My take on using AVWAPsTrying to remove the hard work of selecting multipliers for your anchored VWAPs, I came up with this idea of a AVWAP band and built an indicator for it.
Volume
Scalper’s Paradise Part 2 – Insights on TransactionsThis is my second post and the continuation of the Scalper’s Paradise series . In this installment, I’ll dive into transactions—more commonly known as volume . While everyone is aware of it, few truly utilize it effectively. From a retail trader’s perspective, volume is often misunderstood and misused. That’s why today, I’ll break it down and provide exceptional insights, drawing from my institutional experience as a professional trader.
First, let’s clarify what volume really is. Volume is simply the total number of transactions between buyers and sellers. For example, if one buyer wants to purchase a single stock and a seller is willing to sell that stock, the transaction is recorded as one, meaning the volume reflects 1.
Now, if we see that the volume for a given period is 1,000 traded stocks, this means there were 1,000 buyers and 1,000 sellers. It’s crucial to understand that there are always an equal number of buyers and sellers in any transaction.
With this in mind, we can debunk a common misconception: when we see high volume and price movement, it’s incorrect to say there were "a lot of buyers" or "a lot of sellers"—because both sides are always equal. The real reason behind price movements is a different story, and one that I’ll cover in a future post.
Now, let’s take a look at a chart that’s particularly useful for day trading, especially when combined with the volume indicator.
Here, you can see a 10-second chart, which is particularly effective for spotting algorithmic trades used by institutions.
Now, I’ve marked the high-volume areas with a vertical line. Remember, high volume indicates a significant level of market activity.
Now, I’ve marked the candles that had the highest relative trading volumes.
But what can we do with all this information?
Why is high volume so important?
First , high volume disrupts the market. It clearly signals that a major player is in need of liquidity. The reasons behind this can vary, as discussed in Part 1 of this series, but for now, let’s focus on the key takeaway: big players need volume.
When a market participant requires large volume, their activity becomes visible in chunks, revealing parts of their trading strategy. This is exactly why we use 10-second charts—to spot these institutional trades more easily. Once we identify them, we can determine the price levels where they are beginning to accumulate or distribute their positions.
The second reason is more of an institutional strategy rather than something easily executed by retail traders—but I’ll explain it anyway. During my time as an institutional trader, my performance was often evaluated based on how efficiently I could accumulate volume over time. This required finding other large players in the market.
Let’s say I needed to take a long position. To do so, I required sellers on the other side. If I spotted a large player selling, I could use their selling pressure to gradually accumulate my position around their activity. This strategy allowed me to secure better prices over time by executing fewer, larger trades instead of aggressively chasing liquidity.
Ultimately, this is the core objective of an institutional trader—maximizing position size while maintaining optimal pricing.
How Can Retail Traders Use This Information to Improve Their Trading?
1) Identify high-volume areas on a 10-second chart.
2) Mark these levels on your chart.
3) Wait for a breach of these levels and trade in the direction of the breakout.
If there is no breakout, you can align yourself with the large player instead.
For example, if a big player is accumulating buy orders, mark that level and observe whether they continue to hold their position. If they do, you can go long alongside them. However, if other traders (as I did in my institutional trading days) start pushing against that big player, wait for a breach of your marked level and look for short opportunities instead.
Keep in mind that we are talking about day trading and scalping, meaning these are short-term trades. The goal is to capitalize on immediate price movements rather than holding positions for extended periods.
Here, you can see the levels we discussed earlier. Notice how the market clearly reacts to these easily identifiable levels—though trading them successfully is not as simple.
I always use order flow and Level 2 data to confirm my trade ideas.
Wishing you good luck and plenty of valuable insights from my post!
Marco
How to Use the VRVP Tool – A Complete Guide for All TradersThe Visible Range Volume Profile (VRVP) is a powerful tool on TradingView that helps traders identify key price levels where significant trading activity has occurred. It offers a unique view of market structure by highlighting the volume traded at specific price points within the visible range of the chart. Understanding how to effectively use the VRVP can significantly improve your ability to identify important support and resistance levels, spot potential breakouts, and make better trading decisions. This comprehensive guide will take you through everything you need to know about the VRVP tool, including its features, setup, and how to use it in your trading strategy.
What is the VRVP Tool?
The VRVP (Visible Range Volume Profile) is a technical analysis indicator that shows the distribution of trading volume at different price levels within the visible range of your chart. Unlike traditional volume indicators, which show volume over time, the VRVP focuses on volume by price, allowing you to see where buyers and sellers have been most active. It is displayed as a horizontal histogram along the side of the price chart, with high-volume areas indicating key support or resistance levels and low-volume areas often signaling potential breakout points.
Why is the VRVP Tool Important?
The VRVP tool provides several benefits to traders, regardless of their experience level:
Identify Key Support and Resistance Levels: High volume nodes (HVNs) often act as strong support or resistance zones where price tends to stall or reverse.
Spot High and Low Liquidity Areas: Low volume nodes (LVNs) can highlight areas where price may move more quickly due to the lack of market participants.
Predict Breakouts and Reversals: By identifying volume concentration, you can anticipate areas where price may break out or reverse.
Confirm Trends: By analyzing the Point of Control (POC), you can determine the market’s prevailing trend.
Refine Entry and Exit Points: By combining the VRVP with other tools, you can pinpoint optimal entry and exit points for trades.
How to Add the VRVP Tool on TradingView
To start using the VRVP tool on TradingView, follow these steps:
Open your TradingView chart.
Click on the “Indicators” button at the top of the screen.
Search for "VRVP" or "Visible Range Volume Profile" in the search bar.
Click to apply it to your chart.
Adjust the settings by clicking on the gear icon next to the indicator name.
Recommended Settings:
Row Size: Set between 150-250 for more detail (more rows provide more granularity).
Volume Area (%): Set to 70% to highlight where most trading activity has occurred.
Color Up/Down: Choose contrasting colors for buying and selling, making it easy to distinguish between bullish and bearish zones.
Point of Control (POC): Enable this to highlight the price level with the highest volume.
How to Read the VRVP Tool
The VRVP tool consists of three key components:
High Volume Nodes (HVN): These are price levels where a lot of trading activity has occurred. They often act as strong support or resistance, and the price may bounce off these levels multiple times.
Low Volume Nodes (LVN): These are areas with little trading activity. Prices tend to move quickly through these zones as there are fewer market participants. They often indicate potential breakout or breakdown points.
VAL and VAH
VAH (Value Area High)
Definition: The VAH is the price level at the upper boundary of the Value Area. The Value Area represents the range where a set percentage (usually 70%) of all trading volume has occurred within the visible range.
Significance: The VAH is the price point at which the volume profile starts to show less concentration of volume. It is a level above which price has shown less activity compared to the Value Area. When price approaches or breaks through the VAH, it often signals potential resistance and could be a critical level to watch for a reversal or continuation.
VAL (Value Area Low)
Definition: The VAL is the price level at the lower boundary of the Value Area. It represents the lowest price point where around 70% of all the trading volume has occurred within the visible chart range.
Significance: The VAL is a key support level, as it marks the price level where most trading volume has taken place on the downside. A price approaching or breaking below the VAL can signal potential support or a breakdown, indicating where buyers and sellers are actively engaging.
How VAH and VAL Work Together
Value Area: Together, the VAH and VAL define the Value Area, which contains the range of price levels where the majority of trading volume took place. In a healthy market, the price tends to stay within this area. If price breaks out of the Value Area, it could indicate the start of a strong price move in that direction (either upward or downward).
Relevance in Trading: The VAH and VAL act as key levels for traders to monitor:
Above VAH: Price moving above the VAH suggests bullish sentiment, with the next resistance potentially forming above the VAH.
Below VAL: Price moving below the VAL suggests bearish sentiment, with the next support potentially forming below the VAL.
Example of the VAL and VAH:
Point of Control (POC):
This is the price level with the highest trading volume within the visible range. The POC is often used as a key reference point for future price movements. If the price is trading above the POC, it suggests bullish market sentiment; if below, it suggests bearish sentiment.
Example of the POC level:
How to Use the VRVP Tool in Trading
Identifying Support and Resistance Levels
High Volume Nodes (HVNs): These levels often act as support or resistance. When price approaches an HVN, it is likely to either reverse or consolidate before moving further. If the price is above an HVN, that level may act as support, while if it's below, the level may act as resistance.
Spotting Breakout Zones
Low Volume Nodes (LVNs): These are areas where price can break out or move rapidly due to the lack of significant trading activity. If price enters an LVN, it may continue moving in the direction of the breakout with minimal resistance.
Using the Point of Control (POC)
The POC acts as a market balance point where the most volume has been traded. If the price is trading above the POC, it signals a bullish market trend, and if below, it signals a bearish trend. Watching the POC can help you gauge the overall market sentiment and potential future price movements.
here is another example of the POC
Confirmation with Other Indicators
To increase the accuracy of your trades, combine the VRVP with other technical indicators such as:
Moving Averages (MA): These help confirm the trend direction and potential reversals.
