Understanding Volume & Consolidation

VOLUME

There is a misconception in trading about consolidation. In the

retail world, a consolidation is known as “choppy” and should be
avoided. This only stems from a lack of understanding the term
consolidation and exactly what happens within a consolidation.
The greatest levels of volume of orders being transacted is almost
always within these consolidation periods. Understanding
consolidations is another key and integral part to understanding
the engineering of the markets. Remember, BFI’s account for over
80% of all orders being transacted on a daily basis. They own this
game, they control it, and they run it exactly as they desire. We
have no say in this and it is very important that we follow them
blindly, and to do that we need to understand what they are so we
can take advantage of consolidations them instead of avoiding
consolidation.

Please note; It is not advisable to trade within a consolidation,

especially for inconsistent traders and beginners. The
consolidation trade opportunity is discussed in the Manipulation
of Consolidation section; but the essence of it is to enter outside
of the consolidation , and not to trade within the consolidation.
First, let us discuss VOLUME.

In the following image, we use a volume tool to measure the range

of the candle see the amount of OFV transacted within this single
candle. A new BFI Trader must understand that this could be a 1-
minute candle, or it could be a 1-month candle; what is the
difference?

Using a Fixed Range Volume tool across a single candle.

If this was a 1 minute candle, then our tool will measure the
volume within that fixed range candle.
If this was a 1-month candle, then our tool will measure all the
OFV transacted within that fixed range in this single monthly
candle.
Let us show you where to find this Fixed Range tool on
TradingView in order to measure the OFV within any fixed
range on any timeframe.

Where to find the Fixed Range Volume tool on TradingView.

Understanding what is going on at point A and at point B is
critical to understanding precisely “how” these BFI’s operate.
 Using a Fixed Range Volume tool across a single candle.
Two key points to be made, at A and at B.
A. Here we have outlined the largest levels of OFV

B. Here we have outlined the POC, known as the Point Of

Control; which is the price-level at which the highest level of
volume was transacted. We do not use this level as a support
or resistance level, nor do we use it for any entry's. It is just a
price-level where the most contracts or "lots" were transacted
at. 

Within these bars is VOLUME, or just OFV (order-flow volume)

which are just orders. A large mix of buy-orders & sell-orders,
each in different quantities. Sometimes there are more buy-orders,
or Buy-OFV, than there are sell-orders, or Sell-OFV. There is
stack of Buy-OFV, or a pool of liquidity, scattered around any
price-chart. There are some pools of liquidity where the Buy-OFV
greatly outweighs the Sell-OFV, and there are pools of liquidity
where it is the Sell-OFV that is dominating in large quantities, or
volume. The flow of this volume of orders is important to
understand, and this is the engine behind the markets.
Price Consolidation

Price consolidation, also known as ranging, basing, pausing, etc.,

are all terms that refer to the same thing being discussed in this
section. Price is ranging in between two price-levels. As we all
know, consolidations come in all different shapes and sizes. Some
are a single candle, and some are many candles; in the end, it is
ends up moving sideways. We do not know how long a
consolidation will last, but it is advised to be prepared WHEN the
consolidation period comes to an end, and another impulsive move
is about to begin. Let us take a closer look at some examples of
volume and consolidation in order to understand why the two
words are very related and should be synonymous with one
another; “consolidation” and “heavy volume”.

Why does every consolidation always have very heavy levels of

volume? Because that is the smartest way a BFI can pile up a
bunch of orders without moving price too much against them. You
must remember that the BFI’s control the game, and they have
exquisite way of loading up on a position and exquisite ways of
unloading a huge position. This will not work well for them if
price is moving in an impulsive movement type of fashion; but in
certain cases of consolidation, the price is stuck within a tight
range between two price-levels, which is exactly what they need
to begin their accumulation of very large positions. When they
accumulate a bunch of Sell-OFV, typically at or near a Sell-Zone,
price will move downwards when the BFI’s have completed their
position accumulation.When they accumulate a bunch of Buy-
OFV, typically at or near a Buy-Zone, price will be pushed
upwards when the BFI’s have completed the accumulation of all
their long positions.

Volume simply helps us understand whether or not there exists a

“BFI presence”; if there is a large amount of volume as price is
moving in a “choppy” way, then there is strong impulsive move
that is about to occur.

