The BEST Volume Profile Trading Guide You'll EVER FIND

This is the volume profile. It's one of the best trading indicators out there for finding precise sniper entries. What makes the tool so powerful is that it shows you exactly where the big money in the market is located. And if you use it correctly, they can help you identify the levels where institutions are most active, allowing you to find higher probability trades. So, in this video, we're going to cover everything you need to know about the volume profile. We'll start with the absolute basics like how to draw and read the tool before moving into the various trading strategies you can use to profit from the markets. By the end of this video, you'll know exactly how to leverage the tool to find high probability trades on your own. So, let's get started. First, what exactly is the volume profile? The volume profile is simply an indicator that shows how much volume was traded at each price level. Now, you'll notice that the profile is made up of long bars and short bars. These long bars represent high volume areas, meaning a lot of trading activity took place at these prices, while short bars represent low volume areas, meaning less trading activity took place at these prices. Now, a common question that most traders ask is, what's the difference between a traditional volume indicator, the one you normally see at the bottom of the chart, and the volume profile? And the difference between them is simply how the volume is measured. A traditional volume indicator measures volume across time, while the volume profile measures volume across price. Let's look at an example to understand how this works. In this chart, we're on the 1 hour time frame, and we have a traditional volume indicator applied. Remember, each bar on this indicator shows the volume traded during a specific time period. And since we're on the 1 hour time frame, each bar represents the total volume traded during one hour. So, in this example, we can see that during the 9:00 a.m. candle, the market had high volume, and during the 10:00 a.m. candle, the market had low volume. Pretty simple. However, the problem with this indicator is that it only tells us when that volume occurred, during what time. But it doesn't tell us something even more useful, which is where that volume actually took place, at which price levels. And that's where the volume profile comes in. Using the bars on the volume profile, we can now see exactly which price levels have high volume and which have low volume. Now, why does this matter? Because they can give us a better idea of how price will behave around certain levels. When you see long bars, it means a lot of trading activity took place at these price levels. Usually, price tends to slow down and consolidate near these high volume areas. The reason this happens is because both buyers and sellers are actively trading at these levels. And since there is interest from both sides, a large amount of volume builds up around these prices. On the other hand, short volume bars mean there was less trading activity that took place at these price levels. Usually price tends to move quickly without spending much time in these low volume areas. The reason this happens is because only one side of the market, either buyers or sellers, is clearly dominating the other. So because there is less interest from one side, less volume is traded around these price levels overall. So to give you a price action example, it'll usually look something like this. First, price tends to move quickly through low volume areas. Then once it reaches a high volume area, it'll likely slow down, consolidate, and spend more time there. Once price reaches another low volume area, it'll start moving quickly again. And this is really what makes the tool so powerful because instead of having to guess where the important levels are, the volume profile shows us directly which price levels attracted the most trading activity. This allows us to find precise trade setups, especially using the strategies I'll teach later in this video. Now, before we continue, if you're serious about learning the volume profile and want to actually apply it to your own trades, I created a free volume profile trading blueprint. This guide contains all the strategies I teach inside this video and turns them into a simple checklist. So, whenever you're about to enter a trade, you can quickly go through the checklist to make sure your setup aligns with the strategy. You can get this blueprint for free inside my Telegram community. Links in the description. Now, let's apply the volume profile to your chart. First, open Trading View. If you don't have an account yet, I left a link in the description. Once it's opened, we can apply the volume profile. To do that, go to the left side of the chart, click this button, and select fixed range volume profile. Then to apply it, just click two points on the chart like this. For now, we're only setting up the tool. So, you can place it anywhere. Later, when we get into the strategies part, I'll show you the proper way to place it. Once it's applied, click on the tool and open the settings. From here, make sure VH and VAL are enabled and make sure the PC is also enabled. I'd also recommend changing the PC color to something brighter like red so it's easier to see. And remember, these levels will be used for the strategies part later, so make sure they're turned on. And don't worry, I'll explain exactly what each of them do in just a second. Next, go to the inputs tab, change the row size to 60, and set the value area volume to 70%. Then click okay. So this is what your volume profile tool should look like. Now, let's get into the parts of the tool. So at this point we already know that the bars on the volume profile measure the amount of volume. So the parts that we're going to focus on now are these three lines. First we have the point of control or the PC. This line shows