 Hello everybody, good evening and welcome to the fourth webinar organized by Tithmere in collaboration with volumetric trading talking about volume. Tonight we will be talking about volume profiles. So this will be the first of the two webinars focusing on the volume profile as a tool and how to use it in our trading. Before we get started, I just want to quickly talk about the special offer research for all you subscribing to these series of webinars, which is basically first of all, what you can do, you can go into the volumetric trading website, you can email volumetric trading asking for a free demo of the platform. I'll just write down the email address for you in the chat and for all of you already who are Tithmail customers, there is a special offer special for these webinars, which basically allows you to have a special price to get the platform. And for the first month, this price will be refunded directly in your trading account. And all of the terms and conditions of course apply in the page dedicated to the offer. So before we get started, I'll just write down in the chat the email address at which you can at which you can request a free demo info at volumetrictrading.com, here it is. And for those who are already customers, this is the link you can visit to, here it is, to use the promotion reserved for Tithmail customers for trying out the volumetric trading platform. And this applies of course to the Volsys platform. So those are the terms and conditions of this offer. Let's get started talking about the volume profile. And so we get started with the main topic of this webinar. So first of all, what is volume profile? This is a very important tool and that's why I personally wanted to dedicate two different webinars talking about it. Why? First of all, what is volume profile? It is an advanced charting study displaying trading activity over a specific time period at specified price levels. So unlike the plain ordinary volume indicator, the one you can see here at the bottom of my chart, which displays volume traded over time, volume profile shows trading activity focusing on the price where such volume was trading, so was trading. So basically what its main features? This study plots a histogram on the chart meant to reveal dominant or significant price levels based on volume, so on the price traded. So we unlike the main plain, the ordinary indicator volume, sorry, unlike the ordinary volume indicators displaying price, displaying volume on the time axis, volume profile shows traded volume on the price axis here. So what we get is basically a profile shaping curve showing us which prices where I've caught more interest by buyers or sellers and which prices I've got less interest. So this is basically its main features. In fact, we can immediately distinguish between long histograms and short histograms. That gives us immediately an idea of which volume, which prices were more traded and which prices were less traded. For this reason, we already immediately have an idea, a clue of where most volume has accumulated. Essentially, volume profile takes the total volume traded at a specific price level during a specified time period. And of course that tells us that we can use different types of volume profile. For example, we can decide whether we want to see a daily volume profile like the one I am highlighting right now. This is basically a volume profile. We are on a S&P 500 chart and this one you can see here is a volume profile showing the session. So basically it refers to the entire day of trading. But as you can see here on the right side of it, I have two additional volume profile, the one exactly at the left, at the right, sorry. This is a weekly volume profile. So basically starts on Monday and ends on Friday. And for this reason, it is exactly the same as the daily profile since today is still Monday. And the one you can see on the right, this is a 400 days composite profile. Why is it called composite? Because it includes more sessions together. So that basically tells us that we can, and time is still an important variable of volume profile because basically what we can do is plot a volume profile over a session. So basically a day of trading or a week or two weeks or a month or years. And of course the representation we will get from the tool will be of course referred to the period we have chosen. What are the most important elements of a volume profile? The most important part of a volume profile, as many of you maybe already know, is the POC, which stands for point of control. Point of control is as highlighted here by Paul's platform, as this pink line you can see here exactly at the middle of my drawing. POC, yeah. Now it looks a little bit better. Sorry. Basically point of control shows the trading level which were the most volume of the day as traded. So it is always a high volume node of course. And it shows us where the most volume of the day was traded. Of course, if we are analyzing a daily profile, if we are analyzing a weekly profile, it shows us the price level where the most volume of the week was traded. And of course this is still in reference to the period we are analyzing profile about. What is POC? POC of course being the most traded volume gives us the clue of an accepted price. Not really a clue actually. It gives us the evidence of which price throughout the day was