All language subtitles for 5. Determine market bias

We continue with the multiple uses we
can make of the volume profile.

In this case, we are going to leave the
most operative section for a moment to

approach another one, equally or more
important, corresponding to the correct

reading of the market activity.

To determine the bias of the market, we
will use two alternatives.

The first one will be through the
analysis of the trading zones, and the

one will be through the analysis of the
trading levels.

A correct analysis of these tools will
be very useful to get a more accurate

impression of what is happening, who is
in control of the market, and where the

price is most likely to go next.

In order to determine the market bias,
we will mainly use the high volume

As we have already explained, these
nodes represent acceptance and balance

participants. And in the short term, we
will use them to determine who is in

control based on where the price is in
relation to these zones.

The key is that we will always favor
trading in the direction of the last

trading node generated, and any scenario
against that direction would only occur

if the price has broken out of the zone
that supported the last move.

When the price is above a high volume
node, we will determine that the control

is in the hands of the buyers, and we
will only consider a short scenario when

the price crosses the zone from below,
suggesting that the control has changed

in favor of the sellers.

The logic is that at these nodes, the
price returns to a state of equilibrium

and we will not be able to determine in
which direction it will subsequently

move. Only after confirming the
effective breakout of this zone would we

position to propose a scenario with some
robustness.

In this example, we have a P -shaped
profile that leaves the volume node at

top. The market context after the start
of this profile is that buying should be

valued only as long as the price remains
above the nodal point.

and that selling should be valued with
the price positioned below it.

We see that after the completion of the
upward impulse, the market returns to

the VAH zone of the profile and has a
first reaction to the upside, which is

enough to push the price further up, and
this lack of buying initiative makes

the market return to its equilibrium
zone.

Subsequently, it breaks the volume node
from below, and this is the key action

that should make us change the short
-term market bias.

This action is confirmed by the
subsequent sideways movement of the

the volume zone and the VPOC of the
profile, until it finally generates the

bearish movement that manages to reach
the origin of the movement.

Keep in mind that in all the examples we
see, we could train on the same time

frame or use multiple time frames to
look for an entry on a lower time frame

once the context and the prevailing
directional bias are determined.

A reasonable doubt that might be raised
by this example is that, beyond the

specific location of the HVN, the
breadth of the value zone extends beyond

volume node.

And as we have explained throughout this
course, a price inside the value zone

informs us of a state of equilibrium
where the market is most likely to

up and down within the boundaries of
that value area.

We could decide to wait to confirm that
the directional bias of the market is

definitely bearish when the price is
below the value area.

But in reality, the high volume node is
very well identified and objectively it

is this area that supports the uptrend.

It is the key area that serves to
identify that the market control is in

of one side or the other.

The amplitude of the value area is
determined according to a numerical

For this point, it is true that we rely
on statistics to use the value that

determines a normal or Gaussian
distribution configuration.

which establishes this value at almost
70%. But markets are more than numbers,

and this is an example.

If we throw out the profile of the
entire upward movement from the low to

high, which zone would you say most
accurately identifies the control area

this movement?

As we have already said, the area that
determines this control is the area

the most volume has been traded.

And if we look carefully at the
distribution of the volume throughout

profile, The most accurate area is that
volume node, even if it is within a

wider value area.

Let's analyze another example, in this
case in a bearish movement.

After seeing the end of the bearish
impulse, we start the volume profile and

distribution is as we see.

What we need to do now is to identify
the last volume node since this is the

that represents the seller's control.

We see other small volume nodes, but the
most important is the one at the

bottom. This node represents the zone of
greater balance, so as long as the

price remains within it, the context
will remain directionless and therefore

should not apply any type of trend
trading.

And the context we already know. A
positioning above would allow us to look

the long trades, while a positioning
below would establish a bearish

bias.

What the market is finally doing is
leaving the equilibrium zone at the top

we could activate the bullish context
and start looking for potential buying

opportunities. As we can see, the price
retreated towards the low volume node,

which is marked to generate several
price turns from there, until it finally

gave rise to a bullish trend movement.

Determining market skew using trading
area analysis is primarily useful when

trying to identify market control and
trend moves, as we have just seen in the

previous examples.

It does not make much sense in range
trading contexts, as the lateralization

itself is usually D -shaped and
therefore virtually all of the price

be part of the high volume node.

It would just be a matter of waiting for
a breakout above or below the price to

create a directional bias one way or the
other.

Let's now delve into determining the
market bias by analyzing the trading

levels. Unlike the previous causistry,
this analysis is more useful in both

trend and range context.

That is, we can use it to analyze both
trend movements and lateralizations.

As a general rule, it is most advisable
to trade with the more trading levels

the better. That is, if I am trading
long, I will want to have all the

levels below the price and vice versa if
I am trading short.

This will suggest that the market is
unbalanced in that direction and

that it is the most likely direction
that the price will take.