Relative Strength Index (RSI): This can identify overbought or oversold conditions, which can be used in conjunction with the VRVP to confirm price action.
Candlestick Patterns: Look for reversal or continuation patterns at key volume levels.
Trendlines: Use trendlines to confirm whether price is bouncing off or breaking through key support or resistance levels.
Example Strategy
Step 1: Use the VRVP tool to identify a high volume node (support zone).
Step 2: Check the RSI to see if the market is oversold.
Step 3: Wait for a bullish candlestick pattern (such as a bullish engulfing or hammer).
Step 4: Enter a buy trade with a stop loss placed below the low volume node, which serves as a breakout or breakdown zone.
How to Plan Trades with the VRVP
Here are some scenarios you might encounter when using the VRVP tool:
Price near HVN (Support): Buy with a stop loss placed just below the HVN, as it is likely to act as support.
Price near LVN: Wait for confirmation of a breakout or rejection before taking a position, as price may move rapidly through this area.
Price at POC: Look for reversal or breakout signals. If the price is near the POC, the market may change direction or continue in the current trend.
Price above POC: This indicates a bullish trend continuation. Look for buying opportunities.
Price below POC: This indicates a bearish trend continuation. Look for selling opportunities.
Tips for Beginners
Wait for Confirmation: Always wait for confirmation from price action, other indicators, or candlestick patterns before entering a trade.
Combine with Trend Indicators: Combine the VRVP with trend indicators such as moving averages to ensure you’re trading in the direction of the overall trend.
Use Volume Spikes: Look for volume spikes alongside the VRVP to confirm breakouts.
Practice First: Start using the VRVP tool on a demo account before risking real money to get a feel for its nuances.
Tips for Experienced Traders
Use Multiple Timeframes: Use the VRVP tool on both longer (daily) and shorter (hourly) timeframes to identify the strongest support and resistance levels.
Track the POC Shifts: Observe how the POC moves over time. An upward shift suggests a bullish market, while a downward shift suggests a bearish market.
Combine with Fibonacci Retracements: Combine the VRVP with Fibonacci retracement levels to identify confluence zones, where high volume areas coincide with Fibonacci levels, increasing the likelihood of price reactions at these levels.
Conclusion
The VRVP tool on TradingView is a versatile and powerful tool that offers valuable insights into market structure by analyzing trading volume at different price levels. By understanding how to read and use the VRVP tool, you can identify key support and resistance levels, predict potential breakouts, and refine your entry and exit strategies. Whether you’re a beginner or an experienced trader, the VRVP can be a valuable addition to your trading toolkit.
Start practicing on a demo account and gradually incorporate the VRVP tool into your strategy. With time and experience, the VRVP will help you gain a deeper understanding of market dynamics and improve your overall trading performance.
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I hope you found this guide on the VRVP tool helpful and that you’ve gained some valuable insights to improve your trading strategy. If you learned something new, don’t forget to give a like! If you have any questions or need further clarification, feel free to leave a comment below. I’d be happy to help!
Understanding Volume In TradingVolume is one of the most crucial yet often overlooked aspects of trading. It represents the total number of shares, contracts, or lots traded in a given period and provides insight into the strength of price movements. By analyzing volume effectively, traders can identify trends, confirm breakouts, and detect potential reversals before they happen.
Unlike price action alone, volume adds a critical layer of confirmation. A price move supported by high volume is more likely to be sustainable, while a move on low volume may indicate weakness or manipulation. Institutions, hedge funds, and large market players leave footprints through volume, and understanding these patterns can give traders an edge.
Volume Types 🎯
Volume
Buy/Sell Volume
Delta Volume
Cumulative Delta Volume
Relative Volume
Cumulative Relative Volume
Open Interest
Volume Profile
01. Volume 🔥
In trading, volume refers to the total quantity of assets traded during a specific time frame, whether they are stocks, futures contracts, options, or currencies. It measures the activity level of a security and provides insights into the strength or weakness of price movements.
Key aspects:
Market sentiment: High volume often indicates strong interest in a security and can signal the strength of a price move. Conversely, low volume may suggest a lack of interest and can indicate that price movements may not be sustainable.
Liquidity: High volume generally indicates better liquidity, meaning it is easier to enter and exit positions without significantly impacting the asset’s price. Low volume may lead to higher slippage and greater price volatility.
Volume spikes: Extremely high volume after a prolonged trend may signal the end of that trend (blow-off tops or panic selling bottoms).
Market types: Volume can vary by market type. In stock markets, it is usually reported in shares. In futures and options, it is reported in contracts, while in Forex, it is often measured by tick volume (the number of price changes).
Impact on market orders & liquidity
High Volume = Lower Slippage: Large orders can be executed more efficiently in high-volume environments.
Low Volume = Higher Volatility: Thin order books in low-volume markets can lead to erratic price swings and wider bid-ask spreads.
02. Buy/Sell Volume 💹
Buy volume and sell volume are key metrics that indicate the level of buying and selling activity in a market. They help traders assess the strength of price movements and market sentiment.
Buy Volume
Buy volume represents the number of shares, contracts, or lots traded at the ask price (or higher). It occurs when buyers are willing to pay the seller’s asking price, indicating buying pressure and potential bullish sentiment.
How buy volume is measured:
Transactions that execute at the ask price are counted as buy volume.
In some cases, aggressive market orders (where buyers take liquidity) are considered buy volume.
Buy volume is often compared to total volume to determine demand strength.
Sell Volume
Sell volume represents the number of shares, contracts, or lots traded at the bid price (or lower). It occurs when sellers accept the buyer’s bid price, indicating selling pressure and potential bearish sentiment.
How sell volume is measured:
Transactions executed at the bid price are counted as sell volume.
Market sell orders (where sellers take liquidity) contribute to sell volume.
Higher sell volume relative to buy volume suggests downward price pressure.
03. Delta Volume ✨
Delta Volume (often referred to as Volume Delta) is a key order flow metric that measures the difference between buy volume and sell volume over a given period.
Calculation
Delta Volume is defined as: Delta Volume = Buy Volume − Sell Volume
Where:
Buy Volume is the total volume transacted at the ask price (aggressive buying).
Sell Volume is the total volume transacted at the bid price (aggressive selling).
Interpretation
Positive Delta (Buy Volume > Sell Volume): Indicates more aggressive buying, suggesting bullish momentum.
Negative Delta (Sell Volume > Buy Volume): Indicates more aggressive selling, suggesting bearish momentum.
Near Zero Delta: Indicates a balance between buyers and sellers, often seen in range-bound markets.
04. Cumulative Delta Volume ⚡
Cumulative Delta Volume (CVD) is an advanced order flow metric that tracks the cumulative sum of Delta Volume over time.
Calculation
CVD t =CVD t − 1 + (Buy Volume − Sell Volume)
Where:
Buy Volume = Volume transacted at the ask price (aggressive buying).
Sell Volume = Volume transacted at the bid price (aggressive selling).
CVD*t = Current cumulative delta value.
CVD\*{t-1} = Previous cumulative delta value.
Interpretation
Rising CVD (Positive Delta Accumulation): Buyers are dominating, indicating bullish momentum.
Falling CVD (Negative Delta Accumulation): Sellers are in control, signaling bearish momentum.
Flat or Divergent CVD: A divergence between price and CVD can indicate potential reversals or absorption by large traders.
05. Relative Volume 📉
Relative Volume (RVOL) is a key trading metric that measures current trading volume compared to its historical average over a specified period. It helps traders assess whether a security is experiencing unusual trading activity and provides insights into liquidity, volatility, and potential price movements.
Calculation
Relative Volume is typically expressed as a ratio:
RVOL = Current Volume / Average Volume Over A Given Period
Where:
Current Volume = The total shares/contracts traded in the current period (e.g., 1-minute, 5-minute, daily).
Average Volume = The average volume over a past period (e.g., 10-day average, 50-day average).
A higher RVOL (>1) means the security is trading at above-average volume, while a lower RVOL (<1) indicates below-average activity.
Interpretation
RVOL > 2: Indicates significantly higher-than-normal volume, often linked to news events, earnings reports, or breakout trends.
RVOL around 1: Suggests normal trading activity with no unusual volume spikes.
RVOL < 1: Indicates low trading activity, which may lead to weak price movements and lower liquidity.
06. Cumulative Relative Volume 💥
Cumulative Relative Volume (CRVOL) is an advanced volume metric that tracks the total volume traded throughout a session relative to its historical average at the same time of day.
Calculation
Cumulative Relative Volume compares the ongoing total volume at a given point in time to the average cumulative volume at that same time over a historical period.
CRVOL = Cumulative Volume at Time X / Average Cumulative Volume at Time X over N periods
Where:
Cumulative Volume at Time X = The total volume traded from market open up to time X.
Average Cumulative Volume at Time X = The average total volume at that point in time over a selected historical period (e.g., 10 days).
N periods = The number of historical sessions used for comparison.
