A quick beginners introduction to Volume Profiles.
I have added 3 different Volume Profile indicators to this VeChain 4hr chart as well as the normal volume bar.
Volume Profiles are made up of Histogram Bars which display buyer and seller trading activity. The volume Profiles are default Blue for Buy Volume and Yellow for Sell Volume. This buy and sell trading volume can be for your charts Visible Range (VPVR), a Fixed Range (VPFR) of your choosing, or a Session Range (VPSV). A session range is 24hrs so 1hr will be 24 Candles, 4hrs will be 6 Candles, 1D will be 1 Candle. Volume Profiles can also give you a sense of if the price may encounter potential resistance or support at certain price levels due to increased sell or buy volume located in certain price levels on the chart.
The Volume Profile Visible Range VPVR gives you trading activity values for whatever length you have your chart set at in whatever timeframe you are in, which is good for an overall feel but not good for a macro view of where the key volume areas are. Note that as you zoom in and out of your chart, the Volume Values and VPVR POC level will adjust. You can see that VET is below its Point of Control (POC) for this chart’s visible range.
The Volume Profile Fixed Range VPFR gives you a more macro view in a range of your choosing, you can clearly see that the VPFR gives you a better view of where buyer & seller volume is located and clustered in the range that you’ve selected, compare that with the VPVR at the same level, which doesn’t really give a clearer macro view of recent buyer and seller volume values.
The Volume Profile Session Volume VPSV, for this chart, gives volume levels for each 6 4hr candles or whatever timeframe you are in. A session is 24hrs so 1hr would be 24 candles, 6hrs would be 4 candles and 1D would be 1 candle. The VPSV gives you a more macro view of buyer and seller volume trading activity and where it is clustered. As you can see, each session has its own POC but i have only labelled the most recent one. VET is below its Point of Control (POC) for this 4hr timeframe. There is a HD version of the VPSV called VPSV HD, this version automatically adjust the histogram detail level when you zoom in and out of the chart.
A few extras you can add to any of your Volume Profiles are the Developing POC and Developing Volume area, i don’t really use these as i find a quick glance at the Volume Profile you are using can give you a sense of where the developing volume areas are located, but some of you may find these useful. You can also add the numerical values to any of these Volume profiles as i have done. You can also add or remove rows to increase or decrease the histogram size and smoothness to suite your preference.
Each Volume Profile tool is very useful, but the fixed range VPFR is my favourite because you can place it on any candle range of your choosing, even on just one candle which can give you even more of a macro view, which could be very useful to you especially if you are a scalper.
The volume bar at the bottom shows how each candle for whatever timeframe you are in closed with regards to buy or sell volume gaining the upper hand. Its default is Green for Buy Volume & Red for Sell Volume. You can also add a Moving Average to your Volume Bar as an indicator of potentially increasing or decreasing volume compared to your Volume Moving Average. I just keep the default 20 Period MA but you can change it to a period of your liking.
A very important thing to note is that any Volume Profile you use will only gives you the Volume traded for the Exchange Chart that you are using. So if you are using Binance’s chart, it will just show the buyer/seller trading volume for Binance, if your using a Bitfinex chart, it will show you just the buyer/seller trading volume for Bitfinex and so on.
An interesting thing to note is that when most other exchanges are strong buying such as Bitfinex & Bittrex, Binance is usually going completely in the opposite direction and strong selling. Binance is the biggest exchange and has the most Volume going through it, so when the market makers & Binance themselves short sell the market, all other exchange volume is irrelevant as Binance’s traded volume completely controls the direction of the market. You can clearly see this on ByBit Long vs Shorts, sometimes you’ll see most exchanges are over 50% long, but because Binance’s Longs will be below 50% the crypto asset you are trading…… drops like a tonne of bricks. You can also clearly see this when comparing the Binance, Bitfinex & Bittrex charts I’ve added, the massive buying volume meant nothing from these charts because Binance is mainly shorting. Quite a few times, I’ve seen an exchange on ByBit at 95% long & most others over 50% long for BTC, but because Binance was at 48% long so 52% short, BTC dropped. Crazy & this is just my opinion but that’s how it is.
Here is a comparison of Binance, Bitfinex and Bittrex charts:
Binance:
Bitfinex:
Bittrex:
Anyway enough of that rant. From my experience, Volume Profiles are very useful tools and should incorporate it into your trading strategy.
I hope this post hasn't been too boring or complete boll*x ;-). I hope this is helpful with your trading and hodl-ing.
