Volume Profile Trade Setups on Stocks
Volume Profile is an important Technical analysis tool that can be used to identify if there is any major activity happening in the stock by big players or institutional traders.
This is simple but powerful method that can enhance the accuracy of trading giving all together a different insight and conviction for taking a trade.
There are different shapes to Volume profile named “D Shaped”, “P Shaped”, “b Shaped”
Below is an example of a stock showing “P Shape” Volume profile on Adani Green
Adani Green Daily chart:
Adani Green Volume profile along with VWAP (Volume Weighted Average Price) is shown in the above chart.
We can see a “P shaped” profile that indicates that after a steep run on the upside there had been consolidation and pause in the uptrend and probably re-accumulation by big players. The level with the highest volume profile (grey shaded area on right side of the chart) is shown with a red line. This level is 1080. There is price acceptance above this profile zone and also the VWAP had been in this area.
Basis of this simple concept of volume profile one can make out zone of strong support and resistance where the volume profile is highest and if price acceptance above that zone hints towards bullish sign. However, one can further combine this along with Ichimoku cloud and other intraday techniques to enhance the conviction for trading.
Adani Green buy call was given in Momentum stocks and we have been able to capture the move on upside. Post breaking above 1080 the stock touched high of 1126 thereby providing a 46 points movement sufficient enough for partial profit booking levels in that zone area.
In short, Volume profile is a powerful tool that can be adopted by traders to get a peek into what are big players or institutional traders are upto and then ride the trend in that direction. Adani Green worked out well so far as the partial profits are booked and the stop is trailed to cost thereby ensuring the risk is mitigated.
Do remember not every stock will behave the way we expect. There will be adverse movement and if someone claims to be 100% accurate simply understand they are faking it. If one can manage risk prudently then reward will automatically follow.
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