00:00:00
this is a volume profile and this is an
00:00:03
extremely powerful setup using volume
00:00:05
profiles that I call a value area
00:00:08
rollover and this is another high
00:00:11
probability setup that you're going to
00:00:13
learn today called the value area
00:00:15
retracement for a lot of you this is
00:00:17
going to drastically improve your day
00:00:19
trading volume profiles are the core
00:00:22
Foundation of orderflow trading I
00:00:24
believe it's the most important
00:00:26
indicator a day trader can learn it's
00:00:28
even extremely powerful for long-term
00:00:30
investing it will improve any trading
00:00:32
style or strategy by providing an inside
00:00:35
look at participant activity which
00:00:37
allows you to determine the best trading
00:00:40
setups that can result in huge R
00:00:42
multiples when I began my first trading
00:00:44
job 20 years ago every Trader at the
00:00:47
firm I worked for was purely a level two
00:00:49
Trader we used a level two to identify
00:00:51
areas of high liquidity which act as
00:00:54
support or resistance and to spot areas
00:00:56
of low liquidity where prices were
00:00:58
likely to move through with ease
00:01:00
roughly a decade into my career
00:01:02
algorithms began accounting for more
00:01:03
than 50% of daily trading volume they
00:01:06
are constantly adding and pulling
00:01:08
liquidity from the book as a result the
00:01:11
transparency of a level two was greatly
00:01:13
diminished I was at a transitional point
00:01:16
in my career similar to what the Floor
00:01:18
Traders faced as a markets began to
00:01:20
First go electronic I spent almost two
00:01:22
years making the transition from purely
00:01:24
a level two Trader to more of a
00:01:26
technical order flow Trader my entire
00:01:29
Focus that time was on volume analysis
00:01:32
my goal was to redefine my approach to
00:01:34
the markets with tools that will
00:01:36
continue to work into the future
00:01:38
regardless of algorithms unlike a level
00:01:41
two volume cannot be manipulated by
00:01:43
algorithms due to the fact the trade
00:01:45
must be executed in order to affect it
00:01:48
today you will learn how to use volume
00:01:50
profiles to identify critical support
00:01:52
and resistance levels areas of low
00:01:54
liquidity the strength of a trend and
00:01:56
some very powerful contextual setups
00:01:58
that you can begin implementing into
00:02:00
your strategies later in the course you
00:02:03
will also learn how to use them in your
00:02:05
pre-trade R analysis and to manage your
00:02:07
positions more effectively different
00:02:09
charting platforms use different names
00:02:11
for volume profiles such as volume
00:02:13
imprint number bars volume metrics or
00:02:16
just simply volume profiles there are
00:02:18
three primary volume profile indicators
00:02:21
first we have the Candlestick volume
00:02:23
profile which displays a profile for
00:02:25
every single Candlestick as seen here
00:02:28
your charting platform may also will
00:02:30
display them like this where the
00:02:31
Candlestick is to the left of the volume
00:02:34
profile next is the session profile
00:02:36
which you may already be familiar with
00:02:39
the session profile will represent the
00:02:40
entire day for the security that you're
00:02:42
analyzing some charting software may
00:02:45
also give you the option to construct a
00:02:47
profile based on just the visible bars
00:02:49
on your chart as seen here finally
00:02:52
there's a TPO indicator which stands for
00:02:54
time price opportunity it displays
00:02:57
multiple profiles on your chart for
00:02:59
whatever time period you wish to analyze
00:03:02
such as every 15 minutes 30 minutes
00:03:04
hourly and so on we will go more in
00:03:07
depth on these shortly but first let's
00:03:09
break down the basic components of a
00:03:10
volume profile a volume profile simply
00:03:13
displays the amount of volume traded for
00:03:16
every price increment over a userdefined
00:03:18
session the point of control also known
00:03:21
as the PAC is the price level where the
00:03:24
most volume traded for the session next
00:03:27
we have high volume nodes which is
00:03:29
simply an area of high volume relative
00:03:31
to surrounding price action third we
00:03:33
have low volume notes which as a name
00:03:35
implies is an area of low volume
00:03:37
relative to surrounding price action
00:03:39
high volume nodes act like gravity they
00:03:42
tend to attract price and try to hold it
00:03:44
there conversely low volume nodes are
00:03:47
areas with low gravity the market often
00:03:49
