Mastering this indicator may help you gain a million wealth.

In the Crypto Assets trading field, there is an indicator that could be the key to your wealth. I once met an investor whose net worth skyrocketed from $100,000 to $10 million. Such success is not out of reach; you also have the opportunity to achieve similar breakthroughs.

Let's dive deeper into this powerful tool together.

Introduction to Volume Distribution Indicators

The volume distribution indicator is a graphical tool that displays trading activity at different price levels through horizontal bar charts. The higher the bar, the more active the trading at that price level. These high trading volume areas are often seen as potential support levels.

This technology originated in the late 1980s, founded by trader Peter Steidlmayer. In short, the Volume Profile (VP) indicator is used in technical analysis to show the volume distribution at various price levels over a specific period.

Calculation Principle of VP

The core of the volume distribution indicator is to summarize the total trading volume at various price levels over a specified period. It further divides the trading volume into up volume (trades that drive the price upward) and down volume (trades that lead to a price decline), allowing traders to intuitively grasp this information.

Understanding the Importance of Trading Volume

Think deeply about why this indicator is so crucial.

Market experts believe that prices are essentially an advertising mechanism, where time determines the opportunities for advertising, and quantity ultimately determines the success or failure of these opportunities. This perspective reveals the central role of trading volume in market dynamics.

Application of Fixed Range Volume Profile (FRVP) Indicator

Now that we have mastered the basics, let's delve into the practical applications of the FRVP tool.

FRVP allows you to set a fixed trading volume distribution range within a specific time frame. In the chart tools of the Gate trading platform, you can find the FRVP option under the "Forecast and Measurement Tools" category.

Effective Use Methods for FRVP

After selecting the FRVP tool, you need to specify the starting and ending points for calculating the volume distribution. This tool is particularly effective in analyzing the impulsive behavior of the market.

Taking a quick rise on the DOGE/USDT daily chart as an example, the FRVP can clearly display the volume distribution characteristics during this dynamic process.

In-Depth Analysis of FRVP Indicator

When using FRVP, we need to pay attention to the following key concepts:

• Value Area High (VAH): The highest price within the value area.
• Value Area Low (VAL): The lowest price within the value area.
• Point of Control (PoC): Most importantly, it represents the price level with the highest trading volume during the selected period.

FRVP Trading Case Analysis

Let's illustrate the application of FRVP with a specific example.

Suppose we observe that the market begins to cool down after experiencing a long-term rise. The price sharply drops and hits the bottom. We can use these obvious high and low points to set up the FRVP tool.

The first thing to pay attention to is PoC, which has formed a strong resistance level over several days. Traders can expect this area to react and look for entry opportunities within a shorter time frame in conjunction with other technical analysis tools.

When the PoC area is broken, it may indicate that the price will rise to the top of the range and touch the low volume node (LVN). LVN represents the area with the lowest volume throughout the entire range. Combined with the previous bullish momentum, traders can reasonably expect the price to reach at least this area. If they have established long positions near the PoC, this will be a good target level.

However, the price may continue to rise to the High Volume Node (HVN). It is worth noting that this is the second largest volume area besides the Point of Control (PoC). Once it reaches the HVN, the price may quickly reverse. Similar to the PoC, traders can expect a bearish reaction in this area. At this point, if a double top or other reversal patterns appear, it will be a good confirmation signal.

Common Misunderstandings When Using FRVP

When using the fixed range volume distribution indicator, traders often make the following mistakes:

1. Ignoring other market indicators: Over-relying on FRVP while neglecting other key indicators may lead to a one-dimensional trading strategy. The ideal approach is to combine FRVP with other tools (such as RSI or MACD) to confirm the validity of support or resistance levels.

2. Over-reliance on historical data: Although the FRVP can effectively visualize historical trading activity, it cannot accurately predict future price trends. Traders should avoid viewing volume distribution as the sole indicator of future trends and should conduct a comprehensive analysis that combines fundamental factors.

3. Misunderstanding volume nodes: One should not assume that all HVN or LVN have equal importance. Their influence may change with the market environment. For example, in a strong bullish sentiment, certain HVNs may be easily broken through.

Summary

Through this guide, we delve into the complexities of the Fixed Range Volume Profile (FRVP) indicator, revealing its components, application methods, and potential pitfalls.

You have already understood how FRVP can gain insights into the relationship between volume and price data, how it helps to identify trends, and how to determine key support and resistance levels.

Now, you should have a comprehensive understanding of when and how to use FRVP. I hope this knowledge can help you make more informed decisions in Crypto Assets trading.

Remember, successful trading requires not only tools but also continuous learning and practice. Wishing you success on your trading journey!