Hello Tradingview,
Thank you so much for providing traders such a beautiful platform and it will not be an exaggerating that you are the idea master as your idea for adding community and allowing users to interact with each other and sharing knowledge with each other has changed the of trading of many.
Today I want to write something about one of your great addition to the system , that is FIXED RANGE VOLUME PROFILE which I believe would help many either in taking decisions or to filter the confusion.
The terms to be used in short
What is Volume Profile?
Volume profile is a charting feature (or indicator) that shows the traded volume amount of an asset, over a specified period at certain price levels.
Volume profile shows this data as a histogram in a Y-axis (vertical) next to price levels.
volume profile uses the past traded volume and all of the strategies and plans are coming from historical data.
POC --
Price Of Control, The point of control is simply the price at which the largest trading volume has been made over a period of time (buy/sales). This point is a rare point in the market because it is an indicator that can be observed before and not exactly when the price change occurs.POC or Point of Control is the highest volume node on the volume profile.
The point of control is the longest volume bar on the volume profile and there are lots of volumes transacted there.
Traders use POC as support and resistance or an important retest point.
Value Area (VA)
A Value Area or VA is where 70 % of the volume is located in the volume profile. Determined from surrounding nodes of POC.
In this area, the volume profile gets a little complicated.
what this means is that 70 percent of total volume transacted on the chart had occurred cumulatively at these price levels which are called Value Area or VA.
The Value Area is a Market Profile concept.
This is an area demarcated by 2 prices which bound the "most traded in" part of a time period.
Technically the value area is 1 standard deviation away from the most traded at price which is the price which has the highest number of TPO's. This price is also known as the Point of Control (POC).
Each time that the market trades at a price during a half hour bracket a letter is added to that price (one per half hour) and a vertically aligned bell curve is created. The middle chunk of that chart is the Value Area.
Typically, the upper and lower prices of the Value Area, know as Value Area High (VAH and Value Area Low (VAL) are seen as support and resistance lines - in their simplest terms.
Developing Point of Control (Developing POC)--
A Developing Point of Control is a change of POC over time. As a POC can change over time, you can see the change by looking at the Developing POC line and what it was in the past.
Developing Value Area (Developing VA)
A Developing Value Area is a value area that is changing over time. As the value area changes over time, you can see the change by looking at Developing VA.
Developing VA is determined on the price action and is shown by two lines which show both Value Area High and Value Area Low over time.
Volume Profile Rules
You can identify market states with a volume profile. When you found out what market state you are in, these rules tell you what to look for in volume profile in different market states.
If the price is consolidating (ranging price):
Value Area will be located in the middle of the volume profile.
The price will bounce between HVNs and LVNs
If the price is trending upward (uptrend):
The value area will be located at the bottom of the volume profile.
The price will likely retrace to Value Area High
If the price is trending downward (downtrend):
The value area will be located on the top of the volume profile.
The price will likely retrace to the value area low.
Clearance
A Clearance is an area in the volume profile in which only LVNs are located, and there are no HVNs(high volume node) on that area.
If price enters, this territory expects the price to fall or rise very quickly until it hits a significant HVN.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.(literature copied from the internet).
Now if we analyze US 100 chart with this strategy, from the weekly chart, taking last 20 weeks as history, we see that POC line becoming 14990 and it was hovering around 200 points since last four weeks, but could not break the POC. Fibonacci level 2.272 is coming at 15422 and this beautiful FIXED RANGE VOLUME PROFILE is indicating that a new value area is developing around 15443, and here this indicator becoming special from other indicators as we have got a point 14990 as POC, which will act as a long term support, fibonacci level 2.272 , at 15422 will act as an immediate support if it gives a close above it today as it will be a daily close along with a weekly close.And this move can be considered as a real break out, not fake.
This indicator becoming special for this kind of market behavior where either new highs are forming continuously or new lows are forming continuously , I mean where traders becomes confused and make a mistake . Finally hopes start trading waiting & waiting and often ends in a tragedy.
I believe from the above logical calculations, a conclusive assumption can come out that it will be a buying call which can be more profitable rather to sell like a gambler. And coming to this conclusion, the contributions of this indicator is worth praising.
Thank you once again Tradingview.
