What is Volume Profile??? Volume Profile is an indicator that shows us the amount of traded asset at a certain price level. It shows the data we needed as a histogram in Y-axis next to the price levels.
Difference between Volume Indicator and Volume Profile??? There are two major differences in these important indicator. As we spoked, Volume Profile is defined as Y-axis histogram next to the price levels but the Volume Indicator is based in X-axis bellow the price chart. The other major difference is that, Volume indicator shows the volume parameter by time. for more information, I can tell you that Volume Indicator tells us how many trades happens at specific timeframe. Unlike Volume Indicator, Volume Profile tells us How many trades were made at a specific price level. The longer the bar is, it shows are the more trades were made on that certain price point.
Three different types of Volume Profile:
Visible Range (VPVR): Volume Profile Visible Range (VPVR) is the simple one that most traders use it. As we spoke above it is put next to price levels as histogram. VPVR is automated, that means it shows the volume traded in the price level from the candles shown on your screen. If you zoom in/out or go back and forth in your chart, the VPVR will change also.
Fixed Rage (VPFR): Volume Profile Fixed Ranged (VPFR) is more likely to VPVR with a tiny difference. You can define the start and endpoint for this type of Volume Profile in specific time period, when you want to see the traded volume in that period time of price action As you can see in it's name, the benefit of VPFR is that the Volume Profile will not change by scrolling in the chart. So you can always stay focused in your desired selected amount of candles.
Session Volume (VPSV): Me Myself, see VPSV as the most exciting one. Volume Profile Session Volume show the Volume Profile for all sessions shown on a chart. You can see a divided Volume Profile for each session presenting on the chart. Each session is considered as a day no matter with time frame you're looking at.
Volume Profile different pieces:
High Volume Node (HVN): HVN is a point in Volume Profile where there is a lot higher traded volume than average. I believe the most feature in Volume Profile is to show us the most traded prices for specific time periods and that's what we call it HVN or High Volume Node. You can find HVNs as those bars that are much longer that others around them.
Low Volume Node (LVN) LVN is exactly defined as the opposite of HVN. In these areas there are much less trades has occurred. So we will see shorter bars in LVN.
Point of Control (POC) POC is the highest volume node on the Volume Profile. The point of control or POC is the longest volume bar or sometimes shown as a line that shows us most of the trades happens around it. You as a trader can use POC just like support and resistance area or an important retest point in that session.
Value Area (VA) VA is 70% of the volume or trades happens there. We consider VA as the surrounding area of POC.
How to trade with Volume Profile???
If the price is consolidating: Value Area will be located in the middle of the volume profile. The price will bounce between HVNs and LVNs. So you can move into positions around HVNs and LVNs.
If the price is trending upward: The value area will be located at the bottom of the volume profile. The price will likely retrace to Value Area High. So you can move into positions around VA and take profit around HVN.
If the price is trending downward: The value area will be located on the top of the volume profile. The price will likely retrace to the value area low. So you can move into positions around VA and take profit around LVN.
You can trade breakouts by using a Volume Profile. It is less risky to trade breakouts when you use a Volume Profile. I mean you may still get caught by a false breakout, but if you learn the correct way of using volume profile, you will be more right than wrong in a series of trades. 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 (low volume nodes) are there. You can buy (if the price is going up) or sell (if the price is going down) through the LVNs.
---IMPORTANT--- Volume Profile is a valid strategy for trading. But as all the traders have experienced it, every strategy has it's own risks. So, I strongly recommend you not to use Volume Profile alone in you trading. I suggest you to learn and practice some other strategies. Use them in your your trades as you're using Volume Profile as a confirmation for your trade...
I hope I could tell you what ever you need to learn about Volume Profile (Market Profile), So you can now easily trade with this tremendous indicator. But, if you need more information you can ask whatever you like about Volume Profile. I will try my best to help you.
Great content! I use the volume profile to locate support/resistance areas, draw them on a chart and then delete the volume profile. And I'll watch for breakouts through those areas. So very similar approach.
ArshiaZojaji
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@drewby4321, I'm glad you liked it.. I agree with you, volume profile do a great job giving us support/resistance area. But I want to ask just for my curiosity, do you do intraday trading or you're a swing trader?? because I believe volume profile can do a lot more than just highlighting support/resistance areas. thanks for your comment by the way.. :)
drewby4321
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@ArshiaZojaji, I'd consider myself a position trader, but lately it feels more like swing trading. But anyway, the support/resistance areas (your HVN) are where I'd look to time entry/exits for positions. I expect a stock to move through an area of LVN rather quickly and if it doesn't, I'm suspect of what is going on. Similar to moving through gap areas.
ArshiaZojaji
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@drewby4321, It works well for position trading most of the times.. I wish you more knowledge, more profit my friend :)
Protixder
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@drewby4321, this look the real overtake by usdt whale
kkimani067
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can i download it on mt5
ArshiaZojaji
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@kkimani067, I didn't work with mt5, But I'm sure mt5 has market profile indicator, but it may be not free..
polysa
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Hi Do you know the correlation between the up volume (blue) and down volume (yellow) and price movement?
Based on my research, the up volume is the ask volume traded and vice versa.
I assume when the blue portion of the bar is greater than the yellow portion on a price, the market is in bullish sentiment, am I right?
ArshiaZojaji
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@polysa, Nice way I of thinking, As I don't use up volume in my strategies, I don't know you answer.. But I think your conclusion is not right, the up volume has a different meaning.. I found this article for you to read I believe it can help you my friend :)