1 00:00:00,200 --> 00:00:03,680 We continue with the multiple uses we can make of the volume profile. 2 00:00:04,160 --> 00:00:08,440 In this case, we are going to leave the most operative section for a moment to 3 00:00:08,440 --> 00:00:13,060 approach another one, equally or more important, corresponding to the correct 4 00:00:13,060 --> 00:00:14,320 reading of the market activity. 5 00:00:15,020 --> 00:00:18,140 To determine the bias of the market, we will use two alternatives. 6 00:00:18,520 --> 00:00:22,560 The first one will be through the analysis of the trading zones, and the 7 00:00:22,560 --> 00:00:25,100 one will be through the analysis of the trading levels. 8 00:00:25,770 --> 00:00:29,830 A correct analysis of these tools will be very useful to get a more accurate 9 00:00:29,830 --> 00:00:33,710 impression of what is happening, who is in control of the market, and where the 10 00:00:33,710 --> 00:00:35,390 price is most likely to go next. 11 00:00:36,210 --> 00:00:40,630 In order to determine the market bias, we will mainly use the high volume 12 00:00:40,870 --> 00:00:45,370 As we have already explained, these nodes represent acceptance and balance 13 00:00:45,370 --> 00:00:49,490 participants. And in the short term, we will use them to determine who is in 14 00:00:49,490 --> 00:00:52,770 control based on where the price is in relation to these zones. 15 00:00:53,550 --> 00:00:57,550 The key is that we will always favor trading in the direction of the last 16 00:00:57,550 --> 00:01:02,150 trading node generated, and any scenario against that direction would only occur 17 00:01:02,150 --> 00:01:05,590 if the price has broken out of the zone that supported the last move. 18 00:01:06,370 --> 00:01:10,570 When the price is above a high volume node, we will determine that the control 19 00:01:10,570 --> 00:01:14,650 is in the hands of the buyers, and we will only consider a short scenario when 20 00:01:14,650 --> 00:01:18,850 the price crosses the zone from below, suggesting that the control has changed 21 00:01:18,850 --> 00:01:19,870 in favor of the sellers. 22 00:01:20,680 --> 00:01:25,100 The logic is that at these nodes, the price returns to a state of equilibrium 23 00:01:25,100 --> 00:01:28,700 and we will not be able to determine in which direction it will subsequently 24 00:01:28,700 --> 00:01:33,980 move. Only after confirming the effective breakout of this zone would we 25 00:01:33,980 --> 00:01:36,720 position to propose a scenario with some robustness. 26 00:01:37,420 --> 00:01:41,940 In this example, we have a P -shaped profile that leaves the volume node at 27 00:01:41,940 --> 00:01:46,560 top. The market context after the start of this profile is that buying should be 28 00:01:46,560 --> 00:01:49,740 valued only as long as the price remains above the nodal point. 29 00:01:50,200 --> 00:01:53,680 and that selling should be valued with the price positioned below it. 30 00:01:54,140 --> 00:01:58,720 We see that after the completion of the upward impulse, the market returns to 31 00:01:58,720 --> 00:02:03,920 the VAH zone of the profile and has a first reaction to the upside, which is 32 00:02:03,920 --> 00:02:08,199 enough to push the price further up, and this lack of buying initiative makes 33 00:02:08,199 --> 00:02:10,360 the market return to its equilibrium zone. 34 00:02:11,460 --> 00:02:16,060 Subsequently, it breaks the volume node from below, and this is the key action 35 00:02:16,060 --> 00:02:18,840 that should make us change the short -term market bias. 36 00:02:19,450 --> 00:02:23,690 This action is confirmed by the subsequent sideways movement of the 37 00:02:23,690 --> 00:02:28,410 the volume zone and the VPOC of the profile, until it finally generates the 38 00:02:28,410 --> 00:02:31,410 bearish movement that manages to reach the origin of the movement. 