Original subtitles

Now, let's look at another use of the volume profile tool.

In this case, we will try to analyze the health of the trend to determine when

the market is likely to continue in the direction it is heading and when a

reversal is likely to occur.

To do this, we will use the analysis of value areas, the location of the VPOC,

and the identification of P - and B -shaped profiles that we studied

As we have already seen, Conventional P -shaped profiles, where the bullish

imbalance is followed by a sideways movement, are indicative of bottom

They represent an upward price movement and therefore any uptrend observed in

terms of profiles, whether session or other time frames such as weekly

will show multiple of these P -shaped profiles within them.

Taken in isolation, this is price behavior that suggests continuity in the

movement. Based on the principle of market continuity, if the market has

moving up, it is most likely that it will continue to do so in the immediate

future. Therefore, observing profiles with this type of shape is indicative of

healthy uptrend.

At this point, it also allows us to determine the context and trading bias.

A very interesting sign that the volume profile provides us with is the

continuous analysis of the session profile.

If we are observing an uptrend movement A symptom of the health of the movement

would be to observe that the value areas and therefore the VPOCs of the sessions

are generated higher and higher.

This suggests that the value of the asset is being accepted in the new

areas. It is reaching and therefore the trend is likely to continue.

Trading in this context of control by buyers, we should look for a pullback to

trading areas predisposed to go long.

The same applies to B -shaped profiles.

These types of profiles indicate strong market weakness and therefore suggest

that there is a high probability that the price will continue to move lower.

Any bearish trend will be composed of several of these profiles, indicating

underlying weakness and a refusal to trade at higher prices.

Their identification informs us that the bearish trend is healthy and

establishes a directional bias to the downside, so we should be fundamentally

willing to look for trades in that direction.

An unmistakable sign of its health is the fact that the areas of value leaving

the seconds are observed at lower and lower levels, indicating price

In this bearish control scenario, the most advisable thing to do is to

areas of potential resistance in order to look for short positions.

Having seen the signs that indicate continuity in the movement, let's look

the patterns that indicate a turn in the market.

First of all, we will comment on a sign that would alert us to the health of the

trend. It would be to observe a certain overlap between several value areas and

to see that some of them are moving against the direction of the trend,

the momentum they had been carrying.

At this point, we could already observe a consolidation of the price and

identify a change of character in which the market moves from a state of

disequilibrium to one of equilibrium.

Here we see an example of where the price moves down until it reaches a

where there are four overlapping profiles in the same price range.

Obviously, this tells us that the market is in range and downward movement is

over. Next, we see that the location of the next two profiles alerts us to a new

change in market sentiment, now in a bullish trend context.

To determine this, we look at the value area of both days, although the

definitive signal is the exact level of the VPOC.

The value areas of these two days are completely separate, with the first

in a lower zone than the second, and on the other hand, the VPOC identifies the

total migration of the value, as it has formed several price levels above the

last one.

From this point, we should be able to declare that the context is bullish and

therefore we should only look for buying opportunities.

Here is another example of this same causistry.

We observe that the market is in a healthy uptrend, leaving the VPOC levels

sequentially higher until there comes a time when the value areas in their high

volume levels begin to overlap.

After that, A first value area manages to develop beyond the congestion zone at

its bottom, and the migration of value to lower price levels begins.

In this type of analysis, it is essential to analyze in absolute terms

location of the value areas of the profiles compared to the previous

and the location of the VPOC levels in each of the profiles.

Now let us look at the most true representation of potential reversals

analyzing areas of value.

It's looking for the P and B patterns that we saw earlier to look for changes

value perception.

And this potential change in value perception is very clearly visualized by

P and B patterns.

If the market is in the middle of an uptrend that is taking the value zones

higher and higher, and suddenly a PB pattern appears, we could be looking at

end of that uptrend.

The fact that the market has developed a B pattern after the P pattern suggests

a change in the perception of value, at least temporarily.

it is no longer willing to trade at higher prices, and we may even be seeing

beginning of a bearish trend.

Again, it is important to note that we are referring to the conventional B

pattern, because if what we are seeing is an inverted B pattern, we would

actually have an accumulation, and therefore the uptrend would indicate

more strength.

This is exactly what we see in this example, a bullish move accompanied by

higher value areas.

