Forex for a trader
Using volume profile in forex

Using volume profile in forexTrading Forex With Market Profile Trading Forex Majors Using Market Profile Techniques and Technical Analysis. Forex is the world's largest and most liquid financial market, and Market Profile is our tool to trade it. 10-Hour Online Course. One year of full access to lessons online. for only $550. Dr. Keppler, a Pioneer in the Development and Application of Forex Profile Strategies, has developed a set of unique and innovative trading strategies to capture lucrative opportunities in the Forex Market. Only a small percentage of Forex traders have discovered the analytical power of the profile. This course demonstrates how Market Profile concepts can easily be applied to Forex trading. Forex traders will have an opportunity to learn how to spot selling and buying tails, key auction levels, points of control, fair market price, market value parameters and areas of underdevelopment. The course presents actual examples of Forex trades using profile concepts and basic technical tools. The ability to identify when prices rise above a value area high or drop below a value area low can provide significant trading opportunities in the Forex market. These important developments are not evident or identifiable on any other type of chart. This course is designed to offer Forex traders an opportunity to understand and learn how to apply the Profile Forex Advantage. Learn to Apply the Market Profile Forex Advantage. Market Profile Charts and Concepts are a powerful analytical tool that can be applied to any electronically traded market. Market Profile Concepts can be applied to Forex, Stocks, Futures, Commodities and Bonds.

They are also suitable for position trading, swing trading as well as day trading. Some traders mistakenly believe that since the Forex spot market is not traded on a central exchange, the Market Profile Concepts can't be applied to the Forex market. Nothing can be further from the truth. While it is true that there is no central exchange for the Forex market, the profile provides a formidable and invaluable tool for the Forex trader. The Course Presents Profile Concepts in a Simple & Easy-to-Use Manner. The profile structure can be developed and analyzed for any currency pair. The conceptual framework of the profile design allows for a comprehensive and basic analysis of the market without numerous technical indicators and complex tools. Once a trader understands and learns to use the profile they discover a new world in the Forex market. They are able to identify and capture many opportunities that are simply not visible on traditional charts. The profile provides an organized structure and a logical basis for understanding and interpreting Forex market developments. Market Profile Easily Identifies Value In the Market. In buying or selling any financial instrument, it is extremely helpful for a trader or investor to know and understand where value is in the market relative to the current market price.

Market Profile makes it possible for a Forex trader to identify both long term and short term value in the market. Market profile is the only charting technique that can actually identify value in the marketplace for any currency pair. Once a Forex trader discovers the power and benefits of understanding market value they will be amazed that they were ever able to trade without it. Profile Identifies Key Support and Resistance Levels. The three-dimensional view of market action and the capability of organizing market data in a normal distribution pattern allows investors and traders to gain a tremendous insight into the market. A view that is not possible with conventional charting methods. The support and resistance levels on the profile chart are derived based on actual market activity and value parameters. As a result, these support and resistance levels are more easily and reliably identified by a Forex trader. Market Profile Structure Makes It Easy to Distinguish Between Trending and Non-Trending Markets. Any currency pair on the Forex spot market is continually moving between a state of balance and imbalance in the market. The profile makes it possible to monitor the balance points for the currency and transitions between balance and imbalance in the market as they occur. The profileЂ™s development and path of movement immediately unveils the existence of a directional trend or a sideways market . Thus making it possible to capture directional moves early in their development. In a trending market, the structure of the profile is narrow and long, while a balanced market is more developed and wider in structure.

The course explains the development for the various types of profile structures and the appropriate strategies required to trade them. Market Profile Helps Traders to Accurately Project & Forecast Price Targets. As a basic principle, Market profile charts move our thinking beyond the focus on price . The profile integrates the "Market Value" concept in its analysis Ђ” Forex markets behave just like any other market system, they are governed by the forces of supply and demand. The market for any currency pair alternates between periods of equilibrium and chaos. When prices seek to find a new value area after each trend, the market develop around a fair price. When there is an increase or decrease in buying, prices move out of equilibrium, prices break away from equilibrium and trend higher or lower until a new balance is achieved. The whole process of price action is driven by the laws of supply and demand. This dynamic is clearly visible on the profile chart making it possible to forecast range extensions and potential price targets with remarkable accuracy. Market Profile Charts Identify Trade Opportunities Not visible on Other Type of Chart.

