Volume Profile
Quick Definition
A charting tool that displays the total volume traded at each price level over a specified period, revealing areas of high and low trading activity.
Key Takeaways
- Volume Profile shows volume traded at each price level, not over time
- Point of Control (POC) is the price with the highest traded volume — a key magnet level
- High Volume Nodes act as support/resistance; Low Volume Nodes are areas price moves through quickly
- The Value Area (70% of volume) represents the fair value range for the specified period
What Is Volume Profile?
Volume Profile is an advanced charting study that displays trading activity distributed over price levels rather than time. Unlike traditional volume bars shown at the bottom of a chart (volume over time), Volume Profile plots horizontal bars at each price level showing the total volume traded at that price during a specified period. Key components include the Point of Control (POC) — the price level with the highest traded volume, the Value Area (VA) — the range where approximately 70% of volume occurred, and High Volume Nodes (HVN) and Low Volume Nodes (LVN). HVNs represent price levels of high agreement where significant trading occurred, often acting as support/resistance. LVNs represent price levels where little trading occurred, which price tends to move through quickly. Volume Profile helps traders identify fair value areas, potential support and resistance levels, and areas where large institutional orders were executed. It is widely used in futures and forex trading and has gained popularity in equity analysis. Different types include Fixed Range, Session, and Visible Range Volume Profiles.
Volume Profile Example
- 1The Volume Profile shows a High Volume Node at $150 with 2 million shares traded — when price pulls back to $150, it acts as strong support because so many positions were established there.
- 2Price rapidly moves through a Low Volume Node between $155-$160, confirming that this price area has little historical significance.
Related Terms
Volume-Weighted Average Price (VWAP)
A trading benchmark that calculates the average price weighted by volume throughout the day, showing the true average price institutional traders paid.
Supply and Demand Zones
Price areas on a chart where significant buying (demand) or selling (supply) previously occurred, expected to cause price reactions when revisited.
Support and Resistance
Key price levels where buying pressure (support) prevents further decline or selling pressure (resistance) prevents further advance.
Market Profile
A charting method that organizes price and time data into a bell-curve distribution, showing where the most trading activity occurred at each price level.
On-Balance Volume (OBV)
A cumulative volume indicator that adds volume on up days and subtracts volume on down days, designed to show whether volume is flowing into or out of a security.
Moving Average
A calculation that averages a security's price over a specific number of periods, smoothing price data to identify trends.
Expand Your Financial Vocabulary
Explore 130+ financial terms with definitions, examples, and formulas
Browse Technical Analysis Terms