most accepted. Okay. What do I mean by accepted? I mean that both sellers and buyers were agreeing with that price, with that price being convenient. So basically what do we get? What kind of trading activity we tend to have when price is trading close to the POC? We have a price, a balanced volume. Okay. Many people are, many traders are selling and many traders are buying. That gives us a balanced price area. Okay. And this is the main reason because if you want to apply straight away this concept to our trading or different trading strategies, POC price level, price area, are the most dangerous to start to trade on. Why? Exactly for this reason. It shows us price where both sellers and buyers are somehow sure that by buying or selling, they're making a good deal. Okay. So we will tend to have two ways straight. Of course, it also shows us a balanced price area. So ideally POC level, POC price area, it is best intended as a target level to our trade, not really a good place to start our trade from. Why? Because being a balanced level, a price, an area where sellers and buyers are balancing each other. Of course, after an excess, which we will talk about immediately in a while, price always tends to go back to its price, to its balanced price. Okay. This is because of the auction market theory. Let's assume just for a second, we have price as traded in this area for a while. Okay. And this is POC showing that this price has widely been accepted by the market. Okay. And by its players, of course. Once we have the evidence of a balanced price being widely accepted by market players, of course, immediately market players will have the perception, will tend to have the perception of prices above POC to be considered as perceived as premium prices. Okay. So basically expensive prices and prices below the POC as discount prices. So basically very cheap, quite cheap. Over these levels, we tend to have what is called responsive action. So basically, what happens when prices get into the discount area? So where prices are considered to be discount prices? Of course, buyers will be happy to buy. Sellers will be not that happy to sell at a low price. Okay. So we will tend to have an action which will tend to be more in balance on the buyer's side than on the seller's side. But of course, market is for each buyer, there has to be a seller and vice versa. Okay. So many buyers will be willing to buy in the discounted area. Not so many sellers will be happy to sell. Therefore, not every single buyer will be able to buy at that price. Okay. Because that will depend how many sellers they will find. Okay. For this reason, this is something, this is a concept, the principle that will slightly introduce the concept of liquidity, which we will talk about over the next webinars, but still just to keep things simple. In discounted areas of price, we will tend to have what is called responsive buyers action. So basically, buyers will be more motivated to get into action and buy because price has reached cheap price. Okay. If some of the buyers were already interested to buy maybe here, after price gets back into price, which gives more benefits to buy because of course price is lower, it's cheaper. Many buyers will get into action and buy. Okay. This of course will in balance the market and will tend to bring back the market into the previous balance area. Okay. So let's say towards the POC. Okay. And this of course will happen as well in the premium area where many sellers would be happy to sell, but of course those are expensive prices. So not so many buyers would be happy to buy at such high prices. Okay. That of course is a very good, that would represent very well even if in a very simplified way the auction market theory. Okay. Any market for each good, for each security works in this very same way. Every time we buy something or we sell something, we always have a price we get as a reference price, which is exactly the POC. Okay. And of course what is below this price we will tend to perceive this price as cheap and what is above, we will try and we will perceive this price as expensive. Okay. Of course POC as I was telling you at the beginning of the webinar gives us the evidence of an accepted price. Why? Because so much volume has traded on it. Okay. It is the most traded volume of the day or of the week or over a period of 500 days. It depends by what kind of volume profile we are looking at. But of course high volume, every time we see an Instagram showing us high volume area on the profile, the volume profile, shows us acceptance of volume. Okay. Acceptance of price. And it tends to behave like a POC, exactly like a POC. So that means price will tend to be attracted by that level, by that price level. Why? Because in that area price will find, will try and find its point of balance. Okay. An accepted price where both buyers and sellers are happy to transact. And that helps me to introduce you some different elements, some two more elements making the volume profile, which are high volume areas and low volume areas. Okay. High volume areas basically are given by the peaks of volume you can see. So basically, every time you see a long Instagram here of volume, you can consider that as a high volume area or otherwise also known as high volume node. The only difference between an high volume area and an high volume node, it