moves quickly through these zones due to
00:03:51
the low liquidity fourth we have the
00:03:54
Open high low and close just like any
00:03:57
other traditional Candlestick how they
00:03:59
will be Illustrated varies platform by
00:04:01
platform again typically you're going to
00:04:04
see it overlaid on a Candlestick or to
00:04:06
the left of the volume profile as seen
00:04:09
here finally we have fair value you may
00:04:12
recall from the auction Market Theory
00:04:14
lesson in the last module that
00:04:16
traditionally technical analysts Define
00:04:18
fair value as the range of prices where
00:04:21
70% of the total trading volume occurred
00:04:24
which is usually the standard setting on
00:04:26
charting
00:04:27
platforms a normal distribution also
00:04:29
called a bell curve is simply a
00:04:31
symmetrical probability distribution in
00:04:34
statistics it represents a graph where
00:04:36
the data clusters around the meat with
00:04:39
the highest frequency in the center and
00:04:41
decreases gradually towards the Tails
00:04:44
70% has been used for fair value as it's
00:04:46
close to one standard deviation from the
00:04:48
mean which statistically represents
00:04:52
68.26 of all data ultimately fair value
00:04:55
is the price area that facilitates the
00:04:57
most trade between Market participants
00:05:00
buyer and seller aggression is balanced
00:05:02
resulting in price trading in a tight
00:05:03
range on higher volume personally I
00:05:06
never use fair value with my volume
00:05:08
profiles as 70% is such a large range
00:05:11
that I didn't find it very useful in my
00:05:13
strategies I prefer to analyze
00:05:15
distributions without a fair value
00:05:17
overlay however when I was coaching
00:05:19
retail Traders for a few years they were
00:05:22
having a difficult time analyzing
00:05:24
profiles in the same manner that I did
00:05:26
my ability as a result of thousands of
00:05:28
hours of day trading I did some
00:05:30
experimenting and found that using a
00:05:33
fair value setting of 40% made it much
00:05:35
easier for new Traders when analizing
00:05:38
distributions I highly recommend that
00:05:40
you use this setting when applying
00:05:42
volume profiles to any of your charts
00:05:44
it's what I will be using throughout the
00:05:46
remainder of this
00:05:47
course the only time I would recommend
00:05:50
using 70% is if you like to trade with a
00:05:52
session profile especially if you are
00:05:55
trading any type of mean reversion
00:05:56
strategy the key to using volume
00:05:58
profiles is learning how to read their
00:06:01
distributions you will analyze a
00:06:03
profile's distribution to determine if
00:06:05
price actions indicating a bullish
00:06:07
bearish or neutral bias to understand
00:06:10
the logic let's quickly revisit the
00:06:11
flowchart we covered in the AMT lesson a
00:06:15
security trades at fair value when buyer
00:06:17
and seller aggression is balanced
00:06:19
represented by Price trading in a tight
00:06:21
range on higher volume Market events
00:06:24
such as economic News company earnings
00:06:26
and so on will cause either a buy or
00:06:29
sell imbalance to form this imbalance
00:06:31
drives price away from fair value as
00:06:33
price goes into Discovery in search of
00:06:35
new buyers or sellers eventually price
00:06:38
will reach a level that attracts new
00:06:40
buyers or sellers into the market
00:06:42
offsetting the imbalance forming a new
00:06:44
fair
00:06:46
value let's look at some basic
00:06:49
examples here we have a profile
00:06:51
indicating a bullish bias as a result of
00:06:54
a buy imbalance buyers became the
00:06:56
aggressor during the session and price
00:06:58
goes into discuss Y in search of new
00:07:00
sellers closing out to session near
00:07:03
highs as indicated by the Candlestick
00:07:06
when I say buyers became aggressor
00:07:08
what's actually happening is buyers are
00:07:10
taking the offer more aggressively than
00:07:12
sellers are hitting the bid as well as
00:07:14
the bids are filling in faster than the
00:07:18
offers in this next example we have a
00:07:20
bearish bias due to a sell imbalance
00:07:23
sellers eventually became the aggressor
00:07:25
during the session and price went into
00:07:27
Discovery in search of new buyers as
00:07:29
indicated by the Candlestick sellers are
00:07:32
hitting the bid more aggressively than
00:07:34
buyers are taking the offer and the
00:07:36
offers are filling in faster than the
00:07:40
bids finally we have a neutral bias as
00:07:43
seen here buyer and seller aggression
00:07:45
are closely matched and price closes a
00:07:48