A CRVOL > 1 indicates higher-than-normal trading activity, while CRVOL < 1 suggests lower-than-average activity.
Interpretation
CRVOL > 1.5: Significantly higher trading activity than usual, often linked to news events, earnings reports, or institutional participation.
CRVOL ≈ 1: Normal trading volume, suggesting typical market conditions.
CRVOL < 0.8: Below-average trading volume, often indicating low liquidity and reduced volatility.
07. Open Interest 📊
Open Interest (OI) is a key metric in derivatives markets (futures and options) that represents the total number of outstanding contracts that have not been settled or closed. It is an important indicator of market activity, liquidity, and trader commitment.
How it works?
Open Interest increases or decreases based on the interaction between buyers and sellers:
OI Increases: When a new buyer and a new seller enter the market, creating a fresh contract.
OI Decreases: When an existing buyer and seller close their positions (either by offsetting trades or expiration).
OI Unchanged: If an existing contract is transferred between traders (one trader closes, another opens an equal position).
Interpretation
Rising OI + Rising Price: Suggests strong buying interest, indicating a bullish trend with conviction.
Rising OI + Falling Price: Indicates strong selling pressure, confirming a bearish trend.
Falling OI + Rising Price: Signals a short-covering rally or weakening trend, as traders close positions.
Falling OI + Falling Price: Suggests a lack of commitment to further declines, indicating potential trend exhaustion.
08. Volume Profile 🎢
Volume Profile is a powerful market analysis tool that plots trading volume at different price levels over a specific period. Unlike traditional volume indicators, which show volume per time interval, Volume Profile reveals where the most buying and selling activity occurred, helping traders identify key support and resistance levels, market structure, and potential price reactions.
Components
Volume Profile is displayed as a histogram on the vertical axis, showing the amount of volume traded at each price level. It is built using tick data or intraday price action and is often calculated for different timeframes (daily, weekly, monthly, or custom sessions).
Key components of Volume Profile include:
Point of Control (POC): The price level where the highest volume was traded, acting as a major support/resistance zone.
High Volume Nodes (HVN): Price areas with heavy trading activity, indicating consolidation zones where price is likely to stabilize.
Low Volume Nodes (LVN): Price areas with little trading activity, often leading to fast price movements as there is little resistance or support.
Value Area (VA): The price range where 70% of the total volume was traded, representing the "fair value" zone of the market.
Value Area High (VAH) & Value Area Low (VAL): The upper and lower boundaries of the Value Area, acting as dynamic support and resistance levels.
Types
Session Volume Profile: Analyzes volume for a single trading session (daily or intraday).
Composite Volume Profile: Covers a longer period (weeks, months, or custom-defined ranges).
Fixed Range Volume Profile: Analyzes volume for a specific price range or custom-selected area.
Developing Volume Profile: Updates dynamically throughout the trading session to show real-time changes in volume distribution.
Interpretation
POC as a Magnet: Price tends to revisit the POC due to high liquidity and market agreement at that level.
Breakouts from Value Area: If price breaks above VAH with strong volume, it signals a bullish trend; if it breaks below VAL, it signals a bearish trend.
Reaction at LVN: Price moves quickly through LVN areas but may reverse or stall when approaching HVN.
Rejections at VAH/VAL: If price rejects VAH, it may return to POC or VAL, and vice versa.
09. Indicators 📦
Volume indicators help traders gauge market strength by analyzing the number of shares or contracts traded.
Volume (Default) – Displays the total volume traded per candle, often color-coded based on price movement.
Volume Profile (Fixed Range, Session, Visible Range) – Shows volume distribution across price levels to identify support and resistance zones.
Volume Weighted Average Price (VWAP) – A dynamic support/resistance line that calculates the average price based on volume.
On-Balance Volume (OBV) – Measures cumulative volume flow to detect price trends and confirm breakouts.
Money Flow Index (MFI) – A volume-weighted RSI-like oscillator that identifies overbought and oversold conditions.
Volume Delta – Measures the difference between buying (ask) and selling (bid) volume.
Cumulative Delta Volume – Tracks the cumulative sum of volume delta over time to assess buying/selling pressure.
Relative Volume (RVOL) – Compares current volume to historical averages to highlight unusual trading activity.
Key Takeaways 📋
Volume is a crucial market indicator that reflects trading activity and liquidity, often preceding price movements.
High volume confirms trends and breakouts, while low volume can signal weak or false moves.
Volume Profile identifies key support and resistance zones, with High Volume Nodes (HVNs) acting as strong barriers and Low Volume Nodes (LVNs) allowing fast price movement.
Relative Volume (RVOL) highlights unusual market activity, while Delta Volume and Cumulative Delta reveal buying and selling pressure.
VWAP serves as a dynamic support/resistance tool commonly used by institutional traders.
Understanding Buy The Dip In TradingBuying the dip is a trading strategy where you take advantage of temporary price drops in an overall uptrend. The goal is simple: enter the market at a lower price before it resumes its upward move. It sounds easy, but knowing when and how to do it makes all the difference. In this guide, we’ll explore key setups, ideal market conditions, and smart risk management techniques to help you trade dips like a pro. 🚀
1. Understanding Market Structure 🏗️
Before jumping into a trade, it’s crucial to understand how price moves. A strong uptrend is characterized by higher highs and higher lows—this is where buying dips can be very profitable. But beware: not every drop is a buying opportunity. Some dips are part of a pullback, a temporary retracement before the trend resumes, while others signal a complete reversal—the last thing you want to buy into.
Key levels to watch include support zones, Fibonacci retracement levels, and high-volume areas. These zones act as potential turning points where the price is likely to bounce.
2. Proven Setups for Buying the Dip 🎯
🔢 Fibonacci Retracement Support
When the price pulls back within a strong trend, it often lands on key Fibonacci levels like 38.2%, 50%, or 61.8%. These act as natural support points where buyers step in. If a strong bullish candle appears at one of these levels, it can signal a solid dip-buying opportunity.
Combine this with an oversold RSI and rising volume, and you have a strong case for entry.
🎭 Liquidity Grab (Stop Hunt)
Markets love to shake out weak hands. Sometimes, the price dips below a previous low, triggering stop-loss orders before reversing sharply. This is called a liquidity grab—smart money accumulates positions while retail traders panic.
If the price quickly reclaims the level it just broke, it’s a strong buy-the-dip signal. Look for big buy orders, a sharp recovery, and bullish candlesticks to confirm entry.
📊 Anchored VWAP Test
Institutions often base their trades around VWAP (Volume Weighted Average Price), especially when anchored from a significant swing low. When the price revisits this VWAP in a strong uptrend, it’s a potential dip-buying zone.
Watch for bounces off VWAP, rising volume, and confluence with other support levels for confirmation.
🔥 Point of Control (POC) Revisit
Markets move towards areas of high liquidity. If the price revisits the Point of Control (POC)—the price level where most volume is traded in a range—it often serves as strong support.
When price pulls back into the POC and finds buying interest, it’s a great spot to enter. Look for strong reactions, failed attempts to move lower, and confluence with Fibonacci levels.
📏 Previous Range Support
A breakout from a trading range is significant, but the price often returns to retest the range high as new support before continuing higher. If this happens on low selling pressure and aligns with moving averages or VWAP, it can be a golden buy-the-dip opportunity.
Look for bullish reactions, buying volume, and strong candles off the level.
3. When Buying the Dip Works Best ✅
Not all dips are worth buying. The best setups occur when:
The market is in a strong uptrend, making higher highs consistently. 📈
Volume is high, showing that buyers are stepping in. 🔥
Macro conditions support upside movement, like favorable economic news. 📰
4. Risk Management: Protecting Your Capital 🛡️
Even the best traders take losses. What matters is how you manage risk:
Set a Stop Loss 🎯: Always place a stop below key support levels.
Position Sizing 📊: Never risk more than a small portion of your capital per trade.
Have an Exit Plan 🚪: Know where you’ll take profits, whether it's at a resistance level or a trailing stop.
Scale In and Out 🎢: Enter gradually instead of all at once, and take profits along the way to lock in gains.
Key takeaways 🎤
Buying the dip can be a powerful strategy—when done correctly. The key is patience: wait for strong trends, allow price to reach significant levels, and confirm with volume and momentum. Combine technical analysis with solid risk management, and you’ll improve your chances of success in the markets. Happy trading! 🚀
Divergence Trading Explained For Beginners -DAX Pullback TradeTrading divergence in the Forex or Stock market can be an important tool. Learn how to identify divergences & practically apply them to your technical analysis to increase your edge & profits in the financial markets.
In this video you'll learn
What is a bullish and bearish divergence
How to use divergence to spot potential reversals in the market
How to use volume to identify key levels of reversals
How to measure out a "Kill Zone"
What are tweezer tops & tweezer bottoms & why they are important
How to use the Fibonacci retracement tool
How to use the Relative Strength Index (RSI Indicator)
Your Trading Coach - Akil
Breakout Trading Mastery: Unlocking Explosive Market MovesHave you ever entered a trade just to watch the market move sideways, leaving you stuck in indecision? Or perhaps you've missed out on massive moves because you hesitated to act? These scenarios are common struggles for traders navigating volatile markets. Understanding breakout trading could be the key to overcoming these challenges and capturing significant price movements.
