Volume Price Analysis
Volume price analysis or ‘VPA’ for short is when you match a candle stick to the volume. If you do not know what ‘volume’ is, heres an explanation:
Trading volume is a measure of how much a certain financial asset has traded in a given time period. Volume in stocks is measured by the number of shares traded. Volume in futures and options is determined by the number of contracts traded. Volume is used by traders to gauge liquidity, and variations in volume are used with technical indicators to make trading choices.
A financial asset’s trading volume is a measure of how much it has traded in a certain period of time. The number of shares traded in a stock is used to calculate volume. The number of contracts that have changed hands determines volume in futures and options. Traders utilise volume to measure liquidity, and fluctuations in volume are used with technical indicators to make trading decisions.
When trading price movement, VPA is BY FAR your most significant ally, asset, friend, buddy, bff, and anything else. This is a very accurate visual strategy to pay attention to while scalping, day trading, or swing trading.
As stated above, VPA is a ‘technique’. It takes time to master. The best way to become a master is of course… practice! And this is achieved by many hours of screen time.
You might be thinking right now; “What is VPA, and how can I use this god-like technique?” Let’s get started!
To begin, you must grasp what candle sticks are (so please use the section above on our site and your own research to educate yourself). On any time frame, the wicks and body lengths of each candle are compared to the quantity of volume inside that time window. Because I am a day trader, I will use the 5 minute time period for the VPA examples below.
As stated, this is a skill! It takes years to master but the more practice (i.e. screen time) you get, the better you’ll become. Volume Price Analysis works on any time frame and also works perfectly with indicators.
If you are unsure of what an indicator is, read the definition below:
Market indicators are quantitative in nature, attempting to anticipate market movements by interpreting stock or financial index data. Market indicators, which are often composed of formulae and ratios, are a subset of technical indicators. They help investors make investing and trading decisions.
You may be familiar with or have heard of MACD, RSI, VWAP, EMA, and SMA, for example. These are by far the most prevalent signs. It is worth noting that an indicator works best when several traders utilise it at the same time. For example, the most typical EMAs are 50, 100, and 200. If you used the 68 EMA, you could have less luck than if you used the 50 EMA. This is simply because fewer traders are utilising it, and for the stock to rise (or fall), others must notice the indication on which you’re based your trade off to subsequently purchase. Many traders employ EMAs as both supports and resistances.