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Trading Value Areas With Order Flow

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Trading Value Areas With Order Flow

Posted by Mike on Aug 23, 2023 in Blog

The value area gives traders insight into price acceptance, support/resistance, market sentiment, and fair value.

The value area represents the price range where the most volume or trading activity took place during a specified time period. Looking at the value area can help traders see where most market participants valued the asset during that time.

The value area often acts as support or resistance. Since it represents an area with a high concentration of trading activity, prices will often have trouble breaking above or below the value area. Traders can use the value area levels as potential profit targets or stop levels.

If price breaks out of the value area, it signals that sentiment in the market is shifting as participants are accepting higher or lower prices. This breakout can trigger further momentum in that direction. Traders may want to watch for breakouts of the value area for trading signals.

The value area shows the average price that was accepted by both buyers and sellers during the trading session. As such, it can act as a fair value estimate of the asset. Traders may use value area highs and lows to gauge if prices are relatively high or low.

Changes in the value area over time show how trader consensus changes. If the value area is steadily moving higher for example, it indicates bullish sentiment. Traders can monitor the value area levels to stay on the right side of market momentum.

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