What is the VRVP indicator?

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The Value Range Volume Profile is a technical analysis tool used in financial markets, particularly in trading and investing, to analyze the volume traded at different price levels within a specified period. It helps traders and analysts identify significant price levels where a considerable amount of trading activity has taken place, thus indicating potential areas of support, resistance, or areas of high trading interest.

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This indicator divides a specified period (such as a day, week, month, etc.) into segments based on the value area. The value area is a range of prices where the majority of trading volume occurred during that period, typically encompassing around 70% of the total volume.

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The calculation of the Value Range Volume Profile involves several steps:

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• 1. Volume at Price Levels: It starts by tracking and recording the volume traded at each price level during the specified period. This data is collected to create a histogram that represents the volume distribution across various price levels.
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• 2. Identifying the Value Area: Once the volume at each price level is recorded, the indicator identifies the range of prices where the most significant volume occurred. Usually, this range encompasses the prices where about 70% of the total volume was traded during the specified period.
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• 3. Displaying the Profile: The indicator then plots this information on a chart, typically using a histogram or a vertical bar graph along the price axis. The highest bars represent the price levels with the highest trading volumes, forming the value area. This graphical representation allows traders to visualize the concentration of trading activity at different price levels.
  
  

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So how do we use it?

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There’s three primary indications for which I personally use the VRVP Indicator.

1. Spotting key levels.

2. Spotting FVGs / Voids / Imbalances.

3. Indicating Trend Strength / Coin Strength.

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Spotting Key Levels

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The key to spotting important levels with VRVP is using it in confluence with your own good sense and understanding of support and resistance levels / ranges / retests etc.

You don’t want to blindly long VRVP levels or any other indicator / tool, there must always be confluence within your plan, this can merely add an additional layer of confirmation and clarity to your plan and to your charts. 

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As indicated below, the yellow lines showcase how any trade may have likely drawn the initial range setup. In contrast, the blue lines are more confluent with key VRVP levels. The seemingly small difference in where the lines are drawn could have made a major difference in how you approached this range and how you traded it.

Let’s dive into this contrasting example. First of all there is the redrawing of the bottom support line, which is where we’ll start. In our yellow range (discretionarily drawn) we had many deviations below our support level, if we longed any, or at least some of theses lows with a stop loss below we would have been stopped out, in contrast, the blue range, drawn with assistance of VREVP levels was able to show us where the true support lied during these retests, creating a slightly more solid range bottom than our discretionary yellow line. 

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Secondly let’s go into the midrange, which i have little to say about in this example, and additionally the middle o f the range often is left untraded by me in my trading plan. This is due to the middle of the ranges often not being clean trigger points in my experience, although in this specific chart it was an amazing level to trade off of (and i did back in September 2023). Ultimately, the difference in where this middle range is drawn made little difference and the VRVP mid range. The yellow midrange was equally valuable.

Finally, and importantly, the top of the range, The top of the range is an amazing example similarly to the bottom of the range being an amazing example./ In our yellow discretionary range we didn't break out of the range till we passed the 31000 mark on the chart. Meanwhile, the top of the range according to the VRVP was at 3040 right above where we consolidated shortly before breaking out, this created a much better entry opportunity and a much earlier signal with the VRVP range than with the discretionary range which had you waiting another $600 before ripping through the top of our range. 

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Spotting FVGs / Voids

Firstly, what are FVGs / Voids?

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In trading, the term "voids" refers to specific price levels on a chart where there is a notable absence or lack of trading activity, resulting in gaps or spaces without any recorded trades. These voids can be identified on various timeframes, such as intraday, daily, weekly, or monthly charts, and they can occur for several reasons:

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1. Thinly Traded Zones: Voids often occur in areas where there was limited trading volume or liquidity. These zones might represent periods when there were few transactions or very little trading interest at particular price levels.
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2. Gaps in Price Movements: Voids can also appear as gaps on a price chart, indicating a significant difference between the closing price of one trading session and the opening price of the subsequent session. These gaps can occur due to unexpected news, earnings reports, geopolitical events, or other factors that cause the market to open significantly higher or lower than the previous closing price.
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3. Illiquid Market Conditions: During periods of low trading volume or when the market is illiquid, voids can emerge. This often happens during holidays, after-hours trading, or when there's limited participation from market participants.
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4. Key Support or Resistance Levels: Voids might also be observed around critical support or resistance levels where there's a lack of trading activity. These areas can indicate zones where traders haven't shown significant interest in buying or selling.

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For the sake of this article the reason why the FVG occurred is unimportant, but the principle of it being filled is what’s important. In the case of gaps, traders pay attention to voids as they may anticipate the price to eventually fill the gap by revisiting the price level where the void occurred. 

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Spotting FVGs without the VRVP is easy enough, simply find a candle that moved quickly and inefficiently that has not been revisited since, these will be the FVGs. 

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The VRVP just makes it that much easier bt indicating an extreme lack of volume in that area, showing that the volume was absent and price ripped through that area inefficiently. 

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Trend Strength

Finally, and probably most simply, there’s the indication of the strength of the trend or of the project / coin in question.

This is primarily used on the 1D - 1W charts. But we will continue to use the same chart as an example, just imagine it to be a 1D chart / 1W chart since a coin’s conception.

You can see the primary value area / the area in which most volume was traded is clearly a the bottom / middle of the chart, meanwhile price is trading considerably above this, this indicated great strength, especially relative to many other projects that you can look up that are below their key VRVP levels. This can help you pick the weed from the chaff when it comes to finding strong projects with great momentum in price action.
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Overall, the VRVP is a great tool to add confluence to your plans but should as any other indicator not be used in isolation.

A full short guide on VRVP is available here. (INCLUDING GOOD VRVP SETTINGS!)