TradersLibrary2 - anatomy of a volume profile trader

Volume @ Price
Volume at price is one of the top key concepts which underly the basis for
volume trading. It is the foundation for which all trading decisions are made. As
prices fluctuate it leaves a trail behind itself, and like a shrewd detective we
gather the evidence and analyse it for clues. In this case the evidence is the
amount of volume traded at price. This volume figure shows us how much, or
how little interest each price level holds. In order to execute a trade the evidence
should be distinct and meaningful, not vague and general. Volume traded affects
the movement of price because when there is higher volume at price, there is
also a larger amount of existing transactions which must be cleared in the order
book before moving on.
When a trade is taken in the futures markets it is matched to an opposite trade; a
buyer is matched to a seller. When this occurs, the quantity traded is available
for viewing as it is added to volume at price. The volume trader attempts to
analyze this data in ways that are useful to making an informed trading decision.
The 2 basic tenets of the Volume Profile are: high volume at price indicates high
participation, low volume at price indicates low participation. High volume =
lower ATR (average true range), or lower volatility and thus slower acceleration
of price through the y-axis. Low Volume = higher ATR potential, or higher
volatility and faster price movement potential. By utilizing such volume at price
analysis we are able to distinguish between areas of support, resistance, range
bound trading and price continuation zones which will be covered in later
sections.