28/09/2022, 19:59 Finding Entry Opportunity using Volume Spread Analysis in Trading

Price Action
How to Study Candlestick
Finding Entry Opportunity using Volume Spread Analysis

 Candlestick Analysis in Trading
Back to: Trading with Smart Money
 Price Action Analysis
 Advanced Price Action Analysis
 Thrust Pullback and Measuring Finding Entry Opportunity using Volume Spread Analysis in Trading
Move Analysis
 How to Trade with Smart Money In this article, I am going to discuss Finding Entry Opportunities using Volume Spread Analysis in Trading. Please
 Supply and Demand Zone read our previous article, where we discussed Volume Spread Analysis in detail. At the end of this article, you will understand
the following pointers.
Trading
 How to Day Trade with Trend
 Multiple Time Frame Analysis
 Head and Shoulder Patterns
 How to Trade with Support and
Resistance
 Advanced Candlestick Analysis
 Trendline Trading Strategy
 WRB Trading Strategy

Day Trading Strategies

 VWAP Trading Strategy
 Gap Trading Strategies
 Intraday Open High Open Low 1. Finding support and resistance based on volume spread analysis
Trading Strategy 2. Testing (most important concept of volume spread analysis)
 PIN BAR Trading Strategy 3. Entry opportunity based on testing
 Trading with Sideways Price
Finding Support and Resistance
Action Area
 Pullback Trading Strategy Risk to reward is favored when we trade from support or resistance level. Generally, trade entry types are
 Intraday Breakout Trading
Strategy 1. Reversal from support or resistance zone
2. Pullback entry after some retracement
Risk Management 3. Breakout of support and resistance
 3 Techniques for Risk
Management in Trading SUPPORT

Stock Selection & Live Scanner Support as the “buying, actual or potential, sufficient in DEMAND to halt a downtrend in prices for an appreciable period.” and
 How to Make Your Own Day possibly reverse it, start prices moving up again
Trading Scanner
 Stock Selection for Intraday
Trading

Intraday Trading Course 2020

 Intraday Trading Course
 Multiple Timeframe Analysis for
Intraday Trading 
 VWAP Trading
 Opening Range Trading Strategy
 Opening Range Breakout

Volume Price Action Analysis

 Volume Analysis in Trading
 Volume Price Action Analysis
 Volume Spread Analysis in
Trading
 Candlestick Pattern Analysis
 Finding Entry Opportunity
using Volume Spread Analysis
RESISTANCE
 Spring and Upthrust Trading
Strategy
Resistance is the selling, actual or potential, insufficient supply to keep prices from rising for a time. and possibly turn back, its
 VSA Trading Strategy uptrend

Option Chain Analysis

 Option Chain Analysis in Trading

Indicator 
 RSI Trading Strategy

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28/09/2022, 19:59 Finding Entry Opportunity using Volume Spread Analysis in Trading

BTST 
 BTST Trading Strategy

TECHNICAL ANALYSIS
MASTERCLASS
 Technical Analysis in Trading
 Market Structure in Trading
 Understanding Market Structure
through Swing 
 Supply and Demand Trading
(Part – 1)
 Supply and Demand Trading
(Part – 2) 

Chart Patterns 
 Top 7 Chart Patterns in Trading
Every Trader Needs to Know How to find support and resistance zone?
 How to Trade Bull Flag and Bear
Rejection from an area
Flag Pattern
Flipping zone
Fibonacci retracement
How to Become a Successful
Trader These are the Support and Resistance zone from where we have to find opportunities for trading. Generally, trade entry types are
 How to Become a Successful
Trader 1. Reversal from support or resistance zone
 Free Price Action Trading Course 2. Pullback entry after some retracement
3. Breakout of support and resistance
Most Popular Trading Books
 Most Recommended Trading
Books
 Most Recommended Intraday
Trading Books
 Most Recommended Swing
Trading Books
 Most Recommended Candlestick
Trading Books
 Most Recommended Price
Action Analysis Books

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28/09/2022, 19:59 Finding Entry Opportunity using Volume Spread Analysis in Trading

So the support and resistance for day trading is

Weak Highs/Lows.
Previous Day’s High/Low
Day high or low

Testing

The most important concept of volume spread analysis

What is testing?

The test is required to confirm a trend

Usually, a successful test tells you that the market is ready to move immediately, while a higher volume test usually results
in a temporary move, and will be a re-test of the same price area again at a later time.
Important support and resistance point for testing include Weak Highs/Lows. Previous Days High/Low and day high / low

Why do we place such importance on this action?

Let’s discussed an uptrend (all concepts opposite to downtrend)

The test is employed to make sure that all the selling (supply) pressure has been absorbed in the accumulation phase, and this is
done with a test of supply.

