Programming and Back Testing Volume Profile and Value Areas

SimpleMeLike

SimpleMeLike

Hello all,

Hopefully I can get some help or advice here.

Currently I sim/paper discretionary trade support and resistance made up of Volume Profile, Value Areas, Pivots, High of Day, Low of Day, Open and Close on the ES, and CL based on a strategy I just wrote up over the past 6 months. I am still in forward testing trial and error mode. I would save alot of time by programming a strategy and backtesting it.

Lately, I have been doing extensive research and reading on programming and backtesting my trading ideas.

Is there any way to program and backtest historical daily Volume Profile and Value Areas over the past 5 to 8 years?

I can obtain Volume Profile and Value Areas day-to-day going forward, but I would like to backtest a strategy around Volume Profile and Value Areas from past data.

Any recommendation of existing programs or indicators or programmers or previous experience trying to accomplish the same thing?

Thank you
 
My first guess is that volume profile and value areas are simply the bell curve of normal distribution. But, it sounds interesting and I guess if you wanted to test some ideas it would make a good exercise. Go at it. It's lots of work. But, in my opinion that's what it takes to build some confidence in what you are doing. Sounds like you need data and a platform? Who is your broker? And.. I guess you could store your VP and VA in arrays. The VP to store volume at levels.. the VA to store yay or nay in VA array. If meets criteria, buy/sell.
 
Actually after reading and thinking more, I need confluence zones volume profile, not just day to day Volume profile. These are Volume Profile conflunces areas over different timeframes that create strong resistance and support levels.

I will keep it simple and leave the volume profile and value areas out of the strategy for now as it is too complex for me right now at my learning stage. The other Pivots, High of Day, Low of Day, Open and Close can be easily calculated and backtested with historical data.

Thanks for all the help.
 
In my opinion, VolumeProfile strategies are appropriate for discretion type trading and very hard to backtest with automation. It's a manual process of going back and checking sets of data and conditions. Needless to say, Volume Profile risk management is one of the hardest things to master because Volume and Price change so rapidly you would need to exit way before your expectations.
Here are some resources that may help you.

1) How to use Volume Profile on SC http://www.optimusfutures.com/tradeblog/archives/volume-profile-sierra-chart/
2) Article explaining how to use Volume Profile http://www.optimusfutures.com/tradeblog/archives/tag/volume-profile/

I hope this helps you further your knowledge.

There is a substantial risk of loss in futures trading.
 
MattZ said:
In my opinion, VolumeProfile strategies are appropriate for discretion type trading and very hard to backtest with automation. It's a manual process of going back and checking sets of data and conditions. Needless to say, Volume Profile risk management is one of the hardest things to master because Volume and Price change so rapidly you would need to exit way before your expectations.
Here are some resources that may help you.

1) How to use Volume Profile on SC http://www.optimusfutures.com/tradeblog/archives/volume-profile-sierra-chart/
2) Article explaining how to use Volume Profile http://www.optimusfutures.com/tradeblog/archives/tag/volume-profile/

I hope this helps you further your knowledge.

There is a substantial risk of loss in futures trading.
More...

First smart response I read from a Broker. Probably in my life.

(the "it's hard and useless to automate" part, not the links to the blog)
 
SimpleMeLike said:
Actually after reading and thinking more, I need confluence zones volume profile, not just day to day Volume profile. These are Volume Profile conflunces areas over different timeframes that create strong resistance and support levels.

I will keep it simple and leave the volume profile and value areas out of the strategy for now as it is too complex for me right now at my learning stage. The other Pivots, High of Day, Low of Day, Open and Close can be easily calculated and backtested with historical data.

Thanks for all the help.
More...

or..
// for one hour
upperVA1hr
lowerVA1hr

// for 4 hr
upperVA4hr
lowerVA4hr

// if price in value areas for timeframes, do something.. or assign weight to etc
 
wintergasp said:
First smart response I read from a Broker. Probably in my life.

(the "it's hard and useless to automate" part, not the links to the blog)
More...

Thank you!(?) The article is educational and was done with the assistance of someone who knows volume profile well. It would help beginners grasp basic volume profiles.
 
MattZ said:
In my opinion, VolumeProfile strategies are appropriate for discretion type trading and very hard to backtest with automation. It's a manual process of going back and checking sets of data and conditions. Needless to say, Volume Profile risk management is one of the hardest things to master because Volume and Price change so rapidly you would need to exit way before your expectations.
Here are some resources that may help you.

1) How to use Volume Profile on SC http://www.optimusfutures.com/tradeblog/archives/volume-profile-sierra-chart/
2) Article explaining how to use Volume Profile http://www.optimusfutures.com/tradeblog/archives/tag/volume-profile/

I hope this helps you further your knowledge.

There is a substantial risk of loss in futures trading.
More...
Thank you for the response and thoughts.

You are correct, it will be too complicated to historical daily calculate and then code the volume profile and value areas during backtesting. Right now I manually and discretionary trade confluence volume and value areas from a service I use who calculate the areas for me.

You right , this effort will be too complicated, so I will think of another strategy to back test for now.

Thanks
 
O(1) said:
My first guess is that volume profile and value areas are simply the bell curve of normal distribution. But, it sounds interesting and I guess if you wanted to test some ideas it would make a good exercise. Go at it. It's lots of work. But, in my opinion that's what it takes to build some confidence in what you are doing. Sounds like you need data and a platform? Who is your broker? And.. I guess you could store your VP and VA in arrays. The VP to store volume at levels.. the VA to store yay or nay in VA array. If meets criteria, buy/sell.
More...
Thank you O for the response.

I use Thinkorswim for day to day charting and discretionary trading. I have never automated a back testing a stratext before. It's all been manual forward testing day to day, which is good experience, but tedious time consuming process.

Currently using NinjaTrader to program and backtest some ideas.
 
SimpleMeLike said:
Thank you for the response and thoughts.

You are correct, it will be too complicated to historical daily calculate and then code the volume profile and value areas during backtesting. Right now I manually and discretionary trade confluence volume and value areas from a service I use who calculate the areas for me.

You right , this effort will be too complicated, so I will think of another strategy to back test for now.

Thanks
More...

In my opinion, it takes 3-5 years in real trading and screen experience to have a grasp of any given method.
Paper trading is too limited in scope, psychology, and execution.
 
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