How to Read Volume Profile Structures

There is a small monthly fee, but the power of the volume profile is worth every penny. To learn more about this strategy, check out Optimus Futures’ weekly trading ideas on TradingView. This week’s idea looks at spots where price climbs into a low volume node on low volume, setting up a fading opportunity. The B-shaped profile occurs when there are two D-shaped profiles inside the specified period.

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It refers to an auction process that creates two or more areas of value via a noticeable volume accumulation in the histogram. In the majority of cases, we will have the creation two distributions, less so a triple distribution structure. In the illustration below, you can find an example of a double distribution day.

One of the key lessons from the tutorial about the 4 Pillars in Forex included the relevance of the bell curve, which happens to be one of the backbones’s behind statistics and probability theory. It is also essential to understand for you as a trader if you are going to dig deeper into the study of volume profiles. Let’s say that you wanted to play a short in the EUR/USD 30m chart after the breakout of the range. A fairly conventional strategy would have been to wait for the price to break below the two horizontal support levels and enter short on a retest of either one of them. The next logical question would then be, where would you place your stop? If you are trading conservatively, you’d probably be placing your stop somewhere above the 1.16 in order to leave enough wiggle room in case the rebound returns back into the range.

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The price zone from which a news-based impulsive move was initiated. Due to the nature of the move, the area between the Scene of the Crime and where it is before it retraces remains unauctioned and is therefore susceptible to a retest. Just like a criminal might return to the scene of the crime out of curiosity, the market often does the same. While it varies between futures contracts, it is important to remember that changes to the original order, most often results in the order being placed at the back of thequeue. The Limit Order may be filled in a different sequence than its place in thequeue.

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As with many technical analysis tools originally developed for commodity trading, Market Profile charts quickly favored forex traders. In addition, with the increasing popularity of day trading in the 1990s, many stock traders began to complain if their brokerage firm didn’t provide access to Market Profile data. Points 1 and 2 mark the low and high Virgin Points of Control of the trading session. This chart is also interesting due to the Market Profile indicator settings. This time we broke away from Steidlmayer and use the hourly profile and 5-minute bars, which helps us to see the day development with a much better dynamic pattern.

How to Use Volume Profile indicator on TradingView?

A key component of order flow analysis, Volume Profile can be used in a variety of ways. Displaying the concentration of volume distributed at each price level, Volume Profile can provide insight into what the market might do next. The line for the volume point of control will extend until it gets touched or covered up, sometimes you’ll hear it referred to as a naked volume point of control. Some traders will trade this as a support level if the market is above it and a resistance level if the market is below that VPOC.

Volume profile takes each price point and tells us, how many transactions happened at each price point. It is in these type of retracements that we may see the best opportunities to engage in buy-side business as the pricing of the pair returns to retest an area where sellers got trapped the previous day. Unlike the previous subcategory, we now find ourselves with a bullish structure forming an L-shape .

High Volume Node HVN

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This is the same as a VPOC addressed below but it refers to the VPOC of a Micro-Composite (MC – Micro-Composite). It shows the most accepted price of a balance range within the Composite Profile. Head Traders at CT are typically using the 132.8%, 150%, 161.8%, and 200% extensions as potential key levels. When a trader places a limit order, the order is placed in the ‘Limit Order Book‘ where generally, there will be other limit orders already queuing. The position in the order queue can have an impact on the ability of traders to have their limit orders filled at the price they have designated. Lifting the Offer is when buyers are willing to trade at the next best availableOffer price, rather than waiting for aLimit Order to be filled at the currentBest Bid price.

The market seeks out value and moves from value area to value area. In the case of individual bars, it moves from Point of Control to Point of Control. You have often heard me talk about how the Point of Control can act as support or resistance in the next bar in a sustained move. However, where the Point of Control appears in a bar is important from a market structure stand point.