Breakout trading is a powerful strategy that focuses on entering trades when the price breaks through established support or resistance levels. This method leverages momentum, aiming to catch substantial market moves early. Whether you're a beginner seeking structure or an advanced trader looking to refine your edge, mastering breakout strategies can significantly enhance your trading performance.
A. The Psychological Side of Breakout Trading 🧠
Fear of Missing Out (FOMO): Traders often jump into breakouts late due to FOMO, leading to poor entries. Recognizing this emotion and setting predefined entry rules can mitigate this issue.
False Breakouts and Doubt: Experiencing a false breakout can shake a trader's confidence. Understanding that not every breakout will succeed is crucial for long-term success.
Overconfidence After Wins: A successful breakout trade may lead to overtrading. Staying disciplined and sticking to your strategy prevents emotional decision-making.
Tip :📝 Keep a trading journal to track your emotions and decisions during breakout trades. This practice helps identify patterns in your behavior.
B. Breakout Strategies and Tools 🛠️
1-Identifying Key Levels 🔑:
-Support and resistance zones, trendlines, and chart patterns (e.g., triangles, flags) are prime breakout areas.
-Use higher timeframes (4H, Daily) to validate significant levels.
2-Volume Confirmation 📈:
-Breakouts accompanied by high volume tend to be more reliable.
-Tools like the Volume Profile and On-Balance Volume (OBV) can provide confirmation.
3-Entry and Exit Techniques 🎯:
Aggressive Entry: Enter immediately after the breakout with tight stop-loss placement.
Conservative Entry: Wait for a retest of the broken level before entering.
Stop-Loss :
You can place your stop-loss just below/above the breakout level or use ATR (Average True Range) for dynamic stops. Alternatively, position your stop-loss below/above the previous swing high/low based on Dow Theory. If your trigger is a candlestick pattern like an indecision candle, consider setting the stop below its shadow. You can also place it below the breakout box you've identified. The key is to backtest each method and choose the one that best suits your trading style and market conditions.
4-Risk Management ⚖️:
-I recommend risking a maximum of 1% per trade, though this can be adjusted based on your individual risk tolerance.
-Aim for a minimum Risk-Reward Ratio (R:R) of 1:2 to ensure trades are worth taking.
Tip : 📊 Combine breakout strategies with momentum indicators like RSI for stronger confirmation.
C. Lessons from Real-World Trading 📚
Case Study:GRTUSDT 3/Jan/25 Breakout 💡
Practical Application 🛠️:
Start by backtesting breakout strategies on historical data.
Apply strategies on demo accounts or with small capital to build confidence.
Adjust and refine entry and exit rules based on performance.
Tip: ⏳ Not every breakout leads to a trend; be patient and selective with trades.
Breakout trading offers a strategic edge when executed with discipline and proper analysis. By understanding market psychology, applying robust strategies, and managing risk effectively, you can position yourself to capitalize on powerful market moves.
🚀Ready to refine your breakout strategy? Start identifying key levels today and share your insights in the comments below!
I'm Skeptic , dedicated to providing clear and unbiased trading insights. Let's navigate the markets together and achieve consistent growth! ✍️
Understanding Bollinger Bands: A Comprehensive GuideBollinger Bands are a versatile and widely used technical analysis tool that helps traders assess market volatility and identify potential price levels. Developed by John Bollinger in the 1980s, this indicator consists of three lines plotted on a price chart: the middle band, the upper band, and the lower band.
What Are Bollinger Bands?
Bollinger Bands are constructed using a simple moving average (SMA) and standard deviations of price data. The bands expand and contract based on market volatility.
1. Middle Band:
- A simple moving average, typically set to a 20-period SMA.
2. Upper Band:
- Plotted at a distance of two standard deviations above the middle band.
3. Lower Band:
- Plotted at a distance of two standard deviations below the middle band.
How Bollinger Bands Work
The distance between the upper and lower bands reflects market volatility:
- Wide Bands: Indicate high volatility.
- Narrow Bands: Suggest low volatility, often preceding significant price movement.
Key Concepts and Applications
1-Squeeze:
- A "squeeze" occurs when the bands narrow significantly, indicating low volatility and the potential for a breakout in either direction. Traders often look for confirmation from other indicators to predict the breakout direction.
2. Price Touches and Reversions:
- When the price touches the upper band, it may signal overbought conditions.
- When the price touches the lower band, it may indicate oversold conditions.
- However, these are not standalone signals and should be used in conjunction with other analysis.
3. Trend Following:
- In strong trends, prices can "ride" the upper or lower band without immediate reversals.
4. Double Bottoms and Tops:
- A double bottom near the lower band or a double top near the upper band can signal a potential trend reversal.
How to Use Bollinger Bands in Trading
1. Identify Entry and Exit Points:
- Use the bands to spot potential entry and exit levels. For instance, consider buying near the lower band during an uptrend or selling near the upper band during a downtrend.
2. Combine with Other Indicators:
- Pair Bollinger Bands with RSI or MACD to confirm signals.
- Use candlestick patterns near the bands for additional validation.
3. Set Custom Parameters:
- While the default setting is a 20-period SMA with bands set at two standard deviations, adjust these parameters to suit your trading style and market conditions.
Strengths of Bollinger Bands
- Adaptable to All Markets: Applicable across different asset classes and timeframes.
-Dynamic Nature: Automatically adjusts to market volatility.
- Visual Representation: Easy to interpret and use in combination with other tools.
Limitations of Bollinger Bands
- Lagging Indicator: Based on historical data, Bollinger Bands may not always predict future movements.
- False Signals:In sideways markets, Bollinger Bands may generate misleading signals.
- Dependency on Context:The effectiveness of Bollinger Bands depends on the trader’s understanding of market trends and conditions.
Example of Bollinger Bands in Action
Imagine Bitcoin (BTC) is trading in a range between $90,000 and $105,000. During a period of low volatility, the bands contract, signaling a potential breakout. Shortly after, the price breaks above the upper band, supported by rising volume and a bullish RSI. This could indicate a strong upward move, presenting a buying opportunity. Conversely, if the price breaks below the lower band, it might signal a downward move, suggesting a selling opportunity.
Conclusion
Bollinger Bands are a valuable tool for analyzing market conditions, identifying potential trading opportunities, and managing risk. While they are easy to use, their effectiveness improves when combined with other indicators and sound risk management practices. Always test your strategies with historical data and adapt them to your specific trading goals and market conditions.
Support and resistance levels that workAfter reading this article you will understand why levels are formed, how to identify them on the chart and how to make trades in different market conditions. You will also understand where the price of BINANCE:BTCUSDT BTCUSDT is more likely to go and why.
What are support and resistance levels
Support and resistance levels are areas where big players take positions and then defend them. In these areas, the price can turn around and go in a different direction.
Support: An area where large buyers find the price attractive and begin to accumulate the asset.
Resistance: An area where large sellers find the price overvalued and begin to sell the asset.
Levels are not lines but zones, because large players cannot accumulate large positions at one price, they operate in a range. Zones of levels should be marked on the chart with a reserve for the areas where traders place stops (after their removal it is possible to return behind the level, i.e. a false breakdown).
There are cases when the price stops several times on one line, but these are not levels, but crowd traps.
Why support and resistance levels are important
1. Determining where to look for entry and exit.
2. Placing a stop loss behind the level in a protected zone.
3. Evaluating potential profits. For example, buying from support, you might place take profit in front of a resistance zone.
The market moves from support to resistance, from buyers' stops to sellers' stops, from overbought to oversold.
How to find levels on a chart
1. Price reversals
When the price reverses in a certain zone with increased volume, this zone becomes a potential support or resistance. Even if there is no volume in the zone, it is important to consider such reversals (there may be no volume if there is no reaction from the other side, no buyer-seller fight).
2. Dense accumulations (consolidations)
A long stay of the price in a range, especially if it is accompanied by increased volume, indicates the presence of a struggle in this zone between buyers and sellers. When the price moves out of this area, this area becomes support on the way up or resistance on the way down.
3. Mirror levels
These levels alternate between support and resistance. For example, a level that was previously a support can become a resistance after a breakout and vice versa.
4. High volume zones without price reversal
If there was high volume in the zone and the price went up or down quickly, you should expect a reaction when you approach the zone again.
5. Long volatile candlesticks with increased volume (gaps)
Such candlesticks can be a sign of activity from a large player. If after a long candlestick with high volume, the price returns to it, such a candlestick can become a level from which the price will react.
6. Levels on round price values
Round values such as 100, 150, 200 often become support or resistance levels. These are so-called psychological levels where traders and big players tend to place their orders.
Factors reinforcing the level:
1. Time frame. Strong levels are formed on the older timeframes day, 4 hours. Big players work on them and such levels are more reliable.
