All language subtitles for 9. Calibrate Position Management Take Profit

We will now look at the last use of the
volume profile in terms of calibrating

position management, profit -taking.

For profit -taking, we will mainly look
for those levels or trading zones that

indicate interest or acceptance by
participants.

As we have already mentioned, these are
the high pre -trade zones and the VWAP

levels. Both create an attraction on the
price and this magnetism makes them

excellent locations for profit -taking.

As we have seen, A very important use of
the visible range volume profile, which

shows the volume distribution of all the
price action we observe on the chart,

is to identify large volume nodes from a
bird's eye view.

The basic idea of these acceptance zones
is that since they are expected to

attract some price, the market may
continually rotate between them, making

excellent areas for establishing profit
taking.

This means that if we are at any point
on the chart, We can use this analysis

identify the volume node immediately
above and below us and use it to place

profit taking there.

Imagine that we are at the point I have
marked, within the volume node where the

cause of the next trend movement is
being built.

Now, if we confirm that the effective
imbalance will be generated by the top,

the market will most likely go for the
volume node that is more immediately

above.

Similarly, if the imbalance is seen to
be occurring at its bottom, it is very

likely that the market will visit the
volume node located at its bottom.

The previous example is useful when we
have references, when we have already

developed such high volume nodes.

But what happens if we do not have such
references?

This is what happens in this example.

The market generates a distribution and
we do not observe any volume nodes on

the downside, mainly because the upward
movement was very fluid.

Or, You may even find yourself in a
context where the price is trading at

historical lows and there is absolutely
no reference to take.

In this case, you could take profits
according to the principles of another

methodology you are using, but if you
are only using the volume profile

levels, we can use the VWAP deviations
for these cases.

Here we have the same chart showing the
second negative deviation of the weekly

VWAP. As we can see, after actions that
leave us with short entries, The price

will look for this deviation before
generating a corrective upward movement.

Obviously, this is not the best way to
take advantage of large trends, but it

certainly effective for short or medium
-term trades where we are trying to take

advantage of trend movements of shorter
duration.

Here is an example of intraday trading
with session profiles.

After the buy entry and stop loss
placement, we identify the volume node

top of the previous session.

This would be a good point to take
profit.

It does not have to be the entire
position.

It could be a partial profit -taking
while letting the other part run to

targets. The key is that when a break
-even zone is reached, it is convenient

do some kind of position management.

As a low, we should protect it and move
the stop to break -even.

Another more complex example, the market
generates a sideways movement at the

top that creates a bearish trend
movement.

This movement is stopped with the
appearance of a B -shaped profile.

followed by another profile that
overlaps the value areas, and finally

-shaped profile that finally defines the
bullish reversal pattern that we

studied earlier.

After this, the market begins to move
higher, and the P -shaped profile is

positioned above the value area.

In this bullish context, we should start
looking for potential buying

opportunities until our entry trigger
finally appears with this bullish

candlestick. We set the entry and stop
loss orders according to what we have

learned. and now it is time to determine
the location of the take profit.

Obviously, we do not see a high volume
node in the immediate vicinity of the

current price, so the most logical thing
to do at this point would be to place

the take profit in the lateralization at
the top of the chart.

As we can see, this lateralization
covers three different profiles, which

us wonder where exactly we should place
the take profit.

In this type of situation, it would be
best to draw a manual profile that

the entire sideways movement.

This way we would have a single large
value zone that would identify the

trading level, and it would be there, in
the VPOC of this manual profile, where

you should set the profit taking.

Technically, I recommend placing the TP
a few levels ahead of the exact level

that determines the VPOC.

Sometimes you will see that the VPOC is
missed by a few ticks.

This is because we actually want to take
advantage of the magnetism exerted by

the entire volume knot, not just the
VPOC in isolation, but the area to which

the VPOC belongs.

As mentioned earlier, we need to treat
these levels as zones.

Let's take another example.

Short entry after a rejection at a low
volume node.

After setting the entry and stop loss
orders, we identify the high volume node

at the bottom, which should be used to
do some kind of position management on

it. take partial profit or at least
protect the position.

This range trade is a bit more delicate.

In this example, we enter the market to
buy after the rejection of the price

above the low volume node, which is
located below the value area low of the

profile.

The problem with this type of trade is
that the entry is inside the value area.

And what happens inside the value area
is that the equilibrium is such that

there is an equal probability that the
market will go up or down.

