VSA Module 3: Signs of Strength and Weakness

 

📙 Module 3 — Signs of Strength and Weakness

Big Idea: The market constantly reveals its strength or weakness through price and volume clues. Recognizing these signs early lets traders align with professional activity and avoid emotional traps.

Lesson 1 — Signs of Strength (SOS)

When demand exceeds supply, professional money supports the market. These are known as Signs of Strength (SOS).

• Wide-spread up bar closing near the top on high volume → professional buying.
• Successful test — price dips on low volume then rallies → supply removed.
• Spring / Shake-out — brief move below support on high volume that closes higher → trap for sellers.
• No-Supply bar — narrow down bar, low volume → sellers absent.

📊 Example placeholder: “SOS 1 — Shake-Out below Support.”

Evaluation:

1. “No-Supply” means … a) Many sellers b) Few sellers, low volume c) No buyers d) High effort down
2. Wide up bar + high volume + close near top shows … a) Weakness b) Strength / demand c) Indecision d) Stopping volume
3. A successful test appears after … a) Prior strength b) Distribution c) News d) Trend reversal

Lesson 2 — Signs of Weakness (SOW)

When supply exceeds demand, professionals distribute holdings. These are Signs of Weakness (SOW).

• Up-thrust — price spikes above resistance on high volume then closes down → trap for buyers.
• Buying climax — wide up bar, ultra-high volume, weak close → exhaustion of demand.
• No-Demand bar — narrow up bar, low volume → absence of professional buying.
• Effort to Rise Fails — heavy volume up-bar but closes weak → hidden selling.

📊 Example placeholder: “SOW 2 — Up-thrust above Resistance.”

Evaluation:

1. No-Demand means … a) Lack of professional buying b) Strong demand c) Panic selling d) Sideways market
2. An Up-thrust traps … a) Sellers b) Late buyers c) Smart money d) Institutions only
3. Buying Climax shows … a) Beginning of rally b) End of rally / distribution c) Test of supply d) Support

Lesson 3 — Context Matters

No signal has meaning in isolation. VSA reads the background — what happened before the bar.

• Signs of Strength after prolonged weakness → accumulation confirmed.
• Signs of Weakness after extended rally → distribution confirmed.
• Always link current bar to previous few bars’ volume and spread.

📊 Example placeholder: “Context — SOS following SOW reversal zone.”

Evaluation:

1. VSA interprets any bar in relation to … a) Indicator b) Background c) Candle name d) News only
2. Strength signals are most reliable after … a) Weak background / accumulation b) New highs c) Rallies d) Tests
3. Weakness signals are most valid after … a) Low volume area b) Strong background / distribution c) Shake-out d) Range

Lesson 4 — Confirmation and Timing

After spotting SOS or SOW, wait for confirmation — a follow-through bar or volume behavior that validates the reading.

• SOS confirmed by higher close on increasing volume.
• SOW confirmed by lower close on increasing volume.
• Tests or low-volume retests act as ideal entries in harmony with the background.

Patience avoids false signals and whipsaws.

📊 Example placeholder: “Confirmation after SOS test.”

Evaluation:

1. Confirmation means … a) Indicator crossover b) Follow-through supporting the signal c) Volume drop d) RSI reading
2. SOS confirmation occurs when … a) Next bar closes higher with strong volume b) Low volume c) Range narrows d) Gap down
3. SOW confirmation = … a) Higher close b) Lower close on heavy volume c) Sideways bar d) Low volume

🔑 Key Takeaways:

• VSA identifies strength and weakness through price–volume patterns.
• SOS = demand dominance; SOW = supply dominance.
• Always consider context and wait for confirmation.

Tip: Keep a screenshot folder of each SOS/SOW example you find — building your visual memory is the fastest way to master VSA interpretation.