How to use Volume Profile in the crypto market

It is important to define support and resistance zones for every trader, and currently we have many ways to define these zones, such as using MAs, trendlines, or connecting areas with multiple peaks or bottoms together and one indispensable indicator is the Volume Profile. Today, Bitcoin Magazine will introduce you to the Volume Profile indicator, and how to apply it in the tradecoin.

About Volume Profile

The Volume Profile indicator is an extremely powerful tool that traders can use to improve the effectiveness of their trading strategies.

It is extremely versatile and can be used for a variety of purposes, including finding areas of support and resistance, as well as finding areas where we can expect rapid price movements. fast.

This is an indicator that shows trading activity over a specific period at certain prices. That is, it shows what was bought and sold at those current levels and displays them in a chart that usually appears on the right side of your chart.

On the first time you choose the VPVR indicator, you’ll notice three options: Fixed Range, Session Volume, Visible Range.

I recommend Visible Range as it’s easiest to use and doesn’t require setting up any fix points before use. The rest of this article will guide you to use the Volume Profile Visible Range indicator abbreviated as VPVR (Volume Profile Display Range).

How to use the Volume Profile Visible Range (VPVR) indicator

When using the VPVR indicator, you need to keep in mind the following parameters:

POC: Point of control – the largest / longest volume button on the profile volume, key strength / level.

HVN: High volume node – longer than the average bar on the chart, this is the price point significantly higher than the average trading volume occurred.

LVN: Low volume node – shorter than the average bar on the chart, which is a point where the level is significantly lower than the average trading volume that occurred.

VA: Value area – a highlighted part of VPVR or another color indicating that this area is where 70% of the volume of the trade occurs for this part of the chart, as shown by the red and green bars in the chart below.

TRX / BTC 4-hour chart | Source: TradingView

Together we will analyze the TRX / BTC chart, some symbols in the chart above, highlight some definitions and keywords. First, we will look at the volume button marked POC, which is one of the notable levels, as it serves as a strong support for TRX on this chart. Most prices traded around this POC bar, and then a strong rebound above the POC however the price stopped in the HVN zone, which is a high volume trading zone, and it also plays a role. is the resistance of TRX price. Looking at the chart, you can see that the TRX price is likely to trade in the range from the POC volume button to the HVN volume button.

Continuing to move up the top of the chart, we have highlighted some LVNs representing very low volume places. And price usually moves faster in LVN and slower in POC and HVN.

Looking at the chart, it is clear that the TRX price did very well at the LVN volume buttons, and it mostly worked in the area marked by the two teal arrows above. and this area is called the Value area, which represents 70% of the volume of transactions occurring in this area.

Overall, the VPVR indicator can be very helpful for finding significant areas of support and resistance, and it is very useful for assessing how the price will move through specific areas. And currently it is being used by a lot of traders.

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