Page 73 - A Complete Guide to Volume Price Analysis: Read the book then read the market

At the top of each wave, buyers are left in weak positions, and then sell out on the next wave, to be replaced by more buyers at the top of the wave,
who then sell out at the top of the subsequent wave. It is this constant buying and then selling at similar price levels, which creates the 'invisible'
bands, which are made visible by joining the highs and lows on the price chart.

The buyers who bought at the floor of the price action, are happy to hold on, expecting higher prices. They have bought at the lower level as the
market has pulled back, seen the market rise, and then reverse back to the original entry level. Unlike those buyers who bought at the ceiling level,
their positions have never been in loss. So far, all that has happened, is that a potential profit has been reduced back to zero, or close to zero, so
these buyers are still hopeful of making a profit from their position. Fear is n Kon.ce cot yet driving their decision making.

In fact, there is nothing magical about these price levels of the floor and the ceiling. They simply represent the 'extreme' psychological levels of fear
and greed in that particular price region and time. We must always remember, price action is fuelled by these two basic emotions, and it is in the
price congestion phase of market behaviour, that we see these emotions in their most basic form. At the top of the first wave, greed is the over
riding emotion. By the time the market returns on the second wave, fear and relief are the over riding emotion for these traders.

Fear And Greed Riding The Wave – Top Of Bull Trend

Fig 7.11 Fear & Greed : Bull Trend

As we can see in the schematic in Fig 7.11 it is all very logical once we begin to think of it in terms of emotional buying and selling. The over riding
emotion as the market hits the top of the first wave is greed, combined with the emotion of fear – the fear of missing out on a good trading
opportunity. Remember, these traders are weak anyway. Why? Because they have been waiting and waiting, watching the market continue higher,
frightened to get in, as they are nervous and emotional traders, but at the same time, frightened of missing a 'golden opportunity' to make some
money. After all they have seen the market rise and are now wishing they had entered earlier. They eventually buy at the top of the first wave.

The market then promptly reverses, and they immediately become fearful of a loss. The market moves lower then bounces. At the bottom of the first
wave, buyers come in, entering on the pull back and pleased to be getting into the market at a 'good price'. The market moves back higher towards
the top of the first wave.

The buyers at this level cannot wait to exit, as the fear drains away and they get out with a small loss. Remember, throughout this phase of price
action, they have NEVER seen a profit, only an increasing loss, which has then reduced back to close to zero. Their emotional level of fear, a fear
indicator if we had one, would have been rising steadily on the downwards leg, and then falling on the upwards leg, but at no time was their position