The profile provides a unique visual representation of the market. The profile shape and structure allow traders to identify and spot trading opportunities that are not apparent on any other chart. In this course, Forex traders will have an opportunity to learn how to spot a selling or a buying tail, auction points, points of control, fair price, minus developments and ledges. Moreover, participants will be able to immediately see when prices rise above a value area high or drop below a value area low. These important developments often create rewarding opportunities in the market and are not evident or identifiable on other types of charts. Market Profile Provides Structural Based Protective Stops. Selecting an appropriate location for a protective stop is often a challenging task for many Forex traders. Frequently, Forex traders are stopped out of a trade only to find the market turn and move in the direction of their trade after they have been stopped out. The profile structure makes it possible for a Forex trader to select and base their protective stops on key structural elements in the profile. This allows the Forex trader to strategically and properly identify protective stop locations for each trade. The appropriate location of a protective stop reduces potential losses and enhances the risk management process for each trade. The profile is simply an innovative and smart way to analyze the Forex market. Unlike traditional technical analysis and charting techniques where only price movements are measured by using technical indicators, the Market Profile theories provide the trader with a wealth of information about the underlying structure and strength of the market . Using the power of the profile, a Forex trader can gain a much greater understanding of market activity and the market forces behind the activity. How to trade with volume profile.

By Jean Folger | January 15, 2015. In a previous article, we introduced key concepts in volume profile and the various trends that emerge throughout a trading session. With today’s advanced charting platforms, virtually any trader can access this type of market analysis to identify where (price) trading activity took place and how much (volume) trading took place at each price level. Here, we take a closer look at the volume profile and explain how it can be used to identify trade entries and exits. Volume profile review Many traders are used to viewing volume as a histogram beneath a price chart. This approach shows the amount of volume traded during each price bar, whether it’s a time-based bar (such as one-minute) or an activity-based bar (such as 144-tick or 2000-tick volume). While this is a popular way to analyze volume, knowing where the volume occurs—in terms of price, rather than time—can be more meaningful. Volume profile, plotted on the vertical axis of the price chart, does just that: It shows how much trading activity has taken place at each price level touched throughout the trading session. Why is this helpful to traders? Volume profile points out the prices that have been favored by the market as well as those that have been ignored, which can give traders clues about where price is likely to go in the near future. Volume profile updates every time a new trade order in the market is filled, and the point of control, value area, high volume nodes and low volume nodes all change numerous times throughout a given trading session—especially on actively traded instruments—as more volume activity is recorded.

As volume profile develops throughout the trading session, new patterns and trading opportunities emerge. For instance, at 11 a. m., following the morning push, the point of control may be located at the top of the chart (towards the session high), only to be replaced later in the session with higher trading volume moving the point of control to a price centered on the chart. For active traders, it is the developing volume profile that is most relevant. The volume profile at the end of the day will show the history of volume, but not the patterns that could pinpoint trading opportunities during an active trading session. It is this constant evolution of the volume profile during a trading session that can help form trading decisions. Day Trading Without Charts – Volume Profile In Action. When most people hear about day trading without charts, it conjures up images of other feats of derring-do – boxing with one arm tied behind your back, tightrope walking blindfolded, and bringing a knife to a gunfight all come to mind. Are we discussing a feat possible only by the fearless few, or is it possible that Day Trading Without Charts is something that is quite straightforward? The fact is we are conditioned to use charts because every trading book, course, and educational forum is focused on charts. The downfall of charts is that they can be misleading in terms of where people’s positions lie. If we aren’t using charts, then what information are we using? What we are looking at is “Volume at Price,” also known as “Volume Profile,” which is the total number of contracts traded at each price for the current trading session.

Consider the following scenario. Image 1 – Chart and Volume Profile Perspective. In traditional chart-based analysis, the swing low and swing high would now be considered potential support and resistance. The volume profile, on the other hand, tells a rather different story. We can see that the top five prices have very few contracts traded; there are very few positions there. Similarly, the bottom four prices have very few contracts traded. The significant areas are those where the majority of trading took place. The 22,000 contracts at the top of the high-volume area of the volume profile are far more significant than the 23 contracts traded at the highest price. Before we go any further, we need to consider what those numbers represent. They represent trades of course. A trade occurs when a buyer is matched with a seller.