That is, if price opens completely above the previous day’s profile, price could potentially open up and continue to “run” up the entire session. Conversely, if price opens completely below the previous day’s profile, this could be interpreted as a potential runner on the short side. Volume-by-Price are helpful for identifying important price levels where a lot of traders have placed trades. Very often people confuse time with volume and think that the price the market traded at the longest would have the most volume, but this is a misconception.

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Depending on the trading platform and stockbroker used, professional traders will have to pay anywhere between $50 and up to $500 to get access to the online volume profile. Futures trading contains substantial risk and is not for every investor. Risk capital is money that can be lost without jeopardizing ones financial security or life style. By default, Volume Profile displays in the expansion area to the right of the price chart. But you can change the settings to have it displayed over the price chart . The advantage of viewing it this way is that you get more of a “big picture” view.

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It’s one way to utilize the volume information contained on these TPO Profile Charts. The composite profile shows support and resistance areas and general state of the market. Pay more attention to VA boundaries, when the price moves within a range, since they form strong levels of support and resistance. We purposefully removed prices from this chart and left profiles of each trading day only.

Can I buy a stock and sell it the next day?

There are no restrictions on placing multiple buy orders to buy the same stock more than once in a day, and you can place multiple sell orders to sell the same stock in a single day. The FINRA restrictions only apply to buying and selling the same stock within the designated five-trading-day period.

Market attempts to continue in a prior direction and is met with fierce opposition and off to the races it goes. This is like an Open Drive, but it has gone to an area that did not meet with acceptance. OTF has found an area of conviction to participate in the opposite direction. A limit order is an order to buy or sell the market, up to a maximum or down to a minimum price specified. This describes a day which has 2 acceptance distributions or High Volume Nodes separated by an Low Volume Node .

Where to get the Volume Profile Indicator

What you need to know about Point of Control, how it is calculated and what it really means to traders. Point of Control is an important tool not just for order flow traders but also for any really interested in what is happening in the market. Hi Scobby, I use volume-based tp which I explained in my 15+ hour volume profile course. You can also use a fixed tp/sl range or even further align it with the volatility using ATR.

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However, its accuracy, completeness, or reliability cannot be guaranteed. The official blog of Tradovate, exploring futures trading from issues to innovations. Do you remember that the price stops and strikes a balance after a focused or trend movement? That is, if you see b- or p- shapes of the Market Profile, you should expect the bell shape or balance after them. These are not strict rules – just general observations of how the auction trading occurs. The price movement exceeds the Initial Balance area approximately in two times on such days.

Do you have a trading or investing definition for our dictionary? You will earn 150 bonus reputation points for each definition that is accepted. The “value area” – bounded by the value area high and value area low – contains the price range within one standard deviation from the POC. Use the 80/20 rule when the price comes back to the previous day VA. Market Profiles with settings of display of the hourly VA and POC level only.

Can Volume Profile Used for Day Trading?

Making sure each trade taken passes the five-step test is worth the effort. The strategy is when you see the price is going up or going down and it goes through major HVNs; it shows you the momentum is on that side. You should wait until the price goes through HVNs successfully and arrives in a zone in which lots of LVNs are there. As a POC can change over time, you can see the change by looking at the Developing POC line and what it was in the past. A Developing Value Area is a value area that is changing over time.

As we can see from the table, nearly 30% of trading days were wasted. Jan Firich decided that one of the reasons of shortage of days might be a subjective assessment of how much the price exceeds the initial range on days of various types. If we assume that the price exceeds the eur to cad forecast initial range not in 2 but in 1.5 times on a normal variation day, the data will change. It is easiest to illustrate what a Weak Low by discussing what a Strong or Excess Low is. This generally leaves a buying tail on the chart and little in the way of volume on the profile.

While ShadowTrader calculates its value areas and points of control using volume exclusively, we are always very aware of where the TPO POC is and it’s relation to current prices or patterns in the profile. Volume profile shows traders where and how much volume has traded so far in the trading session. Because it is dynamic and changes every time a new trade order is filled, it can be especially useful in intraday trading.

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