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How do you read the volume-by-price indicator (PLL concept)?

I watch out for Peak Liquidity Levels (PLL) and Low Liquidity Levels (LLL). The former is a price level where a lot of shares changed hands (high volume in the volume-by-price indicator) while the latter is a price level where little actual trading took place in the recent past (low relative volume in the volume-by-price indicator).

Weekly chart where I construct the PLLs:

Daily chart where I analyze the PLLs:

Price can often launch off a PLL (zone limit or sharp level) and then rally up through a LLL zone aka “a void” without much resistance due to a vacuum of potential sellers (Net buying). PLLs often deviate from pure technical support and resistance levels such as pivots. In my opinion a PLL is a much more reliable level for potential support and resistance. The reason why some traders are always taken out via shakeouts can be contributed to the fact that they place their stops below an obvious technical level. By doing so they falsely believe that they created a nice cushion or leeway while in reality they placed their stop right at a major PLL (This is holy grail material so please don’t tell anyone). Always place your stops with respect to PLLs to avoid shakeouts.

I also distinguish between sharp PLLs and wider PLL zones. Inside a PLL zone, price can roam freely between the upper and lower limits while the argument, between buyers and sellers about the correct price, is still ongoing.

This means that price moves inside the limits of the zones are not meaningful. However, when the zone is wide enough one can “play the limits” as trigger levels for smaller scale-ins and scale-outs.

Oftentimes intraday price moves out of a zone reverse just to make sure to close inside the PLL zone “overnight shelter”. Once price managed to leave the PLL zone for good, it revealed the path of least resistance as it requires net buying (for uptrends) and net selling (for downtrends) to move price from one major PLL to the next through a LLL volume void. Such a move is a meaningful price expansion and catching them is a core part of my swing trading method. Movements inside a PLL zone are not a price trend, they are just noise!


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