TradersLibrary2 - anatomy of a volume profile trader

Technical Analysis
Trading the Volume Profile would not be complete without the understanding of
Technical Analysis. Technical Analysis is the study of the aggregate psychology
of all market participants. The market participants are influenced by common
perceptions and this leads to a group think which creates tradeable patterns.
These patterns are self-reinforcing in that traders looking for the patterns
actually trade into the completion of such patterns. However this is not always
the case, a sharp liquidation at a key level could put a crack in the foundation of
the pattern and cause it to collapse under its own weight as traders scramble to
exit.
To make the best use of the Volume Profile we want to combine technical
patterns with the profile in order to identify imbalances in the market; it is these
imbalances that cause the market to move quickly in one direction. Once the
market moves quickly in one direction it attracts the attention of other
speculative traders which act as a self reinforcing mechanism for price to
continue.
Continuation Patterns
ABCD Extension
Ascending Triangle
Bear Wedge
Bull Flag
The ABCD Extension
Formations are shape shifters, they can take shape and morph into other shapes.