So, the next lesson of Dale’s lesson is:
How do we use our levels? Well, from the lesson by Ziggy;, hmm:
What makes price move? This is the most basic element and
yet one that many traders do not understand, it is crucial because it is what
makes everything else happen. Many traders believe that when price moves up it
is because there are more buyers than sellers, this is wrong there are never
more of either, the buy trades are
always exactly the same number as the number of sell trades.
I figured out that if
we can know where the price is going, we can make consistent profit.
The other items to be aware of on the chart are:
1.
The position of the VPOC, the
volume point of control. This is simply the location where most contracts were
traded during the day, it represents the exact location of where the highest volume
of contracts were traded in the day. The reason it’s important is that every
single professional trading house will have their VPOC in the exact same
location, and it is very often used as a target to move to the following day –
which is why sometimes you’ll see people say “closed my trade at the VPOC”.
Until this level is touched it in known as the naked VPOC.
2.
The grey area is known as the
“fair value” area, at the extremes or this area you have the value area high
& the value area low, again all trading houses have the exact same
information, and if you think back to the comment that fund managers must get value
fills for their clients, it gives a clue as to where they might be interested
in trading.
VPOC is the area/price point where mostly orders are there. In
other words, the point where the price gets passed most often. This makes it
most often in the “Value Area” symbolized as grey area. Value area is the area
which most trades are taking place during the day by volume.
I don’t quite know about low volume areas but from Ziggy’s
DOC:
Almost forgot, what can we learn from low volume areas? From
what we learnt above we know that if price moves rapidly through an area with
little volume traded it means there was no interest in trading at this
location, we simply passed through it. This can cause an order book vacuum,
traders, or at least professional traders, tend not to place orders in vacuums
and as a consequence, where a price area is traded through rapidly in one
direction it will often do the same in the opposite direction. Look back
through the charts and you can see it happening, this can be useful when
holding a position and taking a few extra pips of profit……….. but importantly
if the pro trraders don’t take new positions in vacuums neither should we.
What I learnt is that it is the one with low volume in
indicator.
So, from this lesson I can quite conclude that VPOC is the
point of lesson here. We must locate a VPOC through the most volume traded. By simple
hindsight, it’s the longest volume bar in the indicator. But Dale’s VPOC are
somewhat different. It takes into account the orderflows and yearly composite
volume, also futures, which I don’t know yet.
So for now, I’ll just follow Dale’s level posted each day.
