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We continue with the multiple uses we can make of the volume profile.

In this case, we are going to leave the most operative section for a moment to

approach another one, equally or more important, corresponding to the correct

reading of the market activity.

To determine the bias of the market, we will use two alternatives.

The first one will be through the analysis of the trading zones, and the

one will be through the analysis of the trading levels.

A correct analysis of these tools will be very useful to get a more accurate

impression of what is happening, who is in control of the market, and where the

price is most likely to go next.

In order to determine the market bias, we will mainly use the high volume

As we have already explained, these nodes represent acceptance and balance

participants. And in the short term, we will use them to determine who is in

control based on where the price is in relation to these zones.

The key is that we will always favor trading in the direction of the last

trading node generated, and any scenario against that direction would only occur

if the price has broken out of the zone that supported the last move.

When the price is above a high volume node, we will determine that the control

is in the hands of the buyers, and we will only consider a short scenario when

the price crosses the zone from below, suggesting that the control has changed

in favor of the sellers.

The logic is that at these nodes, the price returns to a state of equilibrium

and we will not be able to determine in which direction it will subsequently

move. Only after confirming the effective breakout of this zone would we

position to propose a scenario with some robustness.

In this example, we have a P -shaped profile that leaves the volume node at

top. The market context after the start of this profile is that buying should be

valued only as long as the price remains above the nodal point.

and that selling should be valued with the price positioned below it.

We see that after the completion of the upward impulse, the market returns to

the VAH zone of the profile and has a first reaction to the upside, which is

enough to push the price further up, and this lack of buying initiative makes

the market return to its equilibrium zone.

Subsequently, it breaks the volume node from below, and this is the key action

that should make us change the short -term market bias.

This action is confirmed by the subsequent sideways movement of the

the volume zone and the VPOC of the profile, until it finally generates the

bearish movement that manages to reach the origin of the movement.

Keep in mind that in all the examples we see, we could train on the same time

frame or use multiple time frames to look for an entry on a lower time frame

once the context and the prevailing directional bias are determined.

A reasonable doubt that might be raised by this example is that, beyond the

specific location of the HVN, the breadth of the value zone extends beyond

volume node.

And as we have explained throughout this course, a price inside the value zone

informs us of a state of equilibrium where the market is most likely to

up and down within the boundaries of that value area.

We could decide to wait to confirm that the directional bias of the market is

definitely bearish when the price is below the value area.

But in reality, the high volume node is very well identified and objectively it

is this area that supports the uptrend.

It is the key area that serves to identify that the market control is in

of one side or the other.

The amplitude of the value area is determined according to a numerical

For this point, it is true that we rely on statistics to use the value that

determines a normal or Gaussian distribution configuration.

which establishes this value at almost 70%. But markets are more than numbers,

and this is an example.

If we throw out the profile of the entire upward movement from the low to

high, which zone would you say most accurately identifies the control area

this movement?

As we have already said, the area that determines this control is the area

the most volume has been traded.

And if we look carefully at the distribution of the volume throughout

profile, The most accurate area is that volume node, even if it is within a

wider value area.

Let's analyze another example, in this case in a bearish movement.

After seeing the end of the bearish impulse, we start the volume profile and

distribution is as we see.

What we need to do now is to identify the last volume node since this is the

that represents the seller's control.

We see other small volume nodes, but the most important is the one at the

bottom. This node represents the zone of greater balance, so as long as the

price remains within it, the context will remain directionless and therefore

should not apply any type of trend trading.

And the context we already know. A positioning above would allow us to look

the long trades, while a positioning below would establish a bearish

bias.

What the market is finally doing is leaving the equilibrium zone at the top

we could activate the bullish context and start looking for potential buying

opportunities. As we can see, the price retreated towards the low volume node,

which is marked to generate several price turns from there, until it finally

gave rise to a bullish trend movement.

Determining market skew using trading area analysis is primarily useful when

trying to identify market control and trend moves, as we have just seen in the

previous examples.

It does not make much sense in range trading contexts, as the lateralization

itself is usually D -shaped and therefore virtually all of the price

be part of the high volume node.

It would just be a matter of waiting for a breakout above or below the price to

create a directional bias one way or the other.

Let's now delve into determining the market bias by analyzing the trading

levels. Unlike the previous causistry, this analysis is more useful in both

trend and range context.

That is, we can use it to analyze both trend movements and lateralizations.

As a general rule, it is most advisable to trade with the more trading levels

the better. That is, if I am trading long, I will want to have all the

levels below the price and vice versa if I am trading short.

This will suggest that the market is unbalanced in that direction and

that it is the most likely direction that the price will take.

