Volume Profile displays the total volume traded at each price level over a specified period (session, week, month, or visible range). Unlike time-based volume histograms, volume profile shows WHERE trading activity concentrated. Key levels include the Point of Control (POC), Value Area, and High/Low Volume Nodes.
Point of Control (POC): price with highest volume traded, Value Area: range containing 70% of volume (VAH and VAL boundaries), High Volume Nodes (HVN): price levels with heavy trading (act as magnets/support/resistance), Low Volume Nodes (LVN): price levels with thin trading (price moves quickly through these), Volume profile shapes: P-shape (buying tail), b-shape (selling tail), D-shape (balanced)
Buy at VAL in an uptrend (discount entry within value), Short at VAH in a downtrend (premium entry within value), Breakout from value area with volume = trend trade, POC acting as support/resistance for entry
Target rotation from one extreme of value to the other (VAL → VAH or vice versa), Stop beyond the value area extreme, Extended targets when price breaks out of the value area
30M to Daily for volume profile analysis; all timeframes for entries
Overlay multiple time-period volume profiles — the naked (developing) POC of the current session vs. the composite (multi-day) POC creates powerful confluence zones.
Absorption occurs when large limit orders absorb aggressive market orders without allowing price to move. For example, price hits a level where heavy sell market orders are absorbed by even larger buy limit orders — the aggression is neutralised. Exhaustion is when aggressive buying/selling loses momentum, visible through declining delta and volume at price extremes.
Delta is the difference between aggressive buying volume (market orders hitting the ask) and aggressive selling volume (market orders hitting the bid) within a candle or time period. Cumulative delta tracks the running total over time. Divergence between price and cumulative delta reveals whether rallies/selloffs have genuine buyer/seller conviction.
The Value Area is the price range containing approximately 70% of a session's or period's total traded volume. The Value Area High (VAH) is the upper boundary and Value Area Low (VAL) is the lower boundary. These levels act as dynamic support/resistance and are central to market profile and volume profile trading strategies.
Market Profile organises price data into 30-minute periods called TPOs (Time Price Opportunities), creating a bell-curve distribution that reveals market behaviour patterns. Developed by J. Peter Steidlmayer at the CBOT, Market Profile identifies day types (Normal, Trend, Double Distribution, etc.) and provides a statistical framework for understanding auction market theory.