Tag: volume profile trading strategy
Trading insights on share trading, forex trading, cfd trading and options trading. Powerful insights from our Wealth Advisers at PhillipCapital Australia.
In my previous posts, I’ve mentioned that I don’t think price derivative indicators such as RSI, MACD and moving averages are useful as they don’t reveal any new information to the trader.
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It is impossible to determine where the market will find a peak or trough. However, by using a composite volume profile, we can determine past areas of business or rejection using volume nodes which can help us determine where the market might trade back to or reject.
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Volume profiling arranges volume as a function of price for a period of time, producing a bell curve from which we can determine the value area, or area where there is price acceptance. Where 70% of the volume is transacted, we call this the value area and the tails are called the value area high (15%) and value area low (15%).
Read more about Determining areas of business using volume profile
Why are popular indicators unreliable? The most popular technical analysis methods such as RSI, MACD and moving averages are price derivative indicators and is really just an abstract of what the price is already telling us - whether the market is moving up, down or sideways.
Read more about More accurate market forecasting using volume profile