Volume price analysis and congestion phases

Volume price analysis and congestion phases

Volume Price Analysis & Congestion Phases

A nice congestion phase building on the 5m chart for GBP/JPY, introducing several elements of volume price analysis. First, we have support and resistance. Here, we see a strong region of resistance forming, indicated by the red dashed line. This is on the accumulation and distribution indicator which displays graphically the strength of such regions. In other words, the thicker the line, the stronger the region, so a strong ceiling of resistance is building at 129.75. In addition, we are also trading at the volume point of control at 129.52.

This is the fulcrum of the market at present, with no bullish or bearish bias. In other words, the market is in price agreement, where we have the heaviest concentration of volume. The key now is to wait for the breakaway from this region which will come – it’s a question of being patient and waiting. And on the move away we then move to consider the volume associated with the breakout which will confirm if the move is genuine.

And finally, to help us once the move begins, we have a low volume node both above and below on the volume point of control histogram which will mean any price action here will move swiftly through these levels.

The Evolution of Volume Price Analysis: From Tape Reading to Digital Charts

Volume Price Analysis (VPA) has its origins in the early 20th century with tape reading, where traders like Jesse Livermore and Richard Wyckoff analyzed real-time price and volume data printed on ticker tapes. In an era of paper charts and manual calculations, tape reading was the art of interpreting market intent—high volume on price advances signaled strength, while discrepancies warned of manipulation. Livermore famously profited from the 1929 crash by reading volume to spot exhaustion. Wyckoff formalized this into principles, teaching retail traders to think like institutions. These pioneers laid VPA’s foundation: volume reveals the truth behind price action, where price alone can deceive.

Wyckoff’s Three Laws

Richard Wyckoff’s three laws encapsulate VPA’s core. The Law of Supply and Demand states that price moves based on imbalances—excess supply drops price, excess demand raises it, with volume amplifying the effect. The Law of Cause and Effect (Wyckoff’s second law) explains that major trends (effect) follow preparation phases (cause)—accumulation (buying at lows) or distribution (selling at highs). Finally, the Law of Effort vs Result asserts that volume (effort) should match price change (result)—high effort with low result signals absorption or reversal.

As markets digitized in the late 20th century, VPA evolved from tape reading to screen-based analysis. Anna Coulling modernized it for digital charts, incorporating candle anatomy and multi-timeframe views. Tools like Quantum indicators (VPOC, Trend Monitor) visualize Wyckoff’s laws on platforms like TradingView. In forex (using tick volume as proxy) or stocks, VPA remains universal—high volume confirms trends, low volume at extremes reveals traps.

The Importance of Congestion Phases: Where Trends Are Born

Congestion phases—sideways price action—are VPA’s most crucial element, where trends are “born.” These phases represent accumulation or distribution, per Wyckoff’s Law of Cause and Effect. Low volume in congestion signals lack of interest; rising volume at edges indicates building pressure. Traders ignoring congestion risk false breakouts—VPA helps by spotting volume anomalies: increasing volume with narrowing spreads confirms a breakout’s validity.

In practice, congestion acts like a breeding ground (Wyckoff’s analogy: salmon spawning). Trends emerge from these pauses—bullish from accumulation (rising volume on ups), bearish from distribution (falling price on high volume). VPA traders wait patiently, using tools like VPOC for fair value zones. This approach turns frustration into opportunity—congested phases filter weak moves, leading to high-conviction trends.

VPA gives traders the edge to see the truth behind the price: congestion reveals institutional preparation. Master it at Quantum Trading Education with Anna Coulling—unlock consistent results across markets.

By Anna Coulling – creator of volume price analysis