just depends by how many peaks of price you are talking about. If you are talking about a single take of price, you can talk about it as a high volume node. Otherwise, if you are talking about a wider area, of course, you can refer to those areas as an high volume area. Okay. Those areas basically are the peaks of profile and in some circumstances, they act exactly as a POC. They would attract price, but also act as a volume support and resistance area. Why? Because of course, there is also a statistic saying that for 80% of time, price moves between high volume area and high volume area. Okay. Exactly. As you can see some example here, price today on the ES, as traded over here for a certain period of time and as created this high volume area, then dropped here, broke this temporary support and went here creating another high volume area. Okay. At the moment, what is price doing? It is ranging between two different high volume nodes. This one here and this one here. Okay. So basically, a high volume area acting exactly as the POC would be ideally perfect levels as targets for our trades. Okay. Why? First of all, because they tend to attract price. And second, because since they show lots of accumulated volume over there, it shows us where a volume support and resistance can be. So of course, if high volume area shows that price is struggling to get over it, that means that maybe our trade needs to be protected or at least we need to lock some profit in because price might have reached a support or resistance level. Let's talk now about low volume areas or of course, low volume nodes. Exactly. Refer exactly as I was telling you about high volume areas or high volume nodes. We can talk about low volume areas if you're talking about a wide area or otherwise low volume node if you're talking about the single price level. Okay. Low volume areas are basically valleys, the valleys. So every time we can see a drop in volume within the shape of the volume profile, that means those are level, price level, which weren't that much accepted. Okay. So price hasn't caught so much interest on that level. Many players didn't want to trade at those price. What happens when price reaches low volume areas? Basically, we can have two behaviors. First of all, we can expect price to quickly reject those areas or otherwise to quickly accelerate and go in through the low volume areas. Now, why do those two different patterns happen? Basically, we just need to think about the concept of acceptance I was talking about earlier. If some prices weren't accepted, that means that not so many players wanted to trade those levels. So basically, if I want to buy at this level, I need sellers selling me what I am intended to buy. Okay. Low volume shows that maybe we have reached an area where there is no liquidity. Okay. So price is not actually facilitating trades. Therefore, price tend to escape from these areas and tries to go back into an area where unlike low volume areas, there was acceptance. Okay. And that would actually make our basic strategy to consider price to get back into the balanced area even more strong. Okay. Some other times, what would happen? Price would quickly go through the low volume area. Why? For the very same reason, because if a few people want to decide to buy here, but there is nobody selling, but the strength of buyer will overcome the activity of just a few sellers. Of course, price would just start to accelerate, but still not being for too much time inside the area where price wasn't accepted basically. So now you might ask yourself, if price can reject sometimes and sometimes it can just accelerate and go through it, what I'm supposed to do when price gets to in that area? Okay. The magic word is quickly. Whether it rejects or it accelerates and goes through it, whatever it does, it needs to be done quickly. Okay. This is the main clue given by the low volume areas. Whatever it happens here, it has to happen quickly. That gives us a very good, even if we haven't talked so much already about the application of this principle, that gives us a very helpful clue on how we can use this principle in our trades. Let's assume I've gone long here. Okay. And price is going at my favor, but at a certain stage, I realize I have a low volume area right in front of me. Okay. Okay. I know that price can reject or it can just take off and go through the high, the low volume area. In both cases, what common sense would suggest me, I need to protect and lock in some of the profits because whatever happens here, it has to be happening quickly. Okay. In fact, as you can see, price, every time I try to trade over these low volume areas here, it has rejected and it has come back into its balance area. Okay. Making, of course, this area look more, always more similar, like a bell-shaped curve. Okay. Showing us actually what is called a distribution. Distribution is the keyword in analyzing and working trading using the volume profile. Why? Because distribution is a synonym of acceptance of fair value of market-facilitating trades. And it also shows, of course, the formation of a balanced area, which is slowly facilitating trade. So basically, every single curve we can see in the volume profile, it shows the developing action of what an auction is. Okay. So basically, here, sellers and buyers are trying to find an agreement. Okay. And