Volume Profile Trading: POC, Value Area & HVN/LVN Guide

See Volume Profile Patterns

Click through different profile shapes to understand what they signal about market sentiment:

What Is Volume Profile?

Volume profile is a charting tool that displays trading volume at each price level rather than each time period. Traditional volume bars show how much was traded per candle. Volume profile shows where that trading occurred.

This distinction is crucial. A candlestick chart might show a large green candle, but it won't tell you at which price level most of the buying happened. Was it at the bottom of the candle (accumulation) or the top (FOMO buying)? Volume profile answers this.

The profile creates a histogram on the Y-axis showing volume at each price. Longer bars mean more volume traded at that price—more agreement between buyers and sellers. Shorter bars mean price moved through quickly with little interest.

Key volume profile concepts:

• Point of Control (POC): The price with highest volume—fair value and price magnet
• Value Area (VA): Range containing ~70% of volume—the "accepted" price zone
• High Volume Nodes (HVN): Areas of high activity—support/resistance zones
• Low Volume Nodes (LVN): Areas of low activity—breakout/rejection zones

The Point of Control (POC)

The Point of Control is the single price level with the most traded volume. It represents the "fair value" price where buyers and sellers found the most agreement. The POC is arguably the most important level on any chart.

Why the POC matters:

• Price magnet: Price tends to gravitate toward the POC. When price moves away, it often returns.
• Mean reversion anchor: Extended moves away from POC offer reversion trades back to fair value.
• Support/resistance: Previous session POCs act as key levels on subsequent days.
• Trend confirmation: POC shifting higher = bullish. POC shifting lower = bearish.

Trading the POC: When price is significantly above the POC with declining momentum, consider shorts targeting POC. When price is significantly below POC with selling exhausting, consider longs targeting POC. The POC is your default target for mean reversion trades.

Understanding the Value Area

The Value Area contains approximately 70% of total traded volume. It's bounded by the Value Area High (VAH) at the top and Value Area Low (VAL) at the bottom. This range represents where "value" was established.

Value Area trading rules:

• Inside VA: Price is at fair value. Range trading conditions—buy VAL, sell VAH, target POC.
• Above VAH: Price is extended to the upside. Either trend continuation or mean reversion setup.
• Below VAL: Price is extended to the downside. Either trend continuation or mean reversion setup.
• VA breakout: If price breaks and holds outside VA, it often travels to find the next value area.

The 80% rule: If price opens outside the value area and then moves back inside, there's an 80% chance it will travel to the opposite side of the value area. This is a powerful setup for intraday traders.

HVN vs LVN: Know the Difference

High Volume Nodes and Low Volume Nodes behave very differently:

Reading Profile Shapes

The shape of the volume profile tells a story about market sentiment. Different shapes indicate different market conditions and offer different trading opportunities.

D-Shape (Balanced Profile)

A bell-shaped profile with POC in the middle and volume tapering at extremes. This indicates a balanced market where price found acceptance. Trade the range: buy VAL, sell VAH, target POC. Wait for a breakout with volume for directional trades.

P-Shape (Distribution)

POC and high volume concentrated at the top of the profile. This suggests distribution— smart money selling to retail buyers at high prices. Bearish bias. Look for shorts when price fails to hold above the HVN at top.

B-Shape (Accumulation)

POC and high volume concentrated at the bottom of the profile. This suggests accumulation—smart money buying from retail sellers at low prices. Bullish bias. Look for longs when price holds above the HVN at bottom.

Double Distribution

Two distinct high volume areas separated by a low volume node. This indicates indecision—price is trying to establish a new value area. The LVN between them is a decision point. A break through it targets the opposite distribution.

Volume Profile Trading Strategies

Strategy 1: Value Area Fade

When price touches VAL or VAH, fade the move back toward POC. Entry: At VA boundary. Stop: Outside the value area (VAH+buffer for shorts, VAL-buffer for longs). Target: POC.

This works best in ranging markets when profile is balanced (D-shape). Avoid during strong trends or after major news.

Strategy 2: LVN Breakout

Low volume nodes offer little resistance. When price approaches an LVN with momentum, it often blasts through. Trade: Enter on break of LVN with confirmation candle. Stop: Below the LVN. Target: Next HVN or value area.

The key is waiting for commitment. A wick into the LVN isn't enough—you want a candle body closing through it with volume.

Strategy 3: POC Magnet

Price extended far from POC tends to return. When price is 2+ ATR from POC and momentum is fading, enter a reversion trade targeting POC. This works especially well with the previous day's POC (developing POC) as target.

Strategy 4: Naked POC

A "naked" POC is a previous session's POC that price hasn't revisited. These levels act as magnets—price will often return to "fill" them. Mark naked POCs on your chart and trade toward them when price action aligns.

Choosing the Right Timeframe

Volume profile analysis works across all timeframes, but the interpretation changes.

• Weekly/Monthly profile: Shows major institutional levels. Use for position trades and identifying macro support/resistance.
• Daily profile (Fixed Range): Previous day's POC, VAH, VAL are key for day traders. These levels often see significant reactions.
• Session profile: Asian, London, NY sessions have their own profiles. Useful for intraday setups around session transitions.
• Visible Range (VPVR): Shows profile for whatever's visible on chart. Good for seeing context-specific levels.

Best practice: Use higher timeframe profile for bias and key levels. Use lower timeframe profile for entry refinement. For example: daily profile shows POC at $67,400, so you're bullish above it. 4H profile shows VAL at $67,100 as your entry level.

Combining Volume Profile with Other Analysis

Volume profile is most powerful when combined with other tools:

• Order flow: Use profile for levels, order flow for timing. Enter at VAL when you see bid absorption on the tape.
• VWAP: VWAP and POC often align. When they're close, that level is extra significant. When they diverge, watch for them to reconcile.
• Market structure: A BOS (break of structure) through an LVN is high conviction. A HVN aligned with a swing high/low is strong support/resistance.
• Delta/CVD: Bullish delta at VAL confirms buyer interest. Bearish delta at VAH confirms seller interest.

Related reading: VWAP Trading Strategies and Order Flow Trading Guide

Common Volume Profile Mistakes

• Trading stale levels: Profile levels from weeks ago may no longer be relevant. Focus on recent sessions.
• Ignoring context: A VAL in a strong downtrend isn't support—it's a level to watch break. Consider the trend.
• Over-relying on single levels: Use confluence. POC alone isn't a trade; POC + VWAP + demand zone is.
• Wrong timeframe: Day trading with weekly profile levels leads to wide stops. Match profile timeframe to trade duration.
• Not updating: The developing profile changes throughout the session. Update your analysis as the profile evolves.

Frequently Asked Questions

Related Articles