Seek Refuge with High Volume When Price is Not on Your Trade’s Tail

April 13th, 1726. John William, also known as the Baron de Ripperda. It was a bad day to say the least for the dismissed Spanish Prime Minister. He was accused of fraud and embezzlement and the authorities were hot on his tail.

Fortunately, the British were willing to take him in, allowing for safe harbor while the dust settled. When the markets are violently seeking new highs or lows with a ton of volume at their back – it’s important to know where you can park your trade for safe harbor.

Plotting prior POCs (Points of Control) where historical volume has taken place is an excellent way to mark multiple ’embassy’ locations on your chart – especially if your trade is on the run.

Safe locations unavailable to most retail traders

It all started over a deal that was cut in Vienna. Ripperda managed to behave ‘outrageously’ but the Austrian government was willing to humor him – given his elevation to the rank of duke. The result was the Treaty of Vienna – where Spain was on the hook to pay heavy subsidies. A deal that was ripe for corruption – but somehow was missed by those who signed on.

Likewise, millions of retail traders obliviously sail right past reversal levels available to institutional traders in the know. This is mostly due to the fact that many retail traders simply look for basic support and resistance entry/target locations based on a crude visual analysis – with nothing to support their validity.

Worse yet, there is no understanding that these intermediate reversal levels even exist due to the fact that the volume that precedes price is never fully tracked. This issue is further compounded by price-based indicators that do nothing to key retail traders into the institutional levels that price really respects.

The result: retail traders miss the price levels sitting in between obvious pricing extremes that drive intra-day reversals.

Knowing where most of the volume takes place every day

Time ran out pretty quickly for Ripperda. The Austrians came knocking in 1726 to collect on the subsidies that Ripperda had signed up for just the year earlier. It came out that not only had Ripperda been shooting his mouth off, making promises he couldn’t make – but he had misappropriated large chunks of it for his own use. It always comes out.

Using Point of Control, you can tear back the covers on intermediate trade locations that institutional traders enjoy cozy relationships with. Known as the POC, the Point of Control is the price level where the highest volume took place. Mapping this isn’t hard to do – as long as you know what to look for on a daily basis.

Turn on POC across multiple Daily Volume Profiles to reveal additional intermediate levels that price respects.

Simply grab Static Volume Profiles and add them to a 20-day chart for your preferred futures instrument. Thanks to the NOFT suite of tools, you can toggle on the VPOC and ‘ta-da’ – you can see where the most volume went off for each day – something the institutional traders have known about all along.

Take it a step further and add bars to the chart. An initial glance will tell you that price does in fact respect these pricing levels. With one click, you have now just introduced more opportunities to profit to your chart.

Managing trades when macro levels leave you hanging

When the moment of reckoning came the freshly minted duke did what any decent freewheeling international playboy would do: He made a run for it. It was the British envoy, Colonel William Stanhope, who took him in – for a price: Ripperda betrayed the secrets of his government.

Unlike Ripperda, you can honorably take refuge using the cover that POC offers you – especially when there aren’t a lot of other macro levels to lean on. In instances where an instrument is reaching an all-time high – and the macro volume history for VRLs (Volume Rejection Levels) simply aren’t there – you can combine intermediate POC’s as a starting point for candidate entry locations.

Don't miss the intermediate entry levels that price and the institutions see coming from a long way away.

Looking again at our ES example, note how the POCs can be used to complement VRLs and ITLs (Institutional Trading Levels). Trading with the ITL and VRL levels would have provided an excellent starting point. Adding in prior POCs gives you another option – especially when price is on the run.

Check out the precipitous dip that takes place right before the 9:00 marker. With layering, the prior POC reveals the reason / point that price paused – which would have been otherwise missed.

Drown out the snickering institutional traders who know the retail masses are completely oblivious to these levels and add them to your chart.

To POC or not to POC when a VRL will do just fine

It’s fair to point out that a day’s worth of volume pales in comparison to 300 days’ worth of history. Long-term volume levels – both from a demand and rejection standpoint – have a habit of stopping price dead in its tracks.

Just like Ripperda likely only had a few moments to get himself to the British envoy’s house – it’s important to note that time is of the essence in these instances. On a short-term chart, for intra-day moves, your intermediate lookback is much shorter – usually 5-10 days. As a result, the carry-forward of prior POC levels should be limited accordingly.

Equally important to the element of time: priority. When evaluating your trade locations – or if you’re in doubt – start with long-term macro locations and work your way in. This puts
300-day volume rejection and ITLs ahead of daily POCs. Don’t be shocked when you see POCs coincide with VRLs, ITLs and yes – other prior and future POCs.

Make a run for POC and profit while others have no options

William the Baron managed to last 407 days in the home of the British ambassador. At that point the Spanish finally had enough, barged in and arrested him. One of the more colorful lives history would cover – he was imprisoned in a castle, promptly escaped, and lived the rest of his life in comfort.

Take five minutes at the start of your day to plot prior POCs from the last 10 days’ worth of daily profiles. Take note of the ones that turn into subsequent VAH and VAL levels as being particularly strong. Cross-check the POCs with Institutional Trading Levels and then add them as a global level on your charts.

When you find yourself miles from an ITL or VRL, seek refuge in an intermediate level in the form of prior POCs. Take your safe exit – ideally somewhere picturesque and comfortable.

Live to fight another day with profits in hand.

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