A trader uses volume profile to identify value area highs and lows, then enters aggressively near those levels and looks for price rejection. He averages up on retraces, takes first profit at the midpoint, moves his stop to breakeven after hitting it, and sells into false breakouts for a second target.
So this is the model I use when the markets are in a balanced range. People call it chop as well. Let's just say you have a volume profile like this. That's your value area high. This is your value area low. And you can see this volume is really building out. I'm not interested in the middle. I'm going to wait to see price come up here and see how it reacts. This is an aggressive entry. There's a higher chance I'm going to be wrong here. If I enter here, there's two different ways you can do this. This is aggressive entry. And if I really like to trade and I see a lot of absorption, what I would do is enter here. And then if it comes back down and it comes here, rejects, I would add here. Average up. This could be your first entry. And what you target is the middle point as your first TP. What you do is you look for another false break. You could sell into this break. This would be my TP too. Immediately after this TP is hit, I— my stop would go breakeven because in chop it can come back and tap you out to your entry point.
