Great — I’ll expand into a comprehensive, detailed playbook you can use to learn, test, and trade the Volume-Profile + W-pattern strategy exactly like the photo. I’ll cover concepts, plotting settings, step-by-step entry/exit rules, risk & position sizing (with worked math), how to detect/handle false signals, backtesting checklist, and trade management.
1) Core concepts — what each element really means
Volume Profile (Fixed Range) — horizontal histogram showing how much volume traded at each price in the selected range. Longer bars = more volume at that price (higher interest / fair value).
Point of Control (POC) — the single price level with the highest traded volume in the profile. Acts as a magnet (fair-value) and strong S/R.
High Volume Node (HVN) — cluster of prices with high volume. Price tends to consolidate near HVNs.
Low Volume Node (LVN) — areas with little volume (gaps). Price moves quickly through LVNs (areas of rejection or low interest).
S&R Range (Volume Range / Value Area) — the band (often the value area) containing the majority of volume (commonly 70% value area). Acts as hidden support/resistance.
W-pattern (Double Bottom) — two lows separated by a middle high. Break above the middle high = confirmation of buyers.
2) How to plot the Volume Profile (TradingView / general settings)
TradingView (Fixed Range Volume Profile)
1. Open chart → Indicators → search “Fixed Range Volume Profile” (or “Visible Range” / “Session Volume” depending on preference).
2. Click start point (often the swing low before consolidation) and end point (swing high after move or end of consolidation). This creates the horizontal histogram on the left.
3. Key settings to review:
Value Area %: commonly 70% (some use 68% / 80%). 70% is standard.
Row Size: controls price bin size. Smaller row = more detail; larger row = smoother HVNs. Use default first, then adjust by timeframe (e.g., larger row on daily, smaller on 5-15m).
Profile Type: use Fixed Range for the pictured method. Visible Range is automatic; fixed gives you control.
Show POC: ON (label it).
Show Value Area: ON (shaded region). Other platforms: Look for “Volume by Price”, “Volume Profile”, or “Market Profile” features — same logic applies.
3) Detailed step-by-step trading rules (entry → exit)
Use this as your rulebook.
A. Setup / Market selection
Trade liquid assets (major forex pairs, large-cap equities, futures, indices). Avoid very low volume tickers.
Preferred timeframes: 4h / Daily for swing trades, 1h / 15m for intraday. The profile should be plotted for a meaningful consolidation range on the timeframe you trade.
B. Plot the Profile
1. Identify a consolidation / accumulation area (sideways candles or congestion).
2. Draw Fixed Range VP covering that consolidation (from the swing low to the subsequent swing high or across the consolidation).
C. Wait for price to re-visit the Volume Range
You want price to drop into the value area / high volume cluster — this indicates price is testing where the market previously negotiated value.
D. Require a W-pattern inside the range
W formation: first low, bounce (middle high), second low near the first, then break above the middle high.
Both lows should be within or very near the value area / S&R zone (not far outside).
E. Entry
Enter Long when price closes above the middle high of the W on your trading timeframe (confirmation candle close).
Optional: require volume increase on the breakout candle for extra confirmation.
F. Stoploss
Place stoploss below the lower low of the W (the second bottom). This is logical — violates the pattern if price closes below it.
G. Targets / Trade management
Target 1: nearest recent swing high (conservative).
Target 2: POC or top of high volume node / next HVN (ambitious).
Target 3: use trailing stop (e.g., trail below higher lows or use ATR multiple) to ride a longer trend.
Risk to Reward: aim for minimum 1:2 R:R, ideally 1:2.5–1:3.
4) How to interpret the profile visually (what to look for)
Profile skew: If profile is skewed up (more volume at upper prices), bias long if price above POC; skewed down, be cautious.
POC location: price below POC often gets pulled to it; price above POC may use POC as support on pullbacks.
HVN vs LVN: Quick moves through LVNs — use these as breakout corridors. HVN = congestion → expect chop.
Multiple profiles: When newer profiles form overlapping old ones, look for confluence of POCs and HVNs — stronger S/R.
5) Handling false signals — practical filters
False breakouts are common. Use one or more filters:
Volume Filter: require higher-than-average volume on breakout candle.
Higher timeframe alignment: e.g., if trading 1h, make sure daily structure is not strongly bearish.
Trend bias: prefer entries that align with a larger-timeframe trend (if daily is bullish, 1h-long setups have higher odds).
Time of day: for intraday, avoid late thin liquidity periods.
Multiple confirmation: price reclaiming the middle high by a candle close + follow-through candle.
