A Complete Guide To Volume Price Analysis by Coulling Anna

Author:Coulling, Anna [Coulling, Anna]
Language: eng
Format: mobi, epub
Tags: forex trading
Publisher: Anna Coulling
Published: 2013-06-15T23:00:00+00:00

In the last few chapters we have gradually started to build our knowledge and understanding of VPA, beginning with a very simple analysis of price and volume at the micro level, the ticker tape level if you like. From there, we moved out to consider some simple concepts of price and volume at the macro level, and finally in the last chapter, the 'global' view and the cycles of behaviour that markets follow with the ebb and flow of volume as the insiders push and pull the price action, this way and that, using the media as their primary vehicle.

However, as I said at the start of this book, there is nothing new in trading, and volume has been around for over 100 years. One thing that has changed since, is the introduction of candlesticks as the 'de facto' standard for analysing price action on the chart. All the original books and articles mentioned so far have one thing in common, namely that the charts use bars to describe the price action. Candlesticks have only been adopted by Western traders since the early 1990’s. Again I was fortunate in having been taught the basics by Albert, and I have used candlesticks ever since for a number of reasons.

For me, candles are so much more descriptive than any bar can ever be. VPA with candlesticks is my own methodology. By combining the power of candlesticks with VPA gives us a deeper perspective of market behaviour.

In this chapter I want to move to the next level and explain the various candle and candle patterns that we build into our VPA analysis and education. I must stress, that this chapter is NOT intended as another book on Japanese candlesticks. There are plenty of those already available, and perhaps I may write one myself in the future.

In this chapter I want to explain those candles and candle pattern combinations which are the ones to watch when analysing a chart using VPA. We're going to look at lots of examples using schematics before moving to actual annotated chart examples in subsequent chapters.

However, before moving forward I would like to explain some broad principles which apply, and which we need to keep in mind in any analysis when using candlesticks.

Principle Number One

The length of any wick, either to the top or bottom of the candle is ALWAYS the first point of focus because it instantly reveals, impending strength, weakness, and indecision, and more importantly, the extent of any associated market sentiment.

Principle Number Two

If no wick is created, then this signals strong market sentiment in the direction of the closing price.

Principle Number Three

A narrow body indicates weak market sentiment. A wide body represents strong market sentiment.

Principle Number Four

A candle of the same type will have a completely different meaning depending on where it appears in a price trend. Always reference the candle to the location within the broader trend, or in the consolidation phase.

Principle Number Five

Volume validates price. Start with the candle, then look for validation or anomalies of the price action by the volume bar.

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