Volume profile: POC, value area and VWAP to find the levels that matter

Classic charts spread information over time. A volume profile spreads it by price: it shows, as a horizontal histogram, the total quantity traded at each level over a given period. At a glance you see where the market judged price “fair” and where it barely stopped.

The POC (Point of Control)

The POC is the price level with the highest traded volume. It is the most “accepted” price of the period, where buyers and sellers met the most. It often acts as a magnet when price drifts away without conviction, and as support or resistance when price comes back to test it from outside.

A POC that has not been revisited after its session ends is called a naked POC. Many traders watch it as a potential target.

The value area (VAH and VAL)

The value area is the price range holding roughly 70% of the period’s volume. That figure, inherited from the Market Profile developed at the Chicago Board of Trade, roughly matches one standard deviation around the mean of a normal distribution. It is built by starting at the POC and adding the most active levels on either side until 70% is reached.

• VAH (Value Area High): the upper bound.
• VAL (Value Area Low): the lower bound.

Inside the value area the market is in balance, rotating around the POC. A clean break above VAH or below VAL signals a search for new value — an imbalance that can start a trend.

Volume nodes: HVN and LVN

A profile is almost never a neat bell. It has bumps and gaps:

• HVN (High Volume Node): a heavy-volume area. Price tends to slow down and settle there.
• LVN (Low Volume Node): a thin area. The market crossed it fast, often in a directional move. It tends to cross it fast again — or reject it.

In practice, an LVN between two HVNs is often a good place for a stop (price should not linger there) or a turning point.

VWAP

VWAP (Volume-Weighted Average Price) is the average price of every trade in the session, weighted by volume:

Institutional managers use it to benchmark execution quality: buying below VWAP means paying less than the market average that day. For a trader, price above VWAP says the session’s buyers are broadly in profit, and vice versa. VWAP works as the dividing line of intraday bias.

Three ways to use it

1. Value-area rejection

Price breaks below VAL but finds no extra aggressive sellers (fading delta on the footprint) and moves back inside value. The logical target becomes the POC, then VAH.

2. Acceptance outside value

Price breaks VAH and holds above it for several candles with volume. Value is migrating higher; the old VAH can act as support on a pullback.

3. The 80% rule

Popularised by Market Profile practitioners: if price opens outside the previous day’s value area, comes back inside and stays there for two consecutive 30-minute periods, it has a good chance of crossing the whole area. It is a statistical observation, not a law: test it on your market before relying on it.

Limitations

A profile depends entirely on the chosen period: a one-hour profile and a one-week profile tell different stories. Pick the period that matches your trading horizon and always combine the profile with price structure and order flow. Finally, measure your results: the simulator lets you check, trade after trade, whether your VAH/VAL entries really have positive expectancy.