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What is Volume Profile?

by Nagaraj Rudragouda Freelance SEO Expert

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.


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About Nagaraj Rudragouda Advanced   Freelance SEO Expert

86 connections, 32 recommendations, 482 honor points.
Joined APSense since, June 20th, 2016, From Bangalore, India.

Created on Oct 26th 2021 01:06. Viewed 209 times.

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