Market Profile is an advanced charting technique that displays price distribution over time, revealing where the market has spent the most time trading. Developed by Peter Steidlmayer at the Chicago Board of Trade, it gives traders insight into institutional activity and fair value. Here is how to use it.
What Is Market Profile?
Market Profile organizes price data into a bell-curve distribution that shows:
- Where price traded (vertical axis)
- How long price stayed at each level (horizontal axis)
- The developing auction process throughout the session
Key concept: Market Profile is based on Auction Market Theory. Markets constantly seek fair value where buyers and sellers agree on price. The profile shows this negotiation visually.
Key Market Profile Components
Time Price Opportunity (TPO)
TPOs are the building blocks of Market Profile. Each letter represents a 30-minute time period, stacked horizontally at each price level.
- More letters at a price = more time spent there
- The profile builds throughout the day
- Wide profiles indicate acceptance, narrow profiles indicate rejection
Point of Control (POC)
The POC is the price level with the most TPOs - where the market spent the most time.
- Represents fair value for that session
- Acts as a magnet - price tends to return to it
- Strong support/resistance when tested later
Value Area (VA)
The Value Area contains approximately 70% of the day's trading activity.
- Value Area High (VAH): Top of the value area
- Value Area Low (VAL): Bottom of the value area
- Price within the VA is considered fair value
- Price outside the VA is considered unfair (extreme)
Market Profile Example
Session range: $98 to $106
POC: $102 (longest horizontal line of TPOs)
Value Area: $100.50 to $103.50
This tells us fair value is around $102, with the market accepting prices between $100.50 and $103.50.
Profile Shapes and What They Mean
Normal Day (Bell Curve)
A balanced day with a clear bell-shaped distribution.
- Market found equilibrium
- 70% of activity in the value area
- Good reference for future support/resistance
Trend Day (Elongated Profile)
Price moves in one direction with minimal retracement.
- Single print areas (gaps in the profile)
- POC near one extreme
- Strong directional conviction
Double Distribution Day
Two distinct value areas separated by single prints.
- Indicates a breakout and new value discovery
- Single prints are potential support/resistance
- Often occurs on news days
P-Shape Profile
Long tail at the bottom, fat body at the top.
- Buyers drove price higher
- Short covering or aggressive buying
- Bullish implications
b-Shape Profile
Fat body at the bottom, long tail at the top.
- Sellers drove price lower
- Long liquidation or aggressive selling
- Bearish implications
Trading Strategies with Market Profile
Strategy 1: Value Area Test
Trade rejections at value area boundaries.
- Price approaches previous day's VAH or VAL
- Look for rejection candles at these levels
- Enter in the direction of the rejection
- Target the POC or opposite value area boundary
Strategy 2: POC as Support/Resistance
The POC acts as a magnet and key level.
- Price often returns to test the developing POC
- Prior session POCs provide strong reference points
- Naked POCs (untested) are powerful levels
POC Trade Example
Yesterday's POC is at $150.25 (untested today).
Price rallies from $148 toward $150.25.
Watch for rejection at the POC for a short entry.
Or, if price accepts above the POC, look for longs targeting VAH.
Strategy 3: Open Relative to Value Area
The opening price relative to the prior value area predicts the day's behavior.
- Open within VA: Expect a balanced, rotational day
- Open above VA: Bullish bias, watch for value area acceptance
- Open below VA: Bearish bias, watch for value area rejection
Strategy 4: Single Print Fill
Single prints often get filled as the market seeks balance.
- Identify single print areas from prior sessions
- These represent imbalances in the auction
- Price tends to return to fill these areas
Chart Analysis: Reading Market Profile
When analyzing a Market Profile chart:
- Identify the POC first - this is fair value
- Mark the Value Area High and Low
- Note any single print areas
- Compare today's developing profile to prior sessions
- Watch for profile shape as the day progresses
- Track if price is accepting or rejecting at key levels
Composite Profiles
Composite profiles combine multiple sessions to show longer-term value.
- Weekly composite: Shows the week's fair value
- Monthly composite: Major support/resistance levels
- Composite POC is a powerful level for swing traders
Pro tip: When the daily POC aligns with a composite POC, that level becomes significantly stronger. These confluences offer the highest probability trades.
Market Profile vs. Volume Profile
Understanding the difference:
- Market Profile: Based on TIME at each price (TPO)
- Volume Profile: Based on VOLUME at each price
- Both reveal similar information but from different angles
- Many traders use both together for confirmation
Common Market Profile Mistakes
- Using only today's profile: Prior sessions provide context
- Ignoring the developing profile: Watch how the profile builds
- Trading every level: Focus on high-probability setups
- Forgetting time context: Profiles mean different things at different times of day
Best Practices for Market Profile Trading
- Start by observing profiles without trading
- Mark key levels before the market opens
- Focus on the POC, VAH, and VAL
- Use multiple timeframe profiles for confluence
- Combine with traditional technical analysis
- Keep notes on profile patterns and outcomes
Analyze Your Market Profile Trades
Pro Trader Dashboard helps you track performance at different market profile levels.
Summary
Market Profile reveals where price has spent time, showing fair value through the Point of Control and Value Area. Use profile shapes to understand market sentiment and trade rejections at key levels. The POC acts as a magnet, and value area boundaries provide excellent entry opportunities. Combined with traditional analysis, Market Profile gives you an edge in understanding institutional activity.
Learn more: Volume Profile Guide and Volume Analysis.