Are price and volume in agreement or disagreement?

Are price and volume in agreement or disagreement?

In studying volume price analysis, we are constantly looking for whether price and volume are in agreement or disagreement, and from there determining what is likely to happen next. In this video, we highlight a classic example in which volume and price disagree, creating a trap for market makers.

00:00

Webinar introduction and disclaimer

00:00

The webinar begins with a welcome message and a reminder about the risks involved in trading. Attendees are advised not to use money they cannot afford to lose. The presenter briefly mentions the plan to focus on analyzing charts, especially for newcomers.

00:27

Volume Price Analysis and Forex charts

00:27

The segment introduces live forex charts analyzed through the lens of volume price analysis (VPA), which combines price action and volume to validate market moves. An example involving the Pound-Aussie pair highlights practical VPA application. The discussion also mentions integrating technical analysis, fundamental news factors, and a third unspecified element to comprehensively assess forex markets.

01:35

Related markets and fundamentals

01:35

The speaker explains the concept of related markets, emphasizing that currency pairs and individual currencies do not move in isolation. They highlight the interconnectedness of the four major capital markets: forex, bonds, commodities, and equities. Historically, few have analyzed these relationships, often focusing only on charts and price action without considering volume or fundamental news. The speaker notes that modern analysis increasingly ties movements across different markets together. Additionally, they mention developing specific indicators to track currency flows within the forex market.

02:47

Currency flow indicators and strength

02:47

The forex market reacts very quickly to fundamental and geopolitical news, often causing sharp moves into safe-haven currencies like the dollar, yen, or Swiss franc during crises. When markets are more risk-tolerant, these currencies are typically sold. The speaker explains that their developed indicators track currency strength by analyzing individual currency flows, showing which currencies are being bought or sold. These indicators create a ranking of the strongest currency pairs by flow direction, simplifying the identification of trading opportunities. Examples include tracking Swiss franc and yen flows. Additionally, tools like the currency array and currency map help monitor trend strength and multiple time frames across pairs, aiding in both opportunity spotting and position management.

04:26

Using MT4 and MT5 platforms

04:26

The speaker discusses their preference for using MetaTrader 5 (MT5) over MetaTrader 4 (MT4) and NinjaTrader for chart analysis. MT5 offers more time frames, including monthly charts, compared to MT4, although it lacks second-based charts. It also provides access to a wider range of instruments such as stocks and indices. Additionally, MT5 supports volume price analysis (VPA) on any chart, making the specific ticker symbol less important than the underlying methodology being applied.

05:35

Market sentiment and investing.com overview

05:35

The speaker discusses their morning routine for assessing market sentiment, primarily using investing.com, a recommended free resource for forex students that offers comprehensive charts across various market instruments including volatility indices, bond spreads, and commodities. They highlight checking futures for major indices like the Dow and S&P 500 to gauge market conditions. Additionally, recent market movements showed a pullback following strong performances. The speaker also notes the importance of reviewing current headlines and mentions recent Chinese trade balance data indicating a surplus, which is interpreted positively.

07:20

Chinese trade data impact

07:20

The speaker discusses the export-import balance of major economies like China and Germany, noting that these countries typically export more than they import. However, recent figures have shown a weaker export market, which has surprised the market given current global conditions. The discussion then shifts to other economic indicators such as the US dollar-denominated data and unemployment rates, highlighting the importance of monitoring these statistics to anticipate economic trends.

08:21

The speaker emphasizes the value of using multiple real-time news feeds and economic calendars for trading, recommending financial news services that provide instant updates to better track market-moving events. They point out that popular calendars like Forex Factory and Investing.com are useful but may sometimes miss important information without premium services like Bloomberg or Reuters. The importance of timely news is especially noted for traders operating on fast time frames or scalping strategies. The segment concludes with a mention of October’s reputation among traders as a challenging month for markets.

10:03

October market risks and black swan events

10:03

The speaker discusses market trends, noting that although September typically sees market pullbacks, October is infamous for major economic crashes, specifically those in 1929 and 1987. This association deeply influences trader and investor psychology. The speaker suggests that current conditions might lead to another significant downturn this October due to numerous uncertainties and risks.

10:35

There is speculation about potential unforeseen risks, or ‘black swans,’ that could impact the markets. Key concerns include the ongoing election and the resurgence of the virus in a second wave, which may not be as lethal as the initial outbreak but continues to harm economies worldwide. The situation remains uncertain and troubling.

