Original subtitles

We will now continue to work with the fixed range profile, but for range

trading. We have already seen this example where we were able to identify a

successful bullish breakout test on the VAH and VPOC of the structure.

This time, we are going to deal with one of the most important issues, which is

how to correctly launch manual profiles in this type of contexts.

The scopes of the profile should include the entire price action from the time

the rotation starts until the time of the breakout.

Unfortunately, there will be times when we may not be entirely sure that we are

doing this correctly, as the market is often very erratic and identifying the

boundaries of the profile can become a complex task.

To solve this, I will explain two types of techniques, an objective one, whose

correct application should not create any doubt, and a subjective one, where

final decision on the location of the profile will ultimately be up to us.

What we need to do is identify the total highs and lows of the lateralization.

These levels will determine where the manual profile will be drawn from and

First, we mark the high that occurred before the breakout.

In this case, it is at the end and almost coincides with the upward

the breakout.

But in many other cases, the high of the structure will be identified in its

initial part or in the middle.

How do we determine when the breakout occurs?

we must project the line to the right and the moment any candlestick closes

above it and we begin to observe some space between the candlesticks and the

level, we will begin to treat that action as a potential breakout.

At first, it will always be conditional because we do not know if this action

will eventually become a breakout or remain a false breakout.

So, when will we be able to determine that we are looking at a false breakout?

At the very least, we will need to see the price actually re -enter below the

level. i .e., generate some acceptance.

There is no definitive way to determine what constitutes acceptance.

The most objective way to determine this is to wait for the price to close a few

candlesticks below the level.

The more candlesticks we see it close below the level, the more acceptance we

have that it is a false breakout.

In this example, there are a few times when the price tries to re -enter below

the level, but none of the times it manages to do so effectively.

Therefore, the candlestick on which we will set the end of the fixed range will

be the bullish candlestick immediately to the right of the structure's highest

high, since the next bullish candlestick will close above that high.

We will now identify the lowest low of the entire range.

First, we will use the objective technique.

We go through the same sequence. We identify the low and confirm that it is

extreme by projecting the line left and right.

A priori it might seem that the lowest point is the one marked, but after

throwing the line, we see that there is a point in the price to the left that

exceeds it.

This tells us that the level we initially set is not the lowest level of

entire structure.

Following the same logic, we do the same with the new low we identified earlier.

What happens is that to the left of this level, there is still more price action

in contact with the line.

So in absolute terms, we cannot consider this to be the lowest low of the entire

structure.

In fact, the lowest low of this lateralization would technically be this

Why this level and not another?

Simply because there is nothing to the left of the price.

This is the key to identifying the lows for these types of structures that come

from a previous uptrend.

The absolute low will be the level that once projected to the left and right

does not identify any lower lows.

and that in the left projection no price action is observed that is in contact

above and below the level, as is the case in this example.

And that would be the profile that we would get with the technique that we

This technique is the most objective that we can use for this task, which is

to say that it is the best way to do it, or the one that best represents the

information that we really want to capture with the volume profile.

And that is important to remember.

What are we really trying to capture?

Why are we throwing out a range profile?

What we want to identify is the distribution of volume within the price

where the buyers and sellers are trading.

This trading at the aggregate level creates the price rotation up and down

creates this equilibrium context.

And that's the point.

If what we want to analyze is equilibrium, is this the most

draw profiles?

Is the beginning of the profile really considered an equilibrium zone?

This is actually a very complex example.

I chose it on purpose to help us understand the logic behind profiling.

If we learn how to handle complex scenarios, we will be prepared to handle

simpler scenarios with ease.

The technique we have just seen will be effective in most cases, but not all.

By this we mean that in most areas the beginning of the profile will also be

beginning of the equilibrium context.

But this is not the case in this example.

as we can see a first well -channeled uptrend part before the real rotation

starts. I repeat, there is nothing wrong with using the volume profile plot in

this way, but let's say it is not the most effective way for the purpose we

looking for in all situations.

The purpose is to start the profile from the beginning of the equilibrium and

not before, as is the case here.

Therefore, in this type of situation, if we want to get the most genuine

profile, we should apply some logic to the reasoning and subjectively modify

outline of the profile.

This would be the most efficient way to plot this particular profile.

The upper limit remains the same and for the lower limit, what we do is visually

identify what would be the most appropriate support level for that range

on the number of touches that the line might have.

That is the subjective technique.

From there, we project that support to the left and anchor the start of the

profile on the first candlestick that appears above that level.

This is a discretionary method, but it better represents the essence of

profiling. In this case, we can agree that the start of the profile is closer

the start of the breakeven zone.

