Maybe you should spend less time on trying to PREDICT price and more time on understanding WHY price moves the way it does. The cause of all price movement is the result of imbalances of supply/demand, created by Professional operators. With much thanks and no disrepect, I have attached the previous chart with the Volume Spread Analysis view. 1. Look at the pink two pronged arrow. Notice that this bar is very wide, and closes down vs the previous bar and closes on the lower half with ultra high volume. Many traders would see this as a weak bar. This is, however, a strong bar. If this bar was really weak, the close should be on the low. Moreover, if this was indeed a weak bar the next bar should be down, not up. Strength appears on down bars. Professional money has entered and are buying on this bar into the 'herd' selling. 2. Move over to the first pink line. We see a narrow spread (range) bar that closes up from the previous bar, closes in the middle of its range and has volume that is less than the previous two bars. This is no demand. At this time the Smart Money is not interested in higher prices. While they did come in and buy two bars back, they are none the less not ready to mark the market up at this time. Thus, prices falls down slightly. 3. Next pink line. Here we have a 'test'. The bar makes a lower low, closes lower than the previous bar, closes on or near its high, and the volume is relatively low. At this time the Professional operators are checking, or testing, for sellers underneath and the low volume tells them that there are none. With no sellers (supply) in the market, prices are poised to rise. Markets fall because of substantial selling (supply) by Professional money. Markets rise, however, not so much because of Professional demand (buying), but the lack of substanial selling (supply). BTW this is why it is not good to paint volume red on down bars and green on up bars; it belies the actaul strength in some down bars and the true weakness in some up ones. A better choice is to paint volume green if it is greater than the previous bar and red if it is less. Since volume is activity, you immediately know if one bar has more activity than the next.
I see a "selling climax", then price ranging then a wide spread through resistance on high volume. Am I right? Please say I'm right!
Volume spikes are handy for signalling the end of a move, never seen anything else that works consistently
Bluedemon77 Maybe you can try to look for this particular pattern and keep observing it real time. This will give you some sort of feel as to whether this will be a true breakout or just for a retracement. QUOTE]Quote from KPCURRENCY: [ Maybe you should spend less time on trying to PREDICT price and more time on understanding WHY price moves the way it does. The cause of all price movement is the result of imbalances of supply/demand, created by Professional operators. With much thanks and no disrepect, I have attached the previous chart with the Volume Spread Analysis view. 1. Look at the pink two pronged arrow. Notice that this bar is very wide, and closes down vs the previous bar and closes on the lower half with ultra high volume. Many traders would see this as a weak bar. This is, however, a strong bar. If this bar was really weak, the close should be on the low. Moreover, if this was indeed a weak bar the next bar should be down, not up. Strength appears on down bars. Professional money has entered and are buying on this bar into the 'herd' selling. 2. Move over to the first pink line. We see a narrow spread (range) bar that closes up from the previous bar, closes in the middle of its range and has volume that is less than the previous two bars. This is no demand. At this time the Smart Money is not interested in higher prices. While they did come in and buy two bars back, they are none the less not ready to mark the market up at this time. Thus, prices falls down slightly. 3. Next pink line. Here we have a 'test'. The bar makes a lower low, closes lower than the previous bar, closes on or near its high, and the volume is relatively low. At this time the Professional operators are checking, or testing, for sellers underneath and the low volume tells them that there are none. With no sellers (supply) in the market, prices are poised to rise. Markets fall because of substantial selling (supply) by Professional money. Markets rise, however, not so much because of Professional demand (buying), but the lack of substanial selling (supply). BTW this is why it is not good to paint volume red on down bars and green on up bars; it belies the actaul strength in some down bars and the true weakness in some up ones. A better choice is to paint volume green if it is greater than the previous bar and red if it is less. Since volume is activity, you immediately know if one bar has more activity than the next. [/QUOTE]
Yes you need to keep an eye on the open and close of the bar to see whats really going on which is what I do. I just think the red and green is pretty. Nice commentary. Volume gives so much information that it really puzzles me that some people do not see it.
Your right but theres more. There is so much information in this little sequence. KPC has pointed out some of it. The declining volume after the wide range bar and a new low on much lower volume is screaming reversal.
Bearbelly, thanks! Nice to hear that I am at least going in the right direction on my quest to learn analysis of price volume. Still a lot to learn, but I'm not completely off course. Hadn't read KPcurrencys post at the time of writing! I'm so happy.
KPCurrency. Shadowy shades of Shabacker! Are you sure you are not possessed by his long-departed reerected spirit? Such beautiful 1930's prose and thought!