session inside fair value you will use
00:07:51
longer time frame profiles relative to
00:07:53
your entry chart to determine areas of
00:07:55
support and resistance it's important as
00:07:58
a day trader to define opportunity zones
00:08:01
where price is likely to reverse or
00:08:03
break out far too often new day Traders
00:08:06
will use Simple Triggers on their own to
00:08:08
get into a trade this leads to trading
00:08:10
setups that should have been avoided due
00:08:13
to potential R values that are not
00:08:15
favorable you will use longer time frame
00:08:18
volume profiles to build the proper
00:08:19
context around your triggers in order to
00:08:21
find Opportunities with better R
00:08:23
multiples resulting in a higher
00:08:26
expectancy here we have a volume profile
00:08:29
that represents yesterday's trading
00:08:31
session while doing your pre-market
00:08:33
analysis what knowledge does yesterday's
00:08:36
profile provide you we know a buy
00:08:38
imbalance occurred here at fair value
00:08:40
because price closed out the day pulling
00:08:42
away from fair value in search of new
00:08:45
sellers thus we know buyers were the
00:08:47
aggressor at these prices you will use
00:08:50
that knowledge and if price retraces
00:08:52
back to these levels in the current
00:08:54
session you will look for long setups as
00:08:56
there's a high probability it will act
00:08:58
as support
00:08:59
I'm sure I will receive some comments
00:09:01
saying Adam how can you be sure the
00:09:03
buyers are still there I can't in
00:09:05
trading we're always dealing with a
00:09:07
limited amount of information we never
00:09:10
have the complete story therefore we
00:09:12
analyze the data that we do have to form
00:09:15
a hypothesis and we make trading
00:09:17
decisions based on that hypothesis here
00:09:20
we have another example illustrating a
00:09:22
profile from the prior days trading
00:09:24
session what hypothesis would you form
00:09:27
in your premarket analysis
00:09:31
price closed below value thus we know
00:09:33
that sellers were the aggressor at fair
00:09:35
value if price retraces back into fair
00:09:38
value you would begin looking for
00:09:40
opportunities to go
00:09:41
short there are two more distributions
00:09:44
that I want to cover prior to getting
00:09:46
into some setups we will be using them
00:09:48
throughout the remainder of the course
00:09:49
and they are extremely powerful they are
00:09:52
topheavy distributions and bottom heavy
00:09:54
distributions I apologize for my lack of
00:09:57
creativity and the names but it's what
00:09:58
I've always used when working with
00:10:00
students they can signal a potential
00:10:02
reversal opportunity when additional
00:10:04
context is applied more on this in a
00:10:07
second I Define a topheavy distribution
00:10:10
as a profile that forms when price
00:10:11
rallies through a low liquidity Zone at
00:10:14
the start of a session notated by a low
00:10:16
volume node and closes out the session
00:10:19
near its Highs at fair value a bottom
00:10:22
heavy distribution is just the opposite
00:10:24
it's a profile that forms when price
00:10:26
sells off through a low liquidity Zone
00:10:28
and at the start of a session and closes
00:10:30
out the session near its lows inside
00:10:33
fair value the logic behind these
00:10:35
potential reversal opportunities is if
00:10:38
the trend was still really strong or
00:10:40
weak the session should have closed
00:10:42
above or below the value area in the
00:10:44
direction of the trend as I mentioned
00:10:47
you will need additional contexts in
00:10:49
order to confirm that these are
00:10:50
potential reversals if the security that
00:10:53
you're trading has been in a really
00:10:54
strong Trend I wouldn't be looking for a
00:10:57
reversal anytime you're ating a strong
00:10:59
Trend I suggest you wait for the turn to
00:11:01
start and look to get in on a
00:11:03
retracement or you're going to get
00:11:05
crushed in really strong Trends let's do
00:11:07
a quick context exercise and then we
00:11:10
will get into different setups here's a
00:11:12
summary of the profile distributions
00:11:13
that we've covered when price closes at
00:11:16
fair value you will have a neutral bias
00:11:19
above fair value a bullish bias and
00:11:22
Below fair value a bearish bias we also
00:11:25
have topheavy and bottom heavy
00:11:27
distributions which can signal
00:11:29
reversal for this exercise we're going
00:11:32
to go through one-hour profiles of the
00:11:34
e- mini NASDAQ 100 I want you to
00:11:37
determine if you would have a neutral
00:11:39
