medium · Volume Spread Analysis effort-vs-result-spread
Why is it important to use 'Relative Spread' in VSA rather than absolute price range?
- It helps identify if a stock is 'Bag Holding' weak buyers relative to its parent index's broader trend.
- It identifies if the current bar's price movement is anomalous compared to the recent baseline volatility.
- Absolute range changes based on the asset's dollar price, which alone makes cross-market comparisons impossible.
- It is required to calculate the accurate perpetual funding rate used in crypto derivatives markets.
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