39 00:02:31,910 --> 00:02:36,570 Keep in mind that in all the examples we see, we could train on the same time 40 00:02:36,570 --> 00:02:40,650 frame or use multiple time frames to look for an entry on a lower time frame 41 00:02:40,650 --> 00:02:44,050 once the context and the prevailing directional bias are determined. 42 00:02:45,040 --> 00:02:48,800 A reasonable doubt that might be raised by this example is that, beyond the 43 00:02:48,800 --> 00:02:53,740 specific location of the HVN, the breadth of the value zone extends beyond 44 00:02:53,740 --> 00:02:54,579 volume node. 45 00:02:54,580 --> 00:02:59,160 And as we have explained throughout this course, a price inside the value zone 46 00:02:59,160 --> 00:03:03,360 informs us of a state of equilibrium where the market is most likely to 47 00:03:03,360 --> 00:03:06,280 up and down within the boundaries of that value area. 48 00:03:06,960 --> 00:03:10,960 We could decide to wait to confirm that the directional bias of the market is 49 00:03:10,960 --> 00:03:13,820 definitely bearish when the price is below the value area. 50 00:03:14,330 --> 00:03:19,570 But in reality, the high volume node is very well identified and objectively it 51 00:03:19,570 --> 00:03:21,590 is this area that supports the uptrend. 52 00:03:21,950 --> 00:03:26,690 It is the key area that serves to identify that the market control is in 53 00:03:26,690 --> 00:03:28,070 of one side or the other. 54 00:03:28,670 --> 00:03:33,070 The amplitude of the value area is determined according to a numerical 55 00:03:33,610 --> 00:03:38,310 For this point, it is true that we rely on statistics to use the value that 56 00:03:38,310 --> 00:03:41,090 determines a normal or Gaussian distribution configuration. 57 00:03:42,029 --> 00:03:47,670 which establishes this value at almost 70%. But markets are more than numbers, 58 00:03:47,830 --> 00:03:49,010 and this is an example. 59 00:03:49,390 --> 00:03:53,570 If we throw out the profile of the entire upward movement from the low to 60 00:03:53,570 --> 00:03:58,090 high, which zone would you say most accurately identifies the control area 61 00:03:58,090 --> 00:03:59,049 this movement? 62 00:03:59,050 --> 00:04:03,610 As we have already said, the area that determines this control is the area 63 00:04:03,610 --> 00:04:05,090 the most volume has been traded. 64 00:04:05,490 --> 00:04:09,370 And if we look carefully at the distribution of the volume throughout 65 00:04:09,370 --> 00:04:14,430 profile, The most accurate area is that volume node, even if it is within a 66 00:04:14,430 --> 00:04:15,430 wider value area. 67 00:04:16,430 --> 00:04:20,130 Let's analyze another example, in this case in a bearish movement. 68 00:04:20,589 --> 00:04:24,710 After seeing the end of the bearish impulse, we start the volume profile and 69 00:04:24,710 --> 00:04:26,310 distribution is as we see. 70 00:04:26,990 --> 00:04:31,750 What we need to do now is to identify the last volume node since this is the 71 00:04:31,750 --> 00:04:33,310 that represents the seller's control. 72 00:04:34,130 --> 00:04:37,910 We see other small volume nodes, but the most important is the one at the 73 00:04:37,910 --> 00:04:42,820 bottom. This node represents the zone of greater balance, so as long as the 74 00:04:42,820 --> 00:04:47,140 price remains within it, the context will remain directionless and therefore 75 00:04:47,140 --> 00:04:49,300 should not apply any type of trend trading. 