11:04

The speaker reflects on the virus’s trajectory, likening it to a chart that shows it will likely persist through the coming weeks and possibly until the end of the month. There is hope that the virus will start to subside by November, but the long-term consequences remain unknown.

11:37

A report from Great Western Hotels highlights the severe economic impact on the hospitality industry in the U.S., with an estimated 38,000 out of 56,000 hotels at risk of closing within six months without additional support. The potential job losses from such closures would be significant, underscoring the challenging economic environment.

12:11

The outlook for economic stimulus remains uncertain and closely tied to political events like the U.S. election. Additionally, Brexit negotiations approach a critical deadline on October 15th, but progress has stalled. The month of October continues to hold potential for unexpected developments, maintaining its reputation as a volatile period.

12:43

October’s historical association with major market crashes is well-known but quietly discussed among traders. The speaker reviews recent market activity, mentioning a trade on the pound-aussie currency pair during a peculiar day marked by Columbus Day and unusual price movements on indices, noting that trading volume was not particularly strong.

13:17

Volume Point of Control explained

13:17

The speaker explains the development of the volume point of control indicator, which combines volume at price and market profile elements. This indicator analyzes both activity volume, representing buying and selling, and volume over time to identify key chart structures. Traders use it to find points on the chart where the price is in ‘fair value,’ meaning there is no strong bias toward upward or downward movement.

14:30

The volume point of control indicator highlights areas on the chart where the market is in consolidation or congestion phases, periods when the price is largely stable and waiting for external factors such as news. The speaker emphasizes that price often remains in these phases for extended periods, indicating uncertainty and equilibrium in the market.

15:00

The speaker notes that news events, like the upcoming earnings season, can significantly impact the market. The volume point of control indicator is useful for identifying consolidation phases where there is no clear directional bias. The longer the price remains in such a phase, the more explosive the breakout tends to be once it occurs.

15:36

Wyckoff’s law and VPA program

15:36

The speaker discusses Wyckoff’s second law of cause and effect, a key concept explored in detail in their forex program. They address a common question about whether one can succeed using only books available on Amazon, affirming that incorporating Volume Price Analysis (VPA) from those books into an existing strategy is possible. However, the forex program offers a deeper, forensic exploration of VPA and Wyckoff’s work, explaining trends and identifying key price behaviors during trend formations, which is presented as a reason to invest in the program.

16:46

The speaker illustrates a market congestion scenario using a real-time screenshot to explain price action near crossover trading sessions. They note the impact of the U.S. session, mentioning that on the previous day, Columbus Day affected market openings, with futures open but cash markets closed. The discussion sets the stage for analyzing price movements around specific session times like 3:30 and 1:00 to 1:30.

17:17

Live chart analysis of breakout signals

17:17

The segment explains the market activity around key times when forex and cash markets overlap, creating congestion. It highlights a price breakout attempt that encounters resistance from both camarilla levels and accumulation/distribution zones. A reversal candle appears, which many traders might see as a fake breakout, but volume analysis reveals it to be a minor pullback rather than a complete reversal.

18:50

This part discusses the importance of volume in validating price moves, noting that while some volume is consistent, there is no rising volume during a series of downward candles, indicating a lack of strong selling pressure. Without increasing volume, the downward move is unlikely to sustain momentum, and a support level is approached, emphasizing the need for volume confirmation to judge trend strength.

20:25

The final segment focuses on a significant anomaly: a large upward candle showing a move running out of steam. This highlights the limitations of relying solely on price action without considering volume, as the momentum behind the move appears to be weakening despite the price increase.

20:25

Volume anomalies and price reversals

20:25

The speaker analyzes a significant bullish candle, noting its unusual size and strength, suggesting the price must continue higher despite no clear confirmation. They mention an expected pullback indicated by a weak candle and reversal near the London trading session. The example focuses on the Pound/Aussie currency pair, illustrating the challenges of teaching live market lessons and referencing the use of fast 15-second charts to better capture market movements. The segment concludes with a mention of a recent sharp decline in the Aussie, potentially linked to external factors.

21:31

Impact of Chinese news on Aussie and market view

21:31

The discussion begins with commentary on Chinese news and its impact on currency markets, specifically mentioning the Australian dollar (Aussie) as being oversold and likely to rise. Attention then shifts to the British pound, highlighting a sell position. The speaker plans to review currency pairs on the MT5 platform and invites viewers to ask questions in the chat, promising to address them either live or in the chat.

By Anna Coulling – creator of volume price analysis