Volume Matrix

Volume Matrix

null

Volume Profile on Price and VSA on Time

In my opinion, volume is the most important information the market can give us. Why is it so important? Because around 75 % of ALL trades are made by the 10 biggest financial institutions (the “Smart Money”), they have extreme amounts of money and they manipulate the markets at will.

Volume has to be the most underrated market variable used in technical analysis!

Did you know?

  • VOLUME is a NON LAGGING indicator!
  • VOLUME shows the activity of the “Smart Money” in the market (they simply can’t hide their trading volume)
  • VOLUME Identifies the strength of trends (and when they start to lose momentum)
  • Changes in VOLUME indicate impending price reversals

 

  • 2 axis of Volume (Time & Price)
  • 2 x Smart Money Indicators – VSA (Volume Spread Analysis) + Volume Profile
  • 1 x Volume Matrix MT4 template
  • Works on all markets – Forex, Commodities, Indices, Crypto and Stocks
  • Works on any time frame
  • User manual – 12 page PDF of comprehensive step by step Instructions with pics

Volume Matrix Indicator package

$39

Not familiar with “Smart Money” concepts? Want to learn? Each of my products come with a FREE 12 hour Smart Money Video course (in full 1080 HD) by one of my mentors, a VERY valuable education that gives you the trading edge over smart money.

$39 – Purchase the Volume Matrix indicator package via Paypal. 

Instant download after payment

I have combined two different variations of volume into my Mt4 templates:

  • ‘Volume Profile’ on the charts PRICE axis
  • ‘Volume Spread Analysis’ (VSA) on the TIME axis

 

Most Traders Ignore Volume – Big Mistake!

The significance and importance of volume in the market seems to be little understood by most nonprofessional traders. Most traders believe you can’t analyse volume in the Forex markets because that information is not available, and that is not the (whole) truth of the matter.

There is a common misconception that volume cannot be used reliably in Forex trading for two reasons:

  • There is no central exchange and therefore no official volume data
  • When you’re looking at volume data on your Forex platform, you’re actually viewing ‘tick volume’, not actual volume traded – such as the volume with a stock chart

‘Tick volume’ measures the number of times the price ticks up and down. This is an excellent indicator of the strength of activity in any given bar. But also, the correlation between tick volume and actual volume traded is incredibly high. In 2011, Caspar Marney (head of Marney Capital and ex HSBC trader) conducted an analysis of actual volume and tick volume in the Forex market. For the pairs he studied, he calculated the correlation between tick volume and actual volume is over 90%.

Volume in Forex does work! Period.

Tick volume may not be giving us real-time order flow cues, but it is giving us a fair idea about how rapidly price is moving in a particular direction (rapid price movement equals higher tick volumes).

As a “Smart Money” trader, this bit of information can be gold when put in tandem with other relevant information. If you know how to analyse and interpret volume, you’ll be able to recognise market turning points and be able to anticipate market pullbacks and trend changes.

Volume Profile

The “Smart Money” have extreme amounts of money and they move the markets whenever they like.

But having so much money is also a big problem for them. “Smart Money” can’t just buy 100,000 lots of GBPUSD with one mouse click. They need to enter their positions very slowly (usually over hours) to remain unnoticed.

But their huge volumes will always be visible, and we will always be able to track them. How? With Volume Profile!

Unlike standard volume indicators that only show volumes on the Time axis, Volume Profile is located on the PRICE axis, and can provide much more important information (IE; volume at a specific PRICE).

Volume on the price axis is so valuable because it tells us which price levels are the most important for the “Smart Money” guys who dominate the markets. The more that volume accumulates at a specific price level, the more significant that price level is! (You can tell the amount of volume by the thickness of the Volume Profile).

Note: you cannot use the large build-up of a volume profile level as it is being MADE. You utilize volume profile price levels when price RETURNS TO THAT LEVEL.

The THICK Volume Profile

In a place where the volume profile gets really wide, heavy volume is being injected into the market.

Thick volume profiles usually appear when price stays in a tight range for hours at a time (one great example is the ‘Asian’ session). These profiles are thick because the “Smart Money” are entering huge amounts of volume into the market very slowly over a long period of time.

For this reason these ‘thick’ volume profiles are usually very wide and may contain more than one single POC (Point Of Control).

  • The most significant level in the volume profile histogram is the Point of control (POC). The POC is the exact price level where the “Smart Money” placed most of their volume (money). They accumulated their positions in a wider range, but the POC (signified by a dark blue line that turns gray) is the exact price level where they accumulated most of their volume. It serves as a very strong reference point for all market participants because it shows where the major interest of the “Smart Money” is located.

When price returns to the POC in these thick volume profiles, the aggressive market participants (Smart Money) will most likely become very aggressive again, and add even more orders into the market to defend their positions.

Therefore when price returns to the POC level of a thick volume profile, and you start to see a reaction, you can usually count on it becoming a large reaction in the opposite direction.

The THIN Volume Profile

Where the volume profile is thin, only low volume was injected into the market.

Thin volume profiles appear when there is a strong uptrend or a strong downtrend. These profiles are thin because one side of the market is very aggressive and the price moves very quickly in one direction. There is not much time for volume accumulation because the market is moving too fast.

For this reason there are usually a few spots with small ‘volume clusters’ but no major volume accumulation areas. The most significant levels in a thin volume profile are where the price stopped moving for a little while and the volume profile produced these small ‘volume clusters’.

