Cluster chart - a type of chart that is the basis of cluster analysis. It shows at what price and at what time volume was traded. The chart consists of cluster bars, which in turn consist of rectangles (clusters), within which the following information is embedded:

  • what volume was traded in the asset

  • was more volume bought or sold at this price

  • how much more volume was bought or sold at this price

  • the number of buy and sell trades at this price

  • how much more the number of buy trades was compared to sell trades.

So what is the purpose of volume analysis?

  • Identification of large transaction zones. The cluster chart helps to see where the largest volumes of transactions were, which allows assessing the activity of market participants.

  • Definition of accumulation zones. Zones with high volume can become reversal or continuation points, providing traders with guidelines for opening or closing positions.

  • Assessment of the interaction between market and limit orders. The analysis allows for an objective understanding of how market orders interacted with limit orders and how this reflects on the price.

Here is an example, on the charts showing the following:

  • Blue rectangles: accumulation zones of volumes. There is increased interest from participants in these price ranges.

  • Red rectangle: at the second accumulation there were significant sales. However, the price drop seems insignificant in relation to the previous minimum.

  • In this situation, it is particularly interesting to consider the possibility of opening a long position. Because sales, it seems, have reached the price range of limit accumulation (support), which could potentially stop further price decline.

Next, we observe a growth of more than 10% (red arrow), after which clusters began to form on the volume from above (blue rectangle). It is possible that participants started to take profits from their positions earlier. Now the task is to evaluate how volume will affect price movement further.

And what about the advantage?

We have arrived! The cluster chart reveals the full picture of what is happening in the market. Under the cluster chart, like under an X-ray, we see much more information about the market situation and can make better trading decisions, which gives us an advantage over other participants. In fact, I have already demonstrated this in detail with screenshots and descriptions to make it easier for you to understand.

There are certainly additional indicators on the platform such as Heat Map, BAS Chart, and Dashboard, which help us analyze the market situation. But we must not forget that the primary and main factor for analysis in decision-making should remain volume and its influence on price.

Conclusion

Objective assessment of volumes and understanding their influence helps to build a trading strategy based on real data rather than intuition. Use the cluster chart as a foundation, adding additional factors for precise analysis. And over time, you will always be profitable!

As mentioned in the training from Resonance👇

"We are forming a community of rational and professional individuals capable of discarding intuition and false beliefs, prioritizing the analysis of objective facts."