👀 How does the VPVR (Volume Profile Visible Range) indicator work?
The Volume Profile Visible Range (VPVR) indicator is a powerful technical analysis tool that displays the trading volume at various price levels within the visible range of the chart. This indicator helps traders and analysts understand where the largest trading volumes are concentrated, which can be a clue to identifying important support and resistance levels. In this article, we will look at the basics of how VPVR works and how to use it in trading.
What is VPVR?
VPVR displays trading volume not on a timeline, as regular volume histograms do, but along price levels. This allows you to see at which price levels the largest trading volumes were during a selected period of time.
Main components of VPVR
Histogram Bars (Volume Histograms):
Vertical bars that display the trading volume at each price level.
The length of the bars shows the relative trading volume at that level.
Point of Control (POC):
The price level with the highest trading volume for the selected period.
Usually indicated by a horizontal line or a bright color.
High Volume Nodes (HVN):
Areas of high trading volume that can serve as support or resistance levels.
These levels show where price has spent a significant amount of time meeting a large number of orders.
Low Volume Nodes (LVN):
Areas of low trading volume that often act as reversal or breakout levels.
LVNs can indicate a quick price move through these levels as there were not a lot of orders to hold the price up.
How to use VPVR in trading
Defining key levels:
VPVR helps identify price levels where large trading volumes have been concentrated. These levels often act as strong supports or resistances.
For example, if the price approaches HVN, then there is a high probability that it will meet resistance or support at this level.
Анализ Point of Control (POC):
The POC represents the price level with the highest trading volume and often serves as a strong support or resistance level.
When the POC is broken, a significant price movement can be expected.
Identification of consolidation and trend zones:
HVN and LVN help to understand where price has consolidated (high volumes) and where fast movements have occurred (low volumes).
Consolidation zones indicate possible levels of entry or exit from the market.
Breakout Trading:
LVNs often act as levels through which price can move quickly. Breakouts through these levels can be used for short-term trades.
A breakout through LVN may signal the start of a new trend or momentum move.
Examples of VPVR use
Determining support and resistance levels:
A trader can use VPVR to determine the levels at which price has encountered the most orders.
For example, if the price approaches the HVN level, a trader can expect this level to act as support or resistance.
Trading on pullbacks:
Traders can use VPVR to find levels where price is likely to bounce. HVNs serve as excellent levels to place pullback orders.
Exiting positions:
VPVR helps to identify levels at which to close positions. If the price approaches POC or HVN, this may be a signal to take profit.
Conclusion
The VPVR indicator provides valuable information about the distribution of volumes at different price levels, which helps traders make more informed decisions. Using VPVR, traders can better understand market structure, identify key support and resistance levels, and identify consolidation and trend zones. This makes VPVR an essential tool in any technical analyst’s arsenal.
Note: VPVR is best used in conjunction with other technical analysis tools and should not be relied upon solely to make trading decisions. #MarketDownturn
