Volume Profile is a powerful charting tool that shows trading activity at specific price levels rather than over time. Unlike traditional volume bars that show volume per candle, Volume Profile displays volume horizontally at each price, revealing where institutional traders are active. Here is how to use it.
What Is Volume Profile?
Volume Profile creates a histogram on the price axis showing total volume traded at each price level during a specified period.
- Longer bars = more volume at that price
- Shorter bars = less volume at that price
- Reveals institutional accumulation and distribution zones
Key concept: High volume areas indicate price acceptance where buyers and sellers agreed on fair value. Low volume areas indicate price rejection where the market moved quickly through.
Key Volume Profile Components
Volume Point of Control (VPOC)
The price level with the highest traded volume.
- Represents the "fairest" price during the period
- Acts as a strong support/resistance level
- Price often gravitates back to the VPOC
Value Area
The range of prices where 70% of volume occurred.
- Value Area High (VAH): Upper boundary
- Value Area Low (VAL): Lower boundary
- Trading within the value area is "fair"
- Trading outside is at "unfair" or extreme prices
High Volume Nodes (HVN)
Price levels with significant volume concentration.
- Act as support and resistance zones
- Price tends to consolidate at HVNs
- Indicate areas of high interest
Low Volume Nodes (LVN)
Price levels with minimal volume.
- Price moves quickly through LVNs
- Act as transition zones
- Can become support/resistance after a breakout
Volume Profile Reading Example
Stock profile from $95 to $105:
VPOC at $100.50 (longest volume bar)
HVN at $98 and $103 (thick volume clusters)
LVN at $99 and $101.50 (thin volume)
Expect support at $98-$100.50, resistance at $103.
Types of Volume Profiles
Session Volume Profile
Shows volume distribution for a single trading session.
- Best for day traders
- New profile each day
- Useful for intraday levels
Visible Range Volume Profile
Displays volume for whatever is visible on your chart.
- Adapts as you scroll or zoom
- Great for custom analysis
- Flexible timeframe
Fixed Range Volume Profile
Shows volume between two specific points you select.
- Analyze specific moves or ranges
- Great for studying breakouts
- Most customizable option
Periodic Volume Profile
Automatically creates profiles for each period (day, week, month).
- Easy comparison across sessions
- Good for pattern recognition
- Shows value migration over time
Trading Strategies with Volume Profile
Strategy 1: VPOC as Magnet
Price tends to return to the VPOC.
- If price moves away from VPOC, expect a pullback
- Use VPOC as a profit target
- Naked VPOCs (untested from prior sessions) are strong targets
VPOC Trade Example
Yesterday's VPOC at $152 was never tested today.
Price is currently at $149, rallying.
Long entry with target at $152 (naked VPOC).
VPOCs act as magnets until they're tested.
Strategy 2: LVN Breakout
Trade breakouts through low volume nodes.
- Identify LVN between two HVNs
- When price enters the LVN, it often accelerates
- Enter on LVN break, target the next HVN
- LVNs offer fast moves with minimal resistance
Strategy 3: HVN Support/Resistance
Trade bounces at high volume nodes.
- HVNs slow price movement
- Look for reversal patterns at HVNs
- Multiple tests of an HVN can lead to breakout
Strategy 4: Value Area Rules
Use value area for directional bias.
- Open inside VA: Expect range-bound day, fade extremes
- Open above VA: Bullish, buy dips to VAH
- Open below VA: Bearish, sell rallies to VAL
Chart Analysis: Volume Profile Patterns
Single Distribution
One large volume cluster with the VPOC in the middle.
- Indicates market balance
- Strong reference for future levels
- Consolidation pattern
Double Distribution
Two distinct HVNs separated by an LVN.
- Shows two accepted value areas
- The LVN between them is a key level
- Often forms after trend moves
P-Profile
Heavy volume at the top, thin volume (tail) at the bottom.
- Bullish - buying drove price up
- Bottom tail shows rejection of lower prices
- Support at the base of the tail
b-Profile
Heavy volume at the bottom, thin volume (tail) at the top.
- Bearish - selling drove price down
- Top tail shows rejection of higher prices
- Resistance at the top of the tail
Pro tip: When you see a P or b profile forming during the session, it indicates strong directional conviction. Trade in the direction of the fat part of the profile.
Volume Profile vs. Traditional Volume
Understanding when to use each:
- Traditional volume: Shows activity over TIME (volume per candle)
- Volume Profile: Shows activity at each PRICE level
- Volume Profile answers "where" while traditional volume answers "when"
- Use both together for complete analysis
Multi-Timeframe Volume Profile
Combine profiles from different timeframes:
- Daily profile: Intraday trading levels
- Weekly profile: Swing trading levels
- Monthly profile: Major support/resistance
- When levels align across timeframes, they're stronger
Common Volume Profile Mistakes
- Using too short a period: Need enough data for meaningful profiles
- Ignoring developing profiles: Watch how volume builds during the session
- Trading against clear HVNs: They often hold multiple times
- Not considering context: News events can create misleading profiles
Best Practices for Volume Profile Trading
- Always identify the VPOC first
- Mark HVNs and LVNs before trading
- Use the Value Area for daily bias
- Look for confluence with other indicators
- Track naked VPOCs from prior sessions
- Combine with price action for entries
Track Your Volume Profile Trades
Pro Trader Dashboard helps you analyze performance at different volume levels.
Summary
Volume Profile reveals where institutional traders are active by showing volume at each price level. The VPOC indicates fair value, HVNs act as support/resistance, and LVNs mark fast-moving transition zones. Use the Value Area to determine daily bias and look for confluence with prior session levels. Volume Profile gives you an edge by showing what traditional charts cannot.
Learn more: Market Profile Trading and VWAP Indicator.