Getting in using volume price analysis

Question

Dear Anna,

 I have read your book on VPA. I found that it is a new aspect of trading that I haven’t considered until I began to read your book. I understand the basics of VPA from your book, but I still am having trouble with entry setups, which if I’m not mistaken, you haven’t talked about in your book. I understand that trading is an artform, but is there a discretionary method to find possible entry and exit points? I would like to understand the concept of how you enter, manage (including lot sizes), and exit a trade.

Also, I saw you have an educational section. Is this section free?

Thank you very much in advance for your answer. It was very nice to meet you 🙂

Answer

Hi – first of all many apologies for the delay in replying, but your email ended up in my spam folder and I have only just discovered it as I was clearing it out – so many many apologies. Thank you so much for investing in my books and thank you too for your very kind comments which are much appreciated, and I will do my best to answer your question if I can.

As I’m sure you know from reading the book, volume price analysis covers every aspect of a trading position, from getting you in, helping you to stay in, and then to exit at the right time. If we start with getting in, which is the first part of your question, there is no prescribed set up which will repeat time and time again, but here are some of the basic principles which will generally apply, and if we start with a bearish market, the first signal here is to look for stopping volume. If the market has been selling off in a price waterfall, then at some point, the market makers will start to move into the market and begin the buying process. This is the first step in slowing the selling pressure, and what we are looking for here, is either a narrow spread candle with high volume, perhaps a hammer candle again with high volume, or even a wide spread candle with a deep lower wick. All of these are sending a strong signal that the market makers are moving in, and you can be assured that the selling pressure is starting to be absorbed. This is not to say we are at the bottom, as every market has momentum, and like the oil tanker will continue on for some time, even when the engines are turned off. But this is the first signal of a slowing down.

The next phase is then likely to be a period of congestion as the market moves sideways with further selling then being mopped up and absorbed by the market makers. Here you may see further hammer candles and perhaps narrow spread down candles with low volume. Generally if the volume under the down candles is falling this is signaling weakness in the selling pressure as the consolidation phase builds. This is where price patterns then become important and in particular the support and resistance regions as they build.

This is where trends are borne and from here you can then expect to see a breakout in due course, coupled with a low volume test of supply as the market moves away from this price action. If the move higher is associated with strong volume then this is the entry signal, once the price action has closed above the congestion phase with any stop loss, placed below the floor of the congestion as protection in any retest of support. The reverse scenario applies in a bullish move higher where topping volume is the first signal. Here you may see a shooting star candle on high volume, or a narrow spread up candle with high volume, or again a wide spread up candle but with a deep upper wick on high volume – all of these are signal of a market that is weak as the market makers sell. The selling climax will then follow in the price congestion phase.

Once you are in the market then VPA helps you to stay in, keeping your brain focused on the analysis rather than the P and L of the position. Using multiple timeframes, candle patterns and support and resistance then add the three dimensional view to the position. After all, if the market was strong and you bought, and now the market is looking weak, then its time to close. With regard to education, all of this is free along with my free training rooms and you can find further details at my site at http://www.annacoulling.com.

Once again many thanks for your email and I hope the above helps to answer your question. It does take time to learn, but once learnt you have a methodology for life which can be applied to all markets and all timeframes as long as you have volume reported. All best wishes and thanks again Kind regards – Anna

By Anna Coulling

About Anna 1029 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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