In this way, we forget about the lows of the candlestick and simply identify the

most objective support level that may exist, which, as we know, will be the

that has had the most contact with the price.

And this would be the profile we would obtain by applying this second form.

As I said, without considering the first form as erroneous, the second form

seems to me to represent more faithfully what we are looking for, although it is

true that it can also be more complex since it involves a slight subjectivity

the determination of the support of the structure.

We should also point out that this type of manual profiles in areas must be

continuously updated until the break event that marks the end of the profile

trace occurs.

Let's take another example, this time for an accumulative structure.

In setting the upper limit, we see that the price has left two highs practically

above the same level.

So we project to the left and to the right to verify that there is no further

price action that touches the level.

In this way, we determine that any price action below the level represents a

sideways, range -bound, or market equilibrium context.

This is what we really want to capture when we try to identify the boundaries

the structure to start the profile.

There is also no doubt about the lower boundary.

There is one that is clearly lower than the rest, and to the left and to the

right, obviously, nothing is observed.

In accumulative structures, this will always be the case.

By pure logic, the lower boundary will always be clearly identified.

The difficulty with these types of structures will always be in defining

upper part.

Some may think that it would be convenient to use the subjective

identify the high of the structure.

As we can see, and based on what has been commented on how to identify these

support and resistance levels, the line that has more touches will always be the

one that is created in a discretionary or subjective way.

What we have to evaluate is which of the two techniques is more useful to

capture the beginning and end of the equilibrium context.

In this case, although the subjective technique creates a line with more

touches, in my opinion, the objective one creates the most useful boundaries

this work, and in this case, it would be the one we should use for profiling.

The recent move higher appears to be initially acting as a false breakout

previous highs.

It is an action that has occurred during the development of the entire

structure, so I think it would be most convenient to include it in the profile

as well.

And this is what the profile distribution would look like in this

A fairly balanced D -shaped type.

Now, once we are in a situation of an effective potential bullish breakout, we

need to project the trading levels to the right in order to wait for a

on them that could offer us a buying trade opportunity.

In this way, we could take advantage of a potential bullish effect following

this accumulative cause.

And we see that the opportunity appeared just above the first trade level, above

the high level of the value zone.

We had to zoom in on the image a bit because the market went quite a distance

the upside before revisiting the structure.

This fact in itself, that it moved further away from the equilibrium zone,

should not be taken into account.

For the purpose of what we are concerned with, which is to look for potential

trades with the levels of the structure, these levels would still be fully valid

regardless of whether the market took more or less time to visit them.

Now we have an example of distributive structures.

Unlike the cumulative ones, here the level that will always be clear is the

of the structure. In fact, we could save its identification because the key is

in the lower level, which is the one that interacts with the price from both

sides. As for the low, In this case, there is no great difficulty in

it. We project left and right and analyze the interaction of price and

both sides.

On the left side, there is no kind of movement that can make us doubt, as the

market is in a clear uptrend.

And on the right side, since this is where the breakout occurs, our task here

to determine at what time we consider the beginning of the breakout.

As we can see, this is not difficult to do in this example.

In addition, we see that after the start of the breakout, the market moves down

several levels, leaving some distance.

This is another trace that provides the end of the equilibrium context.

Note that we have used the objective technique to identify the lowest low.

But if we used the subjective technique, the final level would not be very

different and therefore the beginning and the end of the profile would be

practically the same.

As I said, there will be times when there is a big difference between these

techniques. and others when there is not so much, as in this example.

This is what the profile would look like between the opening and closing

candlesticks. In distributive structures, the levels on which to wait

appearance of our entry trigger are the value area low and the VPOC.

In this case, after breaking the lower part of the range, the market retests

broken structure and stops just at the lower part of the profile, at the VAL.

From there, a new selling initiative appears, turning the market and giving a

new bearish impulse.

The market could have re -entered the range and we could still wait for the

possible reaction on the VPOC to continue looking for this bearish

In this potential situation, the anatomy of the bullish move that brings the

price back into the value zone and the subsequent reaction that happens at the

VPOC will be key to determine if it is still viable to look for bearish

continuation at the VPOC or if it is a failed price breakout from the downside,

in which case we would not expect further visits to lower prices.

Let us now turn to an example of a redistribution structure.

It is the examples of reaccumulation and redistribution that raise the most

doubts because there is an interaction between the price and the level at both

extremes, the upper and the lower.

In this case, at the top, because the previous trend is bearish, and at the

bottom, because the breakout is also bearish.

In other words, at both extremes, we need to use the techniques we have

to correctly identify them.