In these small volume clusters, aggressive market participants (Smart Money) were adding to their trading positions to participate even heavier in the trending market. If the price returns to these small ‘volume clusters’ these aggressive market participants will probably become aggressive again and add more orders to the market to defend their positions, and this helps to move the price in the direction of the trend again.

  • Significant volume clusters in an uptrend (in a thin profile) are great support levels
  • Significant volume clusters in a downtrend (in a thin profile) are great resistance levels

Reading the Volume Profile on Order block levels

All “Smart Money” traders know that an “order block” is the last green candle before a down move and the last red candle before an up move.

It’s rather uncanny how strong “Volume Profile” levels will line up perfectly with some order blocks:

In this pic we can see that price is in a downtrend:

  • Price retraces to the order block highlighted with a red arrow
  • On the bottom of the body of the green order block candle was the grey line signifying the strong Volume Profile level
  • Price hits this level then REVERSES back into the downtrend
  • This is not a coincidence!

Watch out for this alignment of strong Volume Profile levels and order blocks, they make great trade entry points.

 

VSA (Volume Spread Analysis)

The study of volume with price started in the early 1900s with a trader by the name Richard Wyckoff. His research, then known as Wyckoff Analysis, developed into what is known today as Volume Spread Analysis or ‘VSA’ for short. Wyckoff stared with a premise that price, volume and time could provide a picture of the supply and demand from “Smart Money” in the markets.

The VSA volume indicator is the best (time based) volume indicator bar none. It works in all markets and for all time frames, but is particularly useful for tick charts.

The VSA method works particularly well at highlighting the imbalances of supply and demand.

Volume Spread Analysis seeks to establish the cause of price movements in the markets. The cause is simply the imbalance between strength and weakness in a liquid market. This is created by the activity of “Smart Money”!

Note: I only run the VSA indicator on the lower timeframes (M1, M5, M15 and H1) because the volume levels (on the TIME axis) of the higher timeframes become irrelevant for day trading.

The VSA indicator uses a combination of bid/ask volume and price range to identify changes in the tick volume levels:

  • GRAY thin bars account for much of the bars in the VSA indicator. Thin gray bars mean that nothing special is happening in the market and volumes of trades match the standard values for their time period.
  • GRAY thick bars indicate very low trading volume. These bars usually have a low height. A decrease in volumes typically occurs when the current trend is close to its completion. The thick gray bar may also indicate the end of market retracement. They are also very useful confirming indicators of a change in trend direction when the market is testing a top or bottom
  • WHITE bars indicate that large volumes are present in the market. When a white bar appears it usually signals a change in trend direction (that does not mean that price is going to reverse immediately and sharply though, the price reversal may happen a few candles later due to the effect of market inertia)
  • GREEN bars indicate that large amounts of Buyers are entering the market and the bars are usually large in size. The beginning of a new uptrend is almost always marked by a green bar. Market tops are also characterized by green bars (signifying a last big push upwards) often followed by low volume bars and a price reversal. During a down trend, retracements are often characterized by green bars (these typically appear as traders are calling a peak low too quickly and starting to place long orders into the market). Usually, as soon as these green bars start to decline, the down trend will continue.
  • RED bars indicate that large amounts of Sellers are entering the market and the bars are usually large in size. The beginning of a new down trend is almost always marked by a red bar. Market bottoms are also characterized by red bars (signifying a last big push down) often followed by low volume bars and a price reversal. During an uptrend, retracements are often characterized by red bars (these typically appear as traders are calling a peak high too quickly and starting to place short orders into the market). Usually, as soon as these red bars start to decline, the uptrend will continue.
  • MAGENTA bars are RARE! They represent maximum volume entering the market (often seen on large news announcements) and they are the strongest signal. They usually indicate the formation of a strong new price reversal.

My Secret to Analysing Volume…

Ultra high volume and ultra low volume seen at THE RIGHT PLACE in the charts, are signals from the “Smart Money” of their true intentions. Always pay extra attention to ultra-high and ultra-low volume in the chart when it appears and ask yourself ‘what is the Smart Money doing here’?

Ultra high volume is very important when you see it, because it will often indicate the top or bottom of a range and give you an early warning that the “Smart Money” is setting up the trade against the ‘herd’.

  • When there is higher volume bars, but PRICE is not really moving (seeming to go nowhere) this is the “Smart Money” buying or selling INTO the retail traders at a range high or low!

IE: If price has stalled at a peak high but you still see high volume bars appearing, “Smart Money” is SELLING into all the ‘buy’ orders the retail traders are offering them. (The retail traders think the price is still going long, but the “Smart Money” is SELLING into all these ‘buy’ orders to FUEL their IMPENDING move short!)

When price is going higher & breaks a previous high, but the VSA indicator on the M1 chart is starting to show low volume, you can be pretty sure that price is about to turn! (because if the strong move up were going to continue, the volume should be going UP not down!) Vice versa for a previous low…

Now do you see why learning to read ‘volume’ on your charts can assist you in not being snagged and dragged ass backwards in your trades by “Smart Money”?

Volume Matrix Indicator package

$39

Not familiar with “Smart Money” concepts? Want to learn? Each of my products come with a FREE 12 hour Smart Money Video course (in full 1080 HD) by one of my mentors, a VERY valuable education that gives you the trading edge over smart money.

$39 – Purchase the Volume Matrix indicator package via Paypal. 

Instant download after payment