So you just started trading forex, and you are looking at maximizing your trading strategies to earn you some potential profits right away or in the future, look no further than adopting the volume profile indicator MT4. We understand this might sound crazy right now but read on to fully understand what volume profile indicator MT4 is about and how it works.
What Is Volume Profile Indicator?
Let’s simplify the definition such that a layperson would be able to understand. Volume Profile Indicator Mt4 is a handy trading tool that shows you the exact price point that the most volume has been executed. This indicator shows this data in the form of a histogram, displaying Y-axis next to price levels. Plus, it uses the previous traded volume alongside trading strategies to maximize profits for traders.
How Volume Profile Indicator Works
If you are a newbie trader, the first time you would see volume profile indicator Mt4, it would appear to you as some crazy colorful bars positioned close to the right side of the chart and next to price levels. But that’s not what it is. At the end of this article, you should be able to identify volume profile indicators MT4 and use them to improve your trading decision.
How are volume profile bars created? Simple; it collects the total traded volume within a given time and at a specific price point and divides the total buys and sells volume. The result is then plotted via a histogram chart. If you can master the use of the volume profile indicator, it would be an excellent addition to your trading arsenal.
Let’s see the difference between the volume profile and traditional volumes.
Volume Profile Vs. Traditional Volume
The significant difference between volume profile and traditional volume is that while volume profile is plotted on Y-axis, the traditional volume is plotted on X-axis. The traditional volume also shows the number of transactions in a daily window, whereas, volume profile indicator in MT4 goes a step further to indicate the number of transactions at each price point. It doesn’t just stop there; the longer the histogram bar, the higher the number of transactions at that price point.
Conclusively, we can say volume profile indicator for mt4 is an indicator by price, while traditional volume is an indicator by time.
Volume Profile Terminologies
There are some important terminologies that you must understand to enable you to use the volume profile indicator mt4. We will explain some of these terminologies to get you started:
- High Volume Node (HVN): This is a point where the volume is higher than average. HVNs are higher than other bars on the chart.
- Low Volume Node (LVN): LVN is the opposite of the high volume node; it’s a point where the traded volume is significantly lower than the average. These bars show that the total traded amount is meager.
- Value Area (VA): A value area is that area where 70% of the traded volume can be spotted at a glance.
- Value Area High (VAH): In typical volume profile, value high area is the highest point in the value area.
- Value Area Low (VAL): Just like the VAH that we explained above, the value area low is the lowest point in the VA section.
- Developing Value Area (DVA): This is a value area that is continuously changing per time. While the value area changes with time, these changes can only be observed by looking at the DVA section of the chart.
- Point of Control (POC): This is a node where the highest traded volume is recorded on the histogram chart. There are lots of traded volumes here. Professional traders use POC as an important retest point or for support.
- Developing Point of Control: POC changes per time; as such developing point of control is designed to capture these changes.
- Clearance: This is an area on the chart where only low volume nodes (LVNs) can be found.
How to Use Volume Profile Indicator on TradingView?
It is seamless and straightforward to use the volume profile indicator on TradingView; all that is required of you is to create a pro account or a free trial account. The following are the steps to follow:
- Go to the volume profile indicator chart
- Click on “indicators” located on the top menu
- Select “Volume Profile” on the left navigation bar
- Choose any of the three options that you see on the screen
- If you are a newbie, we recommend choosing a visible range, as it is the simplest for new traders.
Summary Volume Profile Indicator MT4
There you have it! Just like other trading forex indicators, a volume profile indicator mt4 is a great tool you need to have in your trading arsenal. It is simple to use and can comfortably earn you profits if you master it. While this is just one of the ways that helps you stay on track in Forex, there are several other routes you can take to enhance your income in trading. Find out about those through this link.