Accumulation

[Jillion 10]

Hi Guys :missy:

 

Currently studying volume analysis and wondered please would an experienced trader be able to confirm please my understanding of the accumulation phase:

 

'If we see accumulation during a long term range, we should see shrinking volume near support levels and an expanding volume near resistance.'

 

Am I right in the thinking that 'Smart money' is buying into the downmoves off of resistance and this represents the expanding volume near the range top, and also would it be correct to say that the low volume at the support levels is absorption. ie. the buyers are absorbing the selling and hence the low volume?

 

Thanks in advance for any help, it can be a bit confusing at first starting out with volume analysis!

[luigizerozero 10]

I assume you already found your answer as this post is over 2 years old. But I will answer it here as it might help others. It would be great if others would shed some light as well.

 

From Wyckoff days, accumulation and distribution are each divided into phases. This link best explains it.

http://www.hankpruden.com/MTWyckoffSchematics.pdf

Hank Pruden, btw is someone you should look up and study if you're interested in VSA.

 

What you're referring to should be the period of trading range where prices enter a rigorous shakeout period, or congestion period. As the name implies, there's no real trend in this phase just massive shakeouts and illusions of trend reversal or continuation.

 

With that in mind, you're right in saying that volume will go up near resistance (top) as smart money is dumping and retail investors are entering in the hope of a new bull trend. I'm not sure if volume necessarily shrink at support levels. I will only say that low volume and low spread will be the dawn of a new trend coming.

 

Hope this helps.

[bonz 10]

Thanks alot luigizerozero.I have been going through VSA for the last 3 months and i find it really informative.Knowing where the smart money are taking prices is very crucial and that is what really differentiates professional traders from novice traders.I would want to get your contacts,preferrably your skype name.I really believe in sharing ideas since thats the only way we can grow.Thanks.Look forward to hearing from you

Regards

Bonz

[JohnTrading 10]

Thanks for the explanation luigizerozero and I will get Hank Prudens book, it looks very good.

 

 

I assume you already found your answer as this post is over 2 years old. But I will answer it here as it might help others. It would be great if others would shed some light as well.

 

From Wyckoff days, accumulation and distribution are each divided into phases. This link best explains it.

http://www.hankpruden.com/MTWyckoffSchematics.pdf

Hank Pruden, btw is someone you should look up and study if you're interested in VSA.

 

What you're referring to should be the period of trading range where prices enter a rigorous shakeout period, or congestion period. As the name implies, there's no real trend in this phase just massive shakeouts and illusions of trend reversal or continuation.

 

With that in mind, you're right in saying that volume will go up near resistance (top) as smart money is dumping and retail investors are entering in the hope of a new bull trend. I'm not sure if volume necessarily shrink at support levels. I will only say that low volume and low spread will be the dawn of a new trend coming.

 

Hope this helps.