface-level signals.
Something that’s often overlooked, yet has always been in plain sight.
We all know that VSA stands for Volume Spread Analysis.
And we commonly refer to “spread” as the distance between the open and the close of a candlestick. This is what many traders fixate on — the relationship between price movement and volume.
But that’s only part of the story.
What did names like Wyckoff and Tom Williams really reveal?
They spoke in code — long paragraphs, obscure terminology, layered ideas — never quite saying "this is the hidden key" in a few plain words.
And they were right to do so.
Because I’ve thought the same thing myself:
If everyone knew this… if it was simplified and passed around like a hack… the market could collapse into chaos.
If I’ve had that thought, I’m certain they did too.
So instead, they left trails. Patterns. Puzzles.
They left the second language in the open — but made sure only those with patience, discipline, and time in the charts would ever truly hear it.
There are things the open and close can’t tell you, but...
That… is part of what I meant earlier when I said VSA speaks in two languages.
Some of you already sense what I’m pointing toward.
For the rest — keep watching.
You’ll know it when you see it.
And once you do, you’ll never unsee it again.
Let’s begin with what most traders already know.
We say "spread" in VSA to refer to the range between the open and the close of a candlestick. This spread, in relation to volume, tells us whether a candle shows strength or weakness.
• A wide spread on high volume may signal professional activity.
• A narrow spread on high volume could suggest absorption or hidden effort.
This is the first language — the most commonly taught, and the most widely shared.
But what about the second?
Here's where things get interesting.
Let’s revisit our AIXBT/USD Coin chart, and specifically the large engulfing candlestick that forms around 18:30, just after the very top.
Now ask yourself:
• 🔍 Where did this candle open?
• 📍 What previous zone did it revisit or retest? What’s the story behind on that retest?
• Have you noticed the macro scale Hidden bearish divergence between RSI & PA?
What you're seeing is not just a rejection.
It’s a trigger zone — a price level left behind earlier by institutional activity.
This candle, with its precise open, combined with the volume behavior, is no coincidence. It's not just a rejection — it's a setup, part of a pre-engineered trap. By stealing what Tom Williams said: Big players are simply saying to uninformed traders – “thank you for your money”.
The interaction of price levels over time, the zones formed by previous activity, and how volume behavior aligns with those zones to signal intent.
Most traders never see this and even fewer can interpret it.
Why This Matters
That engulfing candlestick is not just a visual cue — it's a multiple level footprint.
It confirms everything we discussed earlier about how the market is manipulated — often in ways most traders can’t even begin to imagine. Two opposite forces within a zone. One prevails while the other reveals a future!
So now, let this sink in:
To truly master VSA, one must learn to read both languages.
The visible structure, and the hidden context.
One without the other is incomplete.
Now you know why Confirmation is so crucial.
That’s all for now. I hope that all the above paragraphs were able to give you a hint of how things work! And remember: Everything I write is just a small glimpse of the whole that needs to be considered.
Until next time — stay safe, trade wisely, and never stop learning.
