THE HAndbook oF TEcHnIcAl AnAlySISVolume leading price versus price leading Volume Does volume lead price?
Most practitioners will agree that without participation, that is, volume, price will
be unable to move in a significant manner. Nevertheless, technical buy and sell sig-
nals need not require much volume for them to appear on the charts. For example,
a small breakout of a very significant trendline may precipitate a larger breakout, in-
viting tremendous volume as the penetration becomes more obvious. In such cases,
price may be seen leading volume. With the widespread use of technical analysis
today, there may be a greater tendency for price to lead volume more frequently.
Volume Cycles in the financial Markets We may anticipate potential price
action using volume peak cycles that occur on an intraday basis in the markets.
The intraday volume cycle normally peaks around 1:30 p.m. to 2:30 p.m. GMT.
At these volume peaks, price will either reverse or continue, but very rarely
remain unchanged. We see this occurring on the 30‐min EURUSD chart as seen
fIgure 6.34 High Volume Reversal Bars on the Daily Chart of PowerShares DB U.S.
Dollar Bullish Fund.
Courtesy of Stockcharts.com
fIgure 6.35 Constant Volume Charts Indicating Bearish Reversal Bars.