In fact, I'm talking about VOLUME SPREAD ANALYSIS, which assists in the determination of the cause of the FOREX Price Movement, and well will also apply still to Stocks, Futures, and Options evaluations.
In Volume Spread Analysis you use essentially three variables on your FOREX charting system to help you determine the balance of supply and demand as well as FOREX Short Term Market Direction. These variables are the FOREX Spread of the Period, that is the Period High and the Period Low of the bar or candle in question and the volume during the formation of that bar.
With this information there REALLY IS ONLY FOUR CONCLUSIONS that can be made. FIRST, there was Accumulation during the period; SECOND, there was Distribution; THIRD, there was Markup; and last there was a Mark Down in the FOREX Market Price.
Richard Wyckoff in the early 1900's began what can be categorized as the precursor to the Volume Spread Analysis process that we know today and can use in any market, especially the FOREX or FX Market. Volume Spread Analysis was essentially revealed to the public in 1993 through the works of Tom Williams in his book titled "Master the Markets". (A good book to read then have handy on your office shelf.)
Volume Spread Analysis shows us that the Strength of the FOREX Market is in the Down Periods and Weakness in the UP Bars.
THIS IS OPPOSITE OF WHAT MOST TRADERS THINK. FOR A TRUE DOWN TREND TO OCCUR, YOU MUST HAVE A LACK OF SUBSTANTIAL BUYING WHICH CAN REALLY ONLY BE SUPPORTED BY PROFESSIONAL TRADERS.
So the next time you see a Down Period, look to the Volume, there could be more going on than you think.
Always use good money management in your trades. Happy trading.
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