As we can see, fortunately, it is not very difficult because it has two clear

turning points at both ends and does not generate any interaction that could

raise doubts.

On the left side, the price enters the equilibrium zone cleanly, and on the

right side, the price also leaves it cleanly, leaving enough room to

treat this action as a bearish breakout.

And this is what the profile distribution would look like. As we can

the bearish breakout developed, the price returned to the area between the

and VPOC, from where it had a strong reaction that led to the continuation of

the bearish trend.

Let's go with another potential reaccumulation chart.

It has not yet had the effect of the cause, but as an example of profiling,

is very useful.

On the upper boundary, we see two inflection points at almost the same

which allows us to easily determine the high of the equilibrium zone.

We project to the right and see that the potential bullish breakout has already

occurred, so we can definitely confirm where the end of the profile will be.

At the bottom, we can easily identify the lowest low of the entire sideways

movement. If we project the line to the left, we can see that there is another

equilibrium zone interacting with this level at the end, which might cause us

doubt whether this price action should be included in the profile or not.

If we objectively analyze this behavior, we see that most of it is below the

level, so in my opinion, it should not be included in the profile.

They really seem to be different structures. Both are developed at

price levels, so they should have independent profiles.

This is very important and we need to understand it. What we want to capture

the equilibrium zone, the zone that represents the ultimate prevailing

condition. And to do that, the profile should be as horizontal as possible.

a context where the price action is horizontal, is the highest

a true equilibrium zone.

Imagine this other situation where the minor structure identified with the blue

box is at higher levels than the original ones.

Here I would consider that everything corresponds to the same lateralization,

the same equilibrium zone. That is why the price levels at which the range

occurs are so important.

If we project the level that identifies the low to the left, we see how it would

cross all this small equilibrium zone.

This would not be correct.

On the other hand, if we project the lowest low of the whole set, we see that

does not interact with any other price action to the left of it. So this is

definitely the correct way to draw the profile.

It is true that overall it shows a slight upward slope, but that should not

reason to discard the use of this type of profile.

The market is dynamic and changing.

and there will not always be a perfect balance of supply and demand forces.

Occasionally, the equilibrium zones will be slightly unbalanced to one side or

the other. There is nothing wrong with that.

After focusing on this aspect, this would be the profile we would get from

last sideways movement.

As we said, it is already in a position to confirm or reject the bullish

breakout action. Depending on the trading levels, we should wait for the

to break above the VAH to evaluate a potential buying opportunity.

As we have seen, the movement that restarts the broken structure usually

above the extreme of the value area.

However, we have already noted that the trading levels above which we can expect

a price reaction are both these extremes and the VPOC.

In this chart, we will see an example of a test on the VPOC.

We begin by identifying the limits of the profile.

Due to the nature of the structure, we only need to identify the upper end of

the range.

We might think that the subjective plotting technique is the best option.

But just like in the previous example, because we had the new high that

ultimately remained as a shock, all the price action that was subsequently

generated at the levels marked with the blue box should be included in the

profile. This is why the objective technique is again the most useful.

The key is that all the behavior that ultimately remains as a shock should be

included in the profile.

Again, when do we confirm that it is a false breakout behavior?

Well, when several candlesticks close on the other side of the level as marked

in the red box.

In addition, after the projection, we see that enough distance has already

generated on the right side to treat this movement as a potential effective

breakout.

This would be the profile that would correspond to such a lateralization.

As we can see, after the breakout event, The market pulls back to the VAH and

has a first reaction to the upside, but the bearish pressure was so strong that

they managed to send the price to the high equilibrium zone represented by the

VPOC.

There appears to be enough demand to slow the price and push it back up with

some aggressiveness.

The key is that the VPOC will always be our last trading level to consider for

the scenario approach, and as long as the price remains in favor of it, we

be able to look for our trading opportunity.

Finally, let's comment on this particular case where we have made a

between plotting range and trend profiles.

In this case, I have plotted the range profile using the subjective technique

because I believe the multiple touches more faithfully represent the lower

limit. The peculiarity of this example is that we have also started another

profile of the last bearish impulse, from the high to the low.

We can do this for all the ranges we analyze.

In general, The trading levels we will identify from both profiles will be very

similar. We see how after the bearish breakout event occurs, the market pulls

back into the VPOC zone of both profiles, from where it initiates a new

impulse.

Although ideally, and what will happen most of the time, the price will pull

back to the border of the value area.

The key to using the volume profile is that the continuation after breakout

scenario can be maintained as long as the VPOC holds.

This will be the last level we should consider for this continuation trade.