Tracy Volume Profile Flashcards
What are are components of the volume profile?
Value area value area high value area low high of day low of day point of control (POC) Low volume node High volume node
Value Area
This is where 70% of all trading activity took place
another way of looking at it, is this is the average price zone
You want to buy a car model. it sells for anywhere between 1000-2000$
High volume Nodes
These are areas where interest picked up
They will be slow down points
They can be great areas for targets or resest areas
Low volume nodes
This is an area where there was not a lot of interest
Price will usually move quickly though these areas
How do you know if an LVN will be support or if price will move quickly through it?
you dont…
Look at the bigger picture
if things are trending then likely the LVN will act as support
If things are consolidating between two LVN then LIKELY price will pass through quickly.
Volume profile helps us understand what?
Where the support and resistance is and also as it hits these spots again as in a retest or will it drop.
Point of control and why is it important?
This is the point where THE MOST volume took place during the session. (accumulation or distribution area) For BIG MONEY…they take time to get in and out of a position. If price moves up from the POC then the volume was strong buyers (accumulation) and if the price moves down from the POC then the volume was strong sellers (distribution). THIS MAKES THEM VERY STRONG SUPPORT/RESISTANCE LEVELS. BIG MONEY…tend to defend their positions.
Daily & Weekly POC’s - MOST important for intraday trading
Monthly & Yearly POC’s - Most important for swing trading
What is the devPOC? Why is it important?
During a session the POC is still developing. The devPOC shows where the POC was as it develops.
Every reversal contains three components.
absorption
sellers fading (at support) buyers fading (at resistance) pressure dying
Buyers stepping in (at support), sellers stepping in (at resistance) pressure increasing
absorption vs consolidation
They look the same as far as the candles
the major difference is type of action (seen in volume)
this has to do with the pressure applied during absorption vs consolidation
consolidation is a resting state
absorption is a battle
(high volume)
Naked point of control.
Where a point of control has not been tested
D profile
Temporary Balanced Volume
Completed Auction
Ready to move into new price discovery
Balance between buyers and sellers
Sentiment: speaks rest, agreement, calm, non-emotional nor exited
point of control is smack dab in the middle
she uses the volume profile before the one developing until that one is done
The DevPOC, POC and in the afternoon only then can she use the volume profile
Initial Balance
the range created within the first hour of trading. Regular session.
Zone or trading range of the completed 1st HOUR of trading
9:30 am EST to 10:29 am EST (NYSE, NASDAQ, US Based instruments) 8:30 my time
24 hour markets (use the time when volume enters the market)
Primarily used in the futures markets.
Initial Balance - I use my statistics and knowledge of the IB to help hold or exit early
Large IB’s with large volume during the first hour typically leads to ranging days
IB range extensions make for great targets
Statistically speaking within the first hour of trading either the high or low is set for the day (typically around 75-80% of the time depending on the stock or index
Most trand days occur when the IB has broken within the second hour of trading (this is the first hour AFTER the IB has been formed)
In the morning what is going on if the range is big the first hour
The institutions have bought and are done
if the range is big its prob not going to to much more later that day. These are called “range days”.
What happens the second hour
Since the high or low is prob put in by first hour. if it breaks out of that first hour, it will generally become a trend day. If you can get a break outside of that range. the second hour needs to break out.
What is the difference between Normal Structure and Non TREND structure
Price rotates within the range set within the 1st hour of trading
2 Reasons for this:
Reason #1 all the business of the day has been taken care of within that 1st hour (typically larger IB’s with lots of volume in that 1st hour) - Normal Structure
Reason #2: Lack of interest (small tight IB’s with very little volume). Typically an inside day after a large directional - NON-Trend Structure.
What are Regular options?
Expiration is always the 3rd friday of every month. Anything else is a weekly expiration. Not all stocks have them.
Normal variation structure
IB high is broken
Trend is not able to continue once outside the IB range and price rotates back inside
Ultimately closing inside the IB
Once there is a 30 min close back inside the IB, the likelihood of a normal variation increases.
Trend Day Structure
Initial Balance One Side Only Break
30 Min continuous trend during the morning sessions 12 EST
Close outside of the IB at session close
Close outside the IB on the 1/2 hour and never close back inside the IB with a 1/2 hour candle
you get a 30 min close outside of the IB and it never gets a close inside of tthat IB with a 30 min. It might put a wick in but the body will never close back inside the IB
IB LOW BROKE on the example Close is OUTSIDE the IB Trends nicely most of the day Stays below the IB Mid and the VWAP Dev POC trends continuously.
Trend Day/Normal Variation Structure. Key Features? Chop but you can find profit opportunities
Initial Balance One Side Only Break
Close outside the IB at session close
Does NOT close across the VWAP or IB MIDPOINT on a 30 min candle
30 min does not trend cleanly
These are hard to hold days that seem to keep grinding in one direction
Double Distribution Structure
Key Features?
Initial Balance One Side/Both Sides Could Break
Very RARE
Price consolidates followed by some type of pick up in activity followed by additional consolidation
Usually a reactionary response after a news event
Why do we want to know the different Structures and how they behave?
Help you relax during a trade
Note: the IB breaks to the high side
A trend Day closes outside the IB and then never closes back inside the IB with a 1/2 hour candle. So that’s your fail point. As long as we dont close back inside the IB we can continue to try for higher targets.
One extension of the IB
Shes got a target here at one extension of the IB. The red line at the top. This is the same distance as the bottom of the IB I gues.
with a normal structure it’s what?
Shes looking at the afternoon here. What is she showing?
Where the IB high and low didn’t break.
Later in day depending on how the day is forming can lead to additional high probability set ups.
EXAMPLE: IB is Large IB has not been broken Difficulty holding outside prior value
Current profile is looking fairly balanced
Sell at the current value area high and/or buy at the current value area low
She took the trade wheen it hit the high end of value - shorted.
Intraday layout. this is the statistics chart I htink
Shes working on alerts to select for dips too
She uses 10 ema as a stop management tool. Can move stop to an untested pivot.
You can build into the indicator for an alert that goes with a trend line!
