While most traders look at volume over time (daily bars), analyzing volume at price levels provides a different and often more useful perspective. Volume profile shows you where the most trading activity has occurred, revealing key support and resistance levels that traditional charts miss.
What is Volume at Price?
Volume at price (also called volume profile or volume by price) is a charting technique that displays the amount of trading volume that has occurred at each price level over a specified period. Instead of seeing volume as bars at the bottom of a chart, you see it as a horizontal histogram on the price axis.
Key insight: Volume at price shows you where traders have agreed on value. High-volume price levels represent areas of acceptance, while low-volume areas represent price levels where traders did not want to trade.
Key Volume Profile Concepts
Point of Control (POC)
The Point of Control is the price level with the highest trading volume. This is where the most trading activity occurred and often acts as a magnet for price. The POC represents the fairest price where both buyers and sellers were most active.
Value Area
The value area encompasses approximately 70% of the trading volume around the POC. It represents the range where most trading occurred and where market participants agreed on fair value. The value area has two boundaries:
- Value Area High (VAH): Upper boundary of the value area
- Value Area Low (VAL): Lower boundary of the value area
High Volume Nodes (HVN)
High volume nodes are price levels with significantly above-average volume. These levels tend to act as support or resistance because many positions were established there. Traders often defend these levels.
Low Volume Nodes (LVN)
Low volume nodes are price levels with below-average volume. These areas were rejected by the market and price tends to move quickly through them. LVNs can act as trigger zones for breakouts.
Example: Reading Volume Profile
Stock ABC volume profile for the past month:
- Price range: $45 to $55
- Point of Control: $50 (highest volume)
- Value Area High: $52
- Value Area Low: $48
- High Volume Node: Also at $47 (secondary peak)
- Low Volume Node: $53 (very little trading here)
This tells us fair value is around $48-$52, with strong support at $50 and $47. The LVN at $53 suggests price will move quickly through that level if it gets there.
How to Use Volume Profile in Trading
Support and Resistance
High volume nodes act as support when price is above them and resistance when price is below. Unlike arbitrary horizontal lines, these levels have actual trading activity backing them.
Entry Points
Use volume profile to identify optimal entry points:
- Buy at the POC or VAL in uptrends
- Sell/short at the POC or VAH in downtrends
- Enter breakout trades when price escapes the value area
Stop Loss Placement
Place stops beyond significant volume nodes:
- For longs: Stop below the nearest HVN or VAL
- For shorts: Stop above the nearest HVN or VAH
Target Identification
Use LVNs and HVNs for profit targets:
- Price tends to move quickly through LVNs
- Price tends to stall at HVNs
- Target the next HVN for realistic profit expectations
Trade Setup Using Volume Profile
Stock XYZ pullback trade:
- Trend: Uptrend, price above all moving averages
- POC: $75 (strong support from high volume)
- VAL: $73 (lower boundary of value area)
- Current price: $74 (pulling back into value area)
- Entry: $74 (inside value area, above VAL)
- Stop: $72.50 (below VAL)
- Target: $80 (prior HVN and resistance)
- Risk/Reward: $1.50 risk for $6 reward (4:1)
Volume Profile Patterns
P-Shaped Profile
High volume concentrated at the top of the range with a tail lower. This pattern suggests buying exhaustion and potential reversal lower. Often seen at market tops.
b-Shaped Profile
High volume concentrated at the bottom of the range with a tail higher. This pattern suggests selling exhaustion and potential reversal higher. Often seen at market bottoms.
D-Shaped Profile
Volume concentrated in the middle with balanced distribution. This is a healthy, balanced market where fair value is clear. Good for range trading strategies.
Double Distribution
Two distinct high volume areas separated by an LVN. This suggests the market has two different value areas and may be transitioning between them.
Time-Based Volume Profiles
Session Profile
Volume profile for a single trading day. Useful for day traders to identify intraday support and resistance.
Weekly Profile
Aggregated volume over a trading week. Good for swing traders to identify weekly value areas.
Monthly/Yearly Profile
Longer-term volume distribution. Useful for position traders and identifying major support/resistance zones.
Visible Range Profile
Volume profile for whatever range is visible on your chart. Automatically adjusts as you zoom in or out.
Trading Strategies with Volume Profile
Strategy 1: Value Area Fade
- Identify the value area for your timeframe
- When price moves outside the value area, it often returns
- Fade (trade against) moves outside the value area
- Target a return to the POC
- Stop beyond the extreme of the move
Strategy 2: Breakout from Value
- Monitor price at the VAH or VAL
- Look for acceptance outside the value area (multiple candles closing outside)
- Enter in the direction of the breakout
- Target the next HVN or prior value area
- Stop inside the value area
Strategy 3: POC Bounce
- Identify the POC from a recent significant trading range
- Wait for price to pull back to the POC
- Enter when price shows signs of bouncing
- Stop below the POC (for longs)
- Target prior highs or the next HVN
Value Area Fade Example
Stock DEF shows a clear value area:
- VAH: $62
- VAL: $58
- POC: $60
- Price spikes to $64 (outside value area)
- No follow-through buying
- Action: Short at $63.50
- Stop: $65 (above spike high)
- Target: $60 (POC)
Combining Volume Profile with Other Tools
With Traditional Support/Resistance
When traditional S/R levels align with HVNs or POC, the levels become stronger. Confluence between methods increases reliability.
With VWAP
VWAP provides a dynamic volume-weighted average price. When VWAP aligns with POC, both point to the same fair value.
With Candlestick Patterns
Look for reversal candlestick patterns at HVNs for high-probability entry signals.
With Options Flow
Dark pool and options activity at HVN price levels adds confirmation that institutions are active there.
Analyze Volume at Price Levels
Pro Trader Dashboard includes volume profile tools to help you identify key price levels, value areas, and high-probability trading zones. Make better entry and exit decisions with volume analysis.
Summary
Volume at price analysis provides a unique perspective on market structure that traditional charts miss. By identifying where the most trading has occurred, you can find meaningful support and resistance levels, optimal entry points, and logical stop and target placements. Incorporate volume profile into your analysis for more informed trading decisions.
Want to learn more about volume analysis? Check out our guides on climax volume patterns and volume divergence trading.