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Using volume in trading is very important. Volume gives a better aspect on the market strength and weakness more than any indicator, because other conventional indicators or oscillators are lagging behind. Both Richard Wyckoff and Tom Williams hold to the importance of the market phase accumulation and distribution, mark up and mark down.
These phases are very important part in the iVSA trading setup during the markup to buy and mark down to sell. The signs are like price pillar - able to support the market from collapsing. Like the Great Roman Pillars in the Rome's Forum, they too stood the test of time and lasted several thousand years. The sign of strength arises when the price is declining upthrust, stopping volume, test on low volume.
The sign of strength is an exploit looking for an evidence which let us know that demand is in control. In the stock or forex market, this sign of strength usually come in a variety of edition, but basically, the first down bar is a shake-out regularly on a so called bad news. The second bar is hastily marked up to lock traders in if you shorted or away from the market if you wanted to buy in the market.
People keep away from buying because it now seems to be expensive compared to the earlier price. The iVSAChart trading also feature wide spread bar with an increase in volume, and should also have demand on the up bars movement, which is a proof of good demand going forward. VSA trading necessitate it is most excellent that the price is over the broken resistance for a pure mark up phase two to be present.
The sign of weakness arises when price is increasing no demand and falling pressure. This is an exploit which let us know that the supply is in control. Weakness always appears on an up-bar because professional selling has to sell into a flow of buying. Any markets like stock or forex market see many stocks being traded. A sudden down movement denoted by SOW in the chart above will lock many traders into downtrend positions as they wait and hope to get out with little or no loss.
If after a response short rally , the market then started increasing, then any existing resistant level will need an effort to go up and break through these existing highs, because they will need to overcome the selling from these locked in traders who wished to exit now. To approach an old high on a low volume and a narrow spread indicates that the old highs are not going to be breached because there is no demand denoted by more SOW.
If the market is not going to go up then it is going to go down - continuing it pure mark down phase. The effect will go down with a wide spread, an increase in price weakness and increased volume as a proof of increase. What is sign of strength and sign of weakness in Volume Spread Analysis?