Volume profile is a huge tool at one's arsenal should someone know what to do with it.
In this particular example of USDJPY, we can see un uptrend before running into correction. Therefore we draw a volume profile on the given trend to spot where the majority of the volume was traded by market participant.
Here is the interesting part, should price drop to our level those same buyers might show up again and decide to participate once more.
So why the price shows reaction to the level ??
The sellers who short up there need to exit at some point where would be the better point than where majority were buyers before? Therefore sellers don't risk getting into conflict with buyers and exit there.
I therefore set a buy limit order at that particular level.
Points to consider:
1. If there is an important news and price is close to your entry you might want to remove the order, chances are your SL gets hit.
2. Don't overtrade one level, meaning: don't trade multiple times on one level. I personally trade it 2 times only if certain factors are there. (for instance: how was the previous reaction ? did price reacted aggressively or not??)
Today (23/11) we have multiple news for USD that's why you need to be careful trading it.
In this particular example of USDJPY, we can see un uptrend before running into correction. Therefore we draw a volume profile on the given trend to spot where the majority of the volume was traded by market participant.
Here is the interesting part, should price drop to our level those same buyers might show up again and decide to participate once more.
So why the price shows reaction to the level ??
The sellers who short up there need to exit at some point where would be the better point than where majority were buyers before? Therefore sellers don't risk getting into conflict with buyers and exit there.
I therefore set a buy limit order at that particular level.
Points to consider:
1. If there is an important news and price is close to your entry you might want to remove the order, chances are your SL gets hit.
2. Don't overtrade one level, meaning: don't trade multiple times on one level. I personally trade it 2 times only if certain factors are there. (for instance: how was the previous reaction ? did price reacted aggressively or not??)
Today (23/11) we have multiple news for USD that's why you need to be careful trading it.
Comment:
News hit the market therefore aggressive selling resulted in a SL of our first order.