This strategy works for both long and short positions. Candles in this chart are coloured orange with the help of the Bar’s volume filter indicator for better visualization. More often than average, the p-shaped profile is formed at a downward reversal, while the b-shaped profile is formed at an upward reversal. Then, when you interpret the volume of a specific market security like a company that is listed on the stock market, you have an idea about the interest on the long or short side of certain parties. The goal is to test the daily low at 1,334. Notice how the volume dries up as the stock attempts to make a lower low on the day. This is how the markets have been moving for over 100 years. Volume can help with that, confirming a breakout from the pattern in much the same way as we have seen with a reversal pattern. Trading counter to volume spikes can be profitable, but it requires enormous skill and mastery of volume analysis. We use a range of cookies to give you the best possible browsing experience. As a day trader that specializes in early morning breakouts, I have my fair share of trades that just don’t work out. Build your trading muscle with no added pressure of the market. Find out how to use volume data correctly to add an important and useful edge to your trading. Your ability to assess what volume is telling you in conjunction with price action can be a key factor in your ability to turn a profit in the market. By continuing to browse the site, you are agreeing to our use of cookies. This is in stark contrast to the total market volume, which would play a much more significant role in understanding where the market will go next. As a result of inactivity, a convexity in the form of the letter ‘b’ (extended in our diagram) was formed in the market profile. It is also important to understand that the below described rules could be unacceptable due to a unique character of every trader, his experience and preferences. Strategy of trading by Delta and Vertical Volume. In the figure below, you can see an actual SELL trade example. Consider the recent false outburst of lows in the USD/RUB futures market. In this article, we will cover how to assess the volume indicator to help us determine the market’s intentions across four common day trading setups: In addition, we will discuss advanced volume analysis techniques and apply these methods to assess the strength of the equities and bitcoin markets. With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations. We need to establish the Chaikin trading strategy which is finding where to place our protective stop loss. For filtering false signals, a histogram has been added below the chart. There is no desire on the part of the market to develop a decline of 28 March (low of wave 3) and a rapid recovery of daily highs above 150. The goal of this article is to show you in practice: As a result, we described a rather rational method, which deserves your attention. The … We will look at the reversal of the range of RUB 150 in March in an hourly chart (remember that this is done without analyzing the general historical context and metrics). However, once you overlay the volume you will see there are three key levels: (1) 18,500, 21,000 and 25,500. The opposite is the case – red deltas in the support push mean the activation of stop-loss effects of the buyers and the entry into a trap of reckless sellers. This specified period can range from daily charts to 1-minute charts. The DAX chart below highlights this phenomenon, where a downtrend is confirmed via the use of volumes. In relative terms, the 25,500 level is now the high-level volume zone which will act as resistance.