76 00:04:50,060 --> 00:04:54,680 And the context we already know. A positioning above would allow us to look 77 00:04:54,680 --> 00:04:58,400 the long trades, while a positioning below would establish a bearish 78 00:04:58,400 --> 00:04:59,400 bias. 79 00:04:59,720 --> 00:05:04,490 What the market is finally doing is leaving the equilibrium zone at the top 80 00:05:04,490 --> 00:05:08,150 we could activate the bullish context and start looking for potential buying 81 00:05:08,150 --> 00:05:13,510 opportunities. As we can see, the price retreated towards the low volume node, 82 00:05:13,670 --> 00:05:17,910 which is marked to generate several price turns from there, until it finally 83 00:05:17,910 --> 00:05:19,830 gave rise to a bullish trend movement. 84 00:05:21,030 --> 00:05:25,650 Determining market skew using trading area analysis is primarily useful when 85 00:05:25,650 --> 00:05:30,110 trying to identify market control and trend moves, as we have just seen in the 86 00:05:30,110 --> 00:05:31,110 previous examples. 87 00:05:31,500 --> 00:05:35,880 It does not make much sense in range trading contexts, as the lateralization 88 00:05:35,880 --> 00:05:40,520 itself is usually D -shaped and therefore virtually all of the price 89 00:05:40,520 --> 00:05:41,960 be part of the high volume node. 90 00:05:42,340 --> 00:05:46,740 It would just be a matter of waiting for a breakout above or below the price to 91 00:05:46,740 --> 00:05:49,200 create a directional bias one way or the other. 92 00:05:49,980 --> 00:05:54,120 Let's now delve into determining the market bias by analyzing the trading 93 00:05:54,120 --> 00:05:58,880 levels. Unlike the previous causistry, this analysis is more useful in both 94 00:05:58,880 --> 00:06:00,240 trend and range context. 95 00:06:00,760 --> 00:06:04,560 That is, we can use it to analyze both trend movements and lateralizations. 96 00:06:05,560 --> 00:06:09,540 As a general rule, it is most advisable to trade with the more trading levels 97 00:06:09,540 --> 00:06:13,740 the better. That is, if I am trading long, I will want to have all the 98 00:06:13,740 --> 00:06:16,820 levels below the price and vice versa if I am trading short. 99 00:06:17,440 --> 00:06:21,180 This will suggest that the market is unbalanced in that direction and 100 00:06:21,180 --> 00:06:23,980 that it is the most likely direction that the price will take. 101 00:06:24,780 --> 00:06:30,660 One of the useful signs to analyze is the relationship between VPOC, VWAP, and 102 00:06:30,660 --> 00:06:36,760 price. Here we see an example of an intraday chart with the VWAP and VPOC 103 00:06:36,760 --> 00:06:40,640 the session, although in particular, the chart spans several sessions. 104 00:06:41,180 --> 00:06:46,400 The VPOC is the red dotted line. In order to see how the VPOC has evolved 105 00:06:46,400 --> 00:06:50,820 session, we need to enable the Develop POC option, which can be found in the 106 00:06:50,820 --> 00:06:52,440 Style tab of the Profile settings. 107 00:06:53,130 --> 00:06:57,330 This line shows all the changes that occurred in the VPOC from the beginning 108 00:06:57,330 --> 00:06:58,330 the end of the profile. 109 00:06:58,670 --> 00:07:03,010 What we observe are different contexts of range and trend that happen 110 00:07:03,010 --> 00:07:04,010 continuously. 111 00:07:04,350 --> 00:07:08,750 When the market is in range, both levels remain relatively close to each other 112 00:07:08,750 --> 00:07:13,110 and this creates constant fluctuations between them, causing price rotation up 113 00:07:13,110 --> 00:07:14,110 and down. 114 00:07:14,170 --> 00:07:20,070 A relatively close VWAP and VPOC is a footprint that confirms that the market 115 00:07:20,070 --> 00:07:21,630 in a full equilibrium context. 116 00:07:22,480 --> 00:07:26,720 It is possible that the price is in a tight range and the only trading 117 00:07:26,720 --> 00:07:29,160 here would be to look for a reversal at the extreme. 