Page 32 - A Complete Guide to Volume Price Analysis: Read the book then read the market

buyers is met with longs selling out at this level and taking their profits, 'off the table'. So there is no sustained move higher in price.

In other words, what this combination of price and volume is revealing is weakness in the market. If we were to imagine a profile of the volume bar
in terms of selling and buying volumes, the buyers would just outweigh the sellers, reflecting the narrow price spread.

This is akin to driving up an icy hill which is gradually increasing in steepness. At the start we can still move higher, but gradually as we try to move
up the hill we have to increase the power, eventually getting to a stage where we are on full power and standing still, as the wheels spin on the ice.
Perhaps not a perfect analogy, but one which I hope makes the point and cements this idea in place. In our car analogy, we are now stationary,
halfway up the hill, engine on full power, wheels spinning and going nowhere! What happens next is we start sliding backwards, gaining momentum
as we go and mirrors what happened in the price action described. The market reached a point where no matter how much more effort is applied,
is now resistant to higher prices, and the sellers are knocking back the buying.

The reverse, also happens n, lso hapafter a trend run lower. In this case, it is the selling which is absorbed by the buying, and once again signals a
potential reversal point as the market runs out of steam. After all, if the selling had followed through, then we would have seen a wide spread down
candle, and not a narrow spread candle.

Now this candle and volume relationship also raises another much deeper question, and here we go back to the insiders, and the market makers.

If we return to our bullish example again, with the narrow spread candle and the high volume, the question we might reasonably ask, is 'who is
actually selling here?' Is it the investors and speculators, exiting the market after the trend run higher, or is it another group perhaps? Maybe it is the
insiders and the market makers ? Who is it more likely to be? After all, we know that most investors and traders tend to buy at the top when in fact
they should be selling, and sell at the bottom when they should be buying. Something which the specialists and market makers are well aware of in
the psychology and make up of most traders and investors.

They also know this group is easy to frighten out of the market. Generally, they get in far too late after a bullish trend has been in place for some
time, and only jump in when they feel it is safe, having watched the market move higher and higher, regretting the decision not to enter much earlier.
As the late Christopher Browne once said ‘The time to buy stocks is when they are on sale, and not when they are high priced because everyone
wants to own them. This sentiment applies to any instrument or market. Buying when ‘on sale’ is always at the bottom of a trend, and not at a top!

'Missing an opportunity' is a classic trader (and investor) fear. The trader waits and waits before finally jumping in, just at the point when the market
is turning and they should be thinking of getting out. This is what the insiders, specialists, market makers and big operators bank on, trader fear.
Remember, they see both sides of the market from their unique and privileged positions.

Back to the question! The specialists have driven prices higher, but the market is now struggling at this level. They are selling to the market to clear
their warehouse, but the buyers are not there in sufficient numbers to move the price higher, as it is constantly knocked back by longer term traders,
selling out and taking their profits off the table. The specialists continue selling into the buying, but the volume of buyers is too small, in contrast to
the number of sellers, to move the price significantly higher, as each attempt to push the market higher is hit with more selling, which in turn is
replenished with more buyers.

What is actually taking place here is a battle. The first sign of a real struggle, with the specialists struggling to clear their warehouse before moving
the market lower, and fast. The market is not receptive to higher prices, but the specialists cannot move the market lower until they are ready, and
so the battle continues. I explain this in much greater detail later in the book. They maintain the price at the current level attracting more buyers in,
who are hoping to jump into the trend and take some easy profits, but the sellers keep selling, preventing any real rise in price.

This is one of the many classic relationships to look for on your charts. As I have said many times before, this could be on a fast tick chart, or a slow
time chart. The signal is the same. It is an early warning that the market is weak and struggling at this level, and therefore you should either be
taking any profit off the table, if you have an existing position, or, preparing to take a position on any reverng on any sal in trend.

Moreover, it is important to remember that just as a candle can have a different significance, depending on where it appears in the trend, the same
is true with VPA.

When an anomaly occurs, and we will start looking at actual chart examples, the first point of reference is always where we are in the trend, which
will also depend on the time frame. However, this is one of the many beauties of this type of trading analysis. For example, on a 5 minute chart, a
trend might be considered as one lasting an hour, or perhaps even two hours. Whereas on a daily chart, a trend could last for weeks or even
months. Therefore, when we talk about a trend, it is important to understand the context of a trend. A trend is always relative to the time frame we
are are trading. Some traders only consider a trend to be valid if it is over days, weeks and months, the super cycles if you like.

However, I don’t subscribe to this view. To me a trend on a 1 minute or a 5 minute chart is just as valid. It is a price trend, which may be a short term
pull back in a longer term trend, or it may be confirming the longer term trend. It makes no difference. All that matters is that the trend, is a trend in
price. The price has moved the same way for some period of time, in that time frame.

Just remember. VPA applied to a 5 minute chart will yield just as many profitable and low risk trades as on a longer term daily or weekly chart. The
analysis is the same.

The point I am making here is this – whenever we see an anomaly which sets the alarm bell ringing, the first step is to establish were we are in any
trend. In other words, we get our bearings first. For example, are we at a possible bottom, where perhaps the market has been selling off for some