Everyone has heard about Volume Profile analysis, but few use it effectively.
In this thread, we're breaking down everything you need to know about the advanced tool.
Click here to level up your volume analysis game โคต๏ธโคต๏ธ
In this thread, we're breaking down everything you need to know about the advanced tool.
Click here to level up your volume analysis game โคต๏ธโคต๏ธ
1.) What is Volume Profile? ๐ค
Volume Profile is an advanced charting tool that displays trading activity at specific price levels over a specified time period.
Volume Profile is an advanced charting tool that displays trading activity at specific price levels over a specified time period.
On the chart, it plots a horizontal histogram to reveal areas where significant trading volume happened.
2.) Okay, that sounds similar to normal Volume. How are they different?
The core difference between Traditional Volume and Volume Profile is how they consider volume with respect to the time and price.
The core difference between Traditional Volume and Volume Profile is how they consider volume with respect to the time and price.
In other words, Traditional volume tells you when volume happened, and Volume Profile tells you where it happened.
3.) Volume Profile Terminology ๐ค
The Volume Profile tool has several unique components & terminology that you should know about as well.
The Volume Profile tool has several unique components & terminology that you should know about as well.
Point of Control (POC) โ The single price level in a given time period where the most volume traded.
Profile High โ The highest reached price level during the specified time period.
Profile Low โ The lowest reached price level during the specified time period.
Profile High โ The highest reached price level during the specified time period.
Profile Low โ The lowest reached price level during the specified time period.
Value Area (VA) โ The range in which a most of the volume was traded during the time period.
Value Area High (VAH) โ The highest price level within the value area.
Value Area Low (VAL) โ The lowest price level within the value area.
Value Area High (VAH) โ The highest price level within the value area.
Value Area Low (VAL) โ The lowest price level within the value area.
4.) Now, onto some tips & tricks ๐
Just like with most other tools or studies, Volume Profile has a number of uses.
Just like with most other tools or studies, Volume Profile has a number of uses.
One common strategy is to analyze where previous period value areas are vs. the current price. If current prices are outside of a previous period's value area, then it can be assumed that an asset is trending.
If price is still within a previous period's value area, then some may label that asset as being in a consolidation. Determining trend and consolidation are often used in conjunction with trend following and mean reversion execution strategies, respectively.
Another common strategy is to use "Virgin" Point of Control (VPOC's) as key levels in an asset. VPOC's are levels that haven't yet been retested and remain untouched by current price action since they were formed.
The idea here is that if there was lots of action at a certain price, then it's likely that the market's biggest participants have positions from that level. This can cause predictable behavior which keen-eyed traders can take advantage of.
Looking to get access to Volume Profile on your chart? There's still some time left in our Cyber Monday sale. Act fast!
tradingview.com
tradingview.com
Thanks for reading!
If you liked this thread, be sure to like the first tweet below, and share this with a friend. โค๏ธ
Cheers!
If you liked this thread, be sure to like the first tweet below, and share this with a friend. โค๏ธ
Cheers!
Loading suggestions...