Volume by price instead of time
Traditional volume bars answer how much activity occurred during each candle. Volume Profile asks how much activity was attributed to different price areas over the selected range.
Point of Control
The Point of Control, often abbreviated POC, is generally the price level or price bin with the greatest measured volume inside the selected profile.
Value Area
Many implementations define a value area containing a selected percentage of profile volume, often around 70%. Exact calculation procedures can differ between platforms.
High- and low-volume areas
High-volume nodes indicate prices where substantial measured activity accumulated. Low-volume areas indicate comparatively less activity in the profile.
Data and implementation limitations
Profile results depend on the selected time range, price-bin resolution and underlying trade data. Different charting platforms can therefore produce somewhat different profiles.
Historical volume at a price does not prove that the same liquidity or interest remains there now.
How a profile is constructed
A volume profile distributes traded volume across price levels or price bins for a selected observation range. The result depends on the underlying trade data, the chosen range and how the software assigns volume to prices.
Changing the profile range or bin size can change the shape of the profile, the location of high- and low-volume areas and sometimes the reported Point of Control.
Historical volume is not resting liquidity
Volume Profile summarizes transactions that already occurred. An order book, by contrast, displays currently resting orders that have not necessarily traded.
A high-volume node therefore shows where substantial historical trading occurred within the selected data; it does not prove that the same quantity of executable liquidity is currently waiting at that price.
Compare profiles using consistent settings
Profiles from different exchanges, periods or software settings can differ because the underlying transactions and construction methods differ.
For research, document the venue, market type, profile range, resolution and value-area methodology so that the same rule can be reproduced.
Historical concentration of trading can provide market context, but it does not require price to stop, reverse or revisit a level.
Key takeaways
- Volume Profile organizes historical volume by price.
- POC generally identifies the highest-volume price bin.
- Value Area and node calculations can vary by implementation.
- Historical volume does not guarantee future support or resistance.
Sources & further reading
This lesson is educational material. Market structure, exchange rules, fees, margin requirements and derivatives mechanics can differ by venue and can change over time. Verify current rules with the venue you use.