Most retail traders stare at RSI and MACD while institutions are reading volume profile. Here's why you're missing the bigger picture.
What Is Volume Profile?
Volume profile shows you how much volume traded at each price level over a given period. Instead of showing volume as a single bar under the chart, it distributes volume across price — revealing exactly where the market is most interested.
Key concepts:
- Point of Control (POC) — The price level with the highest volume. This is where the most value was exchanged.
- Value Area (VA) — The range where 70% of volume occurred (usually ±1 standard deviation from POC).
- High Volume Nodes (HVN) — Prices where lots of trading happened (support/resistance zones).
- Low Volume Nodes (LVN) — Prices with little trading (price moves through these quickly).
How Institutions Use Volume Profile
Banks, hedge funds, and prop firms use volume profile to:
- Identify fair value zones for mean reversion
- Spot breakout levels when price exits the value area
- Find where to place limit orders (at HVNs for reversals, at LVNs for breakouts)
Practical Strategies
Strategy 1: Value Area Rejection
When price moves above or below the value area and quickly snaps back, it's a mean reversion signal. Enter toward the POC.
Strategy 2: LVN Breakout
When price approaches a Low Volume Node with momentum, expect a quick move through it. This is where breakouts happen.
Strategy 3: POC Support/Resistance
The POC acts as a magnet. Price will often test it. If the auction is balanced, price oscillates around it.
Free Tools for Volume Profile
You don't need expensive TradingView Pro or Bloomberg. The free toolkit at blog.quant-view.xyz/tools/ includes volume profile indicators and automated value area calculations.
Why This Matters
Volume profile shifts your perspective from "what price is doing" to "where value exists." That's the difference between gambling and trading with an edge.
Want to learn more? Join our community at t.me/GFIL_Trading or Discord where we discuss advanced volume analysis every day.
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