How to Find Supply and Demand Zones Using Volume Profile

Volume concentrates around a few key price levels, and the way price typically

moves is that it'll hover at one key price level until one side gets more

aggressive and breaks out.

Let's say it's buyers in this case.

So the market is moving sideways as both buyers and sellers are balanced.

Then suddenly buyers get aggressive.

Well, this will push the price up and create an uptrend.

And since buyers are in control now and there isn't much volume to stop them,

they'll keep moving in that direction until we hit the next high

volume level.

Then we have enough volume from sellers to come in and stop or at least slow down

the buyers. Now we're back at balance between buyers

and sellers.

Once the price is at this high volume level,

it'll keep trading sideways until one

side breaks out, and then it'll move either to the next

high volume level above

this one or back to the level it came from. And that's how the market moves.

You don't have to know why it moves this way or try to understand it.

As long as you know this is how it moves.

It's just Wyckoff distribution, which I'm sure you've seen before.

Accumulation, then mark-up, then distribution, then mark-down,

and then the cycle repeats. So supply and demand levels are really just

accumulation and distribution zones that happen before the large moves.

So how exactly do we find these supply and demand levels?

The first thing we need to do is apply the profiles.

The volume on the side of the chart that you saw before is called the volume

profile. And the volume profile shows you how much

trading happened at each price

level, so you know exactly where buyers

and sellers are.

We wanna be on the thirty-minute or the one-hour for the best results.

To apply this profile, go to the TradingView Indicators tab.

Type VRVP and you should see this Visible Range Volume

Profile, then click it. Go to the settings of the indicator

and change the row size

from twenty-four to two hundred. What this is gonna do

is turn those big bulky

volume bars into much smaller ones so that you can see and understand where the

volume is much more accurately. This is gonna appear on the right side of the

chart, and it'll show you all the volume from

what's visible on your screen.

And now the second profile. We're gonna use a second type of volume

profile called

the Session Volume Profile. In the Indicators tab, type SVP and you're

gonna click the first one. Then you're gonna go into Settings

and change the row

size from twenty-four to one hundred.

SVP is the Session Volume Profile, which shows us the volume profile by

trading

session, which is usually once a day.

And now your setup should look something like this.

We have a very precise view of where the volume is located based on the price

level. This is what we'll use to draw our levels

as precisely as possible.

So this obviously looks very complicated and confusing, but don't worry,

we only need to use two key components here to get our levels.

The first is the point of control, also known as the POC.

And this is the level with the highest traded volume for that session, and it

usually acts as a sort of price magnet.

And when you get multiple POCs aligned horizontally, it usually means that price

level is very important. Keep this in mind for later.

The second component is high volume nodes.

These are the large volume bars on the visible range profile, and these will

highlight areas with a lot of trading activity, as we discussed before.

These are also extremely important, and they usually coincide with the POCs,

but

not always, which is why we have to combine both of

them to get a more accurate

picture. Now let's move on to drawing them.

To actually draw the supply and demand levels,

we need these two requirements.

One, multiple POCs clustered together, and two, a high volume node.

And as a bonus, we wanna see a strong rejection by the

price from that area,

preferably on both sides. Once all three of those align,

we have a strong

supply and demand level. So let's try a few of them.

Here we have one, two, three, four POCs that are very closely

aligned. So that fits step one. Then we need to verify

if this aligns with a high

volume node. And here we see that it does.

We also see that visually we've got tons of strong rejections here on both

sides. You see this sharp drop right at the POC

here and other strong

rejections around this area. So this is certainly a strong supply

and demand level,

and we're gonna draw it by trying to center it around the highest volume point.

And we want the edges to be a point where the volume falls off sharply, and that's

our supply and demand level.

Most traders will tell you to only look for strong rejections or other minor price

action patterns, but those levels turn out to be low

quality.

We want our level to be as strong and reliable as possible,

and high volume is what

backs this up. The market will tell you exactly where it

wants to go next.

You just have to listen and you'll see these levels last forever.

So let's try another one. We see a few POCs clustered in this area

here,

and we also see the high volume node.

And taking a look at price action, we also have visibly strong rejections in

this

area. So just like we did before, let's draw our new supply

and demand level.

It'll look something like this. And you just rinse

and repeat this at every point

where you see this. You'll also notice

that the distance between each of the levels

should be roughly the same.

Not exactly the same distance, of course,

but you'll notice a certain pattern and rhythm in the way the price moves.

And eventually you'll see where a supply and demand level should go.

That's when you know you got it. But for now,

I'm just gonna add a few more supply

and demand levels following the same formula.

All right, here are the levels based on our formula

targeting high volume areas.

So let's see how these levels play out in the future.

Now notice how the price always reacts to these levels with very high accuracy.

That's because it's always gravitating to where the volume is.

So this is like a market cheat code in a sense, and there's a few different ways of

actually trading this, but we're typically looking for a level to

level move.

We wanna enter at one level, then exit at the next.

And with this, we can build a highly profitable strategy.