Delve into the Core of the Volume Power System
The Volume Power System (VPS) is not just a collection of indicators, but a philosophy for market interpretation. It is based on the fundamental principle that volume, when correctly interpreted in conjunction with price action (via Japanese candlesticks), reveals the true intentions of dominant players and the underlying dynamics of futures markets.
Volume: The Traditional Analysis!
Volume is a fundamental technical indicator in financial market analysis. It represents the number of units of an asset traded (stocks, futures contracts, cryptocurrencies, etc.) over a given period. Its importance is crucial for assessing the conviction, participation, and confirmation of a price movement. Here’s why:
Conviction Indicator
Volume measures the strength or weakness of a price movement. A price change accompanied by high volume indicates strong conviction among market participants.
- Rising prices with increasing volume: Buyers are numerous and confident; the upward movement is credible.
- Falling prices with increasing volume: Sellers are dominant; the market reflects genuine downward pressure.
A price movement without significant volume is often perceived as unreliable or speculative, likely to reverse.
Participation Indicator
Volume reflects the market’s level of interest in a given asset.
- High volume: Many participants are involved in trading. This indicates a liquid market, thus less “abnormal” volatility and more transparency.
- Low volume: Low participation, less liquidity, and therefore more risk of erratic movements.
Rising volume can also signal a shift in market sentiment: investors are starting to pay attention to an asset.
Confirmation Indicator
In technical analysis, volume is used to confirm price signals (support/resistance breakouts, chart patterns, etc.).
- A resistance breakout accompanied by high volume is generally valid and signals a continuation of the movement.
- A breakout with low volume can indicate a “false signal.”
Classic rule: “Volume must move in the direction of the trend.” In an uptrend, volume should increase on rallies and decrease on pullbacks.
| Role of Volume | Interpretation |
|---|---|
| Conviction | Validates the strength of a movement |
| Participation | Shows traders’/investors’ interest |
| Confirmation | Supports technical price signals |
Volume Power System: Revolutionizing Volume Analysis.
Philosophy and Key Principles of My System
This is where it gets interesting and surprising for our traditional trading knowledge, particularly regarding the impact and effect of significant volumes on price direction. What we have all learned, or rather, the majority of us, is that a large green volume signifies a buy, and a large red volume signifies a sell, whereas that is false!
If we start from the opposite, we will deduce that a large red volume signifies a buy and a large green volume signifies a sell; we truly arrive at the logic of supply and demand.
This means that a large buyer executing a market-impacting buy order will seek to buy cheaper, and a large seller executing a market-impacting sell order will seek to sell higher.
Finally, to better understand this, imagine the stock exchange as a broker who seeks to satisfy their clients. If you ask them to buy you securities or stocks or anything else, they will seek out the best low prices for you. And if you ask them to sell your securities or stocks for you, they will simply look for high prices.
To substantiate this, we must analyze and study specific cases.
Let’s start with the fundamental analysis of the 2008 economic downturn and the housing (mortgage) credit market crisis, such as companies related to mortgage loans or ETFs (Exchange Traded Funds) linked to mortgage services or banks.
Before 2006/2007: A Sector Deemed Solid, Almost Infallible
Excessive Confidence in Real Estate
- “Housing prices never go down.” → It was a widespread belief.
- The U.S. housing market was seen as one of the safest investments.
- Households, banks, and even governments saw real estate as a stable growth engine.
Massive Expansion of Mortgage Credit
- Explosion of subprime loans (granted to risky borrowers).
- Rise of complex products: CDOs, MBS (mortgage-backed securities).
- Banks earned a lot by securitizing loans, then reselling them as investment products.
AAA Ratings on Toxic Products
- Rating agencies (Moody’s, S&P, Fitch) assigned very high ratings (AAA) to products filled with high-risk loans.
- This created a false sense of security for institutional investors.
OK, everyone understood this in hindsight, which is normal. But the purpose of this is how our “VPS” concept can detect this to help traders profit or stop their losses. There were exceptional winners during this 2008 crisis. Some very insightful investors bet against the U.S. housing market—meaning they shorted (sold short) financial products linked to risky mortgage loans (subprimes). These investors made gigantic profits, sometimes historic.
Decode Market Maneuvers with the VPS
- Institutional Accumulation and Distribution Zones: “Learn to identify phases where ‘strong hands’ build or liquidate their positions, often signaled by subtle yet significant volume patterns.”
- Critical High-Probability Reversal Points: “Identify trend exhaustion and potential reversals when volume confirms a change in momentum suggested by candlesticks.”
- Solid and Validated Trend Continuations: “Filter out false breakouts and engage in established trends with increased confidence, thanks to volume confirmation.”
A Methodology for Seasoned Professionals
The system is designed for experienced traders, market analysts, and portfolio managers who seek to hone their “edge” and gain a deeper understanding of the market.
The Volume Power System is Clarity and Logic, Not a Black Box
The Volume Power System stands out from opaque approaches or ‘black box’ systems. It is not a magic formula or an esoteric theory. Each component of the VPS is based on logical and observable principles of market behavior, offering total transparency in its application. Our goal is to equip you with understanding, not dependency.