the price level with the highest amount of volume within the range. You can clearly see this because it also aligns with the longest bar on the profile. Now a simple way to understand the PC is to just treat it like a support or resistance level. So if price moves towards the PC, since it's the level with the highest volume, there's a chance that it could react or even bounce from the level. Next, we have these two lines, the value area high and the value area low. These lines form the upper and lower boundaries of the value area, which is the zone that contains 70% of all the volume traded within the range. In other words, it's where majority of the trading activity took place. This means that whenever price moves outside of the value area, it's considered overextended because it has moved beyond the zone where majority of the trading activity took place. And so a simple way to understand the value area high and low is to just treat them as discount and premium levels. If price moves below the value area low, it means price is trading at a relative discount. This means there's a chance it could move back up into the value area. And if price moves above the value area high, it means price is trading at a relative premium. This means there's a chance it could move back down into the value area. Now, keep in mind that these are just the basic concepts. It doesn't mean you should immediately take a trade every time price crosses one of these levels. There are still important conditions we need to see before actually taking a trade. I'll explain more later in the strategy section. Now, before we get into the actual strategies, you first need to know how to place the volume profile correctly. And this is where a lot of traders mess up because where you place the tool will actually determine whether the levels it generates will work or fail. So, make sure you get this right. And so, the best way to place the volume profile is to apply it on the previous day session. Let me show you how this works. So, let's say you're on the 45minut time frame chart and today's date is July 3rd. Now, we're actually not going to place the volume profile on today's session. Instead, we place it on the previous day session, which is July 2nd. So, we place it from the first candle to the last candle of that session. Using that profile, we then mark the key levels like the P, the VH, and the Val and use them as reference points to trade today's session. And so as long as the July 3rd session is still running, we'll continue to trade using the levels from the July 2nd session. Once July 3rd ends and July 4th session begins, we repeat the same process. We place the volume profile on the completed July 3rd session. Starting from the first candle and to the last candle, mark its key levels and use them to trade the July 4th session. So you should always use the volume profile from the previous day session. Now you might wonder why aren't we using the volume profile levels from the current day's session. This is because the current trading day has not yet ended. So as new price forms the volume profile will continue changing which means the levels will constantly change in real time. This makes them less reliable and can create misleading signals. So the rule is simple. Place the volume profile on the previous day session. Then use those levels to trade the current session. Now let's try this on an actual chart. First, you want to select an intraday time frame. Now, intraday simply means any time frame below the daily chart. So, this could be the 5 minute, 10 minute, or 1 hour. Basically, anything below the 1-day time frame. [music] In this example, I'll be using the 15-minut time frame. Next, make sure your chart time is set to exchange time. And this is very important, so make sure you don't skip this part. Next, hover your mouse over and check the current date. In this example, the current date is 28th of July. That means the volume profile should be placed on yesterday's session, which is the 27th of July. So, take the fixed range volume profile and place it across the full July 27th session, starting from the first candle all the way to the last. Once it's placed, you can just manually extend the levels and use them to trade the current session. When the session ends and a new one starts later, we'll just repeat the same process. Now, I know there are quite a few steps to remember when placing the tool, but it's important that you get them right. So, to make things easier, I've put together all of these steps into a simple checklist that you can easily follow. So, whenever you're trading, you can quickly go through the checklist and make sure the tool is set up correctly. You can find this inside the volume profile trading blueprint, which you can get completely for free by joining my Telegram community. Links in the description. And so now that you finally understand how the volume profile works and how to place it on your chart, we can move on to the three high win rate strategies you can use to profit from the market. Starting with the first one. For this strategy, we're mainly utilizing the PC to find our trade setups. So we know that the PC represents the highest volume area within the range, which means it also shows us the price level where market participants were most interested in. So, if price approaches that level again, there's a high chance that we can see a reaction from it and we can use this to our advantage to find trade setups. However, we can't just enter a position every time price touches the PC. If you don't use the right setup, the strategy will fail more often than it works. So, there's a specific setup we need to see before taking the trade. Here's how you do it. The first step is we need to find a setup where the previous session ended with price being outside of the value area. And this is very important when trading the PC bounce strategy. To make this even clearer, let's look at