Volume Profile
Count volume by price instead of by time: which price level traded the most?
Every lesson has an interactive simulation you can drag and play, plus a quick quiz. Sign up free to use them and save your progress automatically. Here is the text version of this lesson.
Not sure yet? Try the first lesson (no sign-up needed)「On-Balance Volume (OBV)」。
Text version · Volume & Volatility Indicators, lesson 4: “Volume Profile”
Count volume by price instead of by time: which price level traded the most?
Lay volume out by price
A volume profile counts "how much traded at each price," not "how much traded each day." The longest bar is the point of control (POC), which often becomes strong support or resistance.
In a vacuum, price moves fast
Thinly traded prices lack resting orders and holders, so price tends to pass through quickly; densely traded prices are where lots of people's costs sit, so price tends to stall and get fought over.
Bin size changes the shape
Coarser price bins give a smoother shape but lose more detail; finer bins add noise. The rough location of the POC is usually stable, but thin zones can vanish with coarse bins. Which stretch of time you count also changes the whole picture.
Key takeaways
- A volume profile shows how much traded at each price range, like a map of where positions were built.
- The price with the most trading is the point of control (POC). Many people's cost basis sits there, so it often acts as support or resistance.
- Price ranges with little trading lack resting orders, so price often moves through them quickly. That's a tendency, not a certainty.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Find the longest horizontal bar on the right: what's the name for that price level? Read its price off the indicator card.
- Click "Guess: after falling into the vacuum." After answering, see how many candles price took to cross the thin zone and how many it spent near the POC.
- Drag price bins from 24 to 8 and to 40: does the POC's location change much? Can you still see the thin zones?
- Play from the start: before bar 50, how does the shape of the volume profile slowly grow?
Quiz and explanations
- 1. What's the price level with the most volume in a volume profile called?
- Answer: The POC (point of control).Point of Control.
- 2. When price enters a low-volume "vacuum", it usually…
- Answer: Moves through quickly.There are few resting orders or positions there.
- 3. Price falls from above into a large high-volume zone (around the POC). What's the more common behavior?
- Answer: It lingers nearby with a back-and-forth tug-of-war.Many participants' costs are concentrated there, so buyers and sellers tend to battle it out.
Terms in this lesson
- POC: The point of control: the price with the most volume in a volume profile, often acting as key support or resistance.
- volume profile (Volume Profile): Total volume traded at each price range, showing which prices were most active.