We have been using the Volume chart as a reference along with other indicators, moving averages, exponential moving averages to watch out if the breakout or breakdown is with volume or not. A common belief regarding the Volume was what I grew up learning with and it was only later that I realized after going deeper into Volume that what we see in a normal Volume chart is not exactly what volume is all about. I did not have much knowledge of any Volume based indicators then; and understanding Market Profile was out of question.
I used to keep searching the internet regarding many topics and the priority was that I could find an indicator which can give profits and most importantly consistent profits. In this search for something related to Volume I just happened to add Volume At Price Multi (As it reads in Amibroker) to the price chart. At first I thought that this is what Market Profile should be but then I did not find any other parameters so kept on looking at the Volume at price formations and kept on changing timeframes and as 1 minute was the lowest timeframe I could select due to my data restrictions as I did not have tick data, I started using that 1 minute Volume at Price chart for Intraday trading in Nifty futures and it has served for me as an Effective use of Volume At Price for Intraday Trading.
Have a look at the following 1 minute chart of Nifty Futures :
In the above chart we can see that when we look at the Volume plotted vertically on the price instead of the horizontal volume bars plotted in the pane below, it gives us some clue of the prices reacting in the zone where there is lowest concentration of volume and where there is highest concentration of volume. (Later came to know that this is called High Volume Node and Low Volume Node in Market Profile Terminology).
I take those high and low volume areas very seriously as that gives an idea of the intention of market participants at those prices. As we can see, on 22-07-14 NF (Nifty Futures) opened and traded in a narrow range for an hour and then broke out on the upside with volume and while going up left a low volume area near 7718-7722. Now instead of instantly entering into a buy trade, I would add 50% longs at the point of breakout and then wait for it to decide further move. I went up till 7553 and traded in the range of 7735-7750 for sometime, creating the highest concentration of volume near 7745 zone (marked in blue circle). So now, as per the Volume related with price, 7718-7722 range is support and 7745 is resistance zone as price could not trade above that 7745 zone. As the high of the previous day was same as the lowest volume range I would prefer to buy a dip towards that range and exit part near 7745 and rest at day end.
Again on 23-07-14, the price was trading above the high volume zone of 22-07-14 and then dipped towards another zone of high volume concentration of 22-07-14 ( 7765-7770 range). So I would buy 50% there and waited for the prices to progress. The volume was concentrated now near 7755-7760 zone which was a low volume zone of 22-07-14. Remember, we had highest concentration at 7745 so we will closely watch that price and we got a dip towards 7746 and the prices quickly reversed, assuring of the previous support. We added longs at 7750 and waited for the cross of 7765-7770 range and finally exited longs at day end near 7790.
Followed the same on 24-07-14 but 25-07-14 was different. Prices traded below the highest Volume concentration zone of 7728-7733 and highest volume concentration was formed in 7815-7822 zone on 25-07-14. We now look for the price action near 7805-7810 zone which was the low volume zone of 24-05-14 marked in red circle. It could not stay above that zone so we sell 50% in that range and watch the previous days high volume zone of 7780-7785. Price tried to go towards 7785 in 3 attempts till 7785.05 and finally in 4th attempt it gave a breakdown below that zone and we added 50$ extra shorts. The point to watch out will be the low volume zone of 23-07-14 and high volume zone of 7785. The prices went down and took support near 7750 and till 7745 does not break, the trend will not continue downwards as per all previous observations. prices reversed towards the 7775 zone we book out the shorts on the break above 7775 and at day end.
The above Volume at price observations work better if combined with retracement and Vwap. If the market does not trend or trades in a very narrow range then we will end up in loss of few points but it works well when the market trends for 40 to 50 points after an hour of opening range and is useful for people who do not have access to Market Profile charts.
So, to conclude the observation, I have been trading these Peaks and Valleys created on Vertical Volume At Price in lieu of the access to Market Profile charts and it works well if combined with other studies.
Disclaimer : Anything and everything if followed with discipline will work in the markets and I request to do personal observation before trading on the above method as what works for me may be suitable for my nature and may not fit others trading style or nature.