Volume Price Level Trading

Hi All,

This is how I played out and marked up my chart yesterday. It would of been a succesfull trade. Oh how I wish it was a live account. Ignore the lot size used to trade I realise its high risk etc I just clicked buy and left it to see if I got the direction right.

Willowgal this sort of answers your questions to spud also. Its my take on what went on yesterday. I have attached a pic and my thought process.

Lines A, B are peak volumes to get a base for price levels.

At line C I set a price line at 1.32850. I know this only intersects 1 bar. But price seems to hit resistance so I thought it was a good level to place.

Bar 1. bar is up. Volume is down. But reading spuds post after a spike bar, volume is always less. So expected.

Bar 2. Bar is up. Volume is also slightly higher. (Or equal its hard to tell with bar 1's volume) starting to lean to a buy bias. Which also matches what the chart is doing.

Bar 3. Bar is up. Volume down. Though as this bar is also small in size I expect the volume bar to be lower in height. Still no trade decision.

Bar 4. Bar Down. Volume down. This time the volume is also less than Bar 3. To me this is proving its a buy situation.

Bar 5. I enter a buy at the opening of this bar. My target is 1.33102. I didnt set a TP for this trade. I'm only trying to guess the direction at the moment. The reason I chose this target? Look at support at E. The price line sticks to the rules it ends in a 0 and price was affected at this price level. It was a support line until was broken through.

In hindsight looking at the charts today my TP line was spot on. Price returned to this line this morning around 8.45am GMT today.


I know this is not exactly how spud trades and explained but its what I felt is right for the situation. Adding a little supply and demand theory it worked out. Now to be consistent Time will tell.

There is a systematic approach you can take to establishing price levels. The nice thing about doing it this way, is that you almost always find the "perfect" price level for a trade entry. Rarely is the takedown greater than 5 pips and will rarely go beyond 10-15 pips, if you have the price direction right from the price level.

We know that at every volume peak, the volume after the peak is always down - this is a given truth and must.
This price candle after the volume peak actually carries a lot of meaning to Price Level -- I call it the "Determinator" price candle and you will see why if you try it.

Here's how to establish a price level based on the volume peak price candle and the price candle ("Determinator") that follows:

1. Find the volume peak and corresponding price candle
2. The next price candle "Determinator" draw your price level as close to the open of this candle as possible "ending in "5" or "0"
2a. A down Determinator candle's price level is from open, downward (never up).
2b. An up Determinator candle's price level is from open, upward (never down).
2c. Ideally (or 95% or greater), the price level will intersect through the Determinator candle
3. Option - when the Price Level is so close to the open, but breaks the #2 rule, you can selct this Price Level; aware that it may require a larger stop or may make you miss a trade entry - when I say close..I mean within 1-2 pips.

Trading With This Price Level
Trade entry is only from this established Price Level. Sometimes, price won't hit your price level, and as long as the trade is staying in the dirction you chose, you can enter further off this price level on rare occurances. So, let's say you establish a Price Level in the Determinator candle at 1.3310 but price keeps ranging around 1.3305, then it is ok to jump on the entry at this lower price....keep in mind greater stops required (+5-10) and less pips will be made. I find it is just better to miss the trade and wait for a new Price Level. a whole lot safer and more successful.

Typically these trades easily net 10-15 pips on a regular basis with a 15 pip stop. If you cycle them together you can see continuing trend support runs and make more pips. I usually don't chase beyond 20-25 pips without very good reason. Continually grab 5-10 pips is a great strategy if you have no idea of price direction. If you think you picked the wrong trade direction but are in positive pips...take the pips....don't sit there and wait. Definitely safe to get out if you sense a new price level forming.

Give it a try, I think you will be surprised how well it works in establishing price level. Obviously, we can use VPLT to better establish trade direction...and more on this with charts to follow.

Hello Spud I'm glad to see you back on FF.
Have you evere heard of PVP (Peak Volume Price) and it's use with Market Statistics ? If not information is mostly available on traderslaboratory http://www.traderslaboratory.com/for...-weighted.html and the whole group of threads is listed in http://www.traderslaboratory.com/for...ks.htmlhttp://
Here in FF you can find a PVP indicator in http://www.forexfactory.com/showthread.php?t=189511 ,do you think that using the Peak Volume Price could be useful with your strategy ?

You are so right spud. I have been using VPLT these few days. And, 10-15 pips is a safe gain. Previously, my tp is to big and ended up losing it back. Thank god I didn't let go negative.

Thanks Koopa, this has totally absorbed me all evening :nerd:
I've never seen it adapted as an MT4 indicator.

