Forex market is decentralized and there is no correct volume for fx traders. I trade futures with volume profile and have been through DoM screening time. I start wondering whether there is way to reverse engineering order flow activities from a naked chart. Balance and imbalance are easy to spot; however, how to find a reasonable value area is harder. If I could get a value area, vpoc is an easy one. It's a s/r inside the value area. Does anyone have some ideas or trade this way?
- #3
- Edited 9:27pm Jun 15, 2021 9:11pm | Edited 9:27pm
POC often be at around 50% of the range, depends on the range's profile it could be heavier at lower or upper area. What do you see in this area? I pulled the Fib from highest body to the lowest body. {image}
And the upper part
Notice the area which contains many small range bars consolidated inside the range was heavily distributed at lower part
The profile, thus, should be asymmetrical. The POC should be at the lower part.
Value area, to define it, easiest way is to ignore the lowest body as well as highest body part.
The POC should be at the most traded level, more often we see most candle tend to close nearby.
Also small observation, the last accumulate occurs above POC if price break to the upside afterwards, or below POC if price break to the downside.
Thanks for sharing your points. I completely agree with you about defining VA and POC. VA contains 70% volume of the profile. Without volume information, we have no choice but use an area covering most of candles instead. I think that's the reason you choose to ignore the highest and lowest body, right? IMO, there are some characteristics about VA and POC that could be used to refine them.
1. Since VA has the best liquidity, I expect to see candles leg in and leg out less frequently. Due to liquidity, there should be many small candles inside VA. I consider small candles present balance because the price range accepted by buyers and sellers should be narrow. From liquidity point of view, balance area should be narrow due to many limit orders around VA.
2. Within VA, price should seek liquidity from POC, so we could expect to see many wicks touch POC.
3. For VAH and VAL, they couldn't be easily broken and we could expect to see many rejections when price tends to get inside or outside of VA.
4. Once price gets within VA, I expect to see it touches POC.
This is the VA and POC that's in my head.
1. Since VA has the best liquidity, I expect to see candles leg in and leg out less frequently. Due to liquidity, there should be many small candles inside VA. I consider small candles present balance because the price range accepted by buyers and sellers should be narrow. From liquidity point of view, balance area should be narrow due to many limit orders around VA.
2. Within VA, price should seek liquidity from POC, so we could expect to see many wicks touch POC.
3. For VAH and VAL, they couldn't be easily broken and we could expect to see many rejections when price tends to get inside or outside of VA.
4. Once price gets within VA, I expect to see it touches POC.
This is the VA and POC that's in my head.
- #6
- Edited Jun 17, 2021 12:36am Jun 16, 2021 11:27pm | Edited Jun 17, 2021 12:36am
{quote} This is quite interesting stuff, thanks for sharing. Out of interest, do you trade this off the weekly charts or use that TF just for analysis purposes? Regards, Paul.
It's all about market searching for liquidity. And what i mean liquidity here? We all know the ultimate reason for the existance of any market is "facilitate trade"; and at the Dealer level point of view, they dont make money by speculation, they make money by matching buyer and seller. The more trading activities the better.
Spread * the amount matched is profit.
If we see it as selling or buying pressure, support or resistance, Market only see it, the so called "Market structure" is:
- Where is the money? Where is no money?
What do i mean by "Money"?
At red: no buyer -> no trade, no money.
At blue: no seller. Too low. No money.
At purple: who ever wwants to buy, bought. Who ever wants to sell, sold. There is nothing left there.
At green: potential level. If price goes there, plenty of new buy/sell orders could be triggered, and that's "money" for dealer.
Price could left the "no money" level (purple) and search for green.
- #10
- Edited 5:58am Jun 18, 2021 5:48am | Edited 5:58am
If I am on SierraChart, I'll just merge four profiles together because price doesn't go anywhere. You could see 2nd profile fill the imbalance of 1st profile and 4th fill 3rd. ICTers might call this as "fair value gap".
This is somewhat similar, but more. What the market does is it identifies thin market area, whether that area been traded thru or not, and fulfill it until achieving a near perfect form of "Normal distribution" before shifting to the whole new level with a massive movement
I believe if we move to lower tf, same thing would happen. Even though it keeps filling the thin market of previous Profile, market has to do a breakout at some point. But i couldn't know how to make the connection between analyzing high tf to lower tf
- #15
- Jun 18, 2021 8:00am Jun 18, 2021 8:00am
- Joined Mar 2010 | Status: Trader | 5,930 Posts
{quote} I believe if we move to lower tf, same thing would happen. Even though it keeps filling the thin market of previous Profile, market has to do a breakout at some point. But i couldn't know how to make the connection between analyzing high tf to lower tf {image} {image}
I make a connection by overlapping "fibo" lines for each TF
Forex can only be understood backwards, but it must be traded forwards.
- #17
- Jun 20, 2021 4:11pm Jun 20, 2021 4:11pm
- Joined Mar 2010 | Status: Trader | 5,930 Posts
Forex can only be understood backwards, but it must be traded forwards.
- #19
- Last Post: Jun 22, 2021 2:07am Jun 22, 2021 2:07am
- Joined Mar 2010 | Status: Trader | 5,930 Posts
Forex can only be understood backwards, but it must be traded forwards.