Page 119 - A Complete Guide to Volume Price Analysis: Read the book then read the market

and NOT the open and the close, coupled with a large amount of volume. This too might be equivalent to an anomaly where we have above
average or high volume and a narrow price spread.

Box 3, might be considered representative of a ‘normal’ volume and price relationship, with good volume supporting a solid price change. Finally in
box 4, we have extremes of both volume and price. The box is wide, so above average volume and the price is wide as well, so clearly effort and
result are in agreement here, as they are in box 3.

The color of the boxes is dictated by the close. When the close is above the previous close, then the box is painted black, and when the close is
below the previous close, then it is painted red.

In order to maintain aspect ratios and to keep the charts meaningful, the volume is then normalized by dividing the actual volume for that period, by
the total of all the volume displayed on the chart. Whilst time has been removed from the boxes themselves, it still appears, to help keep the chart in
context for the trading session.

Whilst it is difficult to imagine trading using these boxes and moving away from candlesticks, many of the techniques I have explained in this book
will still apply, as they are equally valid. The focus using this approach is on the box, its shape, and location within any trend. Breakouts from
congestion are just as important for equivolume trading as with more conventional VPA, and here we might expect to see what is often referred to
as a “power box”, which is high volume and wide price. In VPA terms, above average volume and a wide spread candle on the breakout from
congestion. The principles are much the same, it’s the display which is very different.

At this point let me add my own personal thoughts here.

Whilst I like the concept of showing the price and volume together on one ‘box’ which instantly reveals whether we have a high/low combination,
anomalies, or an average/average combination which may be normal, the issue I have is the removal of time. After all, as Wykcoff himself stated, it
is the cause and effect which holds the key to the development of the trend. In other words, time is the third element of the volume and price
relationship. Remove time, and the approach becomes two dimensional, and not three dimensional, and as I hope I have made clear throughout the
book, the longer a market is in a consolidation phase, then the greater will be the consequent trend once the market breaks out. Consolidation
phases are where trends are born or pause before moving on, and if you remove the time element, then to me, this removes one of the pillars of
Volume Price Analysis which is the judgment of the power of any subsequent trend.

This is just my own personal view, and I would encourage you to explore the idea of equivolume further for yourself. The other issue is that
candlestick analysis no longer plays a part, but help is at hand here, with candle volume charts.

Candle Volume Charts

Candle sth=he judgm volume charts are exactly as they sound, and are a hybrid version of equivolume and traditional candlestick charts. In other
words, the ‘box’ of equivolume is then laid over a candlestick with the traditional open, high, low and close, to create a unique chart. This charts
displays candles of varying width and height due to the volume aspect, but with the upper and lower wicks added. A combination of both
approaches which is shown in the schematic below in Fig 12.11