hard · Volume Profile Analysis trading-strategies
A mean-reversion trader on the Euro FX composite profile notes a large single-print (excess) tail on the upside at 1.0865, with the composite VAH at 1.0840 and POC at 1.0810. Price rallies intraday to 1.0862 — inside the excess tail but below its high — on progressively decelerating volume (each 5-minute bar prints less volume than the one before it for six consecutive bars) and without a new session high forming in the final two bars.
What does the combination of decelerating volume into the excess zone and the failure to make a new high in the final bars best indicate for a mean-reversion short?
- Decelerating volume into a known excess zone with stalling price is classic waning buying pressure, supporting a short with the composite POC as the primary downside target
- Since price never actually exceeded the prior excess high of 1.0865, no signal exists yet and the trader must wait for a definitive breach of that exact level before any short can be considered
- Decelerating volume actually confirms accumulation, meaning the correct trade is a breakout long anticipating a push through 1.0865 once volume reaccelerates
- The excess tail at 1.0865 is not relevant to this trade at all, since excess only matters when price closes beyond it, not when price merely approaches it intraday
Sign up free to see the explanation and track your rank →
More Volume Profile Analysis trading-strategies practice
- Where is the most logical place for your protective stop-loss?
- Based on the concept of 'naked POC decay' and magnetic pull, what is the most disciplined
- What is the most defensible stop-loss placement for a short entry based on this rejection?
- How should a trader manage counter-trend resistance levels in this environment?
- If the first target is an HVN at $1.37500, what is the Reward-to-Risk (R:R) ratio of this
- A trader identifies a rejection setup on EUR/USD. Price touc… — How should this trade be s
- A price probe at $1.3615 is followed by a sharp retreat, lea… — How should this 'Failed Au
- What structural landmark now serves as the day's primary protective stop for a short trade