Original subtitles

Another use of the volume profile tool is in impulse trading, where we are

trying to enter a trend movement.

In this case, the key is to correctly identify the impulse movement, to know

to determine when the end of it has occurred, in order to correctly launch

profile.

In this case, we use the fixed range volume profile, where we manually define

the beginning and the end of the range to be analyzed.

Here is an example of a bullish impulse.

After seeing the beginning of the correction, We launch the profile from

of the movement to the high and it identifies the two big zones to be taken

account, the value area high and the VPOC.

As we can see, the price reacts up to three times above the value area high

before generating a new upward impulse.

Here is another example, but this time in the opposite direction.

We have a bearish impulse and once we have determined its end, we start a

profile from the high to the low of the impulse movement to identify the trading

levels. In this case, the market again reacts to the lower level of the value

zone, from where it starts to develop another new bearish impulse.

In addition to the value area limits, we can also consider the VPOC as a trading

level above which market rotation can be expected.

This chart is an example.

After the upward impulse ends, the market begins to correct downward until

reaches the VPOC area, from where it again creates sufficient cause for a new

upward impulse to develop.

In this example, this happened because the value area remained at the top of

impulse, so the corrective movement has already started within the value area.

Ideally, the impulsive movement should leave the value area at the origin of

movement, as we saw in the previous two examples.

This is exactly the same as we discussed earlier about the use of rotation

patterns where we analyzed the intra -bar profile.

We said that the most genuine representation of an initiative in favor

movement must leave the high volume at its origin, so that the continuity in

that direction is subsequently demonstrated.

In this case, since the impulsive move ends with most of the volume traded at

the end of the move, the first trading level you will encounter when the

pullback begins is always the VPOC.

If the bearish corrective move loses the VPOC, i .e. develops further price

action below the VPOC level, the price will most likely target the value area

low of that profile.

At that point, once the VAL is reached, there will likely be some kind of

reaction to the upside, but the market has already shown enough weakness to

looking for a continuation of the uptrend at least for the time being.

This is exactly what happens in this example.

The price develops an upward impulse and quickly corrects to the VPOC zone.

This manages to support the price for a moment, but in the end it loses this

level and begins to move sideways below it as a sign of acceptance of these new

levels. This in itself is a sign of market weakness.

As we noted when we introduced the VPOC, This level also serves to establish

short -term market control, so the fact that it loses the VPOC effectively

indicates that sellers are more active than buyers and that the short -term

sentiment is bearish.

Therefore, at this point, it is very likely that the market will visit the

zone first and the origin of the move second, as in this example.

The market reaches the bottom of the VAL zone as an obvious sign of weakness,

and while it is true there is some reaction at this level, it should be

to evaluate a buying opportunity there.

The underlying weakness is so latent that the most likely outcome at this

is that the market will go to the lows that gave rise to the uptrend.