So the 22,000 contracts traded means 22,000 sold and 22,000 contracts bought. We also have to consider the fact that not all of the buyers and sellers have the same trading horizon or goals. So, of the 22,000 buyers and sellers, some will be: People Closing Positions. Those traders are off our radar, we don’t care about them; they will not be forced to react to price moves in the short term. Long-Term Positions . (longer than intraday) We really don’t care about these traders. They also will not react to short-term price fluctuations. They are establishing long-term positions and won’t be reacting to intra-day fluctuations, unless there is a major correction. ArbitrageSpread Traders . These traders will be in and out intraday, but their positions straddle two or more markets. They are trading the relationship between these markets, so they are watching that relationship and not reacting to fluctuations in just one of the markets in their trade. Short-Term, Intraday Traders . This represents the bulk of trading in many markets. Certainly in US Index futures. These traders will react to short-term price fluctuations and their reactions are reasonably predictable and quite visible.

This is somewhat of a simplification, but, basically, we can forget about long-term traders and arbspread traders because they don’t react predictably to short-term price fluctuations. Neither do traders that just got out. It is the positions of short-term, intraday traders that will set the tone for intraday moves. Of course, sometimes there will be one-way, high-volume-news driven days where institutional buyingselling is driving price in one direction. These are the minority, and we all know what to do on those days anyway (no, not fade the move until you empty your account). Let’s consider the image above once more. We can see a lot of volume traded over 9 prices. From the 22,000 at the top of the high volume area to the 5,000 at the bottom, there’s 259,000 contracts traded. Some will have been in and out, but there are still a lot of intraday traders positioned in that area both long and short. If we look at the push through the top of the high volume area, do we see any evidence that one side has given up or stopped out? Well, no. If we look at the amount of contracts traded there, it’s less than 1,400. If we have hundreds of thousands of short positions in an area and the shorts get stopped out, they will do some by buying to cover. That buying will drive price up violently, so we’d expect to see a larger move up with more volume per price. In this situation, the shorts are still in. As we return to the top of the high volume area, the most likely scenario is that we will fall back into that range, traverse to the other side, and then find support at the low of the high volume area.

Lots of traders have been comfortable trading in that area and there’s no sign any have been stopped out. Let’s consider at a slightly different scenario … Image 2 – Stop Run. In this case, we can see a larger pop through the top of the high-volume area with a lot more contracts traded in the move up. These stop runs have certain characteristics – the move itself will be rapid; the number of contracts traded at each level is set by the size of the offers there; they get hit before they can move out of the way. You are looking for a fast pop up that takes out the offers. It’s not a slow lazy push through the top. We already said that in the high volume area, we have positions both long and short. Now that we have had a fast pop through the top, some of the shorts are out of their positions. The remaining shorts are nervous. The longs, well they are just fine. Think of how you’d feel right now if you’d seen that rapid move through the top. If you were long , you’d be happy; you might have even scaled off some of your position. You may now be considering the possibility of an additional move up. If you are still short , you are not happy at all, you didn’t get out of your position and price has moved up. You are now fingers-crossed, hoping it’ll come down. Not so you can profit, but so you can get out of the position. If you were short and you got stopped out , well your attitude ranges from “I’m fine with that” to “I’m a dumbass,” depending on your level of experience and how well your short followed your game plan. There is one thing that 99% of people on the short side are not thinking right now and that is “If it comes back down, I’m going to short some more.” Some will relish the chance to buy-to-cover at break even or a little worse to exit their position; some will be sulking because of their loss; and the more pragmatic losers will simply be looking for the next opportunity, not sticking doggedly to the opinion that just caused a loss. This isn’t so much trading psychology as understanding the process of speculation. After the stop run, we will fall back and sellers just won’t be interested.

