How to Read Volume Profile Structures

What Is Volume Profile?

There are two ways of observing the total volume transactions in any market. As a spot forex trader, you can tap into tick volumes as an accurate visual representation of the total traded volume in the X-axis, which would then make your analysis be based on time.

  • Visible Range
  • Session Volume (Preferred)

Fixed Range: Selection Of Interest Levels A La Carte

Trading the markets, especially if you are an intraday trader, involves constant interaction with your charts. You are constantly looking for areas that you can lean against to take certain actions. Right? This first fixed range option allows you to select any area in the chart to deconstruct the total activity. This is a tool that can be of enormous value if you are looking to tighten or trail your stops as well as spotting areas of most interest to enter your positions.

Visible Range: The Macro View Of The Market

As the name indicates, the visible range option unpacks as much trading activity as data is in your chart. It portrays the big picture view of the most-traded price levels over a specified period of time.

Session Volume: In Sync w/ The Day-To-Day Context

While the above volume profile options are by themselves very powerful, I refuse to accept that any can beat the ability to be reading the daily auctions.

Types Of Volume Profile Structures

Single Distribution — Inconclusive Bias

Multiple Volume Distributions — Directional Flows

It refers to an auction process that creates two or more areas of value via a noticeable volume accumulation in the histogram. In the majority of cases, we will have the creation two distributions, less so a triple distribution structure. In the illustration below, you can find an example of a double distribution day.

Putting It All Together

We’ve come to the end of this guide. As I always recommend, take your time to practice the varies concepts and structures shared in this tutorial. Ask yourself if any of these lessons can be of any benefit to your trading approach. Be reminded that you should factor in these new concepts as part of a holistic approach to the markets. If you fail to understand your surroundings by not conducting the proper multi-timeframe studies, you might be missing part of the picture. What if we get a text-book long P-shape structure but it happens to be trading straight into an area of daily or weekly resistance? What if we have a tier 1 event coming up which we know is going to distort the structure? Again, knowing the context is king to apply these concepts with success. If you do it diligently, you will be hard-pressed to put in doubt the usefulness of the volume profile as a tool to decipher the market intentions via price auctions.

Bonus — Chart

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Global Prime is a Forex and CFD provider specialising in low latency connectivity to tier-1 bank liquidity/ECNs https://www.globalprime.com

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Global Prime

Global Prime

Global Prime is a Forex and CFD provider specialising in low latency connectivity to tier-1 bank liquidity/ECNs https://www.globalprime.com

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