What is Volume Profile?
Quick Answer: Volume profile maps traded volume at each price level, revealing value areas, rejection zones, and the point of control that guide support and resistance.
Understanding Volume Profile
Volume profile displays traded volume at price levels over a chosen period, highlighting where markets spent time accepting or rejecting value. It complements market profile by focusing on volume instead of time.
Key Elements
High-volume nodes (HVNs) indicate value zones where price consolidated; low-volume nodes (LVNs) mark rejection areas likely to act as support or resistance. The point of control (POC) shows the price with the most traded volume.
Trading Application
Use HVNs to plan range trades and LVNs to anticipate breakout accelerations. Align volume profile levels with structural zones for high-confluence setups.
Practical Considerations
Spot forex lacks centralized volume; brokers provide tick volume approximations. Consider futures data or reliable liquidity-provider feeds for more accurate profiles.
Data Quality
Poor-quality feeds can distort the profile. Validate levels across multiple sources before basing trades on them.
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