In MAIL 5 you can see:
"Drag & Drop Volume Profile" Indicator
Before I tell you all the details about our new Drag & Drop Volume Profile indicator, let's go back to the very beginning:
Jesse Livermore, Charles Dow, Richard Wyckoff.
3 of the most iconic traders of the past. And they have 1 thing in common:
They all rely on volume as a basic tenet of their trading.
Following these giants' footsteps, it's time for retail FX traders to learn how to use volume in their trading too.
But maybe you're wondering...
Is It Relevant To The FX Market?
Maybe you've heard that there's no real volume in forex. Instead, we only have tick volume, which measures trading activity of market participants during a given time period.
But here's the kicker:
Recent research shows that there's a high correlation (as high as 97.9%) between tick volume and real volume...
Do you see the problem here? The market gives you 2 important pieces of information: Price and Volume. And if I have to guess, 95% traders only use price in their analysis, and completely ignore Volume which is equally important.
It changes TODAY.
Why? Because today we'll show you an unusual technique to analyze Volume in the FX market to identify high-probability market turning points, and pinpoint trade entries and profit targets.
This technique is called Volume Profiling. And I guess the first thing I should explain is...
What exactly is Volume Profile?
Volume Profile is a visual representation of how much volume occurs at each individual price over a certain period of time.
The colored box represents the range of bars over which this market profile is calculated and drawn. The market profile itself consists of a series of horizontal bars. And each bar represents how much volume occurs at each price level over this time period.
By the way, here's the link to a Wikipedia article on Market Profile, a similar concept to Volume Profile. Read it if you'd like to dig deeper into this stuff.
You may notice that there are always some prices at which a lot of trading occurs. That means high volume. And we call these price levels: High Volume Nodes (HVN).
On the other hand, there are always some prices where very little trading occurs. That means low volume. And we call these price levels: Low Volume Nodes (LVN).
There's also a special price level where the most trading occurs. We call this level: Volume Point Of Control (VPOC)
A few things you should note: The range of bars encompassed in the lavender rectangle is the period over which our Volume Profile is calculated.
The Volume Point Of Control is highlighted in turquoise. The Low Volume Nodes are highlighted in yellow. You can also notice a few High Volume Nodes that really stand out.
As mentioned, High Volume Nodes represent price zones where heavy trading took place between buyers and sellers. That also means that these prices are accepted by market participants. Buyers are happy to buy and sellers are happy to sell.
What's more important is that once the prices move out these High Volume Nodes, they are likely to act as strong support and resistance when the price revisitits these areas.
In other words, these High Volume Nodes are magnetic to price...
Price is likely to be drawn towards the High Volume Nodes. And this characteristic is invaluable because now you can plan your trades in advance, knowing which areas the price will likely gravitate to.
In this example, the price is stuck in a consolidation period for a while before breaking out to the downside. We draw a Volume Profile for this period of consolidation. The red line on this chart marks the Volume Point Of Control (the most significant High Volume Node of all) which is the price where most trading occurs.
After this period of consolidation, the price breaks out to the downside. Then it briefly rises again until it hits the Volume Point Of Control. And as you can see, the price bounces off this Volume Point Of Control very aggressively upon retest.
We learn 2 things from this example: First, High Volume Nodes are magnetic to price. Price likes to hang around these nodes. And that means once the price breaks out of the High Volume Nodes, it is likely to gravitate towards these levels again and retest them.
And second, High Volume Nodes often act as strong support and resistance levels. And in our experience, more often than not, the price will aggressively bounce off these High Volume Nodes upon retest.
Now, let's talk about Low Volume Nodes. These represents the prices at which there's little trading taking place. And that means the market participants think these prices are unfair.
When price revisits these Low Volume Nodes, it will either move through these zones very quickly, or get rejected very quickly.
And here's an example of price gets rejected when testing these Low Volume Nodes. Although the probabillity of price bouncing off Low Volume Nodes is lower than price bouncing off High Volume Nodes, when it does happen, it's usually very quick. And that allows us to use a tighter stop and hopefully win a trade fast:
Now, let's discuss Volume Price Of Control (VPOC). This is the price at which the most trading occured. Take this example on USD/JPY 30-minute chart:
Volume Profile shows you the market's structure and provides context for current price action. And they gives you clues to where big support & resistance levels are...
Our "Drag & Drop Volume Profile" indicator instantly shows you all the critical price levels: Volume Point Of Control, High Volume Nodes, Low Volume Nodes...
You can even adjust the look of the indicator in any way you'd like using the indicator's convenient toolbar...
You can also choose to display the Volume Profile on the left or on the right hand side of the selected range of bars...
You can apply as many Volume Profiles on your chart as you'd like...