The key concept here to understand is that only during periods of

consolidation can a BFI accumulate large positions and transact
large levels of OFV within a fixed range or boundary without
moving price too much.

When a BFI finishes Sell-Stacking , the downwards impulsive

move will occur.

When a BFI finishes Buy-Stacking , the upwards impulsive

move will occur.

The best time for a BFI to stack orders is within a

consolidation area. When price is “stuck” between two price-
levels, this is when the BFI are likely very hard at work,
transacting huge levels of volume; AKA “orders”.

In the following images, try to notice that the periods of

consolidation tend to have the largest levels of volume, whereas
the impulsive moves that occur before and after the
consolidation, tend to have very little volume; empty peanuts.
That is because all the buying or selling that was done at the
origin of the move, at the consolidation, or the base, is what
CAUSES the impulsive move.

BFI’s rarely transact when price is moving strongly. They are

already positioned and because they have already entered the
market is the same reason why price is now moving strongly.
Do not believe that strong impulsive movements, or large
strong candles, have huge volume. That is not true. The huge
volume is found in the consolidation or the origin of these
impulsive moves, and very little volume can be found within
these strong and large candlesticks.

This is a conceptual example on how Buy-Stacking occurs during a period of consolidation. ; typically
at/near a Buy-Zone.
When a BFI finishes Buy-Stacking , the upwards impulsive
move will occur.

This is a conceptual example of how Sell-Stacking occurs during a period of consolidation; typically at/near
a Sell-Zone. 
When a BFI finishes Sell-Stacking , the downwards impulsive
move will occur.
Most of the volume will be found within a period of consolidation; in this case this was a Sell-Stacking.
The impuisive moves before and after a consolidation tend to have little volume.
Most of the volume will be found within a period of consolidaiton; in this case this was a Sell-Stacking.
The impuisive moves before and after a consolidation tend to have little volume.
Most of the volume will be found within a period of consolidaiton; in this case this was a Buy-Stacking.
The impuisive moves before and after a consolidation tend to have little volume.
 Summary 

The above image is a good summary of this section; there is the

largest volume during consolidation, and little volume during the
impulsive move that occurs AFTER the BFI's have stacked huge
amounts of OFV.
Remember, we are trying first to understand the
engineering of the system first and foremost.
Trading, or entering, or making money, comes only
after this is understood properly and applied properly
on real charts. It makes no sense to enter and we do
not understand the arena into which we are entering.
This is one of the biggest problems in trading that I
have seen over the years; they do not have a proper
understanding of the engineering of the system of the
markets they are trading.
Most retail traders are given the standard retail
“slanted-lines + indicators” approach as to how to trade
the markets. This may work normally and it may make
some normal gains, but that is precisely the approach
we avoid.

The BFI Trading Course is for the elite BFI Trader; we

avoid the standard retail “slanted-lines + indicators”
approach that is in the mainstream retail market; a BFI
Trader goes deeper into their understandings into
“why” movements happen (in terms of a movement of
OFV) and they attempt to understand the rules of the
road; first and foremost. Then and only then can we
begin driving properly on the BFI Roads AKA “trading”.

We have not touched yet on the executing of any

single trade. We know that we will trade where the best
deals are, at these or around these zones, but a BFI
Trader must understand the basics of the way the
architecture is designed first before ever trading.
Anything that has to do with the details on how to take
a trade, is discussed in Part 2: Flawless Execution;
the details regarding the “entering” of a potential
great deal. That is an entirely separate and
completely different process and step
than Analysis; which is just analyzing a price-chart to
extract information from it.

Do not confuse “ANALYSIS’ with

“EXECUTION”. They are entirely separate and most
traders have problems with the execution aspect of
being a manual trader. This is the part that most
traders spend the most time on, but as we will see in
Part 2, “execution” is only a few seconds; it is simply a
transfer of three price-levels, [entry target stop], into a
trading platform, and submitting the order. Let us now
discuss the “consolidation”, which is where we have
learned that it is where the heaviest levels of volume
are being transacted.

As a new BFI Trader, maybe you may not associate

“consolidation” as a synonymous term and you may be
wondering why these two terms are grouped together;
it is because to me they are synonymous, meaning
they mean the same thing. Re-wire yourself and train
your eyes to see these two terms, “consolidation” and
“volume”, as the same thing.
In the next section, we will learn about the way a
consolidation is manipulated; the Manipulation of
Consolidation.