118 00:07:29,660 --> 00:07:34,400 On the contrary, observing some distance between these levels would tell us that 119 00:07:34,400 --> 00:07:38,780 the market is in a context of imbalance and our trading should be to look for 120 00:07:38,780 --> 00:07:41,040 some opportunity in the direction of this trend. 121 00:07:41,760 --> 00:07:46,420 As we can see, when the market begins the bullish imbalance, we begin to see a 122 00:07:46,420 --> 00:07:50,040 significant separation between the VWAP and the VPOC. 123 00:07:50,700 --> 00:07:53,780 which alerts us to the end of the range and the beginning of the trend. 124 00:07:54,320 --> 00:07:58,640 An important filter that we should always use for trading is to observe 125 00:07:58,640 --> 00:08:01,920 price is in favor of both the VWAP and the VPOC. 126 00:08:02,560 --> 00:08:07,140 That is, to determine a clear imbalance in favor of the buyers, we want to see 127 00:08:07,140 --> 00:08:12,640 the price above both the VWAP and the VPOC, while to determine control in 128 00:08:12,640 --> 00:08:15,840 of the sellers, we want to see the price below both levels. 129 00:08:16,260 --> 00:08:20,890 On this chart, it is an example of clear bullet control when the market leaves 130 00:08:20,890 --> 00:08:26,610 the range zones where the price is always above both the VWAC and VPOC, 131 00:08:26,610 --> 00:08:29,370 again as support to initiate new upward movements. 132 00:08:30,210 --> 00:08:35,570 Here, we see another example consisting of a bearish trend, a range, an uptrend, 133 00:08:35,690 --> 00:08:37,169 and finally another range. 134 00:08:37,490 --> 00:08:43,270 We can see the proximity of VWAP and VPOC in the range context and the 135 00:08:43,270 --> 00:08:45,770 separation of the two levels in the trend context. 136 00:08:46,350 --> 00:08:52,130 And as we saw earlier, A very interesting footprint with respect to 137 00:08:52,130 --> 00:08:56,050 on a large number of occasions before the price initiates a new imbalance in 138 00:08:56,050 --> 00:08:59,250 favor of the trend, there is a migration of VPOC. 139 00:08:59,510 --> 00:09:05,410 That is, first the VPOC shift occurs and then relatively a new price impulse is 140 00:09:05,410 --> 00:09:08,810 initiated. This can be very useful for intraday traders. 141 00:09:09,650 --> 00:09:13,110 Let us now look at other examples on longer timeframes. 142 00:09:13,720 --> 00:09:17,520 For longer -term trades, we have already mentioned that it is most useful to use 143 00:09:17,520 --> 00:09:18,740 the weekly VWAP. 144 00:09:19,280 --> 00:09:22,320 As for the VPOC, it depends on the type of trade. 145 00:09:22,780 --> 00:09:27,240 In particular, and as a structure trader, I find it useful to use the 146 00:09:27,240 --> 00:09:31,940 VWAP in conjunction with the VPOC of the structure to eliminate the seasonality. 147 00:09:32,480 --> 00:09:36,780 It is a matter of taste, and this setup should suit each trader's trading style. 148 00:09:37,200 --> 00:09:41,380 The key is that the principles are universal and equally applicable 149 00:09:41,380 --> 00:09:43,120 of the asset and time frame. 150 00:09:43,820 --> 00:09:47,400 This time we have an hourly chart along with the weekly VWAP. 151 00:09:47,860 --> 00:09:52,900 As we can see, it is an ideal filter to determine the market trend. In an 152 00:09:52,900 --> 00:09:57,560 uptrend, the VWAP is almost permanently below the price, indicating an imbalance 153 00:09:57,560 --> 00:09:58,560 to the upside. 154 00:09:58,740 --> 00:10:03,880 In addition, we see how the VWAP acts by pulling the price during consolidation 155 00:10:03,880 --> 00:10:06,840 processes and before a new impulse is given. 156 00:10:07,260 --> 00:10:11,460 We could use these actions to try to position ourselves in favor of the 157 00:10:12,490 --> 00:10:14,730 Here is another example of different contexts. 