Volume Profile Trading Strategy — Step-by-Step Guide & Transcript

[00:00] precise that the moment I started implementing  this into my own personal trading strategy.   I instantly saw my winrate start to skyrocket. And after watching this video, you will not only  

[00:14] know how to use the volume profile But will know all of my secrets on   how I personally use it, in my  own personal trading strategy.   And at the end, we re going to look at a real  AMD trade that resulted in a 300% move..  

[00:28] All because the volume profile  flagged it before it even happened.   Now I m sure most of you  have heard of normal volume.  

[00:47] You get a big volume bar on a big candle,  must mean something important happened.   Here s the thing with normal volume. While yes, it can be somewhat useful.  

[01:01] The default volume bar at the bottom of your  chart tells you how much was traded that day,   but it has no idea what prices the real  buying and selling pressure is occurring  

[01:14] That means every single day, you're  likely entering trades at the exact   price levels where institutions are offloading So the question becomes: what if you could see   where the volume happened, not just when? What if every single price level had its own  

[01:29] volume bar attached to it so you  could instantly see which prices   institutions were actually interested in? That s where the volume profile comes in.   The volume profile is basically just a normal  volume indicator, but flipped on its side.  

[01:45] So now Instead of seeing volume over  time, you now see volume per price level.   And see which price levels had  the highest amount of volume.   And if you re thinking like I m thinking..  we can use this to our advantage.  

[01:58] First things first, go trading view. If you don t  yet have it, I ll leave a link in my description.   Go to the indicators tab, search volume profile. Make sure you choose this fixed one right here.   Once you have selected it, draw a line from  a recent swing low, to a recent swing high.  

[02:13] Next go to the settings of the indicator,  and enable the volume area high and the   volume area low. This is very important. Now, throughout this uptrend, we can easily   see where strong points of interest are. In this uptrend, we can see areas with  

[02:27] high distributions of volume. And we can see areas with low   a lot of trading happened in these areas. And less trading happened in these areas.   Usually, areas with low amounts of volume. Means  one side of the market is dominating the other.  

[02:43] So either buyers or sellers are clearly winning  by a landslide and price isn t there for very   long. Which is why, there is low volume. In areas with high amounts of volume,   means there isn t such a clear winner and there  is big ongoing fight between buyers and sellers.  

[02:59] To give you some sort of price action example. It will often look like this.   then low amounts of volume again. So price will most likely look like this.  

[03:11] Where its going up fast, without a lot of  hesitation, during these low volume areas.   Then the moment we start hitting high volume  areas, price will likely consolidate and start   moving sideways. Spending a lot of time here. Which is why there is a lot of volume.  

[03:26] Then we start heading into a low volume  area again, where price again moves freely,   without a lot of hesitation. So to put it simple, price will   have big spikes in the low volume areas, and  will consolidate more is high volume areas.  

[03:44] When using the volume profile, you will have  3 main lines you ll need to pay attention to.   In other words, the point in this uptrend that  had the most amount of volume or where the  

[03:57] most amount of traders were active. Then you have the volume area high   represented by this line. In between these lines, create this zone..   And this zone is where 70%  of all volume was traded.  

[04:13] And if you use it correctly, it can show  you exactly where big money is likely   Say we have this volume profile. We have the point of interest.   Which means, 70% of all trades  happened within this area.  

[04:30] Or in other words, very cheap prices,  where smart money wants to buy.   Or very expensive prices where  smart money wants to sell. Based   on this trends historical statistics. So often times price, will go below the  

[04:46] value area low, for a very short period of  time, and will want to mean revert back to   point of interest, and spend more time there. Making this spot, a great opportunity to buy.   Same goes the other way. Price will go above the value area high,  

[05:00] for a short period of time, big money will want  to sell here, because prices are very expensive   based on past chart history, and will eventually  mean revert again back to the point of interest.   So a very easy high performing strategy, would  be to buy whenever prices become cheap, IE,  

[05:17] going below the value area low, take partial  profits, when it hits the point of interest,   Short whenever price goes above the volume area  high, parital profits, when price hits the point  

[05:30] of interest, full profits when it becomes cheap. So this is the basics of what volume profile is,   and I even gave some hints on how to use  it, but now its time to go over an actual   strategy that you can use right now. And for this example, we ll use AMD  

[05:46] as its been pumping recently and  a lot of people are trading it.   And if you used the volume profile, you  could have entered in before everyone else.   The one minute, hour, daily,  literally every timeframe.  

[06:02] So you can really implement it with  whatever strategy you re currently using.   But how I like to use, is on larger  timeframes to createa strong bias.   As these higher timeframe volume profiles will  give clear strong levels that institutions  

[06:17] we are going to use the weekly timeframe. Now here, amd had a strong uptrend.   Now if you were using normal tenchincal  analysis, say supply and demand.  

[06:29] You would have a demand zone or in other  words a support here, here, here, and here.   And you wouldn t really know which levels  would hold. Or which ones to trade.   So you d basically be guessing. But if we add the volume profile, it will  

[06:44] tell you exactly where we need to be entering. So grab your volume profile. Mark it from   the low to the high of this move. Again, we have our 3 main levels.   Our volume area high, our point of  control, and our volume area low.  

[06:58] Next, you can easily see that price  consolidated a lot at the high volume nodes.   We had high volume at the point  of control, price consolidated.  

[07:10] Then you can also see, price spiked  up fast, at the low volume nodes.   Also, a key reminder, 70% of  all trades happened between the  

[07:22] volume area high and the volume area low. So in order for prices to be attractive we   would want to buy either at volume area low, or  below it. As that is signaling prices are cheap.   right at our volume area low,  which is literally text book.  

[07:40] We wait for price to come to our area of demand  at our volume area low, we enter the trade here.   Price spikes up fast here with a huge  300% move and if you look closely.   It literally started right where we entered. But it keeps getting better.  

[07:57] Meaning prices are really expensive right now. Which means prices will likely want to revert back   to our previous point of control. And what do you think happens?  

[08:09] Price literally goes all the way back  down, exactly to the point of control.   Stops exactly there. Then proceeds  to start heading higher again.   Hopefully you guys are starting to  understand the power of this tool.  

[08:22] If you use it on higher timeframes and are  patient enough, to wait for the levels to get hit,   tool can be insanely accurate. Lets do one more example.   Grab your fixed volume profile Mark from the low of the trend,  

[08:37] point of control, and our volume area low. Right now price is above our volume area high.   Which we could now assume, price is expensive,  based on past volume and will want to mean revert  

[08:52] wait a bit and that s exactly what happens. But since price came all the way down and is   now past our value area low, we now know price  is considered cheap based on past volume.  

[09:05] So this time, we enter a long. And yet again, prices spikes up immediately   exactly from this point. With a 888% move.   I am not making this up. This  tool works extremely well.  

[09:19] This tool does absolute wonders. And right now we are using just this   tool by itself. It becomes even more powerful when  you add other confluences like supply and demand,   if you are not using the volume profile. If you got some value from this video,  

[09:34] I d 100% recommend joining my  telegram. It s completely free   to join and I share value just  like this in there all the time.   Thanks for watching, and ill see  you guys, next time.