If you’ve been on this site a while now, you’ll know I’m NOT a fan of RBR/DBD zones.
They’re inconsistent, price rarely if ever respects them, and they just generally don’t perform as well as their counterparts – RBD/DBR zones – to be used effectively.
However, all that aside, some RBR/DBD zones do work…
And a few weeks ago, I came across a cool little Tradingview tool for finding high probability RBR/DBD zones that I’m going to teach you how to use in today’s post.
Its name… volume profile.
This tool makes finding good RBR/DBD zones extremely easy.
It reveals what prices high volume (which indicates the banks buying and selling) came into the market. That means we can use it to confirm if the banks played a significant role in causing a RBR/DBD zone to form, and so, whether it has a high chance of causing a reversal.
Let’s start by looking at what volume profile actually is…
What Is Volume Profile And How Does It Work?
Important Note: Volume Profile is only available to pro and pro + users of Tradingview – you need a paid account basically. However, you can test it out for free by getting the free trial. This lasts for 30 days and includes the full range of features and tools pro account users have access to.
Just remember to exit the trial before the 30 days is up, otherwise, you’ll get charged for the next month without any warning.
When it comes to tools, Tradingview really hits it out of the park. And the volume profile tool found inside the indicators tab is one of the best examples of that.
It’s an adaptation of the better-known market profile tool, created by Peter Steidlmayer back in the 1980s.
Volume profile takes the standard volume that appears below our charts and shows the bars horizontally on the right hand side of the screen, so the volume lines up with prices rather than candlesticks. It also splits the bars, allowing you to see whether the volume was buy and sell oriented.
By showing price volume rather than candle volume, the tool gives you a much clearer picture of what’s really going on in the market and where the volume came in.
As we all know, unless you’re a VSA expert, candle volume is limited in the info it shows.
Sure, you can see if a candle had high or low volume, which can come in handy from time to time. But for day-to-day trading, that information isn’t going to help much. It doesn’t tell you anything that important about what’s going on. Seeing the price volume, on the other hand, is much more useful.
For one, you can quickly spot all the major points where something significant happened – making it easy to see where price could reverses and stall in the future.
Ontop of that, the volume itself is much more accurate.
We’re seeing cumulative volume around a price, not just the volume on a candlestick or two. That gives us a better idea of where the banks are positioned and how/where retail traders got trapped in their positions.
So, here’s what the volume profile took looks like.
You can see the bars line up with prices rather of candles. They don’t line up exactly, instead covering a small range of prices, but they all lie horizontally to show volume around each price.
The blue and orange bars show the buy and sell volume; blue for buy, orange for sell.
The difference between them isn’t that important for how we’re using the tool. You see the exact difference by hovering over a bar and then looking at the numbers in the top left. We only care if there was a high level of activity around a bunch of prices (as shown by big bars forming).
Whether that volume was buy or sell, isn’t important; it doesn’t give us any extra clues on what the banks were up to, so it’s basically irreverent.
How To Open And Set Up The Volume Profile Tool
Volume profile tool is inside the Indicators tab on Tradingview – find it at the bottom below the indicator options.
A few variations of the tool exist, but make sure to stick with the visible range tool at the bottom, which displays the volume according to all the candles currently on screen – the other variations either don’t display price volume or only show minor volume, which, while useful for some things, doesn’t really help in finding good RBR/DBD zones.
To open up volume profile, simply hit the button inside the indicators tab…
As with most tools, by default, volume profile doesn’t display the way we need it too – the bars are far too big, and some aren’t visible on the chart. So you need to open up the settings menu and change a few things to get it working the right way.
So, right click the bars and hit Settings from the drop down list.
Once the menu opens, head over to the inputs tab, and change the following settings:
Row Size – 100
Value Area Volume – 100
Now hit the okay button, and head back to the chart…
More bars should appear and be more visible up and down the chart, rather than just in the middle.
And with that, you’re all set to go.
How To Use Volume Profile To Find RBR/DBD Zones
My biggest issue with RBR/DBD zones isn’t that they don’t work…
It’s that you can’t distinguish with a high degree of probability which zones will cause price to reverse. And since so many fail, that means you can’t trade them consistently, resulting in…. yep, you guessed it: lots of nasty, unnecessary losses.
However, with volume profile, we can find many of the high probability zones.
The tool reveals where significant volume came into the market. High volume indicates bank activity. So if a rally-base-rally/drop-base-drop zone has a lot of volume behind it, that suggests the banks could decide to use the zone, giving it a high probability of causing a reversal.
Take the zones below, for example…
Normally, we wouldn’t consider these two zones as valid… being rally-base-rally, they form mid-move, which indicates whatever the banks did to cause them to form wasn’t significant.
But watch what happens when we add the volume profile…
With the tool, we can see these zones have A LOT of volume behind them, revealing the banks caused them to form by doing something significant, placing buy trades in this case.
If price were to now fall, we would probably see a reversal or, at the very least, a retracement from these zones. Because the banks wouldn’t want price to break beyond their buy trades… it would cause them to lose money. Instead, they’d come in and either place more trades or exit their position by creating a retracement.
So that’s how volume profile can help you find good RBR/DBD zones, but how do you find them yourself?
Well, here’s what you need to do:
First, find the zones you want to see the volume for, then add the volume profile to the chart with the settings I explained earlier – right-click and select “Settings” to open up the menu.
The volume profile we’re using (visible range) shows the volume based on what’s currently visible on the chart.
That means if you zoom in/out or move the chart, the volume will change to include the newly visible price action – and discount what you now can’t see. So to find the right volume for your zone, you must put the chart in a specific position in relation to the zone and at the right zoom level.
To do this, click the reset chart button (or hit alt-r), then zoom out 4 times.
Now move the chart so that the right side of the graph sits pretty much on the current candle, just as I’ve done in the image below.
This should give you a good overview of the volume around each zone.
If the zone is too far back to be displayed, move the chart until the left side sits around the point where it formed, then take the volume from there. We have to try to keep the volume as recent as possible because it declines over time, which affects the strength of the zone – remember, we only want to trade the best RBR/DBD zones.
All you need to do now is see how high the volume is for the zone.
Unfortunately, I can’t give you a definite answer on what this should be – it’s too subjective. However, what you see above is roughly the minimum a zone should have to indicate a reversal could take place once price returns.
If the biggest bars are lower than this… best to leave the zone alone.
You might still see the odd reversal, but for the most part, price will either not respect the zone at all or simply stall or retrace slightly before continuing in the same direction.
With volume profile, you now have a great way to find high probability RBR/DBD zones. This doesn’t mean every zone with high volume will result in a reversal – nothing’s 100% in trading, remember. But it will increase your success rate, which should help you achieve better results.
Be sure to check out my “Why You Should Avoid Rally-Base-Rally/Drop-Base-Drop Zones” post to learn why RBR/DBD zones are so unreliable… if you haven’t already that is.