Page 103 - A Complete Guide to Volume Price Analysis: Read the book then read the market

I now want to move to the spot forex market and here the charts are from the MT4 platform. With MT4 we have time charts and tick volume.
However, the same principles apply.

The first example is from an actual trade I took on the Aussie Dollar on the 15 minute chart.

The currency pair had been rising nicely for a little while, volumes were average (as marked with the dotted white line) with no anomalies or signs of
weakness at this stage. Then suddenly we see the blue candle form, with a wide body but also with an equally deep wick above.

Fig 10.16 AUD/USD - 15 Min Spot Forex Chart

We are now paying attention as with this volume bar, the pair should have risen strongly, and clearly in the volume bar there is a large amount of
selling, confirmed by the deep wick to the top of the candle.

The pair manage to move higher for a couple of bars, but the warning has been flagged and sure enough five bars later we see a shooting star
candle with high volume. The next candle is also weak, a narrow spread doji candle with high volume. A potential reversal awaits! The next candle
confirms the weakness, another shooting star candle this time with higher volume still. And what is also important here, a lower high than the
previous candle. This is the time and place to take a short position with a stop loss above the level of the wick of the first candle.

The pair sell off and duly start to move lower, and one aspect that I want to highlight here is how volume helps you to stay in a strong position and
hold it in order to maximise your profits from the trend.
As we all know, markets never move in a straight line, they move lower, then pull back a little, before then moving lower again. Here we can see this
in action perfectly illustrated, and the point I want to make is this.

Four bars after the second shooting star, we have a wide spread down candle, and we are delighted. Our analysis has been proved correct, and
we are now in a strong position. Then the market begins to reverse against us. Is this a trend reversal, or merely a pause in the move lower?

Well, the first candle appears. The spread is relatively narrow and the volume is above average, so this is an encouraging sign. In addition, we have
not seen any evidence of stopping volume with narrowing spreads and rising volume, so this looks like a pause point. The next candle confirms this
as does the third, and on the completion of this last candle we can see that we have a market attempting to rise on falling volume, and we know
what that means!

The next candle is weak, and whilst the volume is below average it is another small shooting star.

The market moves lower in steps and each attempt to rally is seen in the context of falling volume, confirming the weakness further which is my
point.

Once you have a position in the market, you must keep revisiting your VPA techniques as they will give you the confidence to hold and stay in the
trend. If you are short the market and it pulls back against you, but the volume on the upwards moves is falling, then you KNOW that this is simply a
temporary pullback and not a change in trend. Equally, if any pullback has not been pre-ceded with signs of stopping volume, then the buyers are
not in the market at that level and any reversal will not last long, so you can continue too hold.