6) Position sizing & risk examples (worked step-by-step arithmetic)
Example A — stocks (clear numbers)
Account size = $10,000.
Risk per trade = 1% of account.
Step 1: compute risk amount:
10,000 × 0.01 = 100.
(ten thousand times point zero one equals one hundred)
Suppose entry price = $50.00, stoploss = $48.00 → stop distance = $2.00 per share.
Step 2: determine position size in shares = risk amount ÷ stop distance.
100 ÷ 2 = 50 shares.
(one hundred divided by two equals fifty)
So buy 50 shares. Maximum loss if stop hit = 50 × $2 = $100.
Example B — reward:risk calculation
Entry 50, stop 48 (risk = 2), target 56 (reward = 6).
Compute R:R: reward ÷ risk = 6 ÷ 2 = 3 → 3:1 R:R.
(six divided by two equals three)
If you risk $100, expected gross profit at target = $100 × 3 = $300.
7) Backtesting & metrics to measure (do this before going live)
For each trade record:
Date/time, instrument, timeframe
Profile start/end dates & profile POC level
Entry price, stoploss, target(s)
Position size, % of account risked
Outcome (win/loss), pips/$ won or lost
Volume at breakout candle (compare to average)
Trade duration (hours/days)
Notes: market condition, news, reason for entry
Important metrics to compute after many trades:
Win rate (% wins)
Average win / average loss
Profit factor = total wins / total losses
Expectancy per trade = (win% × avg win) − (loss% × avg loss)
Max drawdown, sharpe, number of consecutive losses.
8) Common pitfalls and how to avoid them
Using profile on too short a time range → produces noise. Use meaningful consolidation.
Trading low volume assets → many false moves.
Not controlling risk → even good setups lose sometimes. Use fixed % risk.
Too many discretionary changes → stick to rules.
Ignoring spread/commissions for small stops (they eat the edge).
9) Advanced trade management techniques
Scaling in: enter partial size on first breakout, add on confirmation (risk increases — measure carefully).
Pyramiding: add more size as price confirms and moves in your favor, but always recalc risk so total risk stays within limit.
Trailing stop: move stop to breakeven after 1R, then trail below swing lows or use ATR multiple (e.g., 1.5× ATR).
10) Example annotated trade (text walk-through)
1. Plot VP over a 10-day consolidation — POC at 123.50, value area 120.00–126.00.
2. Price drops to 121.00 (inside value area) → forms first low 121.00 → bounce to 124.50 (middle high).
3. Pullback makes second low at 121.50 (near first low) — now W is forming.
4. Price closes above 124.50 — entry at 124.80 on close.
5. Stop placed below second low at 121.40 (so stop distance 3.40).
6. Target set at next swing high 131.00 (reward 6.20) → R:R ≈ 6.20 / 3.40 ≈ 1.82:1.
7. Manage trade: move stop to breakeven after price reaches 1R; trail as trend continues.
11) Backtest plan (simple 30-trade test)
Choose 1 instrument and timeframe.
Define profile selection rule (e.g., plot profile across every major consolidation lasting ≥5 candles).
Apply the exact rules above (entry=close above middle high, stop=second low).
Record 30 consecutive setup trades.
Compute win rate, avg win, avg loss, expectancy.
If expectancy positive and drawdown acceptable, forward test on demo.
12) Automation / alerts / Pine Script ideas
Plot the Fixed Range profile (manual on TradingView), then add a Pine Script that:
Detects double bottom (two lows within X% of each other),
Detects break above middle high by candle close,
Optionally checks session volume > moving average volume,
Sends alert when all conditions true. If you want, I can build a starter Pine Script that flags potential W-patterns and breakout closes (note: Volume Profile binning must be manual; script can use bar volume filters and price checks).
13) Practical rules & checklist (copy for your trading screen)
1. Instrument: ________
2. Timeframe: ________
3. Plot VP: start _______ end _______
4. POC: _______ Value Area (70%): –
5. Price visited value area? Y/N
6. W-pattern formed inside range? Y/N
7. Confirm breakout close above middle high? Y/N
8. Volume on breakout above avg? Y/N (optional)
9. Entry price: _______
10. Stoploss: _______
11. Risk $ / %: _______
12. Position size: _______ shares / lots
13. Targets: T1 _______ T2 _______
14. Notes: market bias, news, error margin
14) Final practical tips
Paper trade this for 50–100 setups before risking real money.
Keep a disciplined log and review losing trades to find recurring errors.
Combine Volume Profile with structure (higher timeframe trend) for better edge.
Don’t chase: wait for the full W confirmation inside the value area.
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