Many times smart money is just testing the strength of either buyers or sellers. Usually above or below important reference points.
As smart money doesn’t want 2 things to happen

1. If they don’t find any supply below or demand above an important reference then they are confident to move the prices in
the opposite direction of the test.
2. But if they do find it, then they usually follow through and test the next reference for the same

Our entry decision is to depend open the test

So our entry decision is to depend open the test from this support and resistance zone

Rejection from an area

Flipping zone
Fibonacci retracement

TESTING SUPPLY (Opposite of Demand)

Rule: Too much supply the market will fall, if there is no more supply the market must go up

Testing types (DEPEND OPEN THE SUPPORT AND RESISTANCE ZONE TYPE)

1. Test in a Rising Market – Test in an up-trending market (trending )

2. Test after Temporary Weakness – Also seen in an up-trending market –(PULLBACK)

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3. Test into an area of High Supply – Testing into the area of Stopping Volume or Selling Climax (reversal or absorption)

Test variation

Single candle test

Swing test

SINGLE CANDLE TEST

Testing supply in an uptrend

Characteristics

In a bullish trending market

A down bar, on reduced volume and narrow spread
The key is the volume. It should be less than the previous candle
Closes can be on the highs, but better when in the middle or near the high
A successful low volume test tells you that the market is ready to rise immediately

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Entry after seeing no supply candle in an uptrend

No Supply candle means that there is a lack of supply and demand is overpowering supply causing the price to rise in the
future.
Please note that the No Supply candle is a continuation signal, not a reversal signal.

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The background is important here, this is only an entry to the long side if you have strength in the background, not
weakness means if it appears after bullish momentum

1. Since we have the Bullish momentum. We can go long during an uptrend whenever no Supply Signal appears
2. When you see No Supply with climactic action in the background this indicates higher prices so enter a buy order
above the high of the no supply candle

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SWING TEST FOR REVERSAL

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When the market is testing supply any down-move dipping into an area or price range where there was previous high volume
(previous selling), which then returns to close on, or near the high, on lower volume, is a clear signal to expect higher prices
immediately. This is a successful test. Lower volume depicts that the amount of trading that took place on the mark-down was
reduced, that now there is less selling when previously there had been a lot of selling. At this point, it is now important to see how
the market- reacts to the strength seen in the testing.

Characteristic of SWING testing candle

1. A down bar, on reduced volume and narrow spread

2. The key is the volume. It should be less than the previous two bars
3. Closes can be on the lows, but better when in the middle or near the high
4. Follows a Sign of Strength (selling climax or stopping volume)

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ENTRY AFTER SEEING SWING TEST

YOU MUST have strength in the background, such as stopping volume or selling climax. Place a stop under the low of the
climactic bar and place a buy order above the test bar. A test can fail and you can re-test an area several times before the market
moves up, so placing an order above the test lets the market come to you. If the test fails you are not in the position.

Results based on testing volume

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28/09/2022, 19:59 Finding Entry Opportunity using Volume Spread Analysis in Trading

LOW VOLUME TEST

HIGH VOLUME TEST

If there is still too much supply a test can fail and if you see a failed test in a weak market it confirms that the market will continue to
fall.

If the stock recovers to the high and the volume is low it would mean that there was no supply. If the volume is high and if the price
fails to recover it would mean that there is still supply present.

Low volume test

When the market is testing supply any down move dipping into an area or price range where there was previous high volume
(previous selling ), which then returns to close on, or near the high, on lower volume, is a clear signal to expect higher prices
immediately. This is a successful test.

Lower volume depicts that the amount of trading that took place on the mark-down was reduced, that now there is less selling
when previously there had been a lot of selling. At this point, it is now important to see how the market- reacts to the strength seen
in the testing.

With the test now confirmed the insiders can move the market higher to the target distribution level, confident that all the old selling
has now been absorbed

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What price action should follow after a successful test?

If you are in a bearish market, you may see at times, what appears to be a successful test. However, if the market does not
respond to what is normally an indication of strength after a successful test, then this shows further weakness.

Any testing that does not respond immediately with higher prices, or certainly during the next candle or so, can be considered an
indication of weakness. If it were a true sign of strength, the smart money would have stepped in and would be buying the market –
the result of this smart money support would be the beginnings of an upward trending market. The specialist or smart money is
never going to fight the market. If in the smart money view, the market is still weak these days, he will withdraw from trading. The
market will then be reluctant to go up, even if it looks as if it should go up because there was little or no selling on the ‘test’ candle

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High volume test

However, what if the test fails and instead of low volume appearing there is high volume, which is a problem? This has resulted in
sellers returning in large numbers and forcing the price to lower.

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While a higher volume test usually results in a temporary move and will be a re-test of the same price area again at a later time.
This action sometimes results in a “W/M” pattern. This volume price action is sometimes referred to as a “double bottom
(W)/double top (M)”. The “W” shape volume price action results from the action of re-testing an area that had too much supply
before. Vice versa for the “M” pattern

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28/09/2022, 19:59 Finding Entry Opportunity using Volume Spread Analysis in Trading

Please watch the following video if you want to learn and understand How to Find the Entry Opportunity using Volume Spread
Analysis in the Trading concept in a better way.

In the next article, I am going to discuss Spring and Upthrust Trading Strategy. Here, in this article, I try to explain Finding
Entry Opportunities using Volume Spread Analysis in Trading. I hope you enjoy this Finding Entry Opportunities
using Volume Spread Analysis in Trading article. Please join my  Telegram Channel  and  YouTube Channel  as well as
my Facebook Group to learn more and clear your doubts.

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