Power of Trading
Learn the value area trading strategy to identify support and resistance levels used by institutional traders. Use volume profile to calculate value areas. Apply value area trading rules to increase profitability. Spot institutional support and resistance levels using thin volume areas. The 80 rule can be used to improve trading.
Value Area Trading: How Institutional Traders Find Support and Resistance Levels
Introduction
– Video difficult, but informative
– Learn value area trading to master institutional trader strategies
– Use value area trading to day trade any market and increase profitability
Why Volume is Important in Trading
– Volume represents amount of buying and selling in asset classes
– Institutional buying and selling pressure moves stock prices
– Volume profile strategy, also known as market profile indicator, identifies institutional buying and selling activity
Understanding Value Area Trading in Volume Profile Analysis
– Value area measures where most buying and selling volume occurred
– 70% of all asset prices cluster around the value area
– Value area levels highlight where 70% of trading volume occurred during a particular trading session
– Volume profile value consists of value area highway, value area low, and point of control (VPOC)
Calculating Value Area
– Total buy and sell volume multiplied by 0.7 determines 70% of total volume
– Greatest volume block, or VPOC, recorded
– Total volume of first two blocks above and below VPOC added
– Greatest volume between the two volumes added to VPOC
– Process repeated until value area slightly surpasses number found in step one
– Highest row represents value area high, while lowest row represents value area low
Using Volume Profile with Trading View
– Intraday charts work with volume profiles on any time frame
– Volume profiles plotted individually for each session
– Horizontal scale based on price, not time like time-based volume charts
– Value area levels more visible with changed color on style tab
– Value area trading rule: plot on vertical scale, gain more information, spot institutional support and resistance levels
Value Area Trading Rules
– Large institutional traders execute heavy volume
– Large support and resistance levels found where there is high volume
– Thin volume areas indicate lack of trading activity
– Price moves quickly through thin volume areas, more resistance in value area levels
– Use thin volume areas for stop loss placement when shorting
Improving Trading with Value Area and 80 Rule
– 80 rule: if stock price opens or moves above/below value area then returns, it’s likely to continue in opposite direction
– Use 80 rule to determine stop loss placement
– Understand the significance of volume and its impact on price movements
Conclusion
– Value area trading helps traders spot institutional support and resistance levels
– Use volume profile tool to identify large institutional traders
– Master value area trading rules to increase profitability in day trading any market