2. Volumes. The presence of high volumes in the zone of the level confirms its importance. If there are no volumes, the level may be less reliable.
3. Buyers and sellers fight. A strong level occurs when the price consolidates for a long time and then there is an exit with increasing volumes. This indicates that one side, buyers or sellers, has gained the upper hand.
4. Taking out stops. The formation of a strong level is often preceded by a false breakout, which knocks out the stops and increases its importance.
5. Psychology. Round values such as 100, 150, 200 are often strong levels due to their psychological influence on market participants.
How to trade with levels
1. Levels of older time frames are more important. Always start your analysis with the weekly and daily charts, then move to the hourly and minute timeframes.
Note : On illiquid assets, you should only use the senior timeframes day, 4 hours to determine levels, smaller timeframes often look chaotic.
2. The trend determines the priority.
In an uptrend, support areas will be important, resistance areas will be weak.
In a downtrend, support areas will be important resistance areas will be weak.
In a sideways trend, both zones are equally important.
3. When trading intraday , pay attention to more recently formed zones, they have more weight. For example, in the case of an impulsive trend, hourly levels may not have time to form, so 5M levels become important.
Note : The slope angle of the trend and the speed of the trend are very important in determining the levels, because the stronger the trend, the weaker the zones of the opposite direction.
4. In the case of impulsive trends , where the price moves quickly and virtually without pullbacks, you can use junior timeframes, such as 5 minutes, to find local support and resistance zones and enter a trade on the trend. This is important because hourly levels on such trends do not have time to form due to the high speed of price movement.
5. In a declining trend you can even trade against the trend (as in a sideways trend). The fact that the trend is fading can be determined by how the highs (in an uptrend) and lows (in a downtrend) are updated with great difficulty and small values. Divergences can also indicate that the trend is weakening.
Errors when working with levels
1. Blind trading from levels. Never enter a trade just because the price has approached a level. Always look for confirmation: price reaction, volume, etc.
2. Ignoring older timeframes. Levels on older timeframes always carry more weight.
3. Stick to a single point. Levels are zones, not specific prices.
4. Misidentifying the zone. Do not mark too narrow zones, remember that big players work in a range.
Selecting assets for trading
The selection of interesting assets should be based on the following criteria:
Presence of a strong trend.
The price is in correction and close to the level.
High liquidity of the asset.
Assets that are not suitable for trading at the moment:
Absence of a trend.
High volatility without structure (so called "saw").
Low liquidity.
Trading on unsuitable assets becomes a guessing game, choose assets consciously to tip the odds in your favor.
Final recommendations for working with levels
In an uptrend : Look for support zones to long. Resistance zones serve as targets. The stronger the trend, the less important resistance zones are.
In a downtrend : Look for resistance areas to short. Support areas become targets.
In a sideways trend : Trade support and resistance zones. Consider zone extensions and possible false breakouts.
Conclusion
It is important to realize that support and resistance levels are only a part of success.
The main points to consider are
1. Asset selection. Work only with liquid and trending assets where levels are most important.
2. Combine with other methods to find an entry point and confirm the strength of buyers and sellers such as volume, candlestick patterns and technical indicators.
3. Maintain positions : move stop losses, take partial profits and stick to your original plan.
Remember that trading is not only about finding levels and trades, but also about discipline, risk management and constant learning. Each element of your trading strategy is a cog that works in conjunction with the others. The more accurate and reliable the mechanism, the greater your chances of success.
If you found this article useful, place a rocket and write comments. Good luck in trading!
Using Trendlines on ATR for Trading Strategy:Average True Range:
Volatility Resistance: The ATR oscillating at a resistance line suggests that the market volatility has reached a point where it has been repeatedly unable to break through to higher levels. This can mean that despite attempts, the volatility hasn't sustained at higher levels, potentially indicating a stabilization or a ceiling on how volatile the market might get in the short term.
Market Sentiment: This oscillation can also reflect a market where there's a tug-of-war between buyers and sellers, leading to a stabilization of price movement range. When volatility hits a resistance level, it might indicate that the market is preparing for a significant move or a breakout, or conversely, that it might revert back to lower volatility after some consolidation.
Breakout Strategy:
Signal for Breakout: If the ATR breaks above the resistance line where it has been oscillating, it could signal an upcoming increase in volatility, potentially leading to a significant price movement. Traders might consider this a signal to prepare for a breakout trade, either buying or selling depending on the price trend.
Trade Entry: Following a breakout, traders could use this ATR trendline break as a cue to enter a trade in the direction of the breakout, expecting that increased volatility will lead to a more substantial price move.
Stop Loss and Profit Taking:
Stop Loss: The resistance line where ATR oscillates can be used to set dynamic stop losses. If the ATR moves above this line, indicating higher volatility, a trader might adjust their stop loss to be a multiple of the ATR away from the current price to account for the increased risk.
Profit Targets: Similarly, profit targets can be set based on ATR levels. For instance, if the ATR is oscillating near resistance, traders might aim for a profit target that's one or two ATRs away from the entry point, anticipating where volatility might push the price.
Trend Confirmation:
Confirming Trends: ATR's behavior at resistance can confirm trends. If the price is trending upward but the ATR fails to move above its resistance, it might indicate that the trend lacks strong momentum or that a reversal could be on the horizon.
Risk Management:
Adjusting Position Size: High ATR levels near resistance could suggest increasing market noise, prompting traders to reduce position sizes or adjust their risk management strategies to account for potential whipsaws or false breakouts.
Counter-Trend Strategy:
Reversal Signals: If the ATR repeatedly fails to break through resistance, it might signal that the market is overstretched, potentially leading to a decrease in volatility or even a trend reversal. Traders could look for bearish signals if this happens in an uptrend or bullish if in a downtrend.
Incorporating these strategies requires careful observation and should ideally be combined with other forms of technical analysis or indicators for confirmation. Remember, while ATR provides insights into volatility, it does not indicate the direction of price movement, so it should be part of a broader trading strategy.
USD/CAD -Volume Spread AnalysisHere is a perfect example of Pushing Up through Supply.
As shown, when up-trending markets experience the phenomenon created by Market Makers in which supply us introduced to the market. (Notice the Pivot Highs at 1.41942 and 1.41968 which are 4 pips apart) These levels of supply are known by the market makers and are used to lock in bullish traders.
As the market moves against the locked in traders we notice Ultra High Volume (UHV) shows up. As we analyze the volume it suggests professional supply has entered the market and is confirmed by the following Wide Spread and Excessively UHV.
This confirms the intention of the professionals to lock in bullish traders and create an over head supply zone. The following price movement has UHV as well but less than the previous bar and it also closes bullish but inside the larger UHV bar. Peculiar for a market that is doomed to fall to the abyss don't you think? Looking back to the previous 40 price bars we notice price held support above the level of the previous pivot low at 1.40926.
The supply diminishes from this point as price creates a Lower High (LH) then a Higher Low (HL). We also notice the spread bodies of the bars leading to the pivot low at 1.41304 are smaller than any other downward push since the consolidation period on the 10th of December.
This implies supply has diminished until we come back in contact with the supply created by the Market Makers. The UHV suggests supply is present. However, the next bar shows demand is also present and supply has suddenly diminished at the resistance as well.
Prices then proceed to "Push up Through Supply" volume diminishes and prices rise through the supply which is termed and "ease of movement". This is an aggressive BUY SIGNAL which implies prices will not come back to retest the previous area of resistance turned support known as the backup to the edge of the creek.
You have to be aggressive at these moments because prices will not return to the retest the structure as the handling maneuver is completed a as it leaves the re-accumulation area.
Volume Profile: Why I don't trail stops!Two great examples happened this week on INDEX:ETHUSD and S&P 500 futures where price respected the Volume Profile level TWICE! This video is a tutorial on Volume Profile to demonstrate why it is a "cheat code" for finding GREAT LEVELS!
I do not trail stops because when I put a trade on I want it to be at a Support/Resistance: I wan price to HOLD that level. If it holds a GOOD level... it should hold it AGAIN! Just like these two did. You should never have to move your stop up from a Volume Profile level.
Volume Strategy Idea I want show how to combine three of my scripts to derive trading signals. I am going to build this into a coherent Indicator, so any feedback while I am developing is appreciated.
You want to see VAMA defining the trend direction. Then you look to enter on the bars where the Volume Flow Indicator is issueing an New Signal (Dark Green or Dark Red), and Volume Bars showing a significant or massive volume event. These two signals must happen at the same bar and in the direction of the trend defined by the VAMA to confirm a signal.
Im working on this script as I write this and you will find it in my script library soon. I will call the Indicator "Volume Runner". Enjoy.
Mastering the Anchored Volume Profile: Setup & Tutorial on TVMastering the Anchored Volume Profile: Setup & Tutorial on TradingView 📊
The Anchored Volume Profile is a powerful tool that traders use to visualize volume distribution over a specified price range, providing critical insights into market behavior. Here’s a detailed description of its setup and usage on TradingView:
In this video, we will be going in-depth into the following areas:
What is the Anchored Volume Profile?