158 00:10:15,130 --> 00:10:20,310 During bearish trends, we will identify the VWAP above the price, thus proving 159 00:10:20,310 --> 00:10:21,570 the bearish imbalance context. 160 00:10:22,210 --> 00:10:26,510 As we know, identifying the context is crucial because it implicitly suggests 161 00:10:26,510 --> 00:10:28,090 the type of trade we should make. 162 00:10:28,350 --> 00:10:32,970 In this case, in a bearish context, we should try to join the downward 163 00:10:33,150 --> 00:10:38,070 And to do this, we could use the price interactions with the VWAP to look for 164 00:10:38,070 --> 00:10:39,070 our entry there. 165 00:10:39,370 --> 00:10:43,470 We may not even be able to enter on the right side of the market but with the 166 00:10:43,470 --> 00:10:47,590 correct identification of the context, we should at least be able to avoid 167 00:10:47,590 --> 00:10:48,750 entering on the wrong side. 168 00:10:49,070 --> 00:10:52,630 In addition to identifying the accumulation and distribution 169 00:10:52,950 --> 00:10:57,330 determining the directional bias can also be done by looking at the position 170 00:10:57,330 --> 00:10:59,290 the price relative to the VWAP. 171 00:11:00,090 --> 00:11:05,310 In other words, in a bullish context, when the price is above the VWAP, we 172 00:11:05,310 --> 00:11:06,450 should avoid short positioning. 173 00:11:06,990 --> 00:11:11,490 and, in a bearish context, when the price is below the VWAP, we should avoid 174 00:11:11,490 --> 00:11:12,490 long positioning. 175 00:11:12,910 --> 00:11:17,270 Of course, this would not apply to countertrend or mean reversion trades, 176 00:11:17,270 --> 00:11:20,970 these are other more advanced strategies that should only be used by experienced 177 00:11:20,970 --> 00:11:21,970 traders. 178 00:11:22,590 --> 00:11:24,870 Now let's look at some examples and structures. 179 00:11:25,490 --> 00:11:29,210 Here we have an accumulation area where, after the bullish breakout event 180 00:11:29,210 --> 00:11:32,750 occurs, the price returns to the VPOC area of the structure. 181 00:11:33,310 --> 00:11:36,630 an area where it also confluences with the weekly VWAP. 182 00:11:37,430 --> 00:11:41,510 These confluence zones are the most interesting and give us the most 183 00:11:41,510 --> 00:11:43,170 when evaluating a trade opportunity. 184 00:11:43,970 --> 00:11:47,290 As we can see, the bullish imbalance continues from there. 185 00:11:47,850 --> 00:11:51,210 Subsequently, it even leaves another test on the VWAP. 186 00:11:52,130 --> 00:11:54,690 Here is another example of a distributive structure. 187 00:11:55,030 --> 00:11:58,990 After the end of the bearish breakout, the market begins to pull back to the 188 00:11:58,990 --> 00:12:02,570 upside until it reaches the VPOC and VWAP zone. 189 00:12:03,100 --> 00:12:07,240 where a reversal point in favor of supply is created, resulting in the 190 00:12:07,240 --> 00:12:08,720 continuation of the bearish imbalance. 191 00:12:09,380 --> 00:12:13,420 It is important to reiterate the importance of treating these levels as 192 00:12:13,580 --> 00:12:16,540 We will not always see perfect touches above them. 193 00:12:16,900 --> 00:12:21,260 Sometimes, as in this example, the price will react before reaching these 194 00:12:21,260 --> 00:12:25,380 levels. What this tells us is that the market is very unbalanced. 195 00:12:25,800 --> 00:12:30,240 Traders who wanted to position themselves to sell after this pullback 196 00:12:30,240 --> 00:12:31,760 started to enter near the levels. 197 00:12:32,140 --> 00:12:34,080 thus preventing further upward movement. 198 00:12:34,540 --> 00:12:38,680 It is this urgency to enter that has caused the market to fail to reach the 199 00:12:38,680 --> 00:12:40,360 exact levels before the reversal.