Page 31 - A Complete Guide to Volume Price Analysis: Read the book then read the market

level.

The same scenario could equally apply in the forex market.

A fundamental item of news is released,or is rele and the market makers see an opportunity to take stops out of the market. The price jumps on the
news, but the associated volume is low. Now let’s look at another example of an anomaly.

Fig 4.13 Narrow Spread Candle, Low Volume

Once again this is a clear signal of a potential trap. The move higher is NOT a genuine move but a fake move, designed to suck traders into weak
positions, and also take out stops, before reversing sharply and moving in the opposite direction. This is why VPA is so powerful and once you
have learnt this skill will wonder why you never discovered it before. Volume and price together reveal the truth behind market behaviour in all its
glory.

In the example shown in Fig 4.13 we can see a narrow spread candle with high volume which, once again, is another anomaly.

As we saw earlier in Fig 4.11, a small increase in the price (result), should only require a small increase in volume (effort), but this is not the case
here.

The small price increase has been generated by a huge amount of volume, so clearly something is wrong. Generally, we would expect to see this
height of volume bar, accompany a wide spread candle with the volume driving the price higher. But, in this case the high volume has only resulted
in a very small rise in the price.

There is only one conclusion we can draw. The market is starting to look weak, and is typical of a candle pattern that starts to develop at the top of a
bullish trend, or the bottom of a bearish trend.

For example in an established bullish trend the market opens, and starts to rise a little, but the buyers (longs) are now starting to take their profits,
as they have been in this trend for while and feel that this is the right time to close out. However, as these positions are closed out, more eager
buyers come in, (as most traders and investors always buy at the top of markets), but the price never rises as the longs continue to liquidate and
take their profits, before more buyers come in, and the cycle repeats throughout the session.

What is actually happening is that the market has reached a price at which further effort does not result in higher prices, as each wave of new