How volume affects the market at key decision levels. A good way to think of this…
Imagine you’re driving a car, as you travel along the straight ( no support or resistance) we don’t need much fuel (volume) to cruise along. However, now we are approaching a hill (the resistance/support) If we continue without applying more pressure to the peddle and using more fuel (volume) we will stop and start to roll back down.
If the car is expected to keep going up a steep hill, do you think gently pressing the gas pedal would do the job? The forward motion of the car going up the hill can’t possibly be long-lasting unless there is more power (Fuel) applied, correct?
If we apply more pressure to the peddle and use more fuel (volume) we will continue up the hill (support/resistance) until we arrive on the flat.
What if you were to press the accelerator to its maximum capacity yet the car motion is still stagnant going up the hill? That would be another clue, right? Do you start to see how the study of volume can be of real value to tells us a story about the intentions of market participants?
As you can see in the example CHFJPY as we approach the resistance level our fuel starts to run out hence we failed to get up the hill. The same thing happened again a few months later!
Now imagine we are approaching the hill (support/resistance) and we put the pedal on full force and our car keeps on accelerating up the hill (creating large candles as we near the support/resistance), this would be a massive clue that we are about to break the hill (support/resistance)
I hope this helps you all understand volume a bit better and how it works!