It’s a scene straight out of the hit show ER. The ambulance backs up, George Clooney (or a younger version anyway) rounds the corner looking grim-faced and determined. “Adult male!” he bellows, reading from a file prepared by the EMT. “Age 42, suffering from chest pains after meeting his daughter’s fiance for first time!” he continues. “Get this one into the OR STAT!”.
Despite the best frantic efforts, you know what’s coming. Clooney tries everything, but in the end – the frantic beeping in the background goes to a flat, depressing beeeeeeeeep. The EKG just called it for you. You don’t even have to be watching the screen… he’s gone and the daughter’s fiance is surely to blame.
Do you hear that same sound after you’ve entered a trade? The frantic beeping that seems to come every second with your trade going from green, to red, and green again? A profit, a loss… no wait a profit again!? And then finally it flatlines as your trade bottoms out beyond hope of revival?
You can use Volume at Price as your personal EKG, except you can use it to save your trade before it’s too late.
Dead entries that kill accounts every day
As you’d expect, chest pains are among the top ten reasons people head to the emergency room. (Foreign objects in the body that can’t be removed is the second most common reason – but we’ll leave that alone for this article.) This covers everything from basic pain, to the dramatic scenes of jumpers being applied to a patient’s chest – ‘clear’ being yelled to restart the heart.
Every second of every day, a retail trader stares at his or her screen, mouth agape, looking for a set of jumpers to bring life to their dying trade. Why? In many cases it’s simple: They’ve entered with no real idea of where they sit relative to market value – or short term volume.
Not knowing either – or both – of these things for any trade is enough to kill it, before it can even get to the operating room. This is because, if you enter without knowing where you’re at relative to volume – you may be likely taking the exact price institutions are hoping you’ll fall for (on either the buy or sell side).
For reversal trades, this means that the swing you’re hoping for – or that your price-based indicator has turned you on to – will never really materialize. Fortunately, there is a tool that will tell you exactly where you sit relative to value and volume – just as you’re entering.
An EKG for your market that monitors your trade’s vitals
It’s the EKG that tells you how close you are to the edge. The electrocardiogram monitors your heart, recording the electrical signals that travel through your heart. The physician keeps an eye on this to determine the relative strength of your heartbeat – and if it’s in trouble.
Likewise, Volume at Price is the EKG you should be keeping an eye on when considering an entry. It tells you exactly what you need to know about where price sits relative to market activity. It provides a real-time, dynamic view of where the Value Area is – that is where 70% of the volume is taking place. Within the Value Area, you’ll find the POC (Point of Control) – the exact level where the most volume is taking place.
Above the value area, you’ll see that the color of the volume at price profile changes to blue. The portion of the profile, denoted by the gold line, is Value Area High (VAH), directly across at the bottom – the other blue portion of the profile is Value Area Low (VAL). VAH is important because it’s the short-term view of expensive, overbought price conditions – and VAL tells you the zone where cheap, oversold conditions exist.
Thanks to the 24-hour look-back that Volume at Price provides – you have the final vitals you need on where price – and your entry – actually sits.
Revive bad entries with interim emergency targets
For those of you who have never had one, an EKG is painless and harmless. A nurse simply attaches soft sticky patches to your chest, and then snaps electrodes to the patches which are then read for less than a minute. That simple exercise can help you avert disaster – and help your doctor understand exactly what’s going on with your heart. Proactively getting an EKG can save your life.
The same is true for Volume at Price and your trades. In the seconds it takes to look to the right of your chart, you know exactly where you sit relative to value and volume. Even if price approaches a trade location you’ve mapped in advance, if price is in the value zone – steer clear.
Say you’ve decided to enter on what you believe is a market swing. Perhaps there’s been sequential decline – or even responsive activity – and you’ve made your move. Turning on Volume at Price – you immediately realize that you’ve taken a trade in the middle of the Value Zone. (Yes, even if you see sequential decline or responsive activity – if it’s in the middle of the value zone you should wait for those conditions in VAH or VAL.)
Volume at Price can be used to target an exit, even in this perilous trade. Simply track where POC is and where the adjacent Value Area border is. In this case, you’re dealing with VAH and a POC that’s parked right next to it. That’s your emergency target to exit – and live to trade another day.
Why waiting won’t help
Even with the worst of entries, Volume at Price can tell you if there’s hope – or if conditions are really against you – before things get completely out of hand.
There are those who would argue that you should simply wait. This is like sitting in the hospital parking lot clutching your chest hoping that the pain will pass.
Get out in front of your trades – even the bad ones – and know exactly where they sit relative to value and volume. As price advances, so will Volume at Price and the value zones – watch them and look for your opening.
Keep an eye on the volume nodes to the right, knowing that where they extend out into your chart – increased volume – you’re going to see action. When they’re depressed – you’ll also likely see action since these are the equivalent of micro Volume Rejection levels.
Do this in conjunction with your imbalance summaries and delta totals at the top of each bar. When they taper or start to move against your position – know that you may need to bail.
Don’t wait on a bad entry! Manage your trade and salvage it by picking emergency targets based on where you’ll see interim reversals.
Save your entries while managing account-saving exits
Every now and again Clooney managed to break his attention away from the leading lady – just long enough to save some sorry chap. ER aside, the save rate in an ER is incredibly high – with less than one percent of patients never making it back out alive.
With Volume at Price your save rate can be much higher than 1% – which sounds about right for most retail traders. Keep an eye on the volume at price that it delivers with every chart – and steer clear of the dynamic value zone in red.
When an opportunity to enter outside of value presents itself, only take it in conjunction with a long-term volume level. If you find yourself with a bad entry – keep an eye on the POC. If it’s ranging up towards you on a reversal, that’s a strong indication that you should get out. If it’s sitting down, or moving away towards the bottom of the value zone – you may have some room to maneuver.
Watch the imbalances summaries and the deltas, and scrape your way out with just a few ticks to spare on an exit in the middle of the value zone. Walk away to enjoy your next trade and live to tell your kids about it.
Noft Traders offers a Funded Trader Program. To learn more, visit their informational page at NOFT-Traders.com.