I have added 3 different Volume Profile indicators to this VeChain 4hr chart as well as the normal volume bar.
Volume Profiles are made up of Histogram Bars which display buyer and seller trading activity. The volume Profiles are default Blue for Buy Volume and Yellow for Sell Volume. This buy and sell trading volume can be for your charts Visible Range (VPVR), a Fixed Range (VPFR) of your choosing, or a Session Range (VPSV). A session range is 24hrs so 1hr will be 24 Candles, 4hrs will be 6 Candles, 1D will be 1 Candle. Volume Profiles can also give you a sense of if the price may encounter potential resistance or support at certain price levels due to increased sell or buy volume located in certain price levels on the chart.
The Volume Profile Visible Range VPVR gives you trading activity values for whatever length you have your chart set at in whatever timeframe you are in, which is good for an overall feel but not good for a macro view of where the key volume areas are. Note that as you zoom in and out of your chart, the Volume Values and VPVR POC level will adjust. You can see that VET is below its Point of Control (POC) for this chart’s visible range.
The Volume Profile Fixed Range VPFR gives you a more macro view in a range of your choosing, you can clearly see that the VPFR gives you a better view of where buyer & seller volume is located and clustered in the range that you’ve selected, compare that with the VPVR at the same level, which doesn’t really give a clearer macro view of recent buyer and seller volume values.
The Volume Profile Session Volume VPSV, for this chart, gives volume levels for each 6 4hr candles or whatever timeframe you are in. A session is 24hrs so 1hr would be 24 candles, 6hrs would be 4 candles and 1D would be 1 candle. The VPSV gives you a more macro view of buyer and seller volume trading activity and where it is clustered. As you can see, each session has its own POC but i have only labelled the most recent one. VET is below its Point of Control (POC) for this 4hr timeframe. There is a HD version of the VPSV called VPSV HD, this version automatically adjust the histogram detail level when you zoom in and out of the chart.
A few extras you can add to any of your Volume Profiles are the Developing POC and Developing Volume area, i don’t really use these as i find a quick glance at the Volume Profile you are using can give you a sense of where the developing volume areas are located, but some of you may find these useful. You can also add the numerical values to any of these Volume profiles as i have done. You can also add or remove rows to increase or decrease the histogram size and smoothness to suite your preference.
Each Volume Profile tool is very useful, but the fixed range VPFR is my favourite because you can place it on any candle range of your choosing, even on just one candle which can give you even more of a macro view, which could be very useful to you especially if you are a scalper.
The volume bar at the bottom shows how each candle for whatever timeframe you are in closed with regards to buy or sell volume gaining the upper hand. Its default is Green for Buy Volume & Red for Sell Volume. You can also add a Moving Average to your Volume Bar as an indicator of potentially increasing or decreasing volume compared to your Volume Moving Average. I just keep the default 20 Period MA but you can change it to a period of your liking.
A very important thing to note is that any Volume Profile you use will only gives you the Volume traded for the Exchange Chart that you are using. So if you are using Binance’s chart, it will just show the buyer/seller trading volume for Binance, if your using a Bitfinex chart, it will show you just the buyer/seller trading volume for Bitfinex and so on.
An interesting thing to note is that when most other exchanges are strong buying such as Bitfinex & Bittrex, Binance is usually going completely in the opposite direction and strong selling. Binance is the biggest exchange and has the most Volume going through it, so when the market makers & Binance themselves short sell the market, all other exchange volume is irrelevant as Binance’s traded volume completely controls the direction of the market. You can clearly see this on ByBit Long vs Shorts, sometimes you’ll see most exchanges are over 50% long, but because Binance’s Longs will be below 50% the crypto asset you are trading…… drops like a tonne of bricks. You can also clearly see this when comparing the Binance, Bitfinex & Bittrex charts I’ve added, the massive buying volume meant nothing from these charts because Binance is mainly shorting. Quite a few times, I’ve seen an exchange on ByBit at 95% long & most others over 50% long for BTC, but because Binance was at 48% long so 52% short, BTC dropped. Crazy & this is just my opinion but that’s how it is.
Here is a comparison of Binance, Bitfinex and Bittrex charts:
Binance:
Bitfinex:
Bittrex:
Anyway enough of that rant. From my experience, Volume Profiles are very useful tools and should incorporate it into your trading strategy.
I hope this post hasn't been too boring or complete boll*x ;-). I hope this is helpful with your trading and hodl-ing.