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0:00 Maybe you have never seen something like this before. Or maybe you have never taken a volume chart like this that can really help you to understand the market. Today I will show you how volume strategies can really work for you. Let's dive in together. I'm Thomas Forward. I am the coach and traininee of Patrick Nil and I prepare World Cup champions. Trust in me, this kind of stuff is very good for you. I translated everything in AI because my English is not perfect. And I hope you will be very happy with this nice video. Thanks a lot for your time. The perfect trade entry using a volume analysis that you might not be familiar with yet or with a
0:47 volume display that can be incredibly helpful if you want to understand where it actually makes sense to look for trades using volume analysis. Today I want to give you a good impression of how we at trade the traders use volume profile volume and also a bit of market profiling to identify where there are fair price levels and where price levels are unfair. This is by no means rocket science, but it is important to get to know these building blocks. And then it's crucial to draw the right conclusions from them because there are many people who try to place their trades all over the market using different setups. And I can tell you that doesn't work. You need to know exactly where you can enter counter trades. Where you can look for breakouts, where it makes sense to
1:33 trade against the market trend, where volumes are drying up, where there is a high probability of a pullback to fair price levels, and where a market is getting out of control and moving into a strong move, that is into an extreme trend., And, you, can, analyze, or, at least predefine that quite well with it. But in that moment, you have to check whether what you need is actually happening. And for that a setup is again very valuable and useful. But back to the volume profile, what kind of information does it give us? It simply shows us where prices are fair and where they are unfair. There are a few technical terms for this which I'd like to briefly explain and clarify for you so that everyone knows what I'm talking about. And then there are possibilities using exactly these value areas. areas
2:20 that simply mark the boundaries where a market has made the majority of its trades about 70% of the day and is in equilibrium. The absolute equilibrium level is called the Vpo in the volume profile and the point of control in the market profile, the time weighted moment where the market has spent the most time within the relevant time frame. And now we're going to combine these things to see where we can actually find the perfect trade entry. And that is certainly very exciting. Maybe just a very short story about this. The big market participants always feel comfortable when supply and demand are in balance. And that means when the market participants offer them fair prices because you have to know it's quite different from what many retail
3:05 traders assume. They don't use things like volume profile and so on. No, they don't use that. They have completely different tasks. They sometimes have to route orders and for that they need 1 and a half to two days depending on which stock or which instrument they have to position in the market because they simply move gigantic volumes. When a pension fund has inflows of capital it takes time to place these stocks at a fair price level and they like to do that where prices are fair. If prices get out of balance, for example, because of some fundamental news or another event, then it becomes difficult for these guys and they usually stay out of it. Nevertheless, the markets then shoot off in one direction or another and those are also moves initiated by large
3:51 market participants. But these are not the ones who are interested in finding positions at fair prices. These are usually the ones who get out of balance and therefore have to give up their positions or those who want to get into the market quickly because they simply consider a shift in the current price levels to be fair. And that's basically and fundamentally the core logic of the whole thing. And now I'll show you a bit on the chart with different examples what the terminology is but also where to look for the locations and how we do it. Here we have a completely normal chart display where you can see that the market has dropped here and here are the corresponding price levels. Now you can see that down here for example we repeatedly have accumulated
4:36 volumes in this case with delta and all that stuff. But what am I getting at? What I mean is for example you can display volumes for the corresponding candles. How much was traded during a given period X? For example, how much volume was there in this 30inut candle? And then you can read off the total. This is the standard way of displaying volume corresponding to the respective time periods. But now you can also go ahead and say for example, I want to display all of the volume that was traded. For instance, at the price level of 23,740 regardless of the associated candlestick, but instead summed up at that particular price level. And then you get something different displayed.
