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How To Identify Strength On A Price Chart

How To Identify Strength On A Price Chart

How can a retail trader identify strength on a price chart? Let’s assume we are currently in a downtrend and after a decent down move price action starts to consolidate, i.e. move sideways. This price action has now created a level of support were the consolidation has occured. As soon as price has broken the support level, which is usually on high volume, retail traders  usually initiate a short position. When price breaks a support level on ultra-high volume, is this really selling or is this buying?

 

Strength On A Price Chart Appears On A Down Bar

 

Your probably wondering how can strength on a price chart appear on a down bar. Surely when there is a wide spread down bar on ultra-high volume, that is selling! This is not usually the case. When you see ultra-high volume on a down bar and especially one that closes off the lows, this is usually strength.

 

When this sort of pricing action occurs, professional traders a positioning themselves to start accumulating, buying the instrument. They require a level of activity to the downside in order for them to start buying. They require the retail traders to sell in order for them to buy. At those low levels, professional traders are basically saying that prices are cheap let’s start buying.

 

Just think of professional traders sending you a telegram. The volume is a telegram to you, telling you that all is not what it seems in the markets. The chart below of the AUDUSD, the Australian Dollar, shows of a wide spread down bar with ultra-high volume.

 

Strength on a prcie chart

Australian Dollar: Strength Appearing on a Down Bar

 

You can clearly see the ultra-high volume on the down bar, it closed off the lows, next bar was a down bar on much lower volume, signalling that there is not much supply in the market.  The video below discusses the Australian dollar price chart in depth.

 

 

Any questions at all as to what I have covered? Please send me through an email to info@superchargewyckoffvsa.com

 

Danny Younes

Professional Investor and VSA Expert

Author: “Supercharge Your Trading & Investment Account Using Wyckoff / Volume Spread Analysis

 

Have an excellent trading day

 

Danny Younes
Professional Investor and VSA Expert

Author of Supercharge Your Trading & Investment Account Using Wyckoff / Volume Spread Analysis

Danny Younes

Danny Younes is a professional investor and VSA expert. Danny trades options, stocks and forex and has travelled the world teaching retail traders and investors how to invest safely in the financial markets using low-risk options strategies by analysing the markets using Volume Spread Analysis.

2 Comments
  • Posted at 12:33 am, June 20, 2017

    Love this video, would love if you can do more of these. Especially explaining the Ultra High Volume with very wide bars and what it means. Thanks

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