The Truth About Volume Technical Analysis: Why Most Traders Fail to Use It
And how volume technical analysis can make you rich (or poor).
You’ve probably heard of technical analysis, the art and science of using charts and indicators to predict the future movements of the market. You may have even dabbled with some of the popular tools, such as moving averages, trend lines, Fibonacci retracements, and so on.
But have you ever wondered what is the most powerful and reliable tool in technical analysis? The one that can give you an edge over the majority of traders who blindly follow the herd?
The answer is volume. Yes, volume. The number of shares or contracts traded in a given period of time. The one thing that most traders ignore or misunderstand.
Why is volume so important? Because volume is the fuel that drives the market. It is the expression of supply and demand, the force that moves prices up and down. Without volume, there is no market.
Volume is the fuel that drives the market.
But how can you use volume to your advantage? How can you read the hidden messages that volume sends you every day? How can you avoid the traps and pitfalls that volume sets for the unwary?
That’s what this article is all about. I’m going to show you how to master volume technical analysis, using a simple and effective method that has been proven by some of the most legendary traders of the past.
But before I do that, let me ask you a favor. If you find this article useful, please follow my account and let me know what you thought. I’d love to hear your feedback and questions. And if you want to learn more about volume technical analysis, I have just what you need at the end of this article.
So, are you ready to discover the secrets of volume technical analysis? Let’s get started.
What is Volume Technical Analysis?
Volume technical analysis (VTA) is a branch of technical analysis that focuses on the relationship between price and volume. It is based on two simple principles:
- Volume precedes price. This means that changes in volume often signal changes in price direction before they happen.
- Volume confirms price. This means that price movements are more valid and significant when they are accompanied by high volume.
By applying these principles, you can use volume to identify trends, reversals, breakouts, support and resistance levels, and much more.
But how do you interpret volume? How do you know if volume is high or low, rising or falling, bullish or bearish?
That’s where VPA and VAP come in.
What is VPA?
VPA stands for Volume Price Analysis. It is a method of analyzing volume and price together, using candlestick charts and bar charts. It was developed by Anna Coulling, a professional trader and author of the book “A Complete Guide To Volume Price Analysis.”
VPA is based on four key concepts:
- The spread: This is the difference between the high and low price of a candle or bar. It represents the price range for that period.
- The close: This is the last price of a candle or bar. It represents where the market closed for that period.
- The volume: This is the number of shares or contracts traded for that period.
- The effort vs result: This is the relationship between the volume and the spread or close. It indicates whether there was more buying or selling pressure for that period.
By combining these four concepts, you can read the story that each candle or bar tells you about the market sentiment and behavior.
The Spread
A wide spread candle with high volume and a close near the high indicates strong bullish momentum. A narrow spread candle with low volume and a close near the middle indicates indecision or consolidation. A wide spread candle with high volume and a close near the low indicates strong bearish momentum.
Trend Analysis
By applying VPA to multiple candles or bars, you can spot patterns that reveal trend continuation or reversal signals.
For example, a series of wide spread candles with high volume and closes near the highs indicates a strong uptrend. A series of narrow spread candles with low volume and closes near the lows indicates a weak downtrend.
VPA can also help you identify anomalies in the market, such as climactic volumes, no demand bars, no supply bars, stopping volumes, etc.
Effort vs Result
These are situations where there is a mismatch between effort and result, indicating that something unusual is happening in the market.
For example, a climactic volume is a sudden spike in volume at the end of a trend, indicating exhaustion or panic among traders. A no demand bar is a narrow spread up bar with low volume and a close near the low, indicating lack of buying interest. A no supply bar is a narrow spread down bar with low volume and a close near the high, indicating lack of selling pressure.
By recognizing these anomalies, you can anticipate potential reversals or corrections in the market.
What is VAP?
VAP stands for Volume At Price. It is a method of analyzing volume distribution across different price levels, using horizontal histograms or profiles. It was also developed by Anna Coulling, and explained in her book “A Complete Guide To Volume Price Analysis.”