The Anchored Volume Profile is a specialized indicator that helps traders understand the distribution of traded volume at different price levels. Unlike traditional volume profiles that analyze data over a fixed time period, the anchored version allows traders to anchor the volume analysis to specific bars, candles, or price points.
Why Use the Anchored Volume Profile?
Identifying Support and Resistance Levels: You can easily identify key support and resistance levels by analyzing where the most volume has been traded.
Spotting Trends and Reversals: High-volume nodes can indicate areas of strong interest, helping to predict potential trend continuations or reversals.
Improving Entry and Exit Points: Knowing where the market participants are most active can significantly enhance your decision-making process for entries and exits.
How to set up the Anchored Volume Profile on TradingView:
Add the Anchored Volume Profile Indicator:
Click on the “Indicators” button at the top of the chart.
Search for “Anchored Volume Profile” in the search bar.
Select it from the list and apply it to your chart.
Anchor the Indicator:
Click on the anchor icon that appears on the chart.
Drag it to the specific bar, candle, or price point where you want to start your volume analysis.
Customize Settings:
Adjust the settings to suit your trading style. You can modify the range, color, and other parameters to better visualize the data.
Using the Anchored Volume Profile:
Analyzing Volume Nodes: Identify high and low volume nodes. High volume nodes often act as support or resistance, while low volume nodes might indicate potential breakout areas.
Understanding Market Sentiment: See where the majority of trading activity has taken place to gauge market sentiment.
Making Informed Decisions: Use the insights from the volume profile to make better-informed trading decisions regarding entries, exits, and stop-loss levels.
Why Trading Sessions Matter in Forex: Key OverlapsThe Forex market is open 24 hours a day during the weekdays, allowing traders flexibility to trade at any time. However, understanding the best times to trade is essential for effective trading. The market is divided into four main sessions: Sydney, Tokyo, London, and New York, each corresponding to peak activity in key financial centers. Using a Forex Market Time Zone Converter can help traders determine which sessions are active in their local time, making it easier to plan around high-liquidity periods.
Although the market is technically always open, not all trading times are equally profitable. Higher trading volume, which generally occurs during session overlaps, creates ideal conditions for traders. For example, the overlap of the London and New York sessions sees the highest volume, with more than 50% of daily trades occurring in these two centers. Trading at this time, especially with currency pairs like GBP/USD, can lead to tighter spreads and quicker order execution, reducing slippage and increasing the likelihood of profitable trades. Similarly, trading AUD/JPY during the Asian session, when the Tokyo market is active, is advantageous due to higher trading activity for these currencies.
Conversely, trading during times when only one session is active, such as during the Sydney session alone, can result in wider spreads and less market movement, making it harder to achieve profitable trades. Planning trades around high-activity sessions and overlaps is key to effective forex trading.
2 Day Anchored VWAP on ES futuresInitially you have to understand what the volume weighted average price (VWAP) is. Broadly it can be defined as: Total dollars traded divided by the total shares for the period studied Vwap= ∑(Price∙Volume)/∑(Volume)
This means that VWAP is more responsive to volume than price and its calculation does not depend on the timeframe we are in. It is also the most common benchmark used to compute transaction costs.
what is the anchored VWAP ?
The AVWAP is an indication of the average transaction price of the participants for however long it’s plotted. Normally the VWAP resets everyday at the start of the trading session, but the anchored vwap will continue its calculations from the candle it was anchored until the present bar meaning no resets in that period.
In an uptrend buyers will try to defend that average entry price when price comes back to it. in the uptrend when the AVWAP is below price that means that the average participant is making money, when price crosses under they start to lose money and that could lead them to try to exit and push price even lower. So the cross of the AVWAP can mark a change on the near term trend. It is very important to mark the AVWAP from significant price levels or catalysts, in this case we will analyze the 2 Day anchored VWAP (2DAVWAP) on CME_MINI:ES1! futures.
Where do you anchor the 2DAVWAP ?
For example, if it's a wednesday morning you want to anchor the VWAP at monday 5pm CME_MINI:ES1! futures open. An easy way of finding the right candle to anchor is checking the "session breaks" option in the chart settings so after your session break line shows the next candle (in any timeframe) that will be the one anchored so you can trade it at the next session.
How to trade it ?
1. It is very important that CME_MINI:ES1! is in a clear and strong uptrend, this is a following the trend strategy. It can also be used in downtrends but backtesting it has proven to me that long setups are the best setups. If CME_MINI:ES1! has been uptrending and then starts consolidating but starts to move up from a good support level you can also enter a setup on that market context.
2. Anchor the VWAP from the session open and wait until next day.
3. Wait until price retraces to the 2DAVWAP the next day. It only works when the retracement happens the next day, don't trade that anchored VWAP further than that.
2. Watch the price action - Volume when it reaches the AVWAP. Price action and volume should Show an effort of buyers to continue the trend, Candle should reach the 2DAVWAP and form a hammer candlestick closing above the AVWAP in the 15 min TF (best entry point, wait for candle close).
3. Mark the 38.2% and 50% Fibonacci retracement levels from previous day low to the present day high. The lowest price can go for you to still consider entering the trade is the 50% retracement, lower than that you dismiss the trade. Go with confidence if there is a confluence between fib and the 2DAVWAP.
4. Set a Stop loss based on maximum adverse excursion (MAE) and the average true range (ATR) for that day (this risk management should be defined with backtest). A good tip is always try to enter the closest to were you would be wrong in a trade, which can be below the 50% retracement for example.
5. Set a Target profit based on maximum favorable excursion (MFE) and the average true range (ATR) for that day (this risk management should be defined with backtest). A good tip is try to exit at least at previous highs if there is volatility on the day.
Finally, the entry could be at any time of the day, it could happen at 2 am EST or it could happen at 10 am EST, it really does not matter. Always take trading seriously, stay discipline and do your own backtesting and find what works the best for you. I will be posting more educational posts on AVWAP. This strategy has only been backtested in CME_MINI:ES1! futures.
A classic setup for finding trading opportunitiesHi traders and investors!
In a recent post, I talked about a classic setup. You can find the post below in the related ideas section. I decided to elaborate on it a bit more because this setup frequently appears across different assets, and certain elements of this setup are common in various trading methodologies. In this article, I used a bar chart because bars take up less space, making it easier to see other elements of the chart.
Take a look at the chart. The seller's move from the 52,550 level updated the previous local high. The bar with the highest volume in this entire buyer's movement is the bar from September 18. The 50% level of the entire buyer's movement lies within this bar (!).
Next, we see the seller's movement, and on October 3, a test is formed within the key buyer's bar, at the level of 59,828.11. The price didn't reach the 50% level (59,524).
The key seller's bar in this movement (the bar with the highest volume) is the bar from October 1. The 50% level of the entire seller's movement is within this bar (!).
Next, we see the buyer's movement, and on October 5, a test is formed within the key seller's bar, at the level of 62,484.85. The price didn't reach the 50% level (63,163.06).
Then we see the buyer's attack on the test level of 62,484.85 and the 50% level of the seller's movement (63,163.06), followed by the seller returning the price below the test level, accumulating volume for a downward move. After that, the local minimum of 59,828.11 was updated.
Then, the seller attacks the test level of 59,828.11 and the 50% level of the buyer's movement (59,524), and the buyer returns the price above the test level, gathering volume for an upward move. What happens next... we will soon see.
This is how the buyer's attack on the 50% level of the seller's movement looked on the 4-hour time frame.
No differences whatsoever. Although, maybe I didn’t look hard enough. The key bar of the seller's movement intersects the 50% movement. First, there’s a test below the 50% level (test level 62,975), then an attack on the test level and the 50% level.
Hope you found it interesting.
Good luck with your trading and investments!
Two Roads to Profit. A Comparison of ICT/SMC and Advanced VSAHello traders and investors!
When we start engaging in trading and investing, we get acquainted with various methods of forecasting price movements. Gradually, if we have enough persistence, strength, and patience, we choose our own path to profitable trades. Among the most popular approaches, we can highlight the use of various oscillators and channels, Dow Theory, Elliott Waves, Fibonacci levels, supply and demand, Volume Spread Analysis (VSA), market auction theory, and the Inner Circle Trader/Smart Money Concept (ICT/SMC). Many traders combine elements from different approaches into their trading system.
I personally prefer a concept I call Advanced VSA. It’s a comprehensive set of tools that combines ideas from VSA, Dow Theory, and Supply and Demand analysis. The name "Advanced VSA" perfectly captures the essence of the method, as it is fundamentally based on analyzing volume and price spread.
Recently, the ICT/SMC concept has been gaining more and more popularity. Today, I want to explore the similarities and differences between ICT/SMC and Advanced VSA. If there are any inaccuracies in my explanation of ICT/SMC basics, feel free to correct me in the comments. Perhaps after reading this article, you’ll be able to decide which approach resonates more with you and which one you believe will help you in your trading. I hope this will be helpful. Let’s dive in!