This is assuming that the valuations of
the participants have not changed,

because if they have changed, and at the
aggregate level it is considered that

price and value at that point no longer
converge, the market will necessarily

start an imbalance in search of a new
value zone that generates a new

between the participants.

This is what is happening in this
example.

After the rejection from the downside,
the market starts the imbalance from the

upside, and, of course, this imbalance
must first go through the entire value

area of the profile.

So in this context, there would be no
big problem to take the trade.

The problem is that we will always have
this dilemma because we cannot know in

advance if we are really facing the
event that will cause the market

We will always have the doubt whether
the market is still in equilibrium or

In any case, and under this premise,
What we have to do then is to manage the

position more aggressively.

Since we know that in a market in
equilibrium, the price is most likely to

between the extremes of the value area,
the most conservative assumption we will

make in this particular example is that
it is most likely that the market will

react after reaching the upper end of
the value area.

With this baseline scenario, we will
take partial profits there or at the low

end and protect the position at break
-even.

That is the key.

We're not dismissing the opportunity,
but we're managing it more aggressively,

as if the trade were range -bound and
not trend -bound.

We will talk about this later when we
present the principles of trading with

value areas.

Ultimately, this type of trading has a
higher risk, but also a higher potential

for profit.

If we are right and it is the total
imbalance of the structure, the profit

potential will be relatively high.

On the other hand, If we are wrong and
the market is still in balance, we will

protect ourselves with more aggressive
management.

In this other example, we would have
long entry on the test at the value high

area of the lower sideways.

It leaves a good bullish candlestick
that would activate the entry trigger

we would set the stop loss just below
the low of the pattern that identifies

entry signal.

In this case, we cannot move the stop
loss location much further away as it is

relatively close to the VPOC of the
lower structure.

In fact, the current stop -loss location
would already be within the value area

of that profile, so it is not a location
we are very comfortable with.

The problem is that there is no more
suitable location that allows us to

maintain a controlled risk.

These situations will arise at other
times. The key here for stop -loss

placement is to rely on the end zones of
the two profiles.

Both extremes of the profiles identify a
rejection zone.

so we have no choice but to rely on
their strength.

Regarding the take profit, it is the
right situation to zoom in and analyze

overall context through the visible
range profile or view the manual profile

that we have previously pulled, as is
the case.

Fortunately, we have a clear reference
to the left of the price, so we will use

the high volume node of that profile for
the take profit location.

Again, you can decide to take profit on
part of the position or close it

completely there.

Finally, let's look at another example
of profit taking in the VWAP.

In this case, it is the monthly VWAP.

The VWAP is a very important trading
level that also allows us to get a sense

the anatomy of the trends based on how
far the price is from the VWAP.

In this case, as we can see, the price
is far away from the monthly VWAP.

This could be a fingerprint that tells
us that the trend movement could be

overextended, which puts us in a
position to favor a reversion to the

If we have managed to enter one of the
market trading zones, a good place to

take profits would be when the price
reaches the VWAP zone.

We have already talked about creating a
position management where partial

profits are taken when a trading zone is
reached and the rest of the position is

left to run.

Well, part of the position could be left
open until it reaches an area further

away from the price, such as the VWAP.

As we will see later, the magnetism that
the VWAP exerts on the price is

confirmed with this test that occurs to
give rise to the continuation of the

bearish movement.

For more intraday trading, it can be
very useful to identify the developing

volume point of control.

These are price levels that were the
VPOC of a session at a given time.

whether or not they were the final VPOC
of that session.

To have them displayed on the chart, we
simply go to the Style tab of the

session profile and check the Developing
POC box.

As we know, the VPOC of the session
changes based on the trades that are

and this level represents the footprint
of that change.

In this example, we see the price being
attracted to these levels, virtually all

of which are being tested.

This is normal because we are dealing
with a level that has been traded a lot

and is therefore likely to have some
magnetic behavior.

The highlight of these levels is that we
are only considering those that have

not been tested.

The same is true for naked VPOCs.

Naked VPOCs are VPOCs from previous
sessions that were not tested.

Unlike DVPOCs, naked VPOCs were the last
VPOC of the session.

To include them in the chart, we simply
go to the Data Entry tab of the session

profile and check the Expand POC box on
the right.

There is a statistic that VPOCs from
previous sessions have a high

of being tested in the following days.

Therefore, they are very interesting to
consider.

In this example, we see the magnetism of
these levels attracting the price and

even generating a subsequent reversal.

Especially useful, as I said, for
intraday trading.