One of the useful signs to analyze is the relationship between VPOC, VWAP, and

price. Here we see an example of an intraday chart with the VWAP and VPOC

the session, although in particular, the chart spans several sessions.

The VPOC is the red dotted line. In order to see how the VPOC has evolved

session, we need to enable the Develop POC option, which can be found in the

Style tab of the Profile settings.

This line shows all the changes that occurred in the VPOC from the beginning

the end of the profile.

What we observe are different contexts of range and trend that happen

continuously.

When the market is in range, both levels remain relatively close to each other

and this creates constant fluctuations between them, causing price rotation up

and down.

A relatively close VWAP and VPOC is a footprint that confirms that the market

in a full equilibrium context.

It is possible that the price is in a tight range and the only trading

here would be to look for a reversal at the extreme.

On the contrary, observing some distance between these levels would tell us that

the market is in a context of imbalance and our trading should be to look for

some opportunity in the direction of this trend.

As we can see, when the market begins the bullish imbalance, we begin to see a

significant separation between the VWAP and the VPOC.

which alerts us to the end of the range and the beginning of the trend.

An important filter that we should always use for trading is to observe

price is in favor of both the VWAP and the VPOC.

That is, to determine a clear imbalance in favor of the buyers, we want to see

the price above both the VWAP and the VPOC, while to determine control in

of the sellers, we want to see the price below both levels.

On this chart, it is an example of clear bullet control when the market leaves

the range zones where the price is always above both the VWAC and VPOC,

again as support to initiate new upward movements.

Here, we see another example consisting of a bearish trend, a range, an uptrend,

and finally another range.

We can see the proximity of VWAP and VPOC in the range context and the

separation of the two levels in the trend context.

And as we saw earlier, A very interesting footprint with respect to

on a large number of occasions before the price initiates a new imbalance in

favor of the trend, there is a migration of VPOC.

That is, first the VPOC shift occurs and then relatively a new price impulse is

initiated. This can be very useful for intraday traders.

Let us now look at other examples on longer timeframes.

For longer -term trades, we have already mentioned that it is most useful to use

the weekly VWAP.

As for the VPOC, it depends on the type of trade.

In particular, and as a structure trader, I find it useful to use the

VWAP in conjunction with the VPOC of the structure to eliminate the seasonality.

It is a matter of taste, and this setup should suit each trader's trading style.

The key is that the principles are universal and equally applicable

of the asset and time frame.

This time we have an hourly chart along with the weekly VWAP.

As we can see, it is an ideal filter to determine the market trend. In an

uptrend, the VWAP is almost permanently below the price, indicating an imbalance

to the upside.

In addition, we see how the VWAP acts by pulling the price during consolidation

processes and before a new impulse is given.

We could use these actions to try to position ourselves in favor of the

Here is another example of different contexts.

During bearish trends, we will identify the VWAP above the price, thus proving

the bearish imbalance context.

As we know, identifying the context is crucial because it implicitly suggests

the type of trade we should make.

In this case, in a bearish context, we should try to join the downward

And to do this, we could use the price interactions with the VWAP to look for

our entry there.

We may not even be able to enter on the right side of the market but with the

correct identification of the context, we should at least be able to avoid

entering on the wrong side.

In addition to identifying the accumulation and distribution

determining the directional bias can also be done by looking at the position

the price relative to the VWAP.

In other words, in a bullish context, when the price is above the VWAP, we

should avoid short positioning.

and, in a bearish context, when the price is below the VWAP, we should avoid

long positioning.

Of course, this would not apply to countertrend or mean reversion trades,

these are other more advanced strategies that should only be used by experienced

traders.

Now let's look at some examples and structures.

Here we have an accumulation area where, after the bullish breakout event

occurs, the price returns to the VPOC area of the structure.

an area where it also confluences with the weekly VWAP.

These confluence zones are the most interesting and give us the most

when evaluating a trade opportunity.

As we can see, the bullish imbalance continues from there.

Subsequently, it even leaves another test on the VWAP.

Here is another example of a distributive structure.

After the end of the bearish breakout, the market begins to pull back to the

upside until it reaches the VPOC and VWAP zone.

where a reversal point in favor of supply is created, resulting in the

continuation of the bearish imbalance.

It is important to reiterate the importance of treating these levels as

We will not always see perfect touches above them.

Sometimes, as in this example, the price will react before reaching these

levels. What this tells us is that the market is very unbalanced.

Traders who wanted to position themselves to sell after this pullback

started to enter near the levels.

thus preventing further upward movement.

It is this urgency to enter that has caused the market to fail to reach the

exact levels before the reversal.