How to Setup and Trade with Volume Profile

Volume Profile is a handy trading indicator that shows you the price point at which the most volume has been executed. In this video, I'll show you how to add it to your TradingView chart, how it works and when you might want to use it in trading.

If you prefer the text version, it's provided below the video.

Getting Started with Volume Profile

What's up traders, this is Hugh and in this video I'm going to show you how to put Volume Profile onto your charts and why you might want to use it.

Okay, so this is TradingView. I'm looking at the other screen, so forgive me if I'm not looking directly at you. Here is my Volume Profile indicator and this comes with TradingView. I think it's only available with the paid version, but it's a really handy tool because you can see where the most volume has occurred on a chart.

And that's important information because you want to know where you might run into some issues if you're looking at the charts, what price points you're going to run into those issues and where the buying or the selling pressure might be coming from.

Volume Profile vs Regular Volume

So let's take a look at some examples. First of all, I've put the regular volume down here at the bottom. As you can see, it can be a little tough to read this because you have to go candle by candle and you have to really dig into what each candle is telling you.

Whereas Volume Profile is just one line and you can also make it multiple lines, like some people do. So you can show Volume Profile like this and this will show you the levels at which there was the most volume.

So I haven't set it so that it shows me the volume on the candles that are only on the candles that are displayed right now. So as you can see, there's a bunch of volume here and this is the highest volume level.

There's a bunch of here. And then down here around this level is where you're going to see the most volume in this area. So this is really useful information. I only look at the highest volume level because I don't want my charts cluttered up with all this other stuff.

But it's useful to see the volume at all levels. And as you can see, this level is the second highest volume level on this chart. So there's a good chance that there's going to be a turning point.

How Do You Use Volume Profile to Trade?

I don't use it as a rule specifically per se, but I do use it as a guideline to show me where price might turn or where the profit targets might be. So for example, with this Volume Profile right now, I'm actually looking for a short here.

If I do end up taking a short, then I'm going to look for this Volume Profile level as the, as well a little bit above it. But I'm going to sit that as my limit as to how far price could go.

So I'll probably set my take profit a little bit higher than that. And if you are looking for something that's above the level or below level, let's see if I have an example here. So for example, if I move this chart backwards, it will show me the change in Volume Profile level.

Okay, so here, there's a big Volume Profile level here. So if, if you were looking for a long right here, it really helps to know that there was a lot of volume below your level. So you have some confidence to take the trade because a lot of trades have happened here, so there's a good chance that it'll push it out. Right? On the flip side, if you see a volume level really, really close to where you want to take a trade, for example, let's see if we can find one here. Let's scroll back and see, okay, here's a, I think this is a good example right here.

If the Volume Profile is exactly at your level or maybe a little bit below, then you might be in trouble. If you wanted to take a short here and if you had the highest Volume Profile level right there, then that might tell you, maybe you shouldn't be taking that trade because you're going to run into a bunch of volume and you never know what's going to happen at that point.

So if we put the profile back on there, we can see that yes, that is the highest volume level followed by this level down here. It might not be a good trade level, but again, it's just a guidelines. So it's up to you if you want to actually take the trade or not.

If I scroll back a little bit more, like I said, does it help? It helps to zoom out so you can also see the key levels around price and when you zoom in and out like this, you can get a good idea of where the big volume is and you can trade accordingly.

Conclusion

So try it out, backtest it with Bar Replay and see how it works for you. I just use it as a guideline, but maybe you can use it as a specific training program or a trading system.

All right, thanks for watching.

To learn more about TradingView's Volume Profile indicator go here.

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