Basic Differences
Before diving into the technical details, let's first clarify the key differences between these concepts.
Who Controls Price Movements
The ICT/SMC concept assumes that price movements are controlled by large players, such as market makers, who direct prices in the desired direction. This is similar to a model where one "center of power" determines the market's direction.
In contrast, Advanced VSA is based on the idea that two forces influence price — the Buyer and the Seller. All analysis revolves around the interaction between these two sides, creating a more balanced model where both forces are equally important.
Traded Volume
The ICT/SMC concept does not use traded volume as a part of its analysis.
In Advanced VSA, volume is an important factor. It is considered an integral part of the data that helps to understand market processes and the actions of participants.
Now let’s move on to a detailed comparison of the elements of these concepts.
What They Have in Common
Both concepts teach traders to identify price ranges on the chart where a large player (Market Maker in ICT/SMC) or a Buyer (in Advanced VSA) shows interest in buying, and ranges where the Market Maker or Seller is interested in selling. When the price returns to these ranges, traders can execute buys or sells. We can call these price ranges contextual areas for buying and selling.
Neither concept relies on technical indicators. Instead, they focus on the following key terms for identifying the trade direction and the trade entry point:
Trend
Trend break/half-trend
Trend confirmation
Accumulation/Distribution/Sideways movement/Flat
Contextual areas for buying and selling
The first four terms help determine the direction of the trade, while the fifth helps identify the entry point and the likely target of the trade.
Both methods suggest using higher timeframes to find contextual areas and lower timeframes to find entry points within those areas.
What Are the Differences
The differences between the concepts lie in the interpretation of key terms. For the first four terms (trend, trend break, trend confirmation, accumulation/distribution/Sideways movement), the distinctions are minor and relate mostly to specific interpretations. However, the main differences arise in the rules for identifying contextual areas of interest (buyer, seller, or market maker). Let's look at these differences in more detail.
Difference 1: Use of Volume
In ICT/SMC, contextual areas of interest are determined solely based on price action and candlestick patterns, without taking traded volume into account.
In contrast, Advanced VSA sees volume as an integral part of the analysis. contextual areas of interest are identified by both traded volume and price behavior (candlestick patterns). If there was interest from a buyer, seller in a specific price range, leading to a price change, it's logical to assume that the volume traded in that range should be higher than in previous periods over a similar timeframe.
To illustrate the importance of using all available data for analysis, consider an analogy with choosing the best time for a seaside vacation. If the decision is based only on water and air temperature, while ignoring factors like wind or rainfall, the choice may be misguided. For example, choosing April for its comfortable temperature might result in encountering constant rain and high waves.
Thus, in Advanced VSA, volume plays a crucial role, whereas it is absent in ICT/SMC.
Difference 2: Types of Contextual Areas of Interest
In ICT/SMC, the following types of contextual areas of interest are used: order block, breaker, mitigation block, and rejection block. All of these areas are formed by a specific arrangement of candles on the chart.
In contrast, Advanced VSA operates with a different set of contextual areas of interest: effort, zone, and range (sideways movement). Effort refers to a single candle or bar that indicates significant market activity. Zone is formed by a sequence of candles or bars, taking into account their traded volumes. Range (sideways movement) is defined by a series of consecutive candles/bars where price fluctuates within a limited range, interacting alternately with the upper and lower boundaries of the range. It's only possible to identify which party (buyer, seller, or market maker) controls the range after the price breaks out and confirms the move.
If the volumes align with Advanced VSA's criteria, order blocks and mitigation blocks in ICT/SMC can be considered as zones in Advanced VSA. So, not all order blocks and mitigation blocks will be considered zones in Advanced VSA. The breaker will be discussed separately, and there is no equivalent to the rejection block in Advanced VSA.
Difference 3. Price Attraction Points
In ICT/SMC, concepts such as fair value gap, liquidity void, and liquidity are used to describe price attraction points.
In Advanced VSA, the terms fair value gap and liquidity void are not utilized. Most of the time, these ICT/SMC elements correspond to price interest points in Advanced VSA, such as effort. The term liquidity has the same meaning.
Difference 4. Importance of Levels
In Advanced VSA, levels play an important role in identifying trade opportunities. To understand the significance of levels, let’s first recall the concepts of trend and range (sideways movement). In both ICT/SMC and Advanced VSA, a trend is broken down into components, often referred to as impulses or expansion moves. A range, on the other hand, is characterized by its boundaries and the vectors of price movement between those boundaries.
In Advanced VSA, important trading signals include the defense of a broken level or a price retracement to a level followed by its defense.
In Advanced VSA, the defense of a broken level or the cancellation of a breakout (where the price returns back behind the broken level) followed by a defense of that level is considered a signal for identifying trades. This method helps traders spot potential entry points where either buyers or sellers to protect a key price level, giving more confidence in the direction of the market. The most important levels include the base of the last impulse, the boundaries of a range, and the test level of a zone.
In ICT/SMC, there are no direct equivalents of these elements when it comes to searching for trades. However, breakers and sometimes mitigation blocks serve similar purposes to the levels in Advanced VSA, but the approaches differ. In ICT/SMC, trades are typically executed within the breaker or mitigation block, whereas in Advanced VSA, trades are found when a level is defended: buy trades above the level (supported by buyers), and sell trades below the level (supported by sellers).
Additionally, Advanced VSA allows for trading within ranges, moving from one boundary to the other, as long as the boundaries are defended.
Summary
Despite the shared terms and similar approaches, there are significant differences between the two concepts:
Number of forces influencing price movement: In ICT/SMC, it is believed that price is controlled by a single force, the Market Maker (MM). In contrast, Advanced VSA considers the interaction of two forces—buyers and sellers—as driving price movements.
Use of volume in analysis: ICT/SMC does not take traded volume into account during analysis, while in Advanced VSA, volume is a crucial element for identifying market forces and areas of interest.
Use of levels for trade entries: In ICT/SMC, levels do not play an important role, whereas in Advanced VSA, levels one of the possible places for identifying potential trade setups.
Good luck with your trading and investing!
How I used Volume Spread Analysis to avoid FOMO trading!As a trader, I often battle with the fear of missing out (FOMO), a common pitfall among traders that can lead to impulsive, unprofitable trades. After reviewing my journal, I determined that chasing breakouts was costing me a significant portion of my account, so I studied Volume Spread Analysis (VSA) to help me reduce my urges. Here is how is used VSA to avoid FOMOing a trade.
Before we get started, let's clarify two definitions:
Volume: Measures the number of times buyers and sellers exchange 1 unit of an asset at an agreed-upon price. It doesn't inherently indicate whether a trend is bullish or bearish, but rather that a trade has occurred. Low volume suggests that few transactions have taken place because buyers and sellers couldn't agree on price. High volume suggests that buyers OR sellers felt they were getting a bargain at the current price, leading to many transactions.
Spread/Range: The difference between the high and low of a candlestick. A narrow spread indicates little variance between what someone is willing to buy for and what someone is willing to sell for. A wide spread suggests that buyers and sellers have significantly different ideas of what the fair price is.
In short, Volume Spread Analysis (VSA) interprets the relationship between trading volume and candle spread. When volume and spread agree, they are considered harmonious, and the trend will probably continue. If volume and spread disagree, there is a divergence, and the trend may be weak or could even reverse. In general, there are three main harmonious conditions:
Narrowing spread should have narrowing volume.
Average spread should have average volume.
Widening spread should have widening volume.
I spotted a bear flag consolidation on QQQ and decided I would trade the breakout to the downside. I took a break and came back to the chart just after the breakdown had occurred, missing my ideal entry. The candle spread was widening and my first thought was "I have to get in! This thing is free falling!" PAUSE! I reminded myself that I cant make every dollar in the market. If I miss this trade, there will always be another. "Be patient and wait for the market to come back to you."
This is the chart after the initial break. What can we observe? QQQ broke the low of day with high volume and a widening red candle. Based on our definitions from earlier, we know that high volume means that buyers or sellers think they are getting a bargain so they are willing to transact as much as they can at current price. Given that price is falling, we can assume that the volume is due to aggressive selling. We remain patient and continue to watch for something to trade against.
Next, we see a narrower range candle with a long lower shadow and above average volume. By definition, strong volume with a narrow range is a possible divergence. We know that narrow range candles mean that buyers and sellers generally agree on current price, but why would it close near the highs if the selling was so aggressive? Given that there is a long lower shadow and then a bullish candle close, we can infer that sellers were not willing to sell below $467.89. The buyers absorbed the selling at those prices.
Fast forwarding, we notice that the volume and candle size has shrunk back to the average meaning buyers and sellers are in agreeance. The number of people willing to transact is decreasing. We also notice that a small range has formed. Buyers have not stepped in to buy above the previous low of day at $469.35 and the sellers have shown no effort to get back below $467.89. Now we have something to trade against instead of FOMOing in! We will look for a break of this range with increased volume.