this chart example here. We've already applied the volume profile to the previous session. And looking at the price, we can see that that session ended with price being outside of the value area. So this is what we're looking for. Remember if this session ended inside the value area then it's not a valid PC bounce setup. So once you see a valid setup like this we can move to the next step which is to mark the point of control and wait for price to move towards it. Once that happens we move to the next step which is confirmation. So since we're expecting price to bounce from the PC and move lower we want to see some bearish price action forming around the level. In this example, when price touches the PC, we can see a long wick breaking through the level before reversing back below it. This shows that buyers initially tried to push price higher, but sellers stepped in and rejected the move. Next, we can also see multiple red candles forming right after. This adds to the bearish confirmation because it shows that sellers are in control. So, looking at the price action, we now have enough confirmation that price will likely move lower. Now let's recap our setup. First we have the previous session closing outside of the value area. Then we have price moving into the PC and we also have bearish confirmation from the price action. If all those conditions are met, we have a valid setup which means we can enter a short position here. Next, the stop loss can be placed just slightly above the PC and we set our profit target at 2 R. And as you can see, price bounced off the PC and hits our take-profit target perfectly. Let's look at another example. Again, the first step is we need to find a setup where the previous session ended with price being outside of the value area. And we can see one right here. The next step is we mark the PC and wait for the price to move towards that level, which it does right here. Next, we move to the final step, which is confirmation. So, because we're expecting price to bounce from the PC and move higher, we want to see bullish price action near the level. And in this example, after price touches the PC, we can see a large green candle forming. And if you look closely, it actually forms a bullish engulfing pattern, which is a common candlestick pattern where a green candle's body completely covers the body of the previous red candle. This indicates that buyers are starting to take control, giving us confirmation that price will likely move [snorts] higher. So once all the conditions are met, we can enter a long position. Next, the stop loss can be placed just slightly below the PC and we can set our profit target at 2R. And as you can see, price bounced off the PC and hit our take-profit target perfectly. So this PC bounce strategy can be really powerful when the setup has traded right. [music] But there's just one problem. The strategy works best only when the previous session ended outside of the value area. So the question is, what do we do when it ended inside of the value area instead? This brings us to strategy number two. For this strategy, we're using the value area high and value area low to look for trade setups. Remember, the value area represents the zone where the majority of trading activity took place. So, anytime price moves outside of the value area high or low, it's considered overextended, which means there's a good chance price could reverse back into the value area. And that's the move we want to take advantage of. However, you can't just blindly enter a trade every time price crosses these levels. There's a specific setup we need to look for. So, here's how it works. The first step is we want to find a setup where the previous session ended with price being inside of the value area. Here we have the volume profile applied to the previous session and we can see that price was inside of the value area when it ended. So this counts as a valid setup. The next step is we extend the levels to our current session and wait for price to cross outside of it. So either it crosses above the value area high or below the value area low. In this example, we can see that price crossed below the value area low, which means we're looking for a reversal upwards. So, we can move to the final step, which is to wait for price to move back inside the value area like this. Now, make sure that a candle actually closed inside the value area and not just wicks into it. Now, let's recap our current setup. First, the previous session ended with price being inside the value area. Next, price crosses below the value area low. Then it crosses back inside again. Once all the conditions are met, we have a valid reversal setup. So, we take a buy position. The stop loss can be placed near the swing lows and the takerit is set at 2 R. And in this example, price hits our takerit target. Now, the good thing about this strategy is that as long as the current session hasn't ended, we can keep looking for these reversal setups. For example, as we let the chart play out, we can see price crossed outside of the value area once again, but this time it happened at the highs, which means we're looking for a reversal move downwards. So, we move to the next step, which is to wait for a candle to close back inside the value area like this. Once that happens, we have a valid short setup. So, we can take a short position. The stop loss can be placed near the highs and the takerit is set at 2 R. And as you can see, price hits the takerit target. So, you can see just how powerful this reversal strategy is. However, the problem with this setup is we can't keep expecting price to move back inside the same value area forever. At some point, price will eventually break out and form new value areas in the future because that's just the nature of price. So, how do we take advantage of this when it happens? That brings us to strategy number three. For this strategy, we're looking for setups where price