Volume Price Analysis by Anna Coulling
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Hi everyone, in this video we review the book; Volume Price Analysis by Anna Coulling.
Anna has gained considerable authority in the trading world as an author, creating many books based on the concept of volume and price action.
As a fulltime trader and regular poster on twitter, Anna claims that Volume and Price Action can be used across all markets, whether that is Crypto Currency, Stocks, or Forex.
“Learning this method was a defining moment in my life and trading career. I hope that this book will be equally life changing for you too”.
Let’s summarise Anna’s thoughts and learn how the concepts can be applied to your own trading approach.
Anna puts considerable emphasis on volume throughout the book, and starts by saying:
“It is the ONLY leading indicator, which when combined with price, truly reveals the future direction of the market. In addition, volume reveals something equally important. Whether the price action is valid or false”.
Anna admits that her road to success was not ground-breaking, it has been used for over 100 years by many of the iconic traders covered on our channel.
One of the most iconic names in trading over the last century was Richard Wyckoff, known for his Wyckoff Method, and Anna gives considerable credit to the principles of her concept through his research.
Wycoff himself leaned on the knowledge of Jesse Livermore.
At the core of all the research and application, Wycoff detailed three basic laws:
The Law of supply and demand. The law of cause and effect, and the law of effort and result. With each of these highly correlated to volume and price action within financial markets.
If we take Supply and Demand, when demand is greater than supply, prices will rise to meet this demand, and conversely, when supply is greater than demand, prices fall. Such price action often forms a supply zone and a demand zone. Such zones often signal as areas of distribution or accumulation.
The law of cause and effect sits behind this supply and demand action, in other words, the volume is the cause, and the price action is the effect. If the cause is small the effect will be small and if the cause is large the effect is large.
The final and most important piece of Wycoff’s theory, is the law of Effort vs Result.
Like Newtons law of physics, every action must have an equal and opposite action. This means that the price action of a chart must reflect the volume action below it.
This is where Anne suggests anomalies and opportunities can be found in a chart. If for example volume (or demand) is large, and the resulting price action is equally large, then price is acting rationally, whereas a small amount of change in volume, yet a large change in price action signals an anomaly.
The importance of correlation between price and volume has been long standing. Referred to as ticker tapes, these tapes were distributed through ticker machines to various brokerage offices, and these became the study of many iconic traders. The only numbers presented on the tapes were price and volume.
With the relationship of volume and price in mind, let’s look from a more practical perspective.
The theme throughout the book is that of validation, whatever price action is seen it must be supported by volume. The validation process is analysed candle by candle and has the same relevance regardless of time frame.
First we need to understand how a candle develops. The candle will open in a neutral position