Volume Profile

Volume profile turns volume on its side. Instead of a bar under each candle, it piles volume at the prices where it traded. Over a session, a week, or a swing, you see which prices were accepted, the fat parts of the distribution, and which were rejected or travelled through quickly, the thin parts. It is the input behind the point of control, the value area, and high and low volume nodes. The profile does not predict. It records where trade occurred.

A profile built from ticks or from one-minute bars is far more honest than one built from daily bars, because a daily bar can only dump its whole volume into a typical price or spread it with a guess. Know which construction you have. Session profiles reset every day. Composite profiles cover a balance area or a swing and answer a different question: where has this entire auction taken place. Do not mix a one-day profile and a one-year profile and call both "the" volume level.

Use the fat part of the profile as the area where the market recently agreed on price. Trade location is better defined at the edges of that area than in the middle of it. Use the thin parts as places price may travel quickly if it returns, because less trade occurred there to slow it down. This is a tendency, not a promise. A new event rewrites the profile as soon as volume prints at new prices.

Drawing a profile on a daily candle chart and trusting the shape. Also treating yesterday's profile as support in a market that has gapped away and built a new distribution. The old volume is still historical. It is not a standing order.

Profile quality is feed quality. No bid-ask data means the profile is a price-volume histogram, not a map of buyers and sellers. And the picture is always backward-looking. The level with the most volume is where the market traded, not where it must trade again.