Page 7 - A Complete Guide to Volume Price Analysis: Read the book then read the market

Chapter One

There's Nothing New in Trading

Nihil sub sole (there is nothing new under the sun)
Ecclesiastes 1:9

Let me start if I may with a book I have read, many, many times, and was the 'course book' recommended to us by Albert as we sat, innocent and
expectant on that first morning, clutching this book in our hands.

The book in question was Reminiscences of a Stock Operator, written by Edwin Lefevre and published in 1923. It is an autobiography of one of the
iconic traders of the past, Jesse Livermore, and is as relevant today, as it was then. But one quote in particular stands out for me, and it is this:

“there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has
happened before and will happen again”

This in essence sums up volume, and Volume Price Analysis. If you are expecting some new and exciting approach to trading, you will be
disappointed. The foundations of Volume Price Analysis are so deeply rooted in the financial markets, that it is extraordinary to me how few traders
accept the logic of what we see every day.

It is a technique which has been around for over 100 years. It was the foundation stone on which huge personal fortunes were created, and iconic
institutions built.

Now at this point you may be asking yourself three questions:

1. Is volume still relevant today?

2. Is it relevant to the market I trade?

3. Can it be applied to all trading and investing strategies?

Let me try to answer the first if I can with an extract from Stocks and Commodities magazine. The following quote was by David Penn, a staff writer
at the time for the magazine, who wrote the following about Wykcoff in an article in 2002:

“Many of Wyckoff’s basic tenets have become de facto standards of technical analysis: The concepts of accumulation/distribution and the
supremacy of price and volume in determining stock price movement are examples.”

The second question, I can only answer from a personal perspective.

I began my own trading career in the futures market trading indices. From there I moved into the cash markets for investing, commodities for
speculating, and finally into the currency markets in both futures and spot. In all of these, I have used volume and price as my primary analytical
approach to each of these markets, even spot forex. And yes, there is volume in forex as well! Volume Price Analysis can be applied to each and
every market. The approach is universal. Once learnt you will be able to apply this methodology to any time frame and to every instrument.

Finally, the best way to answer the third question of whether Volume Price Analysis can be applied to all trading and investing strategies, is with a
quotation from Richard Wyckoff who, as you will find out shortly, is the founding father of Volume Price Analysis. He wrote the following in his book
'Studies in Tape Reading'

“In judging the market by its own actions, it is unimportant whether you are endeavnd u are eouring to forecast the next small half hourly swing,
or the trend for the next two or three weeks. The same indications as to price, volume, activity, support, and pressure are exhibited in the
preparation for both. The same elements will be found in a drop of water as in the ocean, and vice versa”

So the simple truth is this. Regardless of whether you are scalping as a speculator in stocks, bonds, currencies and equities, or you are trend,
swing, or position trader in these markets, or even investing for the longer term, the techniques you will discover here are as valid today as they
were almost 100 years ago. The only proviso is that we have price and volume on the same chart.

For this powerful technique we have to thank the great traders of the last century, who laid the foundations of what we call technical analysis today.
Iconic names such as Charles Dow, founder of the Dow Jones, Dow Theory and the Wall Street Journal, and generally referred to as the
grandfather of technical analysis.

One of Dow's principle beliefs was that volume confirmed trends in price. He maintained that if a price was moving on low volume, then there could