Page 17 - A Complete Guide to Volume Price Analysis: Read the book then read the market

This is what makes volume such a powerful indicator. As humans we have the ability to judge relative sizes and heights extremely quickly, and it is
the relative aspect of volume which gives it such power. Unlike the tape readers we have a chart, which gives us an instant picture of the relative
volume bars, whether on an ultra fast tick chart, an intra day time chart, or longer term investing chart. It is the relationship in relative terms which is
important.

The second point is that volume without price is meaningless. Imagine an auction room with no bidding. Remove the price from the chart, and we
simply have volume bars. Volume on its own simply reveals interest, but that interest is just that, without the associated price action. It is only when
volume and price combine that we have the chemical reaction which creates the explosive power of Volume Price Analysis.

Third and last, time is a key component. Suppose in our auction room, instead of the bidding lasting a few minutes, it had lasted a few hours ( if
allowed!). What would this tell us then? That the interest in the item was subdued to say the least. Hardly the frenetic interest of a bidding war.

To use a water analogy. Imagine that we have a hosepipe with a sprinkler attached. The water is the price action and the sprinkler is our 'volume'
control. If the sprinkler is left open, the water will continue to leave the pipe with no great force, simply falling from the end of the pipe. However, as
soon as we start to close our sprinkler valve, pressure increases and the water travels further. We have the same amount of water leaving the pipe,
but through a reduced aperture. Time has now become a factor, as the same amount of water is attempting to leave the pipe in the same amount of
time, but pressure has increased.

It is the same with the market.

However, let me be provocative for a moment, and borrow a quote from Richard Wyckoff himself who famously said :