We often fall back to the tick above the high-volume area and there’s just no selling. The high-volume area and subsequent stop-run cause a “future imbalance” in trading behavior which favored the buy-side. An area where there was a good chance that sellers would shy away, where buyers might even add to their position. Don’t take my word for this. You can watch it happen every day. This sort of analysis requires a shift in perspective from considering where price has been to where people are positioned, where people lost money and how that may impact their decision making in the short term. Peter Davies is the founder of Jigsaw Trading . For more information, please click here . Note: If you are interested in Volume Profile, read Dr. Kenneth Reid’s daily futures article in TraderPlanet’s Markets on the Move section. Using Volume to Win 75% of Trades. By: Huzefa Hamid. For a currency to be traded and for its price to move from one level to another, volume is required. Or put another way, volume is the gas in the tank of the trading machine. However, volume has often been overlooked in the study of Forex charts. The focus has been more on price action alone.

Why is volume important to understand? Volume is required to move a market, but it’s a particular type of volume that really matters: institutional money, or “Smart Money”, which is large amounts of money being traded in a similar way, thus affecting the market greatly. Only volume shows when price is being affected by this type of activity. Knowing how institutional money operates, we are able to track those traders and trade along with them, so that we’re swimming along with the proverbial sharks rather than being their next meal. Is Forex volume reliable? There is a common misconception that volume cannot be used reliably in Forex trading for two reasons: firstly, there is no central exchange and therefore no official volume data. Secondly, when you’re looking at volume data on your Forex platform, you’re actually seeing “tick volume”, and not actual volume traded, such as the volume with a stock chart. “Tick volume” measures the number of times the price ticks up and down. This is an excellent indicator of the strength of activity in any given bar. But also, the correlation between tick volume and actual volume traded is incredibly high. In 2011, Caspar Marney, head of Marney Capital and ex-UBS and HSBC trader, conducted an analysis of actual volume and tick volume in Forex. He used data from eSignal, EBS and Hotspot. For the pairs he studied, he calculated the correlation between tick volume and actual volume is over 90%. So the question is: How do we go about tying in volume with price action? The study of volume with price started in the early 1900s with a trader by the name Richard Wyckoff.

His research, then known as Wyckoff Analysis, developed into what is known today as Volume Spread Analysis (or “VSA” for short). Not all VSA traders or techniques are the same. Some are incredibly software driven and complex, whereas I like to keep it simple. This simpler approach yields results. Experientially speaking, a success rate of 75% and more is not uncommon with very few consecutive losses. A simpler approach is reflected in the charts. We have price candles, volume bars, and. that’s it! We use the 50% & 61.8% Fibonacci lines and simple supportresistance to help pin entries, but nothing more. 1. Institutional money, or “Smart Money”, is necessary to move a market and is revealed in the volume bars 2. Forex tick volume can be read as an accurate indicator of institutional or Smart Money strength 3. VSA, when it’s kept simple, can be applied (and taught) more easily with win rates of 75% and more. In the next article in this series, we’ll look at some examples of VSA setups that we use to give us clean entries. Huzefa Hamid is the co-founder of TheForexRoom.

com a service that calls live trades to captures dozens of pips daily with low drawdown. Send me an email on [email protected] com and I can fill you in on some of the progress we've made with volume following this article. Huzefa November 2012. Thanks for sharing, waiting for your next article in this series! nswpro October 2012. Registration is required to ensure the security of our users. Login via Facebook to share your comment with your friends, or register for DailyForex to post comments quickly and safely whenever you have something to say. How to Use Volume to Improve Your Trading. Volume is a measure of how much of a given financial asset has been traded in a given period of time. It is a very powerful tool but is often overlooked because it is such a simple indicator. Volume information can be found just about anywhere, but few traders or investors know how to use this information to increase their profits and minimize risk. TUTORIAL: Analyzing Chart Patterns.

