PowerZone Trading Blog

Trading the Volume Profile

Jean Folger - Wednesday, February 25, 2015

This article appears in the December 2014 issue of Futures magazine.

Many traders use technical indicators to analyze past and predict future price movement, and to identify potential trade entry and exit points. Technical indicators are mathematical calculations derived from price or volume activity. A moving average, for example, calculates the average price of a specific instrument over a defined number of time periods. Often traders will compare moving averages from various time frames to determine market momentum. 

In addition to (or instead of) technical indicators, traders can view price and volume action that are untouched by mathematical calculations. One method of analyzing this market information is through Volume Profile, an advanced charting study that displays trading activity for each price level over a specified time.

Here, we discuss Volume Profile, explain key concepts and look at the different profile types that emerge throughout a trading session. In a second part, we’ll expand on this introduction to explain how Volume Profile can be used to spot high-probability trading opportunities. Read more