VAP is based on one key concept:
- The volume point of control (VPOC): This is the price level where the most volume was traded. It represents the equilibrium point or the fair value of the market.
By using VAP, you can see how volume is distributed across the price axis, and identify areas of high and low volume.
For example, a high volume area indicates a price level where there was a lot of trading activity, meaning that there was a lot of agreement or disagreement among traders. A low volume area indicates a price level where there was little trading activity, meaning that there was a lack of interest or consensus among traders.
Time Frame Analysis
By applying VAP to different time frames, you can spot zones of support and resistance, as well as areas of value and low value.
For example, a high volume area near the current price indicates a strong support or resistance level, depending on whether the market is above or below it. A low volume area near the current price indicates a weak support or resistance level, or a potential breakout zone.
Market Sentiment
VAP can also help you identify shifts in volume distribution, which indicate changes in market sentiment and behavior.
For example, a VPOC that moves higher or lower indicates that the market is accepting higher or lower prices, meaning that there is more buying or selling pressure. A VPOC that stays at the same level indicates that the market is in balance, meaning that there is no clear direction.
By recognizing these shifts, you can anticipate potential trend changes or continuations in the market.
How to Use VPA and VAP Together
VPA and VAP are complementary methods that can enhance your volume technical analysis. By using them together, you can get a complete picture of what is happening in the market, both in terms of price action and volume distribution.
Here are some tips on how to use VPA and VAP together:
- Use VPA to analyze the individual candles or bars on your chart, and look for signals that confirm or contradict the current trend.
- Use VAP to analyze the overall volume profile on your chart, and look for zones that support or resist the current price.
- Combine VPA and VAP signals to identify high probability trading opportunities, such as breakouts, pullbacks, reversals, etc.
- Use multiple time frames to confirm your analysis, and look for alignment or divergence between them.
- Use other technical tools, such as indicators, oscillators, trend lines, etc., to complement your analysis, but don’t rely on them too much.
- Always use risk management and money management techniques to protect your capital and maximize your profits.
Why You Should Buy “A Complete Guide To Volume Price Analysis” by Anna Coulling
If you want to learn more about volume technical analysis, and how to apply VPA and VAP in your trading, I highly recommend you to buy “A Complete Guide To Volume Price Analysis” by Anna Coulling.
This book is a masterpiece that covers everything you need to know about volume technical analysis, from the basics to the advanced concepts. It is written in a clear and simple way, with plenty of examples and charts to illustrate the points. It is suitable for traders of all levels and markets.
I can honestly say that I wouldn’t be able to make trades with anything close to the consistency that I currently do without having read this book. It completely changes the way you look
By reading this book, you will be able to:
- Understand how volume works and why it is so important
- Master the four key concepts of VPA: spread, close, volume, and effort vs result
- Recognize the different types of candles and bars, and what they mean
- Spot the various patterns and signals that VPA reveals
- Identify anomalies and anomalies in the market
- Understand how VAP works and why it is so useful
- Master the key concept of VAP: volume point of control
- Recognize the different types of volume profiles and zones
- Spot shifts in volume distribution
- Use VPA and VAP together to enhance your analysis
- Apply volume technical analysis to any market, instrument, or timeframe
- Develop your own trading strategy based on volume technical analysis
And much more!
This book is a must-have for anyone who wants to improve their trading skills and results. It will teach you how to read the market like a pro, using volume as your guide.
So don’t wait any longer. Click here to buy “A Complete Guide To Volume Price Analysis” by Anna Coulling on Amazon today. You won’t regret it.
What to Take Home
Volume technical analysis is one of the most powerful and reliable tools in trading. It can help you understand what is happening in the market, anticipate future movements, and find profitable opportunities.
By using VPA and VAP together, you can get a complete picture of both price action and volume distribution. You can also combine them with other technical tools to enhance your analysis.
But remember, volume technical analysis is not a magic bullet. It is not a substitute for proper risk.
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