In this section, we will address the importance of understanding Volume. Volume is the markets struggle between buyers and sellers.
Green Candles represent a time frame (15 min, 1 hour, 4 hour, 1 day, etc) where more people are buying versus selling
Red Candles represent a time frame (15 min, 1 hour, 4 hour, 1 day, etc) where more people are selling vs buying
Remember that volume bars represent both the buyers and sellers
This is why we need to pay attention to the candlesticks (Price Action) to understand who truly controlled the time period
By far, the best video I have ever watched on volume and its correlation to candlesticks (price action). Areas to note:
Low volume bars can continually move price in the same direction if there is building momentum (volume bars are greater than the previous)
Higher volume bars of opposing colors (red or green) does not always indicate a reversal. You need to confirm a reversal based on candlesticks (Price Action) and the next volume bars/candles.
How to spot traps and reversal trends. Click to see Volume Traps
While soaring green candles often make us confident about the momentum of the trend direction, lower candle volumes still play an important role in price action. This is an example of TSLA on a 15 minute chart.
Remember that the opening and closing candles will typically have the greatest volume each day.
Make decisions off the entire candle (15 minutes; not 11 minutes, 1 hour, not 45 minutes). Sometimes the final moments can be a reversal which disproves your thoughts.
When you become a more seasoned trader you can begin to include resistance into the equation to help you get in earlier. Until then, stick (get it? haha) to completed candles to make your decision and entry.
We will be using the the chart below from TSLA to showcase the correlation between volume and price action (candlesticks).
Areas to note:
First Red Candle (potential pullback/reversal or consolidation)
Large Green candle that follows first red candle (holds off reversal potential consolidation)
Rising four Green candles following the Second Red Candle, but smaller candles (Confirming bullish sentiment and consolidation)
Good thing because it is bringing us back to the 20 MA which allows us to consolidate at this price level to hold support
Two consecutive Red candles: first candle is greater than the volume of some of the previous green, second red candle is less than first red candle (weakened movement).
Three rising green candles (increasing green candle sizes) following two consecutive red candles (bullish movement)
5th red volume bar is greater than the previous three green volume bars (potential slowing of trend)
Rising two green candles after 5th red candle (continued bullish trend)
Remaining candles near days end