bullish or bearish bias based on the
00:11:41
profile here's the hourly profile that
00:11:43
opens the session for the day would you
00:11:46
be bullish bearish or
00:11:50
neutral if you said bearish you would
00:11:53
have been correct price closes below
00:11:55
value near the lows of the session how
00:11:58
about this this
00:12:02
one once again bearish would have been
00:12:05
correct and how about this
00:12:09
one although the profile closed out
00:12:11
slightly positive we Clos below value so
00:12:15
bearish would have been correct
00:12:17
furthermore notice how the value area
00:12:19
overlaps the prior hours fair value
00:12:23
stack value areas can become very
00:12:25
important levels and are something worth
00:12:27
notating on your charts
00:12:32
next this time we have a bottom heavy
00:12:35
distribution closing out the session
00:12:37
inside value I would have viewed this as
00:12:39
a potential reversal opportunity as you
00:12:42
can see price retested the lows and then
00:12:44
reversed and began to rally at the close
00:12:47
out of this profile would you have been
00:12:49
bullish bearish or
00:12:52
neutral bullish would have been correct
00:12:55
how about this
00:12:57
one
00:13:00
once again bullish as price closes above
00:13:03
value and how about this last
00:13:09
one price rallies through a low
00:13:11
liquidity Zone and closes out in value
00:13:14
near ties this is a topheavy
00:13:16
distribution also forming a double top
00:13:19
signaling another potential reversal
00:13:22
nice work you just built Some solid
00:13:24
context with volume profiles here's the
00:13:26
same chart with value area set to 70%
00:13:30
you can see how it becomes much more
00:13:32
difficult to analyze the distributions
00:13:34
versus a fair value setting of
00:13:39
40% next let's look at some different
00:13:41
contextual setups you will use when you
00:13:43
begin to develop your playbooks later in
00:13:45
the course we will look at all of these
00:13:48
setups on a Candlestick volume profile
00:13:50
as well as using tpos considering we
00:13:53
won't be studying patterns or triggers
00:13:55
until the next module we will simply be
00:13:57
looking for an entry on the break of a
00:13:59
high or low of a
00:14:01
Candlestick in this first example price
00:14:03
is selling off and we have a topheavy
00:14:05
distribution form right here which also
00:14:08
lines up with the prior hours fair
00:14:10
value the region shaded in Gray on our
00:14:13
trigger chart represents the same time
00:14:15
frame as our volume profile on our
00:14:17
context chart you could have played a
00:14:20
break below this candle and place your
00:14:22
stop above the swing and ridden this
00:14:24
trade back to
00:14:27
lows here's another example of a
00:14:29
topheavy distribution at forms in Trend
00:14:32
but this time we're using tpos to
00:14:34
analyze the
00:14:35
distributions ultimately you get the
00:14:37
same story whether you use individual
00:14:40
Candlestick profiles or overlay a TPO
00:14:42
indicator on your charts it comes down
00:14:44
to personal preference I realize a lot
00:14:47
of you are probably on trading view if
00:14:48
that's the case your only option at this
00:14:50
time will be to use their TPO
00:14:54
indicator in this next example we have a
00:14:56
double bottom at the low of the opening
00:14:58
range in a bottom heavy distribution
00:15:00
forms once again you could have looked
00:15:02
for a simple candle break and caught
00:15:04
this
00:15:09
reversal here we have the exact same
00:15:11
setup but using the TPO indicator one
00:15:14
thing I can suggest is that if you use
00:15:16
really short time frames for your
00:15:18
trigger chart roughly 1 minute or less
00:15:20
the TPO indicator may be a better option
00:15:23
for
00:15:24
you this next setup I call a value area
00:15:28
retracement
00:15:29
which we briefly covered earlier when
00:15:31
going over the different distribution
00:15:32
types this is also a good example of
00:15:34
being patient and waiting for the turn
00:15:36
to start the profiles we're looking at
00:15:39
here represent 8 hours each price had
00:15:41
been in a strong uptrend for a few days
00:15:44
and the prior day the market began to
00:15:46
reverse right on the open of the session
00:15:48
we had a retracement into the overnight
00:15:50
value area you could have gone short on
00:15:53
the break of this 5-minute candle and
00:15:55
caught a huge
00:15:57
winner once again here's that exact same
00:16:00
value area retracement using the TPO
00:16:03
indicator if you trade Futures the 8h
00:16:05
hour profile that opens at 1:00 a.m.
