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welcome back to the channel i'm dee this is marcus talkers and today we're going to be discussing the difference between time based profile and volume based profile one question that i keep getting from a lot of my traders is do you use volume how do i start using volume in my trading do you teach how to trade with volume and that's fine but there are also loads of people who interchangeably use terms like order book order flow time and sales and depth of market letter aka the dome thinking that it's all the same thing i just wanted to clarify a little bit about what these terms actually mean and more importantly just how different is that time based profile versus the volume based profile first up let's talk about depth of market the ladder that you see on most futures platforms but the depth of ladder is definitely not the same thing as time and sales window dom only ever has limit orders displayed right orders that are waiting to be executed and these limit orders can also be looked at as the number of units that are available at a particular price for anyone looking to enter the market anyone it could be joe working at morgan stanley or it could be your mate dave down the road or it could be me so anyone right because without a market order these limit orders on the ladder will never get filled so you have to have someone you know doing the button press and initiating a trade for x number of contracts and that is where time and sales comes in so time and sales are real-time orders going through but that's not an order book and also trying to trade through time and sales during like today's electronic exchanges all of the orders just happen so quickly and attempting to sift out reasonable information out of it it's it's just extremely hard and frankly if you want to do that there are better tools out there that will give you the same information in a much more kind of transparent easily interpreted graphical representation now since the dome ladder has limit orders on it i suppose it can act as an order book as well but order book meaning limit orders it actually means the limit orders of an institution and clearly there are many many institutions out there and no not every institution knows where all the other institution orders are located some institutions are also only there to provide liquidity right we need liquidity to trade and most exchanges today rely on limit orders quite a bit to generate that liquidity so the role of a market maker is to fill a certain volume at these sort of nearby limit orders moving the price up or down and how does the price move up or down well once the orders are chewed up at one price the the ladder moves to the next price that's how it works it's a very simple mechanism but that's why you don't want to be involved during that sort of first half an hour to an hour of the exchange open because that's when the market makers are doing their thing they're trying to generate as much liquidity as possible if you want to see where hedge funds and commercial hedges have their massive orders well you can have a look at supply and demand areas on large time frames daily chart weekly charts and that is also considered order flow and why because institutional limit orders will typically be placed at areas of previous large originating swing extremes visible on the daily weekly monthly charts and when you're looking at the chart in that way you will automatically come up with sort of buy low sell high scenarios obviously if nothing is drastically changed in the underlying market that's another cat of worms which we're not gonna touch right now now hedge funds and asset management firms they don't really do your kind of tiny little two to five lot trades we're talking wealth management firms who are usually managing portfolios of high net worth individuals so that's like many many millions when you're working on those kind of portfolios we're talking positions of about three to five thousand standard lots and because of the size of the positions institutions will spend many days there and even many weeks trying to position themselves but the problem is you don't have one single price where you know you can have five thousand ten thousand fifteen 000 contracts available at you know 60 bucks or something instead you're going to get a partial fill at one price and then once all of the available limit orders have been taken by the market orders price will then either rise or fall depending on which side of the dom falls to zero contracts first and there's been this analogy that's been kicking about and it's it's quite a good analogy about chopping a tree so you know you you chop a tree a little bit chop it a little bit more chopped a little bit more chop a little bit more and then when there's nothing left the tree is going to fall it's the same thing with supply and demand areas now that is why when the price reaches a potential area where the large institutional orders might be waiting the price will typically start to consolidate it will start to move sideways it's going to start creating a bracket if you go and watch my weekly strategy video from the 2nd of march 2021 i talk about gold and overlapping value areas now value areas are distribution curves that is where 70 of the business took place in a particular session and when you start to to get overlapping values that means that the price has stopped moving for whatever reason you know you have a couple of days when the distribution curve has stayed pretty much at the same spot that indicates price is getting accepted and that's also why you can start to speculate that there are plenty of orders waiting there and it's preventing the price from going through the level i like to call these areas congestion i live in london so you know it's a pretty appropriate terminology because it is really like a traffic jam you know a lot of cars in one area it means that you're not going to advance very far until the congestion is cleared and then if you apply that same analogy to the prices it means you will get a reversal which will then be visible via you know some kind of a reversal pattern of some sort that's why we look at candlesticks right and the most confident candlestick will be engulfing that's like the simplest way to determine that the other side has one and the larger the time frame the more reliable the pattern is because there's more trading information that goes into it now the way depth of market ladder usually works is that the smaller units will typically be available around the current price and then you'll see the larger units available further away from the current price and that's nothing more than just your institutional supply and demand then we come to order flow so let's start by looking at what order flow isn't order flow is not looking at time and sales and trying to figure out who's got control order flow is nothing more than trying to evaluate how successful