The primary reason most traders use the volume profile is to determine basic levels of support and resistance.
Such use of the volume profile is characteristic of reactive trading methods — when a trader acts after receiving a signal from an indicator. Unlike proactive methods, i.e., anticipatory methods (such as trend lines and moving averages), which rely on current price movements and analysis to predict future price fluctuations, reactive methods focus on past price movements and volume behavior.
↗️📉 According to basic technical analysis, a support level is a price level that supports the price on its downward path, while a resistance level will limit the price in its rise.
Based on this, one can conclude that the price level near the lower boundary of the profile, which significantly favors the buying side in terms of volume, is a good indicator of the support level.
The reverse is also true — the price level near the upper part of the profile, which significantly favors the selling side in terms of volume, is a good indicator of the resistance level.
I understand, it sounds complicated, but the text was agreed upon by two editors, with whom we tried to simplify it as much as possible.
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