On the next candle we see bulls break out of the range with aggressive volume and a wide spread candle. Something of note is that the volume on this bull candle is less that the volume of our initial sell candle. If those sellers were still present, wouldn't they be selling at these higher prices and forcing the candle range to be narrow? This shows us that bulls are now in control and the selling from earlier was just a hoax.
As we can see, the rest is history. If I FOMOed into the short as I had planned, this trade would have resulted in a loss. Being patient allowed me to realize that there was nothing to miss out on and actually allowed me to find a better trade.
Key Notes
Always journal your trades and review them
Never FOMO into a trade. Be patient and wait for the trade to come to you!
You dont need to take every trade to make money in the market. It is okay to miss a trade if it means protecting your account.
Volume spread analysis is not 100%, but it can be useful in determining the strength of a trend.
Navigating the Waves: Elliott Wave Theory and Key IndicatorsEducational Technical Analysis on example chart of UFO Moviez India
Elliott Wave Analysis and Key Moving Averages
Disclaimer
This study is for educational purposes only and does not constitute trading or investment advice. The analysis presented focuses on one potential scenario based on Elliott Wave Theory and other technical indicators. Trading and investing involve substantial risk, and individuals should consult a financial advisor before making any decisions.
Introduction to Elliott Wave Theory
Elliott Wave Theory is a form of technical analysis that traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective activities. The theory posits that stock prices move in predictable patterns or "waves" based on investor sentiment.
Principles of Elliott Wave Theory
1. Wave Patterns: According to Elliott, market prices move in five waves in the direction of the main trend (impulse waves) and three waves in a correction against the main trend (corrective waves).
2. Wave Degrees: Waves are fractal in nature, meaning that smaller waves form part of larger waves, and this pattern repeats on all time frames.
3. Wave Characteristics:
- Wave 1: Usually the smallest impulse wave.
- Wave 2: Corrects Wave 1 but does not exceed its starting point.
- Wave 3: Typically the strongest and longest wave.
- Wave 4: Corrective wave that is usually less severe.
- Wave 5: Final leg in the direction of the main trend.
Current Analysis of example chart of UFO Moviez India
Based on the chart and Elliott Wave Theory, UFO Moviez India is currently suggesting an impulsive and momentum-driven 3rd of the 3rd wave ahead, with an invalidation level at 106.
Key Observations:
1. Wave Count:
- Wave (1): An initial 5-wave impulse has completed.
- Wave (2): A corrective ABC pattern.
- Wave (3): Currently unfolding with sub-waves i, ii, iii, iv, and v marked.
- Wave 3: In the larger context is forming.
2. Breakout:
- There is a breakout above the downward trendline with good volumes, indicating strong bullish momentum.
3. Key Moving Averages:
- Price Trading Above:
- 50 EMA, 100 EMA, and 200 EMA
- 50 WEMA, 100 WEMA, and 200 WEMA
- Crossed above 20 MMA
Technical Indicators and Levels
- Price: 148.54 INR (as of the latest close)
- Support Levels:
- Nearest Invalidation Level: 106 INR
- Major Support: 57.20 INR
- Resistance Levels:
- Immediate Target: 175.58 INR (Wave 1 of larger degree)
- Fibonacci Extension Target: 220.51 INR (1.618 extension of Wave 1)
Conclusion
The Elliott Wave analysis of example chart of UFO Moviez India indicates a potentially strong bullish trend as the stock is in the 3rd wave of a larger impulse. The breakout above the trendline with significant volume further supports this bullish outlook. However, it is crucial to monitor the invalidation level at 106 INR, as a break below this level could invalidate the current wave count and suggest a different scenario.
Educational Purpose Notice
This analysis is provided for educational purposes only. It is not an investment or trading advice or tip. Trading and investing in financial markets involve risk, and it is important to do thorough research and consult with a financial advisor before making any investment decisions.
I am not Sebi registered analyst.
My studies are for educational purpose only.
Please Consult your financial advisor before trading or investing.
I am not responsible for any kinds of your profits and your losses.
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Hope this post is helpful to community
Thanks
RK💕
Disclaimer and Risk Warning.
The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
Volume Spread Analysis (VSA): Volume and Price DynamicsVolume Spread Analysis (VSA): Understanding Market Intentions through Volume and Price Dynamics.
█ Simple Explanation:
Volume Spread Analysis (VSA) is a trading technique that identifies key market patterns and trends by analyzing the relationship between volume and price spread, revealing traders' actions and market behavior.
Essentials in Volume Spread Analysis (VSA):
Laws.
VSA Indicator.
Signs of Strength.
Signs of Weakness.
Note that while the provided examples are excellent for illustrating the points, they are unlikely to play out perfectly in most scenarios.
█ Laws
Three basic laws forming the foundation of Volume Spread Analysis (VSA).
The Law of Supply and Demand
This law states that supply and demand balance each other over time. High demand and low supply lead to rising prices until demand falls to a level where supply can meet it. Conversely, low demand and high supply cause prices to fall until demand increases enough to absorb the excess supply.
The Law of Cause and Effect
This law assumes that a 'cause' will result in an 'effect' proportional to the 'cause'. A strong 'cause' will lead to a strong trend (effect), while a weak 'cause' will lead to a weak trend.
The Law of Effort vs Result
This law asserts that the result should reflect the effort exerted. In trading terms, a large volume should result in a significant price move (spread). If the spread is small, the volume should also be small. Any deviation from this pattern is considered an anomaly.
█ VSA Indicator
This indicator simplifies the identification of Volume and Spread Levels. It provides options to display volume and/or spread bars. An enhanced version of the indicator auto-scales both volume and spread for optimal chart presentation, reloading every time the chart is moved.
Levels: Representing the levels of both volume and spread using the terminalogy of low, normal, high, and ultra.
Indicator Version 1: Display volume and/or spread bars. When both are displayed, the spread bars are shown in a fixed quantity.
Indicator Version 2: Display both volume and spread bars, with the spread bars scaled to the volume bars.
█ Signs of Strength
Indicates that the market is likely to experience bullish behavior.
Down Thrust: Indicates strong buying interest at lower prices, suggesting a potential upward reversal.
Selling Climax: Signifies a reversal point as panic selling exhausts and smart money starts accumulating.
Bear Effort No Result: A large downward price move without strong selling effort (volume) indicates an anomaly where the result doesn't match the effort, suggesting the down move may be unsustained.
No Effort Bear Result: Strong selling effort (volume) fails to push prices down indicating an anomaly where the result doesn't match the effort, suggesting a potential lack of downward momentum.
Inverse Down Thrust: Shows buyers overpowering sellers, likely leading to a bullish market reversal.
Failed Selling Climax: Failed selling effort suggests strong buying support and a possible upward trend reversal.
Bull Outside Reversal: Indicates strong buying reversing a downtrend, confirmed by higher close.
End of Falling Market: Signifies strong buying absorbs panic selling at new lows, likely leading to stabilized price or reversal.
Pseudo Down Thrust: Suggests weakening of the downward momentum with a potential upward continuation if broken above high.
No Supply: Indicates a lack of selling interest at lower prices, potentially setting up for a price rise.
█ Signs of Weakness
Indicates that the market is likely to experience bearish behavior.
Up Thrust: Indicates sellers overpowering buyers during a price rise, suggesting a potential downward reversal.
Buying Climax: Represents peak buying, typically at price highs, with potential for reversal as sellers take control.
No Effort Bull Result: A large upward price move without strong buying pressure (volume) indicates an anomaly where the result doesn't match the effort, suggesting the up move may be unsustained.
Bull Effort No Result: Strong buying (volume) fails to drive prices higher indicates an anomaly where the result doesn't match the effort, suggesting a potential lack of upward momentum.
Inverse Up Thrust: Increased selling pressure during an uptrend suggests a possible shift to a downtrend.
Failed Buying Climax: High buying volume fails to sustain higher prices, indicating a potential reversal to downtrend.
Bear Outside Reversal: Strong selling pressure reversing an uptrend, signaling a potential downtrend.
End of Rising Market: Indicates buying saturation at market peaks, suggesting a possible reversal as demand exhausts.
Pseudo Down Thrust: Indicates weakening upward momentum with potential for downward continuation if broken below low.
No Demand: Indicates reduced buying interest at higher prices, possibly leading to a price decline.
Demand Zone Bounce Lesson This is just going over a lesson I learned and seeing the price actually bounce off of my demand zone I thought it was cool.
How to read Volume properlyIn this video, I explain how to interpret volume bars in conjunction with price movements. Recognizing large volume bars is crucial for understanding significant market interest, especially when they accompany substantial percentage changes in the underlying asset. These insights can help confirm institutional buying, signal the beginning or end of uptrends, and indicate the start of sell-offs or the end of downtrends.
For example, large green volume bars can suggest the start of an uptrend or confirm institutional buying, while large red volume bars can signal the beginning of a sell-off or the end of a downtrend. This indicator simplifies the process of reading volume bars, making it easier to extract valuable insights from them.
