Introduction to Volume Price Analysis + "Insiders"
Introduction to Volume Price Analysis + "Insiders"
Volume Price Analysis (VPA) is the study of Insider Activity in the Markets.
Who are Insiders? Insiders can be classified as a general term when studying the activity in VPA. The Insiders can be defined as the group of the most influential and largest capital investors in the market that include and are sometimes referred to as, Market Makers, Hedge Funds, Other Funds, Large Capital Investors, Big Money, Professional Money, HFTS, basically anyone who is an arms reach from the trading floor. These are the Insiders when referring to VPA, not the Executives of the Stock Companies that are being traded, it is very important not to mix that up. It is functional to group this class of traders and label them Insiders, as in Insiders that know all the secrets of the market, can control the news, create the spread, trades in fractions of second, has billions to invest, and as much man power as they want to harness. We're talking about the groups of people that spend $300 million dollars to straighten out their fiber optic cable to shave fractions of a second off their order time.
Ok, these people are on the inside, that leaves everyone else in the world on the outside. They are Insiders, they invest with large capital, and in respect we (everyone else) are the Outsiders who trade with small capital. Small capital for the most part on it's own does nothing to a stocks price. However when Insiders invest, they use large capital, always, and it is usually the only time the volume will show up above average. Outsiders cannot spike volume, only Insiders can. They invest so much money it takes days to scale into the position and they are track-able because of certain volume patterns seen on the chart.
Above average volume, is always a sign that Insiders are participating, and it's easy to compute. The Volume to Price ratio is very simple, Effort (volume) must equal result (price move). A lot of volume should equal a large candle body, and a large wave/trend should be formed on increasing volume. If this calculation or ratio is not balanced then price is not validated by volume and what is called an Anomaly occurs. An Anomaly is the event that effort does not equal result, or the trend is not validated. This is simply suggesting that price may not behave the way it normally would. There are many reasons an Anomaly may occur. The Insiders may be shaking the market to remove the contrarian sentiment, they may be exiting their position, they may be entering their position, or it could be a market test where the Insiders are measuring the markets response.
To understand the nature of the Insiders it is appropriate to refer to their trades as campaigns. When the Insiders are campaigning to go long they are looking to buy stock at wholesale and sell it at retail (To sell short, vice versa). That's it, they use all their resources and power to do it, and Outsiders can follow along if the VPA is interpreted correctly.
This is my basic Intro to VPA I hope it helps to begin creating a clearer understanding of the market, I will include the source/s I used to study these concepts, although please allow some time I may post another lesson on VPA+Insiders called VPA+Insider 101, and the source/s may be posted there. Ok, if the source/s are not provided below look for them on my next post VPA+Insiders 101. Thank You, God Bless.
Volume Price Analysis (VPA) is the study of Insider Activity in the Markets.
Who are Insiders? Insiders can be classified as a general term when studying the activity in VPA. The Insiders can be defined as the group of the most influential and largest capital investors in the market that include and are sometimes referred to as, Market Makers, Hedge Funds, Other Funds, Large Capital Investors, Big Money, Professional Money, HFTS, basically anyone who is an arms reach from the trading floor. These are the Insiders when referring to VPA, not the Executives of the Stock Companies that are being traded, it is very important not to mix that up. It is functional to group this class of traders and label them Insiders, as in Insiders that know all the secrets of the market, can control the news, create the spread, trades in fractions of second, has billions to invest, and as much man power as they want to harness. We're talking about the groups of people that spend $300 million dollars to straighten out their fiber optic cable to shave fractions of a second off their order time.
Ok, these people are on the inside, that leaves everyone else in the world on the outside. They are Insiders, they invest with large capital, and in respect we (everyone else) are the Outsiders who trade with small capital. Small capital for the most part on it's own does nothing to a stocks price. However when Insiders invest, they use large capital, always, and it is usually the only time the volume will show up above average. Outsiders cannot spike volume, only Insiders can. They invest so much money it takes days to scale into the position and they are track-able because of certain volume patterns seen on the chart.
Above average volume, is always a sign that Insiders are participating, and it's easy to compute. The Volume to Price ratio is very simple, Effort (volume) must equal result (price move). A lot of volume should equal a large candle body, and a large wave/trend should be formed on increasing volume. If this calculation or ratio is not balanced then price is not validated by volume and what is called an Anomaly occurs. An Anomaly is the event that effort does not equal result, or the trend is not validated. This is simply suggesting that price may not behave the way it normally would. There are many reasons an Anomaly may occur. The Insiders may be shaking the market to remove the contrarian sentiment, they may be exiting their position, they may be entering their position, or it could be a market test where the Insiders are measuring the markets response.
To understand the nature of the Insiders it is appropriate to refer to their trades as campaigns. When the Insiders are campaigning to go long they are looking to buy stock at wholesale and sell it at retail (To sell short, vice versa). That's it, they use all their resources and power to do it, and Outsiders can follow along if the VPA is interpreted correctly.
This is my basic Intro to VPA I hope it helps to begin creating a clearer understanding of the market, I will include the source/s I used to study these concepts, although please allow some time I may post another lesson on VPA+Insiders called VPA+Insider 101, and the source/s may be posted there. Ok, if the source/s are not provided below look for them on my next post VPA+Insiders 101. Thank You, God Bless.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.