Page 33 - A Complete Guide to Volume Price Analysis: Read the book then read the market

time, but is now looking at a major reversal?

Or perhaps we are half way up or down a trend, and we are merely observing a minor pull back or reversal in the longer term trend. Deciding where
we are in the trend, is where we bring in some of our other analytical tools which then help to complement VPA and gives us the 'triangulation' we
need.

In judging where we are in the trend, and potential reversal points, we will always be looking at support and resistance, candle patterns, individual
candles, and trend lines. All of this will help to give us our 'bearings' and help to identify where we are in the price action on the chart. A perspective
if you like, and a framework against which to judge the significance of our analysis of volume and price.

Multiple Candle Examples

I now want to explain how we use VPA with multiple candles and volume, as opposed to single candles. The approach is identical as we are only
ever looking for two things. Is the volume confirming the price action, or is this an anomaly?

Fig 4.14 Multiple Bar Validation In Up Trend

In the first example in Fig 4.14 we have a bullish trend developing in a rising market, and what is obvious is that rising prices are accompanied by
rising volume.

This is exactly what we would expect to see and furthermore having multiple volume bars also gives us a benchmark history, against which to judge
future volume bars.

If we were watching this price action live, this is what we would see happening on our chart. The fighchart. irst candle forms, a narrow spread up
candle with low volume, which is fine. The volume validates the price, no anomaly here. The second candle then begins to form, and on close
inspection we note that the spread of this is wider than the first, and based on Wyckoff's rule, we expect to see greater volume that on the first bar,
which is indeed the case. So the up trend is valid, the volume has validated the price on both candles.

By the time the third candle starts to form, and closes with a spread which is wider than both the first and the second, we should expect a volume
bar which reflects Wyckoff's third law of effort vs result. The third law which states we have increased the result (price spread is wider than before)
which should be matched by increased effort (volume should be higher than on the previous candle) – and so it is. Therefore, once again, the price
action on the candle has been validated by the volume. But, in addition to that simple observation, the three candles themselves are now validating
the price trend.

In other words, the price over the three bars has moved higher, developed into a trend, and the volume is rising and NOW validating the trend itself.
After all, just as effort vs result applies to one candle, it also applies to a 'trend' which in this case consists of three candles. Therefore, if the price is