[quote=Spudfyre;6388315]There is a systematic approach you can take to establishing price levels. The nice thing about doing it this way, is that you almost always find the "perfect" price level for a trade entry. Rarely is the takedown greater than 5 pips and will rarely go beyond 10-15 pips, if you have the price direction right from the price level. ..............................................................................................................................................
2a. A down Determinator candle's price level is from open, downward (never up).
2b. An up Determinator candle's price level is from open, upward (never down).
2c. Ideally (or 95% or greater), the price level will intersect through the Determinator candle
3. Option - when the Price Level is so close to the open, but breaks the #2 rule, you can selct this Price Level; aware that it may require a larger stop or may make you miss a trade entry - when I say close..I mean within 1-2 pips.

Hi Spud, Thanks again for a very informative post, but I must admit that I am a bit at a loss with the points 2a and 2b. Must be the ageing of the grey matter. If you don't mind, would you care to illustrate this by means of a chart. Much appreciated.

Regards

Pete

Thank you spud. Appreciate your efforts.

Include some EU chart with price grid to help you practice. Print the chart out and do some practice and you should be able to read the market like a book. There is simply no surprise in the market. Everything is the price level volume. Attached is the example.

Will do. Was going to last night but got side tracked on the indicator Koopa posted

[quote=pete123;6389474]

Do you have a price grid indicator that can draw lines at those specific numbers, the 0's and 5's?

Hey guys

I understand that you all get excited with all the methods how to determine a PL.
But don't we all agree that this is the simple part of the method?

I would like to see more of the other stuff... Spud you know what I mean... right? :-)

My point exactly! Most of the time I get PLines very close, 5 pips apart, so how are you supposed to trade those? Sometimes there's a volume and price spike simultaenously, and as a result it slices through 2 PLines in one go. Confusing situation...

I understand that explaining price/volume moves is more of a dynamic thing, all little things add up, but what are the rock-solid rules which apply in each and every time? Stating those in a clear and concise manner will help to grasp this method better I think.

Visualizing VPLT

Now that I know there is a MT4 Volume Weighted Average Pricing (VWAP) indicator, we can get a great visualization of VPLT at work.

The chart below shows the VWAP from the 2 highest volume peaks and a later volume peak. I'm using the two highest volume peaks for ease of visualization, other volume peaks are still valid and would show the same thing.
The Price Levels are established using the systematic price level approach where the candle after the volume peak candle ("Determinator candle") is used to determine the price level as the price that ends in "0" or "5" closest to the Determinator candle. So we have 3 price levels on this chart marked with red dashed lines.

Price moves to price levels.
Price levels are a magnet, price is attracted to the strongest magnet.
Volume is the strength of the magnet, low volume is a weak magnet, strong volume is a strong magnet.
If there is very low volume than price levels have no power and price will "float" waiting for volume to rise (price level magnet to turn on).
Price will move to the closest magnet with volume.

The writing in the chart should allow you to see how all this interacts.

dappa,

I have posted it earlier.

http://www.forexfactory.com/showthre...88#post6380488

Page 20.

Spud,

It will be nice if you can kindly post the MT4 Volume Weighted Average Pricing (VWAP) indicator for us to play around. Thanx a lot for everything.

I have summarized / created a VPLT terminology document for those who wish to practice drawing on the chart i attached on page 22.

Oh man. Is it just me or i still don't understand the interaction between the price, volume and the price level.

Yicktan,
I am replying from my iPhone so I can't post the indicator but you'll find it in the Ff thread linked in my previous post.
In the Market Statistics v4.1 indicator you'll be able to draw VWAP and PVP but you have to indicate a starting hour from which the calculation is made (usually people put the start of London, NY or Tokyo sessions). The way this particular indicator is made makes it useful for daytrading, I wish I had a version easily used with H4 for example. Spud looks more interested in the VWAP even if at first I showed him this indicator for its use of the PVP ( Peak Volume Price). But I guess we will get in that direction one day or another...

I didn't post it because I just wanted to use the VWAP portion to visualize price levels on the chart. There are lot of other things in the indicator and settings. I'm not familiar with the indicator enough to know the workings of it, but as a visualization tool it is great.

I can almost catch the movement of the market with VPLT. However, the market almost caught me with 20 odd pips. Really wonder what is the idea entries points. I guess I will still need to sharpen my skill. Don't like to get caught with 10-20 pips swing in the opposite direction before thrusting in the direction i traded for.

I find this VPLT system is super good for ranging market. But how to trade the trend with this?

Spoted a volume divergence. Wonder if any of you see it.

Hi,
thanks Spudfyre for teaching about price and volume. Please take a look at attched chart. Is the reasoning oversimpified or ok you think?
And thanks to Yicktan aswell for all valuable posting.

Regards

Waez

http://i46.tinypic.com/34j4n7m.gif