For every buyer, there needs to be someone who sold them the shares they bought, just as there must be a buyer in order for a seller to get rid of his or her shares. This battle between buyers and sellers for the best price in all different time frames creates movement while longer-term technical and fundamental factors play out. Using volume to analyze stocks (or any financial asset) can bolster profits and also reduce risk. (See also: Technical Analysis: The Importance of Volume .) Basic Guidelines for Using Volume. When analyzing volume, there are guidelines we can use to determine the strength or weakness of a move. As traders, we are more inclined to join strong moves and take no part in moves that show weakness – or we may even watch for an entry in the opposite direction of a weak move. These guidelines do not hold true in all situations, but they are a good general aid in trading decisions. Volume and Market Interest. A rising market should see rising volume. Buyers require increasing numbers and increasing enthusiasm in order to keep pushing prices higher. Increasing price and decreasing volume show lack of interest, and this is a warning of a potential reversal. This can be hard to wrap your mind around, but the simple fact is that a price drop (or rise) on little volume is not a strong signal. A price drop (or rise) on large volume is a stronger signal that something in the stock has fundamentally changed.

(For more, see Market Reversals and How to Spot Them .) Exhaustion Moves and Volume. In a rising or falling market, we can see exhaustion moves. These are generally sharp moves in price combined with a sharp increase in volume, which signal the potential end of a trend. Participants who waited and are afraid of missing more of the move pile in at market tops, exhausting the number of buyers. At a market bottom, falling prices eventually force out large numbers of traders, resulting in volatility and increased volume. We will see a decrease in volume after the spike in these situations, but how volume continues to play out over the next days, weeks and months can be analyzed using the other volume guidelines. (For related reading, take a look at 3 Key Signs of a Market Top .) Volume can be very useful in identifying bullish signs. For example, imagine volume increases on a price decline and then the price moves higher, followed by a move back lower. If the price on the move back lower stays higher than the previous low and volume is diminished on the second decline, then this is usually interpreted as a bullish sign.

Volume and Price Reversals. After a long price move higher or lower, if the price begins to range with little price movement and heavy volume, this often indicates a reversal. (See Retracement or Reversal: Know the Difference for additional information.) Volume and Breakouts vs. False Breakouts. On the initial breakout from a range or other chart pattern, a rise in volume indicates strength in the move. Little change in volume or declining volume on a breakout indicates lack of interest and a higher probability for a false breakout. (See also: The Anatomy of Trading Breakouts .) Volume should be looked at relative to recent history. Comparing today to volume 50 years ago provides irrelevant data. The more recent the data sets, the more relevant they are likely to be. Volume indicators are mathematical formulas that are visually represented in most commonly used charting platforms.

Each indicator uses a slightly different formula, and therefore, traders should find the indicator that works best for their particular market approach. Indicators are not required, but they can aid in the trading decision process. There are many volume indicators, and the following provides a sampling of how several of them can be used. On-Balance Volume (OBV): OBV is a simple but effective indicator. Starting from an arbitrary number, volume is added when the market finishes higher, or volume is subtracted when the market finishes lower. This provides a running total and shows which stocks are being accumulated. It can also show divergences, such as when a price rises but volume is increasing at a slower rate or even beginning to fall. Figure 5 shows that OBV is increasing and confirming the price rise in Apple Inc's (AAPL) share price. (For more on the OBV, see On-Balance Volume: The Way to Smart Money .

) Chaikin Money Flow: Rising prices should be accompanied by rising volume, so this formula focuses on expanding volume when prices finish in the upper or lower portion of their daily range and then provides a value for the corresponding strength. When closes are in the upper portion of the range and volume is expanding, the values will be high; when closes are in the lower portion of the range, values will be negative. Chaikin money flow can be used as a short-term indicator because it oscillates, but it is more commonly used for seeing divergence. Figure 6 shows how volume was not confirming the continual lower lows (price) in Apple stock. Chaikin money flow showed a divergence that resulted in a move back higher in the stock. (For related information, see Discovering Keltner Channels and the Chaikin Oscillator .) Klinger Volume Oscillator: Fluctuation above and below the zero line can be used to aid other trading signals. The Klinger volume oscillator sums the accumulation (buying) and distribution (selling) volumes for a given time period. In the following figure we see a quite negative number – this is in the midst of an overall uptrend – followed by a rise above the trigger or zero line. The volume indicator stayed positive throughout the price trend.

