OrderFlow Labs

Volume Profile 2 of 2

Volume Profile 2 of 2

Volume Profiling with Job Part 2 of 2

Welcome back for Part 2 of the Volume Profile where we will discuss how to utilize this with intraday movement. What I want to talk about primarily is areas of interest and volume build and volume taper.  As I come in to an area of interest, let’s say that this is my area of interest, if I’m coming from the top, down into it, if the volume profile is building into that zone, then I’m seeking continuation, because it shows interest here, not yet met with lack of interest, or volume taper. A volume taper is when the volume dwindles off. If it’s met with volume taper, and that lets me know that the interest is dying off. And we need to start seeking that bit on the tape in order to position back against into that area of interest and beyond breaching that information to the other side.

The primary things are formulating your areas of interest, and then watching the build and taper. As as that happens, you’re going to get areas of distribution. And through that area of distribution, you’re going to get low volume nodes and high volume nodes. Placing positioning against these is a premier interest in how to utilize volume as an edge is something that we utilize here with OrderFlow Labs. But as far as the areas of interest, this is mapped out in a pre-session fashion, that way you can watch the volume build around it.

So, let’s talk about that a little bit. Here we are looking at a distribution with NQ on 1029. What we’re going to do is, the yellow line here is the Job pivot. Thenyou can see the extension and targets above that pivot. We’re going to map this fine profile, which is going to crown it right here and show you right off the open. This is a five minute candle here.  To show you on the first five minute candle, what we can see is there are more volume building above or below, we can see that that’s volume that interest is above. And so we had a taper to the downside. As this pushed above here, it pushed into this first target line and began to build volume. In fact, it continued to build volume until it got above and it was bracketed in between the two targets.

Now, even with that taper above, we want to see that come down and make that decision. We know that based on this profile here, we have this LVN down here, we have a taper here. If price were to breach this range, then we would be seeking that liquidation back into this range. But until then, we know that we can play above that pivot with inventory to continue to build volume. Volume is interest, again. As volume builds, you do not want to fade until it lacks interest. As we push up into this mid-range here, we can see initially boom, another high volume node begins to build, shows us further continuation, and then another one builds there in that candle. As we get up here, we don’t have any type of clean taper, we simply just have multiple tiny, little high volume nodes that are building which turned into a distribution.

At thios point, you know that this auction is not going to turn south until it reaches that low volume area and seeks a distribution below it. At this point, it’s going to be rotating here and respecting this range, this 722, seeking, pushing until that final exhaustion occurs. We see it push up again, it builds volume, pushes up again and builds volume, builds a distribution. And then here, we get that. It pushes up, it begins to taper, and as it pushes into a previous distribution, then it builds volume width.

If volume is building in the direction that you’re going, you do not want to be fighting that positioning. Continuing this here, we can see as it respects the low volume nodes below it, it continues to build above, and we further have taper at the top. So, in looking at this here, we have a distribution here at 75 range and one here at 840, 835.   If price were to auction below this, then we wouldn’t be seeking that auction to be targeting the prior areas of interest. And vice versa. If this were to continue to build volume up here, instead of just having this taper, then we want to respect that and not allow that to gauge our bias.

Here’s one to the downside. And we can see off the open, we have more volume building below that pivot there, that yellow line. Now, gauging just off profile, let’s see how this builds out.  As volume transactions,we have a distribution built above. And we see that as interest. And so even as we push back down into balance, and we have less volume build below, at this point here, it tapers. The low end of that candle there drops down and dwindles in volume. So that 405 level on the right here is a breach area that if that reaches, it should come back maybe even respect, as it did, and then push back up to clear this volume there. It needs to taper and clean out. As this pushes back up, it does exactly that. As that tapers, what happens next is it comes out of the prior distribution, built more volume.

Now we have this low volume area here at 0775. And if we were to build volume below that, that’s showing interest below that range—as it does. Until we get down here, which is a very nice, tapered, easy, nice drop off volume, in order to gauge back up into prior distribution and targets. So, utilizing volume taper and LBNs in the distributions as they occur in order to gauge your ranges and find—if you’re a breakout trader, you better be breaking out a volume. If not, that’s simply a stop run back in the liquidity. Otherwise, gauging this can help you work your plan on the day in order to find that range and exploit the activity.

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