The appearance of the P and B pattern and the beginning of the bearish move

profiles that indicate weakness, with good B shapes, lower and lower value

areas, and VPOCs that confirm to us the migration of the security.

Of course, not all market turns will be the same. Some will be very visual like

this example, and some will not.

What we are going to do here is identify the most genuine behaviors so that you

can easily replicate them when you try to analyze the market yourself.

It is important to note that we can find different degrees of urgency in the

development of the pattern, which will give us more or less confidence in the

probability that the market turn will eventually occur.

This urgency has to do with the location of the value zones of the profiles that

generate the pattern.

We will distinguish between moderate and aggressive patterns.

In the moderate reversal pattern, the value zones mostly overlap, while in the

aggressive reversal pattern, there is no such overlap.

In this case, the second profile, the B -shaped profile, develops completely

below the low of the P -shaped profile.

What this suggests to us is that there has been a strong shift in the

of value among market participants who have traded at an aggregate level that

agrees with this large migration of value.

There will be times when we find depictions where the profiles overlap on

side and the other side is left out.

We should think of this concept as having a wide range of possibilities.

with the moderate pattern representing the least aggressive form of a potential

turn, and the aggressive pattern being the one that gives us the most

confidence. In addition, another fingerprint we can evaluate is the

the VPOC at the second profile relative to the other VPOCs.

In this example of the aggressive pattern, the VPOC of the second B

profile is obviously below the VPOC of the P -shaped profile.

but it is also below the VPOC of the two previous profiles.

The concept is that the lower it falls relative to the VPOC of the previous

profiles, the more urgency the movement represents.

Here, we have the inverted pattern where the B -shaped profile appears first and

the P -shaped profile appears second.

This type of configuration alerts us to the possible change in market sentiment,

where the market would move from a range or bearish trend to a bullish trend.

It is important to emphasize that we should not necessarily observe the

appearance of the profiles together.

As we can see in the example of the moderate pattern, the B -shaped profile

appears first, then a traditional profile, and then the P -shaped profile.

The reading is exactly the same, with the only difference that these types of

representations need more time before generating the final turn of the market.

The profile or profiles that may remain in the middle of the pattern indicate a

range context where the cause for the subsequent trend movement is being

Do not dismiss the reading of the potential reversal by the fact that the

profiles do not appear one after the other, as is the case in the example of

aggressive pattern.

As we have said, the aggressive pattern is the representation that suggests the

most urgency and that confirms a large shift in the migration of the VPOC.

Therefore, it is the representation that gives us the most confidence in

assessing the imminent presence of the market turn.

But this does not mean we should limit ourselves to looking for such perfect

patterns. As we know, the market behaves erratically most of the time, so

looking for the appearance of perfect patterns can be a waste of time.

It seems more interesting to stay with the dynamics within them, what is

implicitly suggested by this type of behavior as a whole.

Here, we have a very interesting example where, beyond looking for the perfect

and true representation, we apply the same concepts in a more flexible way to

identify the same turning pattern as a whole.

The price comes down and starts to develop several B -shaped profiles

practically in the same price range, where value areas and the VPOCs overlap

a very narrow space.

This is a sign of acceptance by the vast majority of participants at these price

levels. and therefore indicates that the market has changed its character from a

bearish trend state to a sideways one where a rotation process begins we see

that more price action follows leaving profiles of different shapes until the p

-shaped profile is generated which shows a strong refusal to continue falling

identified by this two candlestick pattern which suggests to us that this

failed price discovery commonly known as a liquidity search false breakout or

trap. What happens next is that the market changes its character again and

from a sideways state to a trend state, creating the bullish imbalance.

The curious thing is that we could have gotten exactly the same reading if we

had started a manual fixed range profile of all this lateralization.

As we can see, at the aggregate level, all of this price action is represented

in a P -shaped profile, where the failed breakout is the action that generates

the P column.

This is an extraordinary example where we can bring together some of the

different concepts that we have learned during the development of this course.

One of the recommendations is that after looking at the overlap of several value

areas of the session profile, you start a manual profile of all that price

action as a whole, as I have done here.

This can give you a better perspective, especially when looking for a market

entry. In this case, we see how the price returned to the value area after

Bullets breakout and was rejected at the VAH, identifying the potential entry

there.