A drop below the trigger level in January 2011 signaled the short-term reversal. The price stabilized, however, and that is why indicators should generally not be used in isolation. Most indicators give more accurate readings when they are used in association with other signals. (See Trend-Spotting With the AccumulationDistribution Line for more.) Volume is an extremely useful tool, and as you can see, there are many ways to use it. There are basic guidelines that can be used to assess market strength or weakness, as well as to check if volume is confirming a price move or signaling a reversal. Indicators can be used to help in the decision process. In short, volume is a not a precise entry and exit tool – however, with the help of indicators, entry and exit signals can be created by looking at price action, volume and a volume indicator. (For additional reading, take a look at Interpreting Volume for the Futures Market .) First-hand Forex trading experience and information about foreign exchange market that will be useful to traders. Subscribe to get daily updates directly to your email inbox.

How to Use Market Profile in Forex Trading? Market Profile indicator is a powerful tool developed by a CBOT trader. Its original purpose was to graphically organize price and time information obtained during a trading session in a manner useful to traders. Today’s Forex market is quite different from what commodity futures trading was back in 1985 when Peter Steidlmayer introduced his charting instrument to the public. Can Market Profile be a useful tool to Forex traders? In my opinion, it can. The main difference in today’s currency market and the futures market of 80’s is the lack of daily trading sessions. Fortunately, it does not produce any real problem. The lack of strict daily close and daily open can be compensated by one of the following methods: A rolling 24-hour window for Market Profile calculation. Each new bar, the Market Profile calculation window is shifted right by one bar as well. This way, a trader is always looking for the graphical profile of the recent 24 hours of trading. Unfortunately, this would require a complete recalculation of the whole curve with every new bar arriving. Smaller geographically-bound time windows. The Forex market operates through several widely recognized trading sessions. The most prominent of them are: London, New York, and Tokyo.

A trader operating mainly inside the New York trading session could use a 10-hour window based on the NY open and close to calculate and display Market Profile. A trader operating within a mix of New York and Asian sessions could use the span of both. The good thing is that with this method, the calculation process is much simpler than with a rolling window. The bad thing is that it ignores all the market data that is left outside the target trading sessions. Weekly trading sessions. Unlike days, the weeks in Forex are clearly defined. The minor difference of SundayMonday open and FridaySaturday close between different brokers and liquidity providers is small enough to ignore (one or two hours of thin-volume trading). Weekly Market Profile is easy to calculate and offers a lot of data to traders. However, it is rarely suitable to short-term intraday traders, less so to scalpers. Apparently, it is still possible to apply Market Profile to modern foreign exchange market. The most consistent approach in our case seems to be the third one, which is based on weekly sessions. Another important issue to solve when using this indicator in analysis is whether to apply it to the current session — and suffer from the lack of data during the early hours — or to the previous session, which could be based on stale data. In reality, this is no issue at all. As outlined in CBOT’s A Six-Part Guide to Market Profile, the most important profile is based on the current session, but the profile built during the previous one is also relevant and should be analyzed by a trader. Moreover, it is possible (and useful) to look on several previous profiles at once, looking at how the trend developed across more than one value area.

Multi-session Market Profile analysis is also a key to detecting long-term areas of balance or detecting states of imbalance. In fact, long-term traders should be looking at Market Profiles of many sessions to determine possible points of entry and exits. The following example shows Market Profile calculated for six weekly sessions of the EURUSD currency pair: As the indicator’s author stated, the Market Profile should not be used as a buysell signal generator. It is a tool for analyzing the market and getting information, which is not evident from the bare chart. Here is how the main parts of the Market Profiles can be used in Forex trading: Value area — the area of market acceptance. The price spent a hefty amount of time at those levels — the market likes it. The edges of the value area form strong support and resistance levels. Median — the middle of the value area offers a strong pivot point. It serves both as the attractor for the price and as the bounce level. The median is also called a fair price . If market is below the level, it is considered undervalued . If it is above the median, it is overvalued . Areas of low volume — long tails below and above the value area show the price areas rejected by the market. Bottom tail is telling us of long-term buyers outperforming long-term sellers at those price levels. Top tail is telling us about the long-term sellers doing better than buyers at the respective price levels.

