hard · Volume Profile Analysis trading-strategies
A volume profile trader uses the 'Value Area Rule' (VAR) to decide whether a breakout from balance is genuine. The prior 5-day composite Value Area spans 5,580 to 5,620. Today, price opens at 5,625 — above the composite VAH — and holds above 5,620 for the first hour. By lunch, the developing session VAL is at 5,622 — entirely above the composite VAH.
What is the VAR signal and what is the cautionary condition?
- The VAR signal is bullish continuation: the session's developing value area migrating entirely above the composite VAH means new higher value is being accepted. The cautionary condition is a return and close back inside the composite Value Area, which would negate the breakout signal
- The VAR signal is bearish: opening above the composite VAH and holding there confirms the market is overextended and must mean-revert to the composite POC near 5,600
- The Value Area Rule only applies to single-session profiles; it cannot be used with composite profiles spanning multiple sessions
- One session of value migration above the composite VAH is always sufficient to enter with maximum position size for a multi-week breakout continuation trade
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