Hello Anna, I am currently reading your book “A Complete Guide To Volume Price Analysis”. It is an intriguing book as it explains the principals in layman’s terms much better than the other manuals around, such as Tom Williams’ and Gavin Holmes. Rather than just presenting a concept and moving along to another completely different concept, you build on a concept further. It is a true teaching manual. I am currently about ¼ of the way through it. I have one embarrassing question to ask you. I wasn’t sure if I could ask you a question directly or if I have to join a specific blog or become a member to do so. But here goes anyway.
My question is: Why is it that volume has to rise with rising candles to confirm a legitimate up-move? Why can’t the volume remain the same as the previous volume where the price rose? If, for example, a volume of 10,000 made a price of a stock rise from $1.10 to $1.20, why can’t the same volume of 10,000 also raise it from 1.20 to 1.30? All the principals of VSA start from this premise of this basic principal so it would be nice to get the reasoning behind it. Thanks for publishing a very helpful book Anna. I cannot wait to read the rest of it. Regards
Hi – Many thanks for your email. It’s always a great pleasure to hear from fellow traders, particularly those who have kindly bought my books. It is much appreciated and I’m so delighted you find the volume book useful. There are no embarrassing question and what you ask is an interesting question, and one which lies at the heart of volume price analysis. So here goes with an answer. Using your example, the answer is – it can. In other words, the stock rises by 10 cents on a volume of 10,000 and then rises a further 10 cents on a further 10,000. Indeed it could continue higher this way for some time, with perhaps 5 or 6 consecutive bars – all rising on the same volume and similar price. The key is when either the volume or the price then displays an anomaly.
Using your example once again, following the first candle, the second candle then forms with a 10 cent move, but with 30,000 of volume. This is clearly signaling an anomaly. Alternatively, we could see the 10 cent move with only 5000 volume – again an anomaly since we know from the previous candle that it has taken a volume of 10,000 to move it 10 cents. Neither of these would be trading signals, but merely giving us an early warning of possible strength or possible weakness which we then wait to be confirmed or validated with further price action. I hope the above clarifies this aspect for you, and thank you once again for taking the time to write to me. Kind regards – Anna