Recently, while watching the market, I thought of a classic problem—many people tend to overlook the divergence between price and volume signals when doing technical analysis. Actually, this thing is quite important because it can help you anticipate turning points in the market.

Simply put, price-volume divergence occurs when the price trend and trading volume move in opposite directions. You will see two common situations: one is the price rising while volume is shrinking; the other is the price falling while volume is increasing. The implications behind these two phenomena are completely different.

First, the situation where the price is rising but volume is decreasing, we call it volume-price top divergence. What does this usually mean? It indicates that the main players are not adding new buying pressure at high levels, but are just riding on previous positions to push the price up. Be cautious at this point, as the market may have already topped out, and a decline could follow soon. If you hold the coin, this is a sell signal.

Conversely, when the price is falling but volume is increasing, this is called volume-price bottom divergence. This signal is much better—it shows that although the price is moving down, the support at the bottom is strong, with a large amount of positions being absorbed. This often indicates that a rebound is imminent and can be a good buying opportunity.

Let me elaborate on two specific forms of these divergences. An increase in volume accompanied by a price decline often appears at the early stage of a downtrend. Why is that? Usually, after a period of rise, the market has accumulated a lot of profit-taking positions, and investors start selling, causing the price to turn downward. This is a clear sell signal.

On the other hand, a decrease in volume during an uptrend is common in the later stages of a rally. If the price continues to rise but volume shrinks, it indicates that the main players have high control, and a large portion of circulating positions are locked in. But be careful—if volume then suddenly increases again, it means the main players are offloading at high levels, which warrants caution.

To sum up, volume-price divergence is essentially telling you the true intent of the market. High volume at the top suggests the main players are exiting, so be prepared to sell; low volume at the bottom indicates accumulation, and the divergence can be a signal to buy. This logic is quite practical in real trading.

If you find this helpful, feel free to share it with your trading friends. These are practical skills for market observation—paying more attention to volume-price divergence signals can help you avoid many pitfalls.