Before you start
What you need on your chart
Real volume.
Any stock works. For Nifty or Bank Nifty, use the futures chart: the index itself doesn't trade, so it has no order flow.
Yesterday's volume profile.
A session (daily) profile with the value area at 70%, so you can read yesterday's VAH, POC and VAL.
A footprint chart.
Also called an order flow chart. Several Indian platforms have one now, for example the Order Flow chart on Dhan. It splits every candle into two columns: what was sold in a hurry and what was bought in a hurry, at each price.
Delta and CVD.
Most footprint charts print the delta under each candle. Add a session CVD (cumulative volume delta) indicator below the chart.
A 15-minute chart.
Every signal here is a 15-minute candle closing, not a wick.
Read the footprint
Read the footprint in ten seconds
Absorption candle
The process
Four steps, in the order you'd do them live
Long side first. Prices are an illustration; the shape of the trade is what repeats.
Example chart · 15 min
- 1
Mark yesterday's levels.
From yesterday's profile: VAH, POC and VAL. In the example: VAH 24,660, POC 24,600, VAL 24,500. The VAL is where you'll look for this trade.
- 2
When price falls below the VAL, look for absorption.
Open the footprint and check three things on the candles at the low: big numbers on the sold side in the bottom rows, a deep red delta, and yet price not going any lower. Together they mean someone big is quietly buying everything that's sold, with limit orders. This is a warning sign, not your entry.
- 3
Check the CVD.
The CVD is all the deltas added up through the day, a live scoreboard of buyers against sellers. If price makes a new low but the CVD doesn't, the selling is getting weaker. In the example, the new low (24,470) printed with a delta of +669: CVD 6,703 → 7,372.
- 4
The trigger, the stop, the target.
Buy when a candle's delta turns green and it closes back above the VAL (the example's trigger: delta +4,465, close 24,510). Stop just below the price where the selling got absorbed. First target: the POC. Your reward must be at least 2x your risk.
Price makes a new low, but the CVD makes a higher low. The selling is getting weaker.
The example in numbers
Reward 2.0x the risk. The trade passes.
Buy
24,510
Stop
24,465
Target
24,600
Entry 24,510, stop 24,465 (below the absorbed selling at 24,475 and the new low at 24,470), risk 45 points. Target, the POC 24,600: 90 points away, 2.0x the risk, so the trade passes. If the POC had been closer than twice your risk, you'd skip it.
When not to trade it
Skip it when nobody is absorbing
The fall is real when the selling keeps winning
The delta stays red
candle after candle
The sellers are still the ones in a hurry. There's no buyer taking it.
The CVD keeps falling
with the price
New low in price and a new low in CVD: no divergence, no weakness in the selling.
Price keeps making new lows
the wall breaks
If the low you saw "holding" breaks on big selling, the limit buyer is gone. So is your reason for the trade.
Big news days
results, RBI policy, the Budget
Levels get run over when the whole market reprices. Sit those days out.
Less than 2x
to the first target
If the POC is too close for a 2x reward, skip it, however good the signals look.
Six mistakes that break this setup
Buying the big red candle itself. Absorption is the warning. The entry is the green-delta close back above the VAL.
Reading one cell. Look at the cluster in the bottom rows, and the delta, not a single big number.
Using wicks. A wick back above the VAL is not a signal. Wait for the 15-minute close.
Stop below the whole fall. The risk gets too big and the trade fails the 2x check. Stop just below the absorbed selling.
Ignoring the CVD. If price and CVD are both making lower lows, the sellers are still winning.
An index chart with no volume. Use Nifty or Bank Nifty futures for their order flow.
Practise before you put money on it
Use your platform's bar replay. Go back through 20 days on Nifty futures or a stock you follow, mark yesterday's VAL on each, and every time price falls below it, run the four steps. Note which days showed absorption, which showed a real fall, and how each played out. Trust the setup because of what you saw on your own chart.
Keep this next to your screen
The checklist
Tick every box, or don't take the trade.
Before the open
At the value area low
The trade
Skip it if
0 of 12 ticked
The series
Volume Profile + Order Flow
CASE 01· YOU ARE HERE
Absorption at the VAL
CASE 02
Exhaustion at the VAH
CASE 03· COMING SOON
CVD divergence
CASE 04· COMING SOON
The real breakout
CASE 05· COMING SOON
Trapped traders
CASE 06· COMING SOON
Naked POC magnet
CASE 07· COMING SOON
Stacked imbalances
CASE 08· COMING SOON
Thin zones
Get the next case when it drops.
Follow @compoundwithraunakEducational only, not investment advice. The prices and volumes on this page are an illustration, not a real session. Trading involves risk of loss; size every position so a stop-out is a loss you can afford. Follow @compoundwithraunak for the next case.
Compound with Raunak is not a SEBI-registered investment adviser. All content published on this platform, including trade calls, research, and analysis, is for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell any security. Readers should consult a qualified financial adviser before making investment decisions. Past performance is not indicative of future results.