The volume
profile shows the volume traded vertically at a price. If a contract is traded
on the market, the volume profile point is like a volume. Traders can see where
the highest and least volume is traded at a price and interpret market
movements. In addition, the volume profile has three essential points that can
be marked automatically.
The VPOC means
the volume most traded on the price during a specific period. The volume area
with the two limits (high and low volume area) shows a place where more volume
is traded. There are different volume profile settings, and you can adapt this
tool to your trading style and strategy, which we will discuss in the following
sections.
Volume profile
data:
• Shows vertical
volume in price
• It can be
coupled to different time horizons
• Shows the most
traded volume (VPOC)
• Show value
area (most traded volume area)
• Configure the
volume profile of your trading strategy
What exactly is
volume?
The volume
profile displays the trade volume. Indicates that you matched a buyer and
seller (1 contract) for a volume. Limit orders are executed and eaten by market
orders to move the market. BID and ASK are two terms used on the stock
exchange. This is a limited-time offer. On a market order, the trader buys or
sells directly from it. There will be a volume if a contract is traded.
Remember that to trade; you'll always need a seller and a buyer who are
compatible. To gain complete knowledge about Volume Profile one must do Volume Profile Trading course.
Volume Profile
Highlights
The Volume
Profile can display more than the vertically traded volume in price. You can
activate VPOC (Volume Control Point) and volume area (the most traded volume in
an area). These are essential points and indicators to develop trading
strategies.
VPOC
The control
point represents the most-traded volume. It is essential for day trading. One
may mark the most traded volume of the day and the previous several days, for
example. Because it is a reasonable price, the market will frequently test this
location. Many merchants wanted to purchase or sell at this price because it
was fair.
Value Area
The value area
is divided into two parts: a high-value area and a low-value area. It's similar
to the VPOC, but instead of a price, it's an area.
Volume profile
trading strategies
The Volume
Profile is a highly versatile tool that may be tailored to any time frame. You
can link the tool to any period, whether you wish to trade short or long term.
Now we'll go through some straightforward trading methods.
Extend the VPOC
as a first step
The VPOC, as you
may know, is the most considerable traded volume. The market almost always
wants to return to the VPOC because the price is reasonable, and many traders
want to purchase or sell. You can use this method by dialing the VPOC from
yesterday and waiting for the first touch. Frequently, the price will react in
this area.
The trading
software can do this automatically, which will extend the VPOC line to the
initial touch. This strategy is compelling to win some ticks in the market. The
entries can be combined with the footprint chart to obtain a minimal stop loss.
Use the Volume
Profile to analyze the trend
With the Volume
Profile, you can quickly analyze the market trend using any technique. Traders
might pay attention to the volume area and seek a change in the volume area or
the inner day. Exploring the value area might help you detect trending or
ranging markets. However, keep in mind that this form of analysis can only work
with probabilities because trends can shift quickly.
Indoor day:
This means that
you will see the next value area being created in yesterday's value area. It is
often a range market, and the price will trade from the high-value area to the
low-value area.
Trend day:
The trend day
means a change in the value area. The highest volume is trading lower or higher
than yesterday. Indicates sellers or buyers who want to trade with new prices.
You will see a change in the volume profile.
Also, it can be
an indicator for the next day that the trend will continue. Analyzing the value
area and volume is very important to understand the chart and likely trends. We
recommend expanding yesterday's value area to see important price areas where
the market will perhaps react.
Trading in high
and low volume areas is a strategy
The fact that
the market is looking for liquidity also plays a role in this strategy. There
may be the most liquidity in the limited book, the most enormous traded volume.
You'll notice that the market spends a lot of time in the value zone. It's
because most merchants consider the price to be reasonable. Seventy percent of
the volume traded is in the value area.
One may search
for entries outside the value area and look for overrides. Wait for the volume
down. If the market does not want to operate, the market will seek new prices.
This can be an investment. You can expand the value was yesterday. If it hasn't
been touched, it will work very well.All of these strategies show you that the spots
and areas of the Volume Profile are significant. It is recommend to backtest,
analyze the charts along with doing Volume
Profile Trading course.