Stocks & Commodities V. 24:10 (52-56): Confirming High-Probability Turning Points by Todd Krueger

Stocks & Commodities V. 24:10 (52-56): Confirming High-Probability Turning Points by Todd Krueger

Here’s how to use volume spread analysis to track market activity of the professionals.

As traders, we have different methods with which to analyze the market and on which to base our trading decisions; the two most commonly used are fundamental analysis and technical analysis. Each approach offers varying insights into market activity. Fundamental analysis is often used to help determine the balance of supply and demand, in which reports of crop yields or crude oil inventories, for example, are studied to gain a better knowledge of an underlying cause for the price of a given futures contract to move in a particular direction.

Fundamental analysis attempts to answer why a price will move, but not when. Technical analysis, on the other hand, is often used to answer when the price is ready to move on any given contract with no regard as to why.

A third approach can be used to analyze a market that will answer why and when simultaneously; this methodology is called volume spread analysis (VSA). I will show you how the VSA approach can track professional activity (also known as the smart money), compare this to both fundamental and technical analysis approaches, and show examples of VSA being used to confirm technical analysis indicators to make better trading decisions.