medium · Volume Price Analysis validation
A trader identifies a 'Double Top' on a daily chart. The second peak has slightly higher price than the first, but the volume is 40% lower.
What VPA law is being applied?
- The Law of Supply and Demand; the lower volume proves that supply has been removed from the market.
- The Law of Effort vs. Result; less effort (volume) at the second peak produced a higher result, signaling a trap.
- The Law of Cause and Effect; the consolidation between the tops is the cause of the next big move.
- The Law of Institutional Markdown; the lower volume confirms that the insiders are now driving the price down.
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