Does volume spread analysis work in Forex?

Let me explain why volume spread events in Forex during accumulation. First, we have the initial support, when a lot of buying starts after a long period of price decline in volume increases, and the difference between the highest and lowest prices increases and widens. Then we have oversold; this is where it reaches.

Does volume spread analysis work in Forex?

Even more retail traders keep selling, but the smart money starts buying at or near the bottom, and then we have an automatic rally. After the intense selling pressure decreases, there is a buying wave that easily pushes prices higher. This rally helps us identify the upper limit of the trading range.

During the subsequent accumulation, the secondary price test revisits the oversold level to see if there is a balance between supply and demand at that level to confirm the bottom; volume should be significantly lower as the market approaches the support level around the oversold area and it is expected to perform tests—multiple secondary after oversold.

Sign of strength in Forex trades

A strength sign occurs when the price rises with an increased spread and relatively higher trading volume. A strength sign often appears after the spring and is an imaginary breakout and flow of liquidity trapping retail traders on the short side. The spring is when the price falls below its usual range and then quickly jumps back to this range.

Then, we have the last support point, the lowest point during the pullback after the strength mark on it represents the final push towards the bottom of the accumulation phase before the uptrend begins. The last support point starts creating a higher low, and the price rises strongly again.

The different stages of accumulation in Forex

Now, let’s analyze the different stages of accumulation, taking into account volume first: Stage A is dominated by sellers so far. We see a reduction in supply during initial support and oversold. These events are usually evident on charts with wider spreads in trading volume. High in Phase B, Smart money starts buying at a relatively low price in anticipation of the next surge. Price fluctuations are wide with high trading volume.

However, as intelligent traders absorb the available supply, the supply volume during downward fluctuations within the trading range tends to decrease in phase C, and the price goes through a critical test of the remaining supply to determine if it is ready to increase. It serves as a trap for those who sell. A successful test of the supply with a ring provides an opportunity. Good for starting a long position in Phase D. Demand starts to dominate supply. Continuously, a price pattern presents signs of strength with wider spreads and increased trading volume.

Trade Forex at a lower support point with smaller spreads

There is also a lower support point with smaller spreads and lower trading volume. Finally, we have the e phase, when the price leaves the trading range, and demand takes over, ultimately leading to an apparent increase in new trading ranges known as re-accumulation by intelligent money.

These ranges are like stepping stones towards higher price targets. Let’s also talk about woff events during the distribution. First is the initial supply. This is when the smart money starts selling after falling prices. As trading volume rises, the spread between the highest and lowest prices widens, indicating that the trend may change after that.

Overbought currencies in Forex

There is a peak in buying activity with higher spreads. Peak buying often represents a top in the market. This is the automatic reaction after peak buying, where intense buying pressure decreases, and selling occurs. This action helps determine the lower end of the distribution trading range. Then, there is the secondary test, where the price returns to the overbought level to test the balance between supply and demand. So trading volume and spreads should decrease as the price approaches the overbought resistance level.

Sometimes a secondary test takes the form of an upward push, a liquidity process where the price briefly moves above the level of resistance level before quickly reversing back below it after which it is a sign of weakness. This is observed as a downward move to or slightly below the lower end of the trading range and typically occurs as spreads increase and volume increases automatically.

A sign of weakness in the Forex market

A sign of weakness indicates that supply is now dominant in the market and finally, we have the last supply point after testing support on a sign of weakness there may be a rally with tight spreads The market is struggling to advance through this rally indicating weak demand Now let’s look at the distribution phases in Phase A .

The previous uptrend has stopped and supply is starting to enter the market, we see the initial supply and overbought followed by a spontaneous reaction and a secondary test of the overbought in smart money phe B that initiates short positions in anticipation of the next decline, signs of weakness are often followed by large downward price movements and increased trading volume.

Are there upward impulses to price movements in Forex?

Bullish pushes may occur for price movements above the trading range and then reverse sharply back down, as many retail traders fall into this phase. A buy trap during this phase is in the face of signs of declining demand, and the price may break the trading range support or fall below the middle of the range.

It is the right time to sell at the last point of the offer and it is also the last opportunity for long positions to close their positions and sell in the final stage of the distribution. Supply is dominant, and price breaks below the trading range support high volume. The supply breakout pattern is one of my personal favorites when the smart money rises through a potential supply zone, which is known as a resistance level.

Forex gap strategy

Expert Forex traders use a strategy called gapping which means pushing the price up quickly and significantly through the supply zone by the way I learned this from Tom Williams’ book Master of the Markets is a must if you want to learn more about this this high volume momentum candle does not encourage traders Trap on Sell As the market approaches the point where these sellers can sell without a loss the price suddenly rises.

It often creates a gap in the chart, giving these traders a profit and reducing their tendency to sell. Supply gapping by supplying in large quantities is a tactic used by smart money to limit the amount they need to buy to maintain the price. The rally helps them avoid buying at high prices when high volume follows these wide spreads.

Summary

When there’s a market breakout, more traders join in, creating bullish positions for professionals. Bearish bars with low volume after a gap event are considered a strong buy signal..