Multi-Timeframe Volume Profile and Divergence Strategy

Objective:

To combine multi-timeframe analysis, volume profile insights, and divergence patterns for identifying high-probability trades.

1. Strategy Components

A. Multi-Timeframe Analysis:

Use three timeframes for analysis:
Higher timeframe (HTF): To identify the overall trend (e.g., Weekly/4H).
Intermediate timeframe (ITF): For spotting critical support/resistance zones (e.g., Daily/1H).
Lower timeframe (LTF): For precise entry and exit signals (e.g., 15M/5M).

B. Volume Profile:

Incorporate Volume Profile Visible Range (VPVR):
Identify key areas: Point of Control (POC), High Volume Nodes (HVN), and Low Volume Nodes (LVN).
Use these levels as dynamic support and resistance.

C. Divergence Patterns:

Look for Bullish Divergence and Bearish Divergence on oscillators like:
Relative Strength Index (RSI)
MACD
Stochastic RSI
Combine divergences with price action near significant volume levels.

D. Additional Tools:

200 EMA (Exponential Moving Average): For trend direction.
ATR (Average True Range): For stop-loss and take-profit levels.
Fibonacci Retracement: For confluence with volume profile levels.

2. Trading Plan

Step 1: Higher Timeframe Trend Identification
Use the HTF to establish whether the market is in an uptrend, downtrend, or range.
Mark key swing highs, lows, and supply/demand zones.

Step 2: Intermediate Timeframe Analysis
Apply the Volume Profile on the ITF to find:
POC: Indicates price consensus.
HVN/LVN: Potential zones for reversals or continuation.
Watch for price approaching these levels.

Step 3: Lower Timeframe Execution
Monitor LTF for:
Divergence signals on oscillators.
Candle patterns like pin bars, engulfing candles, or inside bars at significant levels.
Confirm trades using:

Price breaking out of LVN or rejecting HVN.
Crossovers of EMA for extra confirmation.

3. Entry, Stop Loss, and Take Profit

Entry:

Long Position:
Price reacts at HVN/LVN near a support level.
Bullish divergence on LTF.

Short Position:

Price tests HVN/LVN near resistance.
Bearish divergence on LTF.

Stop Loss:

Place just beyond recent swing high/low or above/below the LVN/HVN zone.
Use ATR (1.5x) for volatility-based placement.

Take Profit:

First target: Nearby POC or Fibonacci levels.
Second target: HTF supply/demand zone