5:23 You get a volume profile for this profile. It simply shows the price level. And that could be let's say a total of 5,000 contracts were traded at the price level of 23,740. Then on the scale here you have the corresponding volume level. If for example you had very little volume at the price level of 23,800 then only a small amount of accumulated volume will be shown here and from that you get a volume profile like this which is always aggregated and calculated according to the corresponding price levels because what was traded there ultimately demonstrates to you a detailed profile like this with the corresponding volumes at each price. And this is the representation I want to
6:09 show you now. And it comes with a few specific terms. It's the so-called volume profile which has the point of control as I just mentioned. That's the point within the relevant time period I'm analyzing with the highest trading volume. Then there is the value area high and the value area low. These are the boundaries. As a rule, you use 68.2 2 or 70% of all trades of the day and say that where 70% of the highest trading volume occurred is the so-called value area and this value area for me means the price range in which the market is fairly priced. Now there are also different profile shapes and so on but let's stick with this standardized model for now.
6:56 Everything above and everything below these price levels are to put it simply the unfair prices. And then there are also the so-called low volume nodes. These are price areas where the market has shown very little trading volume at the corresponding price levels. To summarize again, there is the value area which is this boundary here. There is the point of control which is the point with the highest trading volume. And there are the unfair price areas for the corresponding time frame. These are simply the price areas that the market has not accepted much and where little trading has taken place. This means to sum it all up that on such days the global players feel comfortable here
7:42 when they can do their business and here they try to trade back to these comfort zones first. And that's why we also like to call the point of control a magnet as long as the market environment is stable. And 70% of the time we are in stable market phases. You need to be very clear about that. But how do we for example identify support and resistance? Let's just take a look at this image here and say that each of these volume profiles represents a complete day. It could just as well be that each of these price areas represents a week. It could also be that you display it for the month. You can decide that for yourself, but in day trading, we really like to use the days. Now, I'll just draw the volume areas
8:29 using these purple boxes and say that the market had fair prices within these boxes. And these fair price levels are interesting for us because we know that's where the market is in its comfort zone. And all of this is first of all a look at the past. And of course with this information we can then clearly see where we have many such important price areas or zones where a market has what are commonly referred to as so-called overlaps. In these price areas, a counter trade or an opposing trade often takes place because the market will generally always try to return to a state of equilibrium or balance. Now the only question that remains is how can you accurately and reliably locate such areas and what additional information do
9:16 you actually need in order to for example successfully execute such a counter trade here because as we all know there's always the possibility that a market will move up here and just break through and then we often have the situation where a market gets out of balance here and as a result just moves extremely quickly. Why is that? It's simple because at that precise moment, everyone who had been speculating on further falling prices down here hits the brakes and exits. Now, you should definitely know that there are actually quite a lot of these really nice and charming fairy tales out there where people often say things like, "Oh, this is a stop-loss wave." And so on and so forth, as you might have heard before. and all. No, as I
10:02 just mentioned, when a market gets out of balance, then the big market participants have to start hedging themselves. This is the original idea behind futures contracts as a hedging vehicle. And then, for example, they hedge themselves using a futures contract and buy it because otherwise down here with their other assets whether options, stocks or whatever they simply have to hedge them. Commodity traders do this very often and that's why such strategies are really really cool in commodities because in the commodity markets it's the case that the big commercial traders especially the producers need stable prices and when a market there gets out of balance and suddenly new trends emerge it's the
10:48 case for them that they have to hedge themselves so they don't end up underwater with their production costs and so on. And it's really important to take some time to think through and understand these profound ideas behind it. And yes, it's just incredibly incredibly valuable when you really internalize this kind of information because then you're able to understand why markets establish such trends and what kind of impact an extreme trend can have on you. For example, you can also visualize the whole thing like this. You can also look at the volume profile over several weeks or months. You can display it on either side. It doesn't matter whether you use the right or the left. And examine a corresponding
11:33 price range with it. This way you also get information about this price range where most of the trading volume occurred. In other words, where the fair price area is. You get information about where little trading volume was generated. These are the so-called low volume nodes. And then um you can quite easily determine for yourself with careful observation that if the market moves into unfair price areas, there's a high probability that it will eventually return to a fair price level because it wants to do business at fair prices. I know the big players prefer that. But of course, there are also moments when such markets start to rise very sharply. And when prices rise extremely quickly
12:19 the likelihood that the volume profile on this side will also become large is very very small because traders simply can't establish such a volume peak, such a fair price area in a fastmoving market. They don't have the opportunity to easily find supply and demand there for themselves and calmly conduct their business. For example, if I am Starbucks and I want to hedge my prices in order to keep my coffee production stable, then I need these fair price areas where the market naturally stays for a while. And that's how as a company like Starbucks, I build exactly this volume peak. And as a result, these volume peaks, let's call
13:04 them that, are so interesting as locations for fair pricing. For us in trading, this means that when a market reaches such fair price levels, we can initially assume that a reaction will occur. And whether that reaction is a counter trade or a profit- takingaking opportunity for us depends on the idea we have with our trade. It can just as well be a signal for us if we have adapted all the rules of the corresponding volume patterns for ourselves. But the most important information is when you're looking for setups, don't look for them somewhere out in the middle of nowhere, but make sure you look for these setups in the areas I'm about to show you. This is an example of how we actually visualize everything in the end in order to create analyses.
