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The fundamental basis for the
application of volume profile principles

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premise that the market has a memory and
tends to repeat its behavior.

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Certain zones are expected to behave in
the same way in the future as they have

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in the past.

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In other words, if a leveler zone acted
as a sign of acceptance because a large

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amount of volume was traded, it is
expected that trading at those price

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will be generated again in the future.

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This concept is crucial because it
implicitly suggests that the equilibrium

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zones, those zones where a large number
of contracts have been exchanged, will

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have a certain magnetism and will
generate price attraction towards that

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On the other hand, if there were price
levels that showed a certain refusal to

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negotiate, as evidenced by a low volume,
this lack of interest on the part of

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buyers and sellers to negotiate at those
price levels will influence the price.

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so that in the future, those same price
levels will again show this refusal to

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execute a large number of transactions.

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As we will see below, there are two ways
in which the price can represent this

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rejection on the chart, through rapid V
-turns, known as traps or false

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breakouts, and through rapid
displacement movements.

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The volume profile takes the principles
of auction theory and puts them into

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practice to visualize zones of interest
on the chart.

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Interest is simply measured by the
activity generated in a particular zone,

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that activity is identified by the
volume traded.

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The more volume traded, the more
prominent the horizontal bar will be

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price level.

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This tool will therefore make it easier
for us to identify areas of greater and

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lesser interest and help us to evaluate
the price in relation to them to

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determine whether an acceptance or
rejection is taking place.

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One caution to keep in mind is that the
market's memory is mainly short -term.

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This means that more recent trading
zones are more important than older

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When the price initiates an imbalance,
the first zone to be considered is the

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most immediate previous equilibrium
zone.

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The more time the price is spent away
from a particular acceptance area, the

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less significance it will have.

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If we have no other reference, it will
still be useful to evaluate it, but it

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important to be aware that the most
immediate equilibrium zones will most

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be the ones the market will look for
first.

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as they are the ones that best represent
the value at the moment.

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This is pure logic. A price range or
lateralization results from a market

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equilibrium. It is a context in which
the valuations of the participants are

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very similar, and therefore there are
rotations at the extremes of these

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These valuations are subject to the
current fundamental conditions, so small

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changes in these conditions will result
in imbalance movements toward former

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trading zones that are relatively close.

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and larger fundamental changes will
result in imbalances toward zones that

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at trading levels farther from the
current one.

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In this chart, we see an example of this
concept in Bitcoin.

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The market reached the higher price
levels, possibly accompanied by positive

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news and the greed of participants to
miss the move.

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Once the market entered a sideways
environment, buyers and sellers began to

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trade comfortably, as evidenced by this
rotation up and down.

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This is because both groups, at an
aggregate level, believed that the true

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of the asset was above these levels.

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But as we saw in the auction theory,
this efficiency can break down when new

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information emerges that creates
disagreement among the participants.

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In this case, the new information has a
negative sentiment and causes a change

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in the perceptions and valuations of the
agents, who now believe that price and

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value do not coincide.

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This latest information introduced into
the market whether in the form of news,

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rumors, or any other element that has
the ability to change the fundamental

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valuation of the asset, has caused the
value to decrease, and therefore traders

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begin to close long positions and open
short positions.

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Together, these auctions can cause the
markets to fall.

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When the bearish imbalance begins after
the distribution, the most likely

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scenario is that the price will visit
the trading area at the bottom.

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And this is what happens.

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The stop of the move occurs at the
previous sideways zone, which was the

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that gave rise to the last upward move.

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Here, we have a complete price cycle
with the accumulation, the bullish move,

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the distribution, and the bearish move.

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And once the market is trading at levels
where buyers and sellers again agree

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that these are fair prices, another
lateralization begins, another rotation

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produces these ups and downs.

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Once again, we are in a context of
equilibrium.

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which is maintained until new
information appears that changes the

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the agents and generates the imbalance
to one side or the other, depending on

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the sentiment of that information.

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In this case, it is now breaking through
its top, possibly led by some good news

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for the Bitcoin ecosystem.

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As we know, the next step after the
imbalance is to try to determine whether

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have an acceptance or rejection of that
imbalance.

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Acceptance is evidenced by effective
breaks where the price continues to move

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that direction.

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while rejections are false breaks or
traps that generate a reversal of the

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movement.

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Once again, the market successfully
imbalances to the upside, creating this

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acceptance pattern, which is nothing
more than a bullish breakout move plus

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test, before continuing the move to the
upside, where the market rebalances and

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another rotation is created by the
exchange between buyers and sellers.

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This is the dynamics of the market. The
point to note is that the upward

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movement stops again at the previous
distribution.

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in the previous sideways zone proving
this magnetism and attraction on the

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price.

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But before this last action, the market
took a brief pause in what would be the

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post -breakout test move.

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At first glance, it appears that there
is no previous sideways zone that could

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have acted magnetically on the price.

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But if you look at the distribution
profile, there are two well -identified

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-volume trading zones.

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These zones are known as high -volume
nodes, and we will talk about them

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The key is that the pause generated
higher trading and some rotation in the

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price because this trading zone had
already been previously established as a

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zone of interest as shown with the
volume node.

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And again, we are back to the same
situation.

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If the market becomes unbalanced at the
bottom of the last structure, the first

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stop would be set at the first area
immediately below.

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And if it continues to fall, the lower
area would be targeted.

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And as we can see, it has reached the
two structures below, creating a short

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pause when it interacts with the more
immediate one, and a further

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lateralization when it reaches the lower
structure zone.

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As we will see later, one of the uses we
will give to the identification of

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structures will be to establish targets,
based on the premise that the old

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trading zones exert a certain magnetism
on the price, attracting it towards

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them. But the story doesn't end there.

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If we zoom out and move away from what
we are observing, we see that the market

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continued to fall after the above, and
where did it stop?

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The market fell with some force until it
found an old equilibrium zone, at which

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point sellers began to unwind their
positions and buyers began to appear.

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Behavior that on an aggregate level
resulted in the halt of the bearish

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and the subsequent lateralization of the
market.

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As we can see, In environments where the
market has historical references above

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or below the current price, the most
normal thing is that it uses these old

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equilibrium zones to stop the trend
movements that may occur and find a new

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equilibrium among market participants.