the final result of this agreement will define what the next action in terms of price will be. We will talk about this process on the next webinar. But what is very important to focus on right now is why this auction is in progress. We will see, we will tend to see price staying within this zone, showing a distribution, especially why. Because as you can see, a normal bell-shaped curve would have this kind of shape, right? Actually, it quite reminds us this kind of shape. But as you can see, there is some volume here missing in order for us to have a perfect bell-shaped curve. That means the auction, the balancing process, the distribution process is still going on. Okay. And of course, as long as this process is still on and we can detect this process is still in place, of course, a very good idea of using the volume profile for our trades is detecting what the south of this auction is and what the north of this auction is. Because that will tell us very good potential entry points for our trades, accompanying the distribution process. Okay. Next time, of course, we will see how to use this concept in our trading. Actually, right before we started the webinar, I was observing how this low was rejected. As we can see, the extreme areas of the volume profile shows us not that much volume. Therefore, they can consider as low volume areas. We had the rejection here and price has gotten back to what this first high-volume node was. And actually, right now, as you can see, it is treating this high-volume area at the south of this distribution zone as a support. So at the moment, if we can tell that price is trying to reject what a cheaper price are and is still distributing between those two high-volume nodes, the one at the north and the one at the south of the profile. Okay. I can see there is a question. Let me just read it. Which volume profile would you use on the 16 minutes, 16 minutes, intraday chart daily volume? Yes, definitely. If you are using a 16 minutes intraday chart, I would tell that maybe you are trading intraday swings. So yes, definitely I would use a daily profile. So basically, you can spot where you have those three distribution areas. That would definitely give you a very good indication of what areas are more important for the day, for the session. Hannah is asking, hi, just wondering if you showed footprints or it's in the next webinar. Yes, definitely, I will show footprint charts and how to use them. It will be our last webinar because, of course, this is the most advanced tool we will be talking about. And of course, it is the perfect tool we can use to execute actually what we get from the volume profile analysis. What do I mean with that? Now, as I was telling you, I've already had the clue of price rejecting the south of the profile. Okay. But of course, before I execute, so I can think about a long trade because I already had an evidence of price not wanting to go lower at lower prices and I still have the evidence of price likely to distribute in between those two high volume areas. But of course, I need confirmation in terms of not only volume, but also in terms of order flow. That means I really want to have the validation of this scenario. Okay. So ideally, order flow footprint charts, it is the ideal tool to be combined with the volume profile analysis, which is actually the same kind of trading that I do. Personally, I use order flow charts to execute trades, but about how do I use it? I use it as a magnifying glass. Okay. Where prices gets into important levels, but how do I get important levels? Important levels for me are the ones given by the analysis of the volume profile telling me the structure. Okay. I would never, even if I had a wonderful long signal, I would never go long if I have the POC right in front of me. Okay. For the reason I was telling about earlier. On the opposite, I would definitely take a long signal gotten from the footprint chart if I am at the south side of a balancing volume profile area. Okay. A balancing distribution area. Basically, that helps us a lot on choosing whether a trade location is a good one for a trade or not. Okay. So as long as we go on with our next appointments, we will see and how all of these bits can be put all together. Okay. So now, please, if you have some other questions, don't hesitate to write them down. Let me remind you once again, the offer for the Volsys platform in collaboration with TickMeal. You can ask for a free demo, emailing info at volumetricartrading.com. You can find the link here in the chat. I'm going to write it down once again. Here it is. And of course, if you're already a TickMeal customer, you can go at that link, this link. And if you follow the instruction here at this page, you can get a refund on this monthly purchase fee, which is anyway already discounted for TickMeal customers. Okay. This is an offer going on for the entire time of our webinars will be on. So basically, still six weeks. Okay. So important reminder. Next webinar will be on Wednesday, the 20th of April. And we will have the second part of the webinar of today. Also, I'll still be talking about volume profile and how its reading can be applied to the trading. Okay. So I hope many of you will be at the webinar. I hope this topic today was of your interest. And let me thank you for your attention and have a good evening and good trading.