breaks out of the value area. And this is where things can get really interesting because once price breaks out and starts gaining momentum, it's often followed by a larger continuation move right after. So, if we can time our entry right before that continuation move happens, it can give us a solid risk-to-reward trade. So, here's how the strategy works. First, for the breakout strategy, it doesn't matter whether the previous session ended inside or outside of the value area. Either one can still form a valid setup. The only thing you need to look for is that price must significantly break outside of the value area in the current session like this. Once price broke out, we still don't know whether it will continue breaking out or reverse back inside the value area. So we move to the next step which is to wait for price to make a pullback towards the value area and hold near the level like this. Now it doesn't have to hold the level perfectly. As long as the pullback doesn't move too deep into the value area, the setup is still valid. Once that happens, we move to the final step, which is to look for a break of structure. For those of you who don't know, a break of structure simply means price breaking a previous higher low and continuing the initial move. So for a bullish setup, we want to see price forming higher highs. And for a bearish setup, we want to see price forming lower lows. In this example, since we have a bullish breakout setup, we wait for the price to form higher highs like this. So let's recap the setup. First, price broke significantly outside of the value area. Then it formed a pullback but still managed to hold around the level and finally it formed a break of structure in the breakout direction. Once all three conditions are met, we have a valid setup so we can take a buy position. Stop loss goes slightly below the break of structure and take profit is set at 2 R. And as you can see, price hits our takerit target. Now let's look at another example. In this chart, we can see that price broke significantly above the value area high. So we have the first condition. Next, price formed a pullback towards the value area. However, it did not manage to hold there and instead broke below, which means this setup is no longer valid. So we just let the price run and look for another setup. Later price crosses below the value area low. then forms another pullback, but this time it managed to hold there, which means this is a potential bearish setup. So now we move to the final step, which is to look for a break of structure. Since this is a bearish setup, we're looking for price to form lower lows like this. Once all conditions are met, we can take a short position. Stop loss goes slightly above the break of structure and take profit is set at 2 R. And as you can see, price made a sharp move downwards and smashes through our profit target. So notice just how powerful the breakout setup can be. Now, this is where it gets even more interesting. The three volume profile strategies I just showed you aren't actually separate strategies where you have to choose only one. Instead, they all work together as one complete volume profile trading system where you simply use a different setup depending on what price is doing. Let me show you an example. In this setup, the previous session ended inside the value area. Then price crossed below the value area low and then crossed back inside. Based on the rules we just learned, this gives us a valid reversal setup. So we enter a long position here targeting a 1:2 riskreward, expecting price to reverse higher. However, price moved lower instead. So this trade ended in a 1R loss. Now if we look closer at the current setup, we can see that price actually formed a bearish break of structure. And if we look at the setup again, price has now crossed below the value area low, made a pullback, and held around the level and formed lower lows. Based on the rules we just learned, this is actually a valid breakout setup. So we can enter another short position here targeting a 1 to two riskreward. And this time, price hits our take-profit target for a 2R gain. So, even though the first reversal trade lost us one R, the breakout trade made us 2R, leaving us with a 1R gain for the session. So, you can see just how powerful the volume profile tool can be. By combining all the strategies I just showed you into one complete trading system, you're no longer relying on just one type of setup. Instead, you're adjusting your setup depending on what price is showing. But there's just one problem. There are a lot of moving parts to remember when trading this system. You need to remember how to set up the tool correctly, which settings to use, and what to look for in each setup. Whether it's a PC bounce setup, a reversal, or a breakout. And you might remember all of this while watching my videos. But once you actually sit down and start trading it yourself, you might forget some of these steps. So to make things easier, I created something that can help you. It's called the volume profile trading blueprint. This guide compiles everything we covered in this video and turns them into a simple checklist starting from how to draw the tool correctly to the right settings to use to identifying each of the different setups. So before entering a trade, you can quickly go through this blueprint to make sure you're following the system correctly. You can get this blueprint completely for free inside my Telegram community where I also share daily market analysis with the members there. For example, just recently I pointed out that gold was sitting at support and had the potential to move higher. A few days later, it rallied more than 3,000 pips. If you took that trade with me, you could have made some nice gains. So, if you want to get the blueprint and see my market analysis every single day, join my free Telegram community. Link is in the description. I'll see you in the next