low volume volume profile trading strategy

This clause on Volume Profile Trading is the opinion of Optimus Futures.

Samara Points:

Loudness profiles are hefty analytics that display where the most and least volume occurs in a tending flow, identifying a value range likewise as a point of control where the highest volume occurs.
Spell market profiles look at the time spent at for each one damage, volume profiles look up at the number of contracts or shares traded.
Traders use these profiles to identify areas of musical accompaniment and resistance, as well as spots unlikely to contain either.
Usual volume profile shapes include P-shape, D-shape, b-physical body, and B-shape.

Futures charts graph two data points: time and price.

Traders analyze this relationship to spring up strategies and ideas about the market.

This has led to several indicators including volume-weighted average Mary Leontyne Pric (VWAP), moving averages, and the like.

Volume profiles take these two concepts deeper, letting traders see how much or little action takes grade at different prices.

We had previously discussed volume analysis in the context of footprint charts.

Today, we deficiency to add another layer by dig into volume profiles, explaining what they are, how to read them, interpreting different shapes, and offering up a few strategies to get you started.

What Is A Volume Visibility

Volume Visibility displays trading activity over a circumstantial catamenia at certain price levels. Displayed as a horizontal histogram (see sample below), it shows significant price levels based on trading bulk.

Imputable its preference, the Volume Profile can also be referred to atomic number 3 Naiant Volume.

Savvy the price action in the linguistic context of bulk adds another level of analysis that helps traders make better decisions.

Volume profiles help traders identify key points within a given time period that nates act as patronage and ohmic resistanc.

These admit:

Point of control – A price level where the highest listed volume occurred, often represented with a yellow line of work.

Profile rock-bottom – The lowest price listed during the menstruum

Profile high – The highest price traded during the period

Prize area – A range within the profile where most of the volume occurred. Typically, traders volition use 70% as the benchmark. The range is bordered by the prise area high-stepping and broken.

Is Book Profile The Same As Market Profile?

Traders will often use the terms volume and marketplace profiles interchangeably. However, there is a central difference between the two.

Market profiles look at how polysyllabic a price traded at apiece pull dow, devising them time-based.

Book profiles look at how many contracts or shares are listed at a given level, making them volume-settled.

We also want to distributor point unstylish that volume profiles are related to but not the same as footprint charts.

Footprint charts dig into the intensity at the offer and ask or similar measures within all period.

But then, volume profiles look up at the aggregate trading volume for a time stop.

Identifying Support And Resistance Levels With Intensity Profile

Volume profiles work good at characteristic support and electrical resistance levels as a reactive method. That means they rely on bypast price movements.

So, if you'Re looking to try to find a spot above all-time highs in the market, bulk profiles won't beryllium of much help.

Traders often look for affirm and resistance areas at two key areas – high and forward volume nodes.

High volume nodes, like the point of control, are where heavy-footed amounts of volume were traded. These can entail 'antimonopoly value areas.' In possibility, markets are less potential to break through and through these areas.

You can identify high volume nodes as peaks in the volume visibility A shown below.

High Volume Nodes

Low volume nodes are the opposite. These appear as valleys in the volume visibility chart and represent points where less volume was listed. Low volume nodes can imply areas of discount or premium.

When markets approach these areas, they can constitute more likely to push through than other high intensity points in the loudness profile.

Low volume nodes

Types of Volume Profiles

In that location are tetrad intense types (or shapes) of intensity profiles: D, P, b, and B.

Each typecast corresponds to the distribution cut of the trading volume.

1: D-shaped Volume Visibility

Inside a D-shaped visibility, the highest level of trading volume occurs centrally. This indicates a balance between buyers and sellers. The price at which volume is greatest is known As the Point of Control (POC).

A D-shaped profile can indicate a market that lacks direction or is choppy. It can too meanspirited a period of integration before a breakout as institutional players establish a position (known as accumulation).

2: P-formed Volume Visibility

A P-shaped Volume profile occurs when the Price rises and then consolidates around a new point of see to it. The lower thin part of the P-shaped visibility shows a period of low trading volume. The wider upper part of the P-formed profile shows a new 'fair' price (POC) between buyers and sellers. This increases trading activity and a great deal indicates a bullish signal.

Typically, we expect to see a P-shaped profile approach the highs or after a price run. When information technology occurs near the highs, that's often a point where Price takes some time to consolidate before continued with the upward trend.

However, when we come up a P-shaped visibility left the lows, it can signal a short-covering rally or a reverse that can be used as a bullish accelerator to ride price high.

3: b-wrought Volume Profile

The b-attribute profile is the opposite of a P-shape. The b-shaped profile represents a period of sell-remove before the securities industry settles on a new price. As with the P-shape, the volume of trading natural process peaks A price re-balances. As noted, b-shaped profiles show a betray off geological period indicative of a pessimistic signal.

Like a P-shape in an uptrend, a b-shape in a downtrend is common and often points to an area of consolidation before price continues with a trend. Conversely, if we look a b-shape during an uptrend, it may indicate a reversal as bulls leave the food market.

4: B-shaped Book Profile

The B-shaped profile occurs when there are two D-shaped profiles inside the mere period. When analyzing B-shaped profiles, traders may separate them into heterogenous D-wrought profiles.

What makes B-shaped profiles unique is that we find inebriated volume nodes at two different points in the range. This creates bookends for price to bounce between A it consolidates. When we find this after a recent trend, this can signalise a hesitate before the trend continues. That's why we wishing to take line of which node provides stronger support or resistance.

B-shaped

Mass Profile Trading Strategies

Bullish Retracement

Like many breakout trades, optimistic retracements build happening an extant trend. Therein case, we search for a longer-term uptrend.

The premise is somewhat simple. We want to use a strong upwardl lunge followed away a consolidation period.

Next, we looking at for a break complete the range and a retest of the point of control. Also, we can look to a move from the top of the range into the point of control.

The point of control acts as a support level off to buy in the market for a yearlong swing swap.

The chart down the stairs shows how the point of control from the previous day's trading crop acted as support for the next wooden leg higher.

Bullish Retracement

Bearish Retracement

On the flip pull of the bullish retracement trade is the bearish alternative.

In the bearish alternative, we're using the momentum of a well-set downward go off into a consolidation range as our direction. We and then want to employment the point of ascertain every bit a impedance level accelerator to mount up the next affect lower.

Using the heating oil futures chart below, you can see how the previous day's point of control acted as resistance when price came back into information technology. We can use that level as a place to initiative a pessimistic position.

Bearish Retracement

The Low Loudness Fade

As mentioned, Volume profiles assure us which prices see the near and to the lowest degree add up of volume.

One way to take advantage of that is looking for setups where price climbs on low bulk into a premium or discount low volume node.

To learn more about this strategy, correspond come out of the closet Optimus Futures' weekly trading ideas on TradingView. This week's idea looks at floater where price climbs into a alto volume node on low-set volume, setting up a attenuation opportunity.

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Trading futures and options involve substantial risk of loss and are not suitable for whol investors. Past performance is not necessarily indicative of time to come results.