medium · Volume Profile Analysis auction-market-theory
An 'Efficiency Ratio' (ER) computation for a 20-period window returns a value of 0.15.
How should this influence the selection of trade setups?
- The market is about to 'Break Out' because compressed volatility has reached an extreme low
- The market is in a 'noisy' or rotational regime; prioritize 'Rejection Setups' at the edges of value.
- The market is in a strong directional trend; use only 'Trend Setups' entered on shallow pullbacks
- Volatility is far too high to trade safely right now; widen the ATR stop multiplier on every position entered
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