Nick_Core

Volume Profile - Fixed Range/Session Volume/Visible Range

Education
BITFINEX:ETHUSD   Ethereum / U.S. Dollar
Volume Profile (The explanation here is extremely detailed. The actual use I explain is the second bottom half)

1. Introduction
2. Use Options
3. Terminology
4. Example
5. Conclusion


1. Introduction

The Volume Profile is an extremely useful tool that can give you an expanded view of actual price pressure if you struggle to find support levels.

There are a number of strategies the Volume Profile was designed to be used for, but I have found over the years most of it is useless in Crypto or it can be found with better methods. I will cover what I use it for in this educational piece.

Most traders use the default Volume indicator that measures Volume based on time instead of price levels. While this is semi useful, I remove that on all of my charts and use Volume Studies that are based on price levels for a more accurate view.

The Volume Profile can be found in the indicators section on TradingView shown in the link below.
https://imgur.com/Ez7z99g

  • As a note, I do change my settings depending on how I am using this indicator. I do enable Show Values, so I may see a detailed look at actual numbers. Also, I do change the amount of rows (Row Size) depending on how detailed of a look I need for the current situation. For the most part, I disable the P.O.C., Developing P.O.C., and Developing VA. I have found these features to clutter what I am looking at and not provide me with any kind of accurate or useful information. Some traders will disagree, but in reality they are just added features that rarely apply to crypto trading as a strategy. However, there may be times when they are useful and there is actual strategies that can be used, but I will not cover them because it will waste everyone's time.

    2. There are 3 different ways to use it:

  • Fixed Range- This is used for a set number of candles. Upon clicking this, you then select the area you would like to study. This is extremely useful when studying past fractals and how they would apply to current price action. Also, they are useful when studying how a catalyst or black swan affected the price of an asset for future theories and trading preparation.

    Shown below is a Fixed Range from December 10th to the 19th for Ethereum . ($415-$861)

  • Session Volume- This measurement takes the Daily close no matter what time frame you are viewing and sets individual measurements for that 24 hours.

    Shown below is a the last 3 days as of this writing for Ethereum .

  • Visible Range- This option is useful for quick views of price levels that automatically adjust as you zoom in and out of the chart. Whatever candles are visible on the chart, it shows trading Volume at those price levels.

    Shown below was Ethereum's last rally from $300-$1,425 and current correction. (Values have been disabled & row amount/size is set at 100)

    3. Terminology

  • Point of Control (P.O.C.) – The price level for the time period with the highest traded volume .
  • Profile High – The highest reached price level during the specified time period.
  • Profile Low – The lowest reached price level during the specified time period.
  • Value Area (VA) – The range of price levels in which a specified percentage of all volume was traded during the time period. Typically, this percentage is set to 70%. However, it is up to the trader’s discretion.
  • Value Area High (VAH) – The highest price level within the value area.
  • Value Area Low (VAL) – The lowest price level within the value area.
Comment: High Volume Nodes (HVN) are peaks in volume at or around a price level. HVN can be seen as an indicator of a period of consolidation. Usually there is a great deal of activity on both the buy and sell side and the market stays at that price level for a great deal of time compared to other levels in the profile. This can imply a “fair value area” for the asset. When price approaches a previous HVN (or fair value area) a sustained period of sideways movement is expected. The market is less likely immediately break through that price.

Low Volume Nodes (LVN) are the opposite. They are valleys (or significant drops) in volume at or around a price level. Low Volume Nodes are usually a result of a breakout rally or a breakdown. During a rally or a breakdown, there will typically be an initial burst of volume and then a significant drop off. The drop off can imply an “unfair value area” for the asset. When price approaches a previous LVN (or unfair value area), the market is much more likely to rally through or bounce off of that price level. Because it is seen as an unfair value area, the market will not spend as much time there compared to some other levels in the profile.

See: https://www.tradingview.com/wiki/Volume_...

4. Example

Shown above (The main chart at the top) is Ethereum on the hourly. I have Session Range (Values shown) & Visible Range (No Values shown) enabled.

The example here does not provide any trade opportunities, but does show the basic functions of this tool. We can see the Value Areas in purple that show the highest amount of Volume along with our buy pressure in green and sell pressure in red.

This indicator is a flexible indicator that allows you to adjust the settings depending on the situation you are viewing or the amount of detail you need to see. The main adjustments I make are the amount of rows (Row size) for expanded price detail, Values Shown (the actual amount of Buy vs. Sell in blue) and the time specifications (Fixed range, session range etc.).

Shown below is Ethereum on the daily with major levels of volume marked in yellow that line up fairly accurately with major Support and Resistance levels. Also seen is the Value Area with the most amount of volume in purple (Sell side) and blue (Buy side). These levels are great for marking as possible buy areas (Support) & sell areas (Resistance) depending if the price action is above or below the viewed zone.


5. Conclusion

As with any indicator, this should be used in conjunction with other tools such as clear trend lines and also the Ichimoku Cloud and similar Volume indicators to find an accurate support or resistance zone. As I move thru the various indicators in these educational ideas I will begin to connect the way these indicators should be used in tandem with each other.

When I first was learning the various indicators used for trading, I discovered that once I have an understanding of their functions, Technical Analysis began to fit naturally and mesh in a cohesive fashion similar to a puzzle. Learn what the image is of each puzzle piece (Indicators) and over time as you assemble the puzzle, the entire puzzles image (Price prediction) becomes clear.

The Volume Profile is a charting tool that truly does have a wide array of uses. Unlike many other indicators, there is little to no debate about Volume Profile’s usefulness. The data that is provided by Volume Profile is indisputable, leaving it to the trader to find new and creative ways to use it. Even though in its simplest form, it is a great reactive method for discovering traditional support and resistance areas, traders are still coming up with ways to chart the indicator in predictive or proactive ways.

Click like on this if you would like to learn about arming yourself with more trading tools. Thanks!

All posts are for educational purposes and are simply my views of markets conditions. Please see https://www.thetradingwizard.com/automation for access to free scripts.

Please do your own research and use my content to educate yourself.

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