Thank you so much for providing traders such a beautiful platform and it will not be an exaggerating that you are the idea master as your idea for adding community and allowing users to interact with each other and sharing knowledge with each other has changed the of trading of many.
Today I want to write something about one of your great addition to the system , that is FIXED RANGE VOLUME PROFILE which I believe would help many either in taking decisions or to filter the confusion.
The terms to be used in short
What is Volume Profile?
Volume profile is a charting feature (or indicator) that shows the traded volume amount of an asset, over a specified period at certain price levels.
Volume profile shows this data as a histogram in a Y-axis (vertical) next to price levels.
volume profile uses the past traded volume and all of the strategies and plans are coming from historical data.
POC --
Price Of Control, The point of control is simply the price at which the largest trading volume has been made over a period of time (buy/sales). This point is a rare point in the market because it is an indicator that can be observed before and not exactly when the price change occurs.POC or Point of Control is the highest volume node on the volume profile.
The point of control is the longest volume bar on the volume profile and there are lots of volumes transacted there.
Traders use POC as support and resistance or an important retest point.
Value Area (VA)
A Value Area or VA is where 70 % of the volume is located in the volume profile. Determined from surrounding nodes of POC.
In this area, the volume profile gets a little complicated.
what this means is that 70 percent of total volume transacted on the chart had occurred cumulatively at these price levels which are called Value Area or VA.
The Value Area is a Market Profile concept.
This is an area demarcated by 2 prices which bound the "most traded in" part of a time period.
Technically the value area is 1 standard deviation away from the most traded at price which is the price which has the highest number of TPO's. This price is also known as the Point of Control (POC).
Each time that the market trades at a price during a half hour bracket a letter is added to that price (one per half hour) and a vertically aligned bell curve is created. The middle chunk of that chart is the Value Area.
Typically, the upper and lower prices of the Value Area, know as Value Area High (VAH and Value Area Low (VAL) are seen as support and resistance lines - in their simplest terms.
Developing Point of Control (Developing POC)--
A Developing Point of Control is a change of POC over time. As a POC can change over time, you can see the change by looking at the Developing POC line and what it was in the past.
Developing Value Area (Developing VA)
A Developing Value Area is a value area that is changing over time. As the value area changes over time, you can see the change by looking at Developing VA.
Developing VA is determined on the price action and is shown by two lines which show both Value Area High and Value Area Low over time.
Volume Profile Rules
You can identify market states with a volume profile. When you found out what market state you are in, these rules tell you what to look for in volume profile in different market states.
If the price is consolidating (ranging price):
Value Area will be located in the middle of the volume profile.
The price will bounce between HVNs and LVNs
If the price is trending upward (uptrend):
The value area will be located at the bottom of the volume profile.
The price will likely retrace to Value Area High
If the price is trending downward (downtrend):
The value area will be located on the top of the volume profile.
The price will likely retrace to the value area low.
Clearance
A Clearance is an area in the volume profile in which only LVNs are located, and there are no HVNs(high volume node) on that area.
If price enters, this territory expects the price to fall or rise very quickly until it hits a significant HVN.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.(literature copied from the internet).
Now if we analyze US 100 chart with this strategy, from the weekly chart, taking last 20 weeks as history, we see that POC line becoming 14990 and it was hovering around 200 points since last four weeks, but could not break the POC. Fibonacci level 2.272 is coming at 15422 and this beautiful FIXED RANGE VOLUME PROFILE is indicating that a new value area is developing around 15443, and here this indicator becoming special from other indicators as we have got a point 14990 as POC, which will act as a long term support, fibonacci level 2.272 , at 15422 will act as an immediate support if it gives a close above it today as it will be a daily close along with a weekly close.And this move can be considered as a real break out, not fake.
This indicator becoming special for this kind of market behavior where either new highs are forming continuously or new lows are forming continuously , I mean where traders becomes confused and make a mistake . Finally hopes start trading waiting & waiting and often ends in a tragedy.
I believe from the above logical calculations, a conclusive assumption can come out that it will be a buying call which can be more profitable rather to sell like a gambler. And coming to this conclusion, the contributions of this indicator is worth praising.
Thank you once again Tradingview.