Why This Massive Green NQ Candle Was a Textbook Trap – Low Volume Screams No Demand (VPA & Wyckoff Lesson)

In this video, we highlight two important lessons in volume-price analysis and a textbook trap on low volume. The first is the classic trap of a monster candle on the news of a temporary ceasefire. The second is even more so, and shows you how to hold through a trend to maximise your profits, and is one of the most powerful applications of volume price analysis.

00:21

Rare monumental candle on March 23

00:21

The speaker describes a challenging day for short sellers on Monday, March 23rd, highlighting an unusual market event marked by rare candle patterns across timeframes. They mention the significance of this occurrence and reference a recent announcement from the US regarding a temporary ceasefire, prompting them to record this brief video update.

01:00

Market reaction to US ceasefire news

01:00

The speaker describes a significant market event that occurred around 11 to 11:15 UK time, following a bearish gap down in the indices overnight. They highlight the appearance of an immense and rare candle on the chart, emphasizing its monumental nature and noting their previous discussions on such market phenomena.

01:41

Thinking like a market maker

01:41

The speaker explains the mindset of a market maker, emphasizing their goal to profit by manipulating the market. Market makers exploit all news, big or small, to mislead the retail market and keep them consistently on the wrong side, ensuring the market maker’s advantage.

02:20

Using volume price analysis

02:20

The speaker explains that retail traders can defend themselves by using volume price analysis, which reveals market participants’ presence through volume activity. This method helps interpret their actions and intentions in the market. The speaker introduces two classic examples based on recent news to illustrate this concept.

02:55

Bearish trend before the candle

02:55

The speaker describes a significant bearish market movement characterized by a large downward candle following a bearish trend over several time frames including daily, weekly, and monthly charts. This trend had been accelerating over the past few weeks after a period of congestion and a rounded top formation. Despite news that seemingly triggered a sharp 700-plus point move early Monday morning, the speaker questions the volume supporting this price action. Comparing volume bars during the London session, they highlight that the volume required for such a large price movement appears disproportionately low, casting doubt on the market makers’ immediate reaction to the news.

04:52

Suspicious volume on huge price move

04:52

The price movement described is extremely sharp and dynamic, yet it is not supported by corresponding volume activity. A novice volume price analyst would notice this discrepancy and suspect something unusual. The volume is significantly lower than expected if market makers were truly involved, indicating a lack of genuine participation. This suggests that the price move is a trap designed to lure traders in for quick profits before the price reverses and declines.

06:05

Market makers’ trap explained

06:05

The speaker explains the perspective of market makers, emphasizing their primary goal of making money for themselves rather than helping retail traders. They highlight how market makers use continuous news flow to manipulate prices. The importance of volume analysis is stressed, showing how it reveals traps and market maker participation or lack thereof, providing deeper insight into the true price action behind candles. Observing volume alongside price helps traders follow market makers’ footprints to interpret market strength, weakness, and activity. The segment concludes by transitioning to the early US trading session, noting the time change and the start of cash market activities.

08:15

Primary vs secondary trends with volume

08:15

The speaker discusses normal volume activity in the market, highlighting a significant price waterfall as an example to explain the difference between primary and secondary trends. The initial sharp fall in price demonstrates momentum consistent with a primary trend.

08:49

The fall in the market is confirmed as genuine due to rising volume accompanying the price drop. Rising volume is essential for trend validation whether the market is moving up or down, and this supports the presence of strong momentum.

09:23

Wide candlesticks indicate strong momentum in the falling market, with volume confirming this movement. The market reaches a pause point near the volume point of control, signaling an important level where trading volume is concentrated.

09:54

The volume point of control, a key volume-based indicator, identifies high and low volume price regions that influence price behavior similarly to traditional support and resistance levels. This tool helps analyze market dynamics.

10:23

The primary trend is bearish, followed by a reaction against it known as a secondary trend. The secondary trend is characterized by falling volume, indicating it is a temporary counter-move rather than a reversal to a new bullish primary trend.

11:00

Identifying trend reversals by volume

11:00

The speaker explains that despite rising prices, the volume is falling, indicating a secondary trend rather than a primary one. This suggests that the original primary trend will resume, which it eventually does after a two-bar reversal. The key lesson is that staying in a trend is difficult because of emotional challenges when profits start to diminish.

12:12

The discussion focuses on the emotional difficulty traders face when profits begin to shrink, often leading them to exit prematurely. Market makers exploit this fear. It’s crucial to distinguish between a primary trend reversal and a secondary pullback, as minor pullbacks and congestion are normal within any trend.

12:45

Trends never move in straight lines; they pause, experience congestion, and show minor reversals before continuing. A full primary reversal will be accompanied by rising volume as price moves decisively. The speaker points out that in the example shown, volume patterns confirm the current movement is a secondary trend, not a full reversal.

13:15

Following a two-bar reversal, the market enters a congestion phase with diminishing selling pressure as indicated by falling red volume bars. A small rally with rising volume follows, although not very strong, suggesting the start of renewed upward movement. This volume behavior supports the interpretation of a secondary trend.

13:41

As the rally develops into an uptrend, a minor pullback occurs but is accompanied by falling volume. This is a sign that the pullback is weak and likely just profit taking rather than a reversal. Volume analysis combined with other factors helps assess the strength and nature of price movements.

14:09

The speaker reiterates that falling volume during a downtrend pullback is an anomaly and indicates a minor secondary move rather than a true reversal, which would show rising volume. A candle wick confirms the minor nature of the pullback, and the price subsequently continues higher, validating the secondary trend interpretation.

14:37

Summary of volume price analysis insights

14:37

The speaker reflects on a fascinating and thought-provoking day centered around volume price analysis. They emphasize the power of this method in revealing the true market movements by following market makers, who are insiders guiding the market direction. The essence of volume price analysis is to track these insiders to anticipate market moves, helping traders avoid traps and identify participation. The video concludes with thanks and a promise of more content to come.

By Anna Coulling – creator of volume price analysis

By Anna Coulling – creator of volume price analysis