13:52 This is market profile. I'll go into more detail on that in another lesson. These are the time frames summed up over the different price areas. There you can see how long a market has traded and that gives you even more information. But for us, what's important is the volume profile which I'm drawing here in yellow and which is often very similar to the market profile. We use this first to locate where the interesting price areas are. Yes. And these interesting price areas, you can also see them wonderfully here. They are always the point of control, always the value area high and the value area low. And when the market moves there, let's assume the market now has a new opening pattern here. And this chart you're seeing is a
14:38 weekly chart. And if we move down from up here, then I know. All right. I have here so-called reaction levels value high, value low, and if applicable, the point of control. And then I know that I should take a look here to see if I can identify suitable trading ideas for myself. Of course, I can also do this in the so-called low volume areas and see if I can find an interesting trading idea to implement for myself. In the previous lesson, I already talked a bit about context and the probabilities with which markets process certain things and that's why you have to understand there are three things. Where do I look for trades?
15:24 Which direction is prevailing? and which direction are the global players taking? And then crucially, what am I looking for? And with this valuable information that I have gathered from the volume profile I am able to accurately pinpoint and determine where the price areas are considered fair within the value area as well as where the price areas are considered unfair both above and below the value area. If I have fully understood the corresponding context, I can immediately identify for myself the specific places where I should be looking for counter trades, where to look for breakout trades, and what particular setups I should be searching for. And that's incredibly exciting. And I know for a fact that there are many
16:10 people out there who charge huge amounts of money just to explain and elaborate on things like this. For me, without this matrix, and I know this simply from many years of experience, and without the deep knowledge needed to correctly interpret the relevant capital flows these are just auxiliary tools that provide you with information. And I just want to go a bit deeper into this like I just did and take you along with me, helping you become aware of what you can look out for. And I hope that's cool for you and that you can use it to educate yourselves a bit and gain a deeper understanding of why, for example, setups often just don't work. I'd like to give a very brief example of this. Just imagine that you're someone
16:55 who likes fast markets, who likes to trade breakouts, and now someone has told you this is a great breakout setup. For example, this is the value area. This is the P, the point of control, and you get breakout setups here or here or here. That's often what people say. With this setup, you can make a lot of money in the market. Yes, but such a breakout setup doesn't make any sense at all. You won't get a fast move within a fair price range unless some news comes out or some other event causes the market to break out. So think carefully about which variations of such setups actually make sense and then you'll realize okay wow that's cool and if you then also
17:40 understand which of these actually suits you and fits your personality whether you're someone who reacts very quickly or someone who is very patient then you'll also realize that maybe you're not a breakout trader at all but rather someone who should be looking for counter trades or someone who prefers to wait for pullback. backs because you always want some extra reassurance for yourself. And yes, these are some of the complexities that you first have to develop for yourself in your everyday trading. And back to the volume profile it's a great tool that shows you where a market is in balance or imbalance and provides you with information just like I gave you earlier to gain a deeper understanding of who is actually dominating the markets. I'm looking
18:26 forward to your feedback. Many things.