One of the useful signs to analyze is
the relationship between VPOC, VWAP, and

price. Here we see an example of an
intraday chart with the VWAP and VPOC

the session, although in particular, the
chart spans several sessions.

The VPOC is the red dotted line. In
order to see how the VPOC has evolved

session, we need to enable the Develop
POC option, which can be found in the

Style tab of the Profile settings.

This line shows all the changes that
occurred in the VPOC from the beginning

the end of the profile.

What we observe are different contexts
of range and trend that happen

continuously.

When the market is in range, both levels
remain relatively close to each other

and this creates constant fluctuations
between them, causing price rotation up

and down.

A relatively close VWAP and VPOC is a
footprint that confirms that the market

in a full equilibrium context.

It is possible that the price is in a
tight range and the only trading

here would be to look for a reversal at
the extreme.

On the contrary, observing some distance
between these levels would tell us that

the market is in a context of imbalance
and our trading should be to look for

some opportunity in the direction of
this trend.

As we can see, when the market begins
the bullish imbalance, we begin to see a

significant separation between the VWAP
and the VPOC.

which alerts us to the end of the range
and the beginning of the trend.

An important filter that we should
always use for trading is to observe

price is in favor of both the VWAP and
the VPOC.

That is, to determine a clear imbalance
in favor of the buyers, we want to see

the price above both the VWAP and the
VPOC, while to determine control in

of the sellers, we want to see the price
below both levels.

On this chart, it is an example of clear
bullet control when the market leaves

the range zones where the price is
always above both the VWAC and VPOC,

again as support to initiate new upward
movements.

Here, we see another example consisting
of a bearish trend, a range, an uptrend,

and finally another range.

We can see the proximity of VWAP and
VPOC in the range context and the

separation of the two levels in the
trend context.

And as we saw earlier, A very
interesting footprint with respect to

on a large number of occasions before
the price initiates a new imbalance in

favor of the trend, there is a migration
of VPOC.

That is, first the VPOC shift occurs and
then relatively a new price impulse is

initiated. This can be very useful for
intraday traders.

Let us now look at other examples on
longer timeframes.

For longer -term trades, we have already
mentioned that it is most useful to use

the weekly VWAP.

As for the VPOC, it depends on the type
of trade.

In particular, and as a structure
trader, I find it useful to use the

VWAP in conjunction with the VPOC of the
structure to eliminate the seasonality.

It is a matter of taste, and this setup
should suit each trader's trading style.

The key is that the principles are
universal and equally applicable

of the asset and time frame.

This time we have an hourly chart along
with the weekly VWAP.

As we can see, it is an ideal filter to
determine the market trend. In an

uptrend, the VWAP is almost permanently
below the price, indicating an imbalance

to the upside.

In addition, we see how the VWAP acts by
pulling the price during consolidation

processes and before a new impulse is
given.

We could use these actions to try to
position ourselves in favor of the

Here is another example of different
contexts.

During bearish trends, we will identify
the VWAP above the price, thus proving

the bearish imbalance context.

As we know, identifying the context is
crucial because it implicitly suggests

the type of trade we should make.

In this case, in a bearish context, we
should try to join the downward

And to do this, we could use the price
interactions with the VWAP to look for

our entry there.

We may not even be able to enter on the
right side of the market but with the

correct identification of the context,
we should at least be able to avoid

entering on the wrong side.

In addition to identifying the
accumulation and distribution

determining the directional bias can
also be done by looking at the position

the price relative to the VWAP.

In other words, in a bullish context,
when the price is above the VWAP, we

should avoid short positioning.

and, in a bearish context, when the
price is below the VWAP, we should avoid

long positioning.

Of course, this would not apply to
countertrend or mean reversion trades,

these are other more advanced strategies
that should only be used by experienced

traders.

Now let's look at some examples and
structures.

Here we have an accumulation area where,
after the bullish breakout event

occurs, the price returns to the VPOC
area of the structure.

an area where it also confluences with
the weekly VWAP.

These confluence zones are the most
interesting and give us the most

when evaluating a trade opportunity.

As we can see, the bullish imbalance
continues from there.

Subsequently, it even leaves another
test on the VWAP.

Here is another example of a
distributive structure.

After the end of the bearish breakout,
the market begins to pull back to the

upside until it reaches the VPOC and
VWAP zone.

where a reversal point in favor of
supply is created, resulting in the

continuation of the bearish imbalance.

It is important to reiterate the
importance of treating these levels as

We will not always see perfect touches
above them.

Sometimes, as in this example, the price
will react before reaching these

levels. What this tells us is that the
market is very unbalanced.

Traders who wanted to position
themselves to sell after this pullback

started to enter near the levels.

thus preventing further upward movement.

It is this urgency to enter that has
caused the market to fail to reach the

exact levels before the reversal.