I am not a regular user of Market Profile indicator. My main trading strategy is based on a different concept (chart patterns) while my other strategies are either automated with expert advisors or use fundamental indicators. Still, I do consult the long-term market profiles in times of doubt when I lack accurate information on where to put my entry order, take-profit , or stop-loss . More accurate market forecasting using volume profile. The most popular technical analysis methods such as RSI, MACD and moving averages are price derivative indicators and is really just an abstract of what the price is already telling us - whether the market is moving up, down or sideways. The fallacy of using price derived indicators is that a derivative indicator does not produce new information, hence why the majority of the most popular indicators are unreliable at best. Derivative indicators were developed many moons ago before cheap and fast access to market data was available and using them in this day and age will hand market participants who use non-derivative indicators an advantage. Why Volume Profiling is more accurate. Volume Profiling is more accurate purely because it treats the market as what it should be, a venue to advertise price. The stock market, for all intents and purposes is basically an auction house, with buyers and sellers advertising price.

The market is always continually searching for an equilibrium where a large buyer will meet a large seller and when that equilibrium is found, a transaction will take place. This transaction will show up as volume, where buyers and sellers have agreed the market is at fair value. Based on the presumption that the market is simply an auction house, we can conclude that the current bid and offer is an advertisement of price and volume is the confirmation of fair value. This means that any move on low volume is simply a search for value and any move on high volume indicates acceptance of price and is significant. By using this information, we can more accurately deduce where the collective market and more importantly, where large participants perceive to see as fair value. Volume as a function of price rather than time. Most people who have traded the markets would have seen volume as a function of time, where volume is plotted on the x-axis. However, viewing volume as a function of time does not give us enough information - a market participant may have acted at a specific point in time, but at what price? Volume profiling sees volume as a function of price and is plotted on the y-axis. By categorising volume at each level of price, we can see what price market participants have deemed as fair value and derive a bell curve from this volume. By constructing a bell curve from the transacted volume, we can then start to determine areas of high and low probability. Where 70% of the volume (one standard deviation) is transacted, we deem this to be the value area, and the other 30% of the tails is deemed the value area high, and value area low - where volume has indicated are areas which there is minimal participation and potential areas of opportunity. Technical analysis using volume rather than derivative indicators gives the trader an extra dimension of data and can assist the trader in making better decisions based on probabilities.

With volume profiling, we can construct a market profile based on volume and get a better understanding of where market participants perceives as value, with opportunities arising when the advertised price moves away from areas of value. PhillipCapital has over 25 years of experience in forex trading, learn more about our ECN Forex Trading and secure client money protection. This article contain insights and opinions provided solely by the author and no warranties of accuracy, reliability or completeness are given. No responsibility for any errors or omissions or any negligence is accepted by PhillipCapital or any of its directors, employees or agents. Exploiting the Volume Profile. In the last article in the series, we discussed robust trading ideas, comparing moving averages with a channel breakout strategy, showing how the latter is of much greater value and how using a moving average system may show great results in back testing but can be fatally flawed in actual trading. The channel breakout strategy, while having less impressive performance statistics during ‘in sample’ testing, showed robust performance over time, with the same parameters providing a robust edge, over time. The reason that channel breakout systems have stood the test of time is likely because markets trend in the long term and a new multi-month high is always going to have much more psychological significance than the crossing of two arbitrary moving averages. The findings strongly support the argument that any system based on predictable market behaviour, is likely to be much more robust than one based on arbitrary mathematical algorithms.

Therefore, in this article we are going to explore another exploitable aspect of predictable behaviour in the markets, which is much shorter term in nature; namely when traders start and end their trading day. This has been exploited in the futures markets with strategies such as the opening range breakout. Volume and Time of Day. Monroe Trout, who famously made billions out of systematic trading, made some interesting observations about the futures markets when asked about the most liquid times of day, in his interview in ‘The New Market Wizard’ by Jack Schwager. “The most liquid period is the opening. Liquidity starts falling off pretty quickly after the opening. The second most liquid time of day is the close. Trading volume typically forms a U-shaped curve throughout the day… Generally speaking those patterns hold in almost every market. It’s actually pretty amazing.” Forex Meets the Market Profile Discover the Advantages. Forex is the world's largest and most liquid financial market, and Market Profile is our tool to trade it. Forex Meets the Market Profile 5 Lesson Home Study Course. One year of full access to lessons online.

