Page 92 - A Complete Guide to Volume Price Analysis: Read the book then read the market

Fig 9.11 Sales Volume vs Price – Rotated

Now perhaps you can begin to see how the principle of volume at price really works, and in many ways the term itself describes the methodology.
What we are looking at here, is the volume at the price. In other words, we can see the volumes associated with each price level as the market
moves higher and lower. What we have is a volume histogram of the buying and selling volumes associated with each price point. We can imagine
this as a dissection of the single volume bar that we use in Volume Price Analysis (VPA). Here the volume bar records all the volume of activity
associated within the period of the bar and the spread of the price action.

With VAP, what we are doing is taking that volume bar, and cutting it open to reveal where the concentration of volumes actually occurred. After all,
if the concentration of volume was at the bottom, then this is more likely to be buying volume rather than selling volume. Conversely, if the
concentration of volume took place at the top of the bar rather than at the bottom of the bar, then this is more likely to be selling volume. Volume at
price gives us a different perspective on the more traditional volume bar, revealing as it does, the concentration of buying and selling, at the various
price levels, which in turn gives us an alternative perspective, not only in terms of momentum, but also in terms of support and resistance.

And, as far as I am concerned, this is the KEY point.

The way to use this methodology is as an enhancement to the classic VPA approach, and NOT to replace it in any way. As you will di [s y
width="0"scover shortly, volume at price gives us a very different perspective, as it provides an insight into the concentrations of buying and selling
areas, which to me means support and resistance. As we have already discovered how to identify these areas using price, and price action, VAP
then gives us an additional tool to use, which gives us a visual representation of these areas on the chart. If you remember back to the previous
chapter, I referred to support and resistance as invisible barriers, natural barriers if you like – well now, with volume at price, these barriers are
actually revealed on our charts.

However, we must remember, VAP is a supporting technique to VPA, NOT the other way round. Whilst VAP is powerful and gives us a three
dimensional view of the volume and price action, it does NOT replace traditional VPA, and never will in my view. So please use VAP as a tool with
which to identify price congestion along with support and resistance zones, which you can then confirm with traditional analysis using VPA.

Let's look at some examples and the good news is that this indicator, is generally available free on most good charting packages. All the examples
in the remainder of this chapter are taken from my NinjaTrader trading platform.