Any good volume profile material?

Discussion in 'Trading' started by Xhale12, Feb 6, 2014.

  1. Xhale12

    Xhale12

    Where can I learn how to use volume profile to identify levels of support and resistance?
     
  2. You don't need volume.

    When the price stops going up and starts to reverse down, that's resistance.

    When the price stops going down and starts to reverse up, that's support.

    It's more significant when it happens more than one time at that same level.

    It's even more signifianct if it happens on more than one timeframe.
     
  3. Just overlay the profiles on historical data, it should be pretty self evident. Pick a time frame for the profiles (I like option expiry) and then mark the high points and low points of each obvious volume clusters from the previous time frame and see what happens.
     
  4. Lucrum

    Lucrum

  5. I think of volume as "market disagreement". When the volume is rising, it means that more and more people are in disagreement....some think the stock is a bargain, some think the stock is a good buy....so the sales speed up. For example, if the price of a stock rose one dollar today and the volume rose substantially, that usually means that some people are beginning to think that the price is too high, and they are starting to sell...the sellers disagree that the stock is fairly priced...they think it is liberally priced. Likewise, if the price of a stock FELL one dollar today and the volume rose substantially, it usually means that potential buyers are viewing it as bargain priced and starting to pile in...the buyers disagree that the price is the market price, they believe it is a bargain....which may mean that the price may soon stop dropping.

    When volume is shrinking, it means that everyone pretty much agrees on the price direction. For example, if the price of a stock rose one dollar today and the volume fell, it means that the crowd generally is in agreement that the stock price should be rising. This is an indication that price might keep rising.

    One exception to all this. Sometimes, when price is rising and volume is falling, you'll get a mysterious small "puff" of volume. I think this is because some traders see the price rising nicely, and they buy in aggressively to ride the elevator up. That little puff of volume isn't disagreement with the price's upward direction, but rather a vote of confidence by traders.

    I'm amazed people write books about price action and don't consider volume in their charts or discussion.