Volume profile trading system

Volume is the most effective tool in trading. Volume tools outweigh the influence of indicators for one simple reason.

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Volume leads to price and confirms a move. A move in either direction in the market accompanied by strong volume confirms the move. If it is on weak volume, that move will find exhaustion. This is because markets cannot go up with no buyers. The more buyers, the more it will move. This swing trading strategy is taught in more detail in our day trader pro package here , as well as in the options and swing trader package here.

If you want to learn more about the best swing trading charts timeframes click here. Before we can talk about the swing trading strategy, we need to dive deeper into the volume profile. Most traders are used to watching volume at the bottom of their charts. This volume is time-based, meaning that volume is printed every x minutes that pass by.

For this reason, most professional and successful traders use volume profiles in their regular analysis. Volume profiles plot volume on the vertical scale and show you how much volume has been traded at each price. On Trading View, the volume profile study can be added on a cumulative basis to encompass whatever is shown on the chart. Or on an intraday basis such as is demonstrated below. To identify the volume profile for a single day of price action. These volume profiles can show you at which price a heavy volume of shares traded.

On the right-hand side of the chart, right beside the price of the stock. In this case from August 2nd to August 12th, All of the volumes are reflected on the large volume profile on the right-hand side.

Because this will show you at which price large institutional traders are making trades and where there will be likely support and resistance in the near future. Also, this will show you where traders have open positions. Now that you understand how volume profile works, we can dive right into the swing trading strategy.

This, of course, is not advice. A trader should only do this if they have done the analysis for the trade and the trade meets all the criteria of their plan. The general market trend should be analyzed and a top-down, technical multi-timeframe analysis should also be implemented. Price action is your friend, no matter the market you trade.

Swing Trading Strategies: What is a Volume Profile?

To avoid too many losses, you can pull up a Fibonacci retracement and only enter until the price is at or before a If a stock price retraces beyond that, the current trend is likely over and has reversed. Start trading the reverse side with this same strategy. This is one of my favorite swing trading strategies and is even one of my favorite tools for day trading.

This information could be used in intraday trading. See Picture 5. There are two trading sessions in the chart — June 11 and 12, The first day was clearly a trend day and now we will tell you how this could have been understood in the process of trading by TPO. The price first moved down but closed higher and a tail appeared in the first candle.

In fact it means that buyers were losing their strength. Overlapping of various period prints one over another is called rotations. Rotation could be upward, downward or coincide with the boundaries of the previous print. Rotations mean the movement strength.

They could be calculated during a trading session or based on the results of the whole day. Maximum volume level is calculated in TPO by the biggest number of letters in one row. When prints are added at one price level, the number of letters in a row increases. POC moves during a trading session and its movements could be estimated by a number of letters. We want to remind you that the Initial Balance is the range where the price is traded during the first hour.

If the initial balance is narrow, the probability of its breakout in one or both directions at the same time is high. One more single print appeared. The further price decrease was to be expected. Single prints tell us that the market is unidirectional. If they start to close, it means that the market situation changed.

A balance was formed in the market in these periods because the profile shape in the lower part resembles a bell and prints are inserted in each other like nested dolls. Despite the trend day of sells, the maximum volume level stays on top.

If the trading session would have lasted for another half an hour, there would have been one more print and POC would have moved down, since the number of symbols in the lower part would have become one symbol bigger than in the upper part. It is strange to see such a correlation on a trend day of sells, but remember that POC just lacked time to move. The number of TPO could be calculated and POC movement direction could be forecasted during a trading session in order to understand who is stronger — sellers or buyers. The TPO value area is marked orange.

Single prints and the previous trading session levels slow down and reverse the price.

These levels could be taken into account in your trading strategy and the number of profitable trades could be increased. James Dalton also recommends position traders to work with the profile. A report could be drawn up based on the trading day results in order to analyse the price behaviour.

See Picture 6.

Volume Profile trading strategy – what happens with a timeframe?

Dalton provides a report, which consists of the following parts:. You may expect a certain price behaviour the next day based on these data. For example, a trend day of sells on the increased volume developed in the example provided. Long-term sellers would hold short positions. While conducting such an analysis, it is important not to take a certain position before trading starts, because a certain mood could interfere with seeing the whole picture in general.

The volume profile and TPO help to assess the market state without emotions and join the stronger participants. Use ATAS. Its advanced instruments for professional analysis will help you to act in harmony with the real market mood. All situations, discussed in the article, are provided with the purpose of getting acquainted with the functionality and advantages of the ATAS platform.

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