Wyckoff's third law says volume is effort and the price move is the result. Comparing the two, candle by candle, is one of the oldest and most practical ways to read what is happening beneath a chart.
When effort and result agree
A large candle on high volume, in the direction of the trend, is harmony. Lots of participation produced a lot of movement: the move is genuine, and likely to continue.
When they disagree
Big effort, small result: absorption
Very high volume but a small candle, often with a long wick, means huge buying (or selling) was met by an equally large opposite order. Someone absorbed all that effort. After a rally, it often means a large seller is distributing; after a decline, a large buyer is accumulating. Selling climaxes and buying climaxes in the schematics are classic examples.
Small effort, big result: no opposition
A large move on low volume means there was little on the other side to stop it. On a breakout from accumulation, that's bullish: the supply has been used up.
Rallies on falling volume: no demand
If price rises but volume shrinks with each candle, fewer buyers are willing to pay higher prices. The rally is running out of fuel, and often reverses.
| Volume (effort) | Price move (result) | Reading |
|---|---|---|
| High | Large, with the trend | Harmony: the trend is healthy |
| High | Small, with a long wick | Absorption: a reversal may be near |
| Low | Large | No opposition: the path is clear |
| Falling | Rising, but slowly | No demand: the rally is weakening |
| Low | Small pullback | No supply: a healthy pause in an uptrend |
Where to apply it
- At range edges: absorption at the top of a range warns of distribution; a low-volume test at the bottom suggests accumulation.
- On breakouts: does the breakout candle show harmony, or high volume with a small body that closes back near the level?
- On pullbacks: low-volume pullbacks in a trend are healthy; high-volume pullbacks deserve suspicion.
Key takeaways
- Volume is effort and the price move is result; compare them on every important candle.
- Harmony (big volume, big move) confirms a move; absorption (big volume, small move) warns of a reversal.
- Big moves on low volume show little opposition; rallies on falling volume show fading demand.
- Apply it at range edges, on breakouts and on pullbacks, comparing volume with the same time of day.