Page 105 - A Complete Guide to Volume Price Analysis: Read the book then read the market

The above example is a case in point. The first few candles on the up move are supported by good volume, which is up and down, but above, or
just around, average. This is fine. After all, there are always going to be variations particularly when you begin to look at the longer term timescales.
There may be seasonal effects, days when the markets are thinly traded during holidays, and of course days when the markets actually close. This
rarely happens in forex, but it does happen in other markets and affects the forex markets accordingly.

Please be a little flexible in your approach when judging volume in trends, and allow a little bit of latitude in your analysis. Here we were waiting for
an anomaly, and until the two low volume candles arrived, there was nothing to signal that any change in trend was imminent.

I now want to consider the opposi cer hatte, namely a buying climax and once again we have a nice example on the AUD/USD weekly chart in Fig
10.18 below.

On this chart, we are looking at an eighteen month period approximately, and we can see that the pair has topped out and rolled over into a nice
price waterfall, all confirmed with nicely rising selling volumes, validating the move lower.

Then a hammer candle arrives and we need to assess whether there is sufficient stopping volume? The next candle gives us the answer with a
small shooting star on high volume.

Fig 10.18 AUD/USD - Weekly Spot Forex Chart : Buying Climax

Clearly the market is NOT ready to rise just yet and the selling pressure continues as we finally enter the buying climax phase. However, as the pair
attempt to rally the first candle we see is a narrow spread up candle with a deep upper wick, hardly a sign of strength, on high volume. The pair are
not ready to rise just yet, and the following two candles confirm this, with very low volume. The second of these is particularly significant with a wide
spread and ultra low volume.

The AUD/USD pair then roll over again and back down into the congestion area, which I have marked on the chart with the two yellow lines, and this
is the ceiling of resistance that we would now be monitoring, along with the floor of support below.

Any break above through this resistance area would now need to be supported with good rising volume. It doesn't have to be 'explosive' volume,
and in many ways it is better that it isn't – just steady and rising. If this were a gap up breakout, as we saw in earlier examples, then we do expect to
see volumes well above average, and even ultra high if the move is dramatic. But for normal breakouts through an area of resistance, then above
average is fine.

The pair then develop a nice even trend higher, with some pauses along the way. This trend lasted for over nine months before finally running out of
steam with a selling climax developing.

I now want to move into the world of futures and back to my NinjaTrader platform. The first chart is the 5 minute on the YM E-mini futures contract, an
extremely popular index futures contract for scalping, and derived from the Dow Jones Industrial Average in the cash market.

There are two versions of the index, the 'small' Dow and the 'big' Dow. This is the small Dow with each index point worth $5, whilst the big Dow is
$25. I ALWAYS recommend new traders to any market to start with the smallest instrument, so if you are new to index trading or indeed the futures
market in general, start with the mini Dow.