Volume Spread Analysis short-cut tools

Outline:- 

1. Introduction

2. Market Makers
3. Effort vs Results
4. Sign of Weakness / Strength
5. Trade Examples

Who are theMarket Makers?

    

Demand  and  Price  chart

                                                              Support  and  resistance  line

The market manipulation benefit the bears MMs by:

1. Drawing in retail buyers by putting a bullish PA;
2. The demand from the buyers pushes prices higher;
3. MMs now able to sell their orders to these buyers
without causing prices to fall;
4. This is the distribution phase where the bears MMs
are selling to the buyers.

 Volume indicator -> trading activities -> ‘Effort’
 Price action -> ‘Results’ of the effort
 Buying effort will result price to increase
 Selling effort will result price to decrease

When there is an Effort to move,
there should be a Result.

Effort to go up:-

 Wide spread up-bar

 Closing on the highs with increased volume

 Volume not excessive

                    What if Effort  doesn’t show Results?

               The high volume must have  contained more Selling  than Buying.  This  is  a sign  of  weakness. 

                        How do we know if it is SOW or  SOS?

 Up-trend =>      look for SOW

 Down-trend => look for SOS

                                         

                            When to  enter the market?

Lack of Demand (No Demand):

 Narrow spread up-bar with low volume

 MMs have no interest buying into the market

 Indicates temporary weakness

No Selling Pressure:

 Opposite of no demand

 Prices close down with narrow spread

 Declining volume

 Indicates temporary strength

 No demand -> weakness -> SELL?

 No selling pressure -> strength -> BUY?

  Wait for a SUCCESSFUL test  of confirmation.

Test of Confirmation:

 Up-trend -> look for SOW -> no demand

 Down-trend -> look for SOS -> no selling pressure

Market Scenario:

 Rallies will meet resistance when there is supply

 Floating supply needs be removed

 Rapidly mark prices down to test sellers

High Volume Mark Down:

 Supply is present

 Usually results in a temporary up-move

 Subject to a re-test

 Forms a ‘W’ shape or a ‘Double Bottom’

Low Volume Mark Down:

 Little selling / low supply

 Catch any SL below the market

 Buying at still lower prices (springboard)

 Successful test of supply

 Market ready to rally

                     Wyckoff Logic Effort vs Results

MMs: 

 MMs will choose the path of least resistance

 Demand & supply often act as resistance

 Accumulation phase to reduce supply

 Distribution phase to reduce demand

Uptrend:

 Look for SOW -> effort doesn’t show results

 No demand -> buying decreased on up-move

 Market will want to fall.

Downtrend:

 Look for SOS -> effort doesn’t show results

 No supply -> selling decreased on down-move

 Market will want to rise

Market Movement:

 Low volume -> reduced trading

 Little interest in that direction

 Path of least resistance is generally the opposite

direction.

 Volume Spread Analysis:

 Conceptual market analysis

 Understanding the market movement

 Complimentary with other strategies