00:16:07
eastern and closes out at 9:00 a.m.
00:16:10
eastern 30 minutes before the US Open is
00:16:13
a profile that can provide some amazing
00:16:15
traits it's one of my favorites in my
00:16:18
playbook here we have another value area
00:16:21
retracement on a one hour profile notice
00:16:24
how the market started to turn in the
00:16:25
prior hour if you were patient and
00:16:28
waiting you could have played a great
00:16:29
retracement a much better setup than
00:16:32
looking to play the bottom heavy
00:16:33
distribution seen right here as it was
00:16:36
driving into fresh lows again showing
00:16:38
why you shouldn't be looking to fade
00:16:40
strong Trends until after the turn
00:16:43
starts and here we have the exact same
00:16:46
setup on the TPO profile if you're only
00:16:48
using one monitor you are probably going
00:16:50
to want to try the tpos first but if you
00:16:53
have two monitors I recommend you try
00:16:55
both to discover what you find easier to
00:16:57
analyze
00:16:59
if you're enjoying this course don't
00:17:01
forget to subscribe and like this video
00:17:03
in doing so I promise to continue to
00:17:05
produce training that I'm confident will
00:17:07
help you become a better day trader it's
00:17:09
truly
00:17:11
appreciated next we have a setup that I
00:17:13
call a value area rollover one of my
00:17:16
favorite setups to trade is you can get
00:17:18
some huge R multiples with them due to
00:17:20
the earlier entry with rollovers you
00:17:23
want to see price Rally or sell off in
00:17:25
the first half of the session in this
00:17:27
example we're looking at one hour
00:17:29
profiles so the first 30 minutes in the
00:17:32
second half of the session you want to
00:17:34
see value form and then look for a
00:17:36
reversal trigger in hopes that the
00:17:38
profile rolls over in this example price
00:17:41
sells off for the first 30 minutes and
00:17:43
we have a little consolidation resulting
00:17:46
in value forming at the lows you could
00:17:48
have played a simple candle break once
00:17:50
again and caught this huge
00:17:55
reversal here's that exact same setup
00:17:57
using the TP o
00:17:59
indicator let's take a look at one more
00:18:01
rollover this time to the short
00:18:04
side notice how price ralles up on light
00:18:07
volume and value forms near the highs
00:18:10
furthermore price is now forming a
00:18:11
double top you could have played a
00:18:13
simple break of this candle and caught
00:18:15
the sell
00:18:19
off and once again here's the exact same
00:18:22
setup using a TPO
00:18:24
profile rollovers topheavy and bottom
00:18:27
heavy distributions are very similar
00:18:29
setups the only difference is you're
00:18:31
looking for the reversal to begin before
00:18:33
the session closes out on the profile
00:18:35
that you're
00:18:37
analyzing finally I have a few time
00:18:39
frame recommendations for building
00:18:41
context with volume profiles my personal
00:18:44
favorites are 1hour profiles and the 8h
00:18:46
hour overnight profile for intraday
00:18:49
premarket I always analyze a daily and
00:18:52
weekly chart as well looking for large
00:18:54
high volume nodes and low volume nodes
00:18:57
I'm a very short-term scalper and don't
00:18:59
necessarily look for setups at these
00:19:01
levels but I like to notate the high
00:19:03
volume nodes and low volume nodes on
00:19:05
these time frames as they can be very
00:19:07
beneficial in trade management if I'm in
00:19:10
a position and notice we're breaking
00:19:12
into a low volume node on the daily
00:19:14
chart I will try to hold the position
00:19:16
longer high volume nodes can serve as
00:19:18
great take profits as well we'll dive
00:19:20
deeper into using volume profiles for
00:19:22
trade management later in this course
00:19:25
far too often I see new Traders using
00:19:27
really short time frames when you're new
00:19:29
your contact skills aren't going to be
00:19:31
strong enough to trade on really short
00:19:33
time frames that doesn't mean you won't
00:19:35
eventually but as you're building your
00:19:37
skills start with longer based time
00:19:39
frames we covered a lot of information
00:19:41
in this video if needed don't hesitate
00:19:44
to re-watch it and please feel free to
00:19:46
leave a question in the comments I will
00:19:48
respond to as many as I can with that
00:19:50
said it's time for you to start getting
00:19:52
screen time working with volume profiles
00:19:55
I'll see you in the next video take care
