TradersLibrary2 - anatomy of a volume profile trader

This is how typical volume is read. In this book we will turn volume on its side
(literally) to see volume traded at price which will give us a new perspective for
which to base our trade decisions.
1.2 Line chart depicted over a supply and demand curve.
Changes in trend show areas of short-term market equilibrium, or pauses prior to
a change in direction. At D1, buyers come in, at D2 the last buyer buys and
supply overpowers the market. A retest of these areas will result in a future
reaction in price.
The above diagram is a simple approximation of a basic econometric supply and
demand curve which is applicable to any auction market such as the Futures
markets. The volume traded at these turning points often leaves imbalances as
many traders selling short into the prior downtrend are now trapped. As price
returns to these levels they look to offset their losing positions near break-even.
A build-out in the profile (which we will get to later) will show us where these
orders are clustered. It is at these equilibrium points that price makes its
reversals. These hidden areas cannot be seen in the classical volume indicator.
The volume profile indicator attempts to record such levels through tick by tick
updating of all orders at price.