VPVR
The volume profile is an advanced charting Indicator which is available on a Tradingview Pro subscription. It displays trading activity over a specified period and plots a histogram on the chart which reveals dominant and significant price levels based on volume and in essence gives a clear indication of Supply or demand at a certain price rather than volume in a certain period.
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The Levels of Significance
Point of Control (POC) — The price level for the time period with the highest traded volume.
Profile High — The highest reached price level during the specified time period.
Profile Low — The lowest reached price level during the specified time period.
Value Area (VA) — The range of price levels in which a specified percentage of all volume was traded during the time period. Typically, this percentage is set to 70% however it is up to the trader’s discretion.
Value Area High (VAH) — The highest price level within the value area.
Value Area Low (VAL) — The lowest price level within the value area.
VPVR to Determine Resistance and Support
The Resistance and Support levels can be provided by the Volume profile using a reactive method so they constantly change with price action and give a more clear picture to predict future price movements. The Reactive method relies on past price movements at certain price levels and applies a more significant understanding of price reaction at certain meaningful levels.
Support levels will be areas where price will be supported on the way down.
Resistance levels will be areas that resist price on the way up.
A basic understanding of this is that Buyers will enter the market at the bottom of a profile and sellers will enter the market at the top of the profile.
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The Basic Inputs
VOLUME NODES
High Volume Nodes or HVN are the peaks in the volume profile, they signify areas where there was a lot of interest in the market at a specific price. These HVNS form when price spends a great deal of time at a certain price level and can therefore be seen as areas of consolidation. The Node is also a peak as the volume of Selling and buying at these price levels is normally very High the highest Peak or largest HVN is known as the Point of Control (POC). The POC can also be defined as the fair market price currently for an Asset.
The developing POC is also significant as it moves along with price and can be used to see previous areas of high concentrated volume before price moved lower or higher.
Summed up if the Developing POC is making lower Horizontal Shelves price is generally downtrending. If the Developing POC is making higher Horizontal Shelves price is uptrending.
Each Session the Developing POC becomes the new POC for each range
As Seen in the above example the Developing POC is still an important area as it will show you price levels that are still High Volume nodes and when price is downtrending the Developing POC is an area of resistance.
The POC and Developing POC are now on the same level and at the Highest HVN this will in turn be very strong Support.
Low Volume Nodes or LVNs are the opposite to the HVNs they are price areas where there is significantly less trading and in turn less volume. These areas are historical areas where price burst through the price range and there was little market interest at those price levels. LVNs are also the “Unfair Market Price” so price tends to spend very little time in these areas.
Low Volume nodes are sometimes places where traders would put there stops just under a HVN. That is why the LVN sometimes also acts as an area of support because of the liquidity in these areas.
Generally price doesn’t spend a lot of time in these areas and will either be pushed further down in a down trend or bought back up in an uptrend
THE VALUE AREA
The value area is set to 70% in the settings and the Histogram depicts the Value Area as the darker area. The Value Area in essence is the area where 70% of the trading volume takes place.
What is interesting about the value area is that it will also act as resistance in a bearish market and as support in a bullish market.
When the Value area is in the middle of the histogram we are normally in a ranging market
RANGING MARKET
The Value Area can also be shown by the developing value area the blue lines on my chart. These Developing Value Areas are reactive as well and move with price. Seeing the historical areas of value area show us where potential areas of resistance and support and allow us to understand what will happen with price action
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