Scalping strategy: Cluster analysis | Point of control

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The answer is Point Of Control (POC). POC is a price level or narrow price range where the heaviest volumes were traded. Point Of Control is so important because it shows the place where the most trading took place – where the biggest trading positions were accumulated.

In the order book, we can find POC in clusters. But, before we start, lest clarify what clusters are. Clusters represent the so-called history of the orders executed by each price per chosen timeframe.

Each column in clusters reflects the 5 minutes timeframe in the past where we can see how much contracts were executed within 5 minutes (or another timeframe that you can chose) at each price. If one cluster section is fully green/red it means that the absolute dominance of buyers/sellers was at such price with corresponding execution of contracts number.

Now, after we have figured out the mechanics of clusters we can discuss how to find point of control and what is the use of it. The POC is highlighted with a white border as shown in the screenshot above. The largest volume that passed through a particular price in 5 minutes is always highlighted with a white frame, regardless of the predominance of participants (buyers or sellers).

In order to find a sufficient point of control, we should search for the zone or narrow range of POCs aggregation (2-4 pocs) that forms the support/resistance level. It means that maximum orders were executed within such price range making such level strong and reliable enough that should be solid alternative for a reliable amount of limit orders you get used to search for. Even the color of POC doesn't matter, some of them can demonstrate the dominance of sellers, another—the dominance of buyers, the most important fact is that this zone is the level where the heaviest volumes were executed.

Another useful tip is the defining the hidden power of participants. At the screenshot above you can observe the situation when the clusters demonstrate solid pressure of sellers. Dominance of sellers logically must push the price lower, however, it doesn't happen. On the contrary, the price keep rising going long. This is the sign that there is a huge potential of buyers and this is a good confirmation for long. It means that despite huge sellers` contracts execution that should have been lowered the price, the buyers` force at the moment managed to buy out the sellers and move the price forward. This is how we can define which side of the market (buyers or sellers) is stronger at the moment.

Please be sure that points of control defined in clusters alone doesn't provide you a reliable argument for actions. Please use such knowledge along with your analysis and trading strategy. Always keep an eye on the direction of BTC, do not enter the market against a move caused by strong news, and use the information in this article as confirmation of your trading signals and as part of your trading strategy backed by your risk management.