or unsuccessful the move is or was if you're looking at older supply and demand areas how did it arrive at the level did it get there without creating congestion areas on the way up or down are there any signs of the move reversing do we have a sustained auction in one direction away from initial balance from that day initial balance what is that is the first hour of any exchange open and then we use that the initial balance range to evaluate the marketing context so once you know all of this we can hopefully take out the mystery of order flow order book time and sales depth of market and all of that and then focus on the question about the differences between using volume profile versus time based profile are they really all that different they're not and why because the strength of the move is almost always correlated with the amount of volume that came into the market too many traders give way too much focus on volume as if it's some sort of a crystal ball you know holy grail of trading all the while neglecting two things that in my opinion are actually a lot more important which is time and strength of the move how long has the move been going on how large is the move inside a given time period and average size candles you know all of that is pretty important whereas volume it's always more of a supportive factor volume is not going to tell you which way you're supposed to be trading so volume is just one element on our blog tech market profile we have both the tpo value area but also the volume value so let's just have a look at it see how different they are all right so what i've got here so i've got both of them displayed let me just flip around this volume because these are volumes right now baby blue is your tpo value area time price opportunities so that takes into account time and price and then you have the volume value area so as you can see on this particular date they're a little bit different but it's pretty similar actually you know what is this this is like 10 ticks difference now i'm going to use blotek backtest mode to go back in time it's one of the very innovative features of our indicator very useful if you want to see what's happened before for example this is the value area from one of the wednesdays and you can see this is the volume value area they're pretty much the same they're the same levels almost to the tick right and that will be the case on most of the days and here we are again so you have a tpo value area baby blue and you have the volume value in yellow it's not normally yellow i just wanted to you know have a better color so you can see the differences between the two here's another day previous day pretty much to the tick and another one in this case tpo value is slightly bigger so as you can see they're remarkably similar so for me i trade a lot through time-based concepts how much time is the price spending at a particular level volume doesn't show you that and for me that is a flawed approach because it only gives you one part of the picture one part one small part of the entire auction process therefore what really matters is not whether you're going to be using tpo value or volume value area but instead where the volume signals are actually happening are they happening inside or outside the value area is the price accepting or rejecting value and if you're using the same calculation to create both of the value areas then there's very little differences between the two and in fact i'm gonna go on record to say that tpo profile is much more transparent than just the volume profile because with volume there is no time component okay so i've imagined that already and time is you know it's pretty important especially with the products that we're used to if you're just reading through volume all you're going to be left with is just volume nodes and again depending on where and how these volume nodes are happening you can have very high volume that means completely different things so can low volume you know markets can actually trend in low volumes too so it's definitely not as simple as hey i've got a high volume node it's got to act as a supports or resistance and without time or any other context reference of what should be happening at that area at that particular time of day it becomes a very kind of flimsy low probability flawed approach to evaluating the market by the way if you're liking this video i would love to have you here as a part of my little marcus talkers family so press the subscribe button turn it gray like my real hair color and also you might want to press the notification bell so you don't miss any future uploads anyways where was i oh yeah volume versus time profile now if you combine volume with something like a very large candle move for the particular time period that's a whole different story for example if you see something like this candle here it's quite large right and some people who are a little bit inexperienced they would be like oh my god new trends it's all falling but if you see an extraordinarily large candle that also has a very high amount of volume coming in very quickly also known as the you know high volume churn that's very likely going to be a out so for profile traders you have value acceptance the market open outside of value fell into it but how did it fall it fell into the value with a super explosive massive candle with a ton of volume that accompanied it so these kind of candles that filled the entire daily range in you know the space of 30 minutes that's an anomalous event that is also accompanied by anomalous volume and that rarely brings a continuation move in fact usually these sort of moves like you see here they end quite quickly and that gives way to a reversal trade so if you know all this statistical daily ranges looking at how fast is something moving within a certain time period all of that can give you very very valuable information so large volume in this particular case it means a low probability of a continuation and that's why when i see you know novice traders who are getting super excited over a massive move that happened right off the exchange open they're like yes there's going to be a massive it's not going to be anything okay it's actually going to be a out and then i usually catch the move and they're like how did you know because i've seen it about half a million times that's how i know that's all the wisdom that i've got for you this time around feel free to check out the description box down below there's a link to my market profile udemy course if you're someone who is struggling with their intraday trading performance you'll definitely want to look into using institutional order flow concepts it's no accident that market profile to this day remains the most commonly used tool of successful prompt traders and here are a couple of other videos that may interest you if you're struggling with some typical trader issues so feel free to check those out as well and i'll see you guys next time [Music]