Volume price analysis reveals the truth behind the price action

Volume price analysis reveals the truth behind the price action

Many traders rely on price alone to forecast future direction, yet this is only half the picture, a two dimensional one at best. What volume does is provide a three dimensional view of the chart and what is going on behind the price action. It removes the cloak of secrecy which is used by all the insiders to hide their activity. With volume they cannot hide and as volume traders all we need to do is follow them. Buy when they buy, sell when they sell and stay out when they do – it’s that simple.

00:10

Introduction to volume price analysis and sentiment trading

00:10

The speaker discusses a reversal pattern observed on the Canadian pound using a Renko chart and introduces a sentiment trading website featured in a recent Forex webinar. This site offers a free newsletter and numerous sentiment indicators designed for investors. The tagline emphasizes leveraging emotions in trading, highlighting how market makers, or smart money, manipulate retail traders by inducing fear to force them out of the market.

01:32

Using VPA to identify market tops and bottoms

01:32

The speaker explains how retail investors and independent traders often buy at market tops and sell at bottoms due to emotional reactions. They emphasize that Volume Price Analysis (VPA) helps interpret these market emotions by identifying general tops and bottoms through chart reading, though it does not provide exact pinpoint signals.

02:09

Accumulation and distribution phases explained

02:09

The speaker explains how analyzing price action alongside volume can help identify whether a market is in an accumulation or distribution phase. They reference recent market events, particularly a crash triggered by the virus, and mention an article from Reuters discussing strategies that involve not only buying assets outright but also borrowing large sums to quickly profit.

02:48

Investor behavior during market crashes and Fed support

02:48

During a market crash marked by widespread fear and massive sell-offs, some wealthy UBS clients borrowed large sums to invest billions into falling stock markets. This strategy was supported by the Federal Reserve, which provided substantial backstopping to stabilize the financial system.

03:25

Analyzing volatility candles and price retracements

03:25

The segment discusses significant market volatility during a major panic period, highlighting large price swings and volatility candles on monthly charts. It explains how prices typically retrace within the range of extreme volatility candles, using examples where prices moved back inside the candle spread before continuing trends. The speaker also notes the extreme trading volume beneath the wick, indicating strong buying pressure despite widespread fear driven by pandemic news. Ultimately, after a brief congestion, the market resumed an upward movement.

04:58

Profit-taking and fear of missing out in current market

04:58

The segment discusses recent selling activity following a significant market reversal, interpreting it primarily as profit-taking by earlier buyers. It highlights the presence of buyers driven by fear of missing out despite the selling pressure. The explanation emphasizes how volume and price analysis can help understand these market dynamics.

05:32

Real-life VPA example and beginner trader success

05:32

The speaker shares enthusiasm about the positive feedback received from followers, highlighting a tweet from a beginner who successfully applied volume price analysis (VP8) from the book. The tweet exemplifies a clear pattern recognition, demonstrating the practical value of the methodology.

06:06

The speaker elaborates on the example by showing a chart with a long congestion period followed by a breakout characterized by rising prices and volume. They note the confirmation of the move by volume and price being above the moving average, reinforcing the validity of the trend.

07:09

The analysis continues with a discussion of a pullback after a significant upward move. Despite the pullback causing concern, volume decreases during this phase, indicating a potential continuation of the trend. The speaker points out a candlestick with a large upper wick and high volume, signaling an imminent reversal downward.

08:06

The speaker reflects on the beginner’s journey into trading, praising volume price analysis as a game-changer and encouraging further learning. They emphasize the flexibility of combining VP analysis with standard or proprietary indicators and express excitement about the user’s progress before transitioning to live market updates.

08:38

Market drivers: vaccine developments and stock watchlists

08:38

The speaker shares a final tip about market drivers, highlighting Bloomberg’s paid service that tracks vaccine development and its impact on the market. This resource lists key players in the vaccine race, offering valuable insights for stock watchers. The speaker notes that breakthroughs by any listed companies could significantly influence market movements. The discussion then shifts to recent market quietness following a sell-off, attributed partly to Chinese stock declines of nearly five percent, which have affected US indices. Live charts are introduced to further analyze the ongoing market situation.

By Anna Coulling – creator of volume price analysis