$350.00. Many individual traders have yet to discover and utilize the power of Market Profile concepts and charts. This course is designed to offer Forex traders with an overview of the valuable information and the many benefits that can be gained through the use and application of profile charts. The course discusses how Market Profile charts organize market activity and allow us to identify points of control, areas of distribution, value areas, acceptance and rejection of price levels. Once it is properly understood and applied, the Market Profile quickly becomes an indispensable tool for success in the global Forex market. Dr. Keppler has been a pioneer in applying powerful market profile concepts and strategies to the Forex Market. He has devoted an entire chapter in his book addressing some of the practical ways that the profile can be applied to the Forex Markets. While it is true that there is no central exchange for the Forex Market and the required precise volume data is not available to provide us with accurate footprint charts or volume profiles, nevertheless, there are many other valuable profile principles and insights that can be a tremendous asset to a Forex trader. To accommodate the nature of Forex Market data Dr. Keppler uses time based profiles to analyze market activity for different currency pairs. The market activity generated over time provides important reference levels in the market.

It also helps to identify whether value is trending higher or lower in the market. By blending technical analysis methods and profile trading strategies, Dr. Keppler has developed a unique, innovative and integrated approach for trading the Forex markets. Forex meets the Market Profile Home Study Course. Lesson 1: Introduction to Profile Concepts Lesson 2: Identifying Value in the Market Lesson 3: Understanding & Trading Profile Structures Lesson 4: Integrating Technical Analysis & Profile Concepts Lesson 5: Developing Trading Strategies. Volume Profile Trading Strategy Fundamentals Explained. Notice in the chart precisely what the profile appears like every time an industry is trending. Also pay attention to the daily target levels on my twitter feed etc. and produce a trading program with a fair risk profile. The profile follows a standard distribution curve. For active traders, it’s the developing volume profile that’s most relevant. We’ll take into consideration your circumstances and offer a consistent support. There are a lot of tricks and strategies utilized by men and women to be able to attempt to be successful in the area of forex. Though it isn’t possible to select the peak and trough of a current market, we can use volume profiling to acquire a notion of where the industry might revisit and the way that it might react when it does. For extra reading, look at Interpreting Volume for those Futures Market.

We can observe that HP would finally have a heightened set of workers. Finally, the general efficiency behind posting collateral by using centralized collateral portfolios to rapidly establish trading and boost volume. A great deal of unnecessary marketing and advertising failures become attached to these ailments. Because of this villages had started popping up throughout Mexico, includingTeotihuacan. What’s going to always stay true through every one of these changes is the demand for collateral administration. It’s this constant development of the volume profile in a trading session which can help form trading decisions. But a complete comprehension of the info is imperative to put it to use with good trading procedures. This would be certain that the investment relations of the business would improve. However, that’s not the case all, here. All big formats out there. There wasn’t any legal standards surrounding the procedure nor practically any regulation to ease the conditions of the agreements. So, the quality isn’t guaranteed to improve. Key Pieces of Volume Profile Trading Strategy.

Each indicator employs a slightly different formula and, thus, a trader should discover the indicator that is most appropriate for their specific market strategy. Indicators can be utilised to assist in the decision approach. I like to start with A, but you’ll see varying charts begin with unique letters. The purchasing strategy of the business would likewise stick to a standard mechanism. At the moment, however, collateral management was regarded as a back-office” task, without the necessity for much attention. Because of the current competitive market, it’s the only means for a business to survive. This would signify that the business would grow tremendously in volume. It simply doesn’t work like that within this business. Finally, an individual could also observe an opportunity in reinvesting. The benefits of this merger within the field of marketing can be observed in the instance of shared branding, sales and support. The most significant thing in Forex trading isn’t to lose. It is an impossible task to figure out where the marketplace will discover a peak or trough. Foreign exchange (or forex) markets are among the quickest and most.

Profit” isn’t a dirty word. Excessive profit” is undoubtedly a dirty word. Regardless of what, you wish to prevent negative equity as much as possible. Therefore, if we broke greater to a greater valuation for instance, we’d want to use caution at the many virgin points of control above it.



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