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?

  1. 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
  2. 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
  3. Decelerating volume actually confirms accumulation, meaning the correct trade is a breakout long anticipating a push through 1.0865 once volume reaccelerates
  4. 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

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