Volume Profile (VP) | Share Market Learning Series | Trading with Profiles | Types of Volume Profile Tools Available

Volume Profile: Analysing market through Volume Profile

In this post, i will share my understanding about Volume Profile:

• Volume Profile is one of the most powerful tools in a trader’s arsenal.
• It provides deep insight into market behavior by revealing where trading activity is concentrated across different price levels—not just over time.
• Traditional volume indicator shows volume traded w.r.t time (For every 1/2/5/15 Min candle). It only shows volumes transacted from time point of view, not from price point of view.

Volume Profile:

• Volume Profile is a charting study that plots volume traded at each price level over a selected time period.
• Unlike traditional volume bars that sit at the bottom of your chart, Volume Profile overlays directly on the price chart.
• This makes it easy to spot "high volume nodes" (where most trading occurred) and "low volume nodes" (areas with little interest).
• Volume Profile has following important reference zones:
1. Value Area (VA).
2. Value Area Extremes (VAH, VAL).
3. Point Of Control (POC).
4. Volume Nodes (HVN, LVN).
• VA: where 68% of highest volume traded corresponding to the selection range.
• VAH/VAL: are the extremes of VA, which serves as important reference zone for future (S&R).
• POC: level where
• highest volume of the session got traded.
• both buyers & sellers agree to trade in balance.
• VN: Based on volume traded at a price we can call them as HVN or LVN.
• HVN: Where high volume got traded during session.
• Balance: Area which got agreed by both buyers & Sellers.
• There can be multiple HVN in single VP.
• LVN: Where low volume got traded during session.
• Imbalance: Area of quick price move. (Rejected/dominated by any one party)

Volume At Price:

• VAP: shows where did largest buying or selling volume happened w.r.t price.
• Since volume is the driving factor of price, Areas where large volumes are traded are important area of support and resistance.

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Different Types of VP Tools:

    There are various ways to view VP based on selected time.

1. Session VP (SVP)
2. Fixed Range VP (FRVP)
3. Composite VP (CVP)

SVP:

• Shows VP for every trading session. (Based on its setting Monthly/Weekly/Daily).
• Here every session is the range to draw VP graph.
• E.g.: Daily Session VP, shows volume traded at different price within a single day.
  

FRVP:

• Used to see VP based on the time range selected by user.
• We can draw single VP by combining multiple session's into single range.
• It is useful to analyze price w.r.t important pivot level. (Swing H/L, Monthly H/L, Yearly H/L)

CVP:

• Shows VP based on visible range of price in chart.
• Irrespective of time and swings, this shows VP  based on data visible on chart.

Cumulative VP for BNF for month of June 2025

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Usecase of Volume Profile:

• Volume Profile gives traders a clearer view of market structure and sentiment. Here’s why it's favored by professionals:
• Identifying Support and Resistance: Price often reacts at high-volume levels.
• Spotting Breakout Zones: Low volume areas can act as price vacuums, enabling sharp moves.
• Evaluating Fair Value: The Value Area helps define where most market participants agree on price.
• It’s especially powerful in futures, forex, and index markets where volume data is more reliable and centralized.
• Incorporating Volume Profile into your strategy requires practice and context. Here are three common applications:
• Trend Trading: Use POC shifts to confirm trend direction.
• Reversals: Look for price rejecting low volume areas after overextensions.
• Range Trading: Trade within the value area, fading extremes and targeting POC.
• Combining Volume Profile with price action or indicators like VWAP and RSI can significantly enhance your market edge.

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Summary:

• In today’s fast-moving, data-driven markets, traditional indicators often fall short of revealing the full picture. That’s where Volume Profile stands out—it's not just another tool; it’s a critical lens for understanding true market behavior.
• Price + Volume = Market Context. So to understand Market Context, we need to understand about VOLUME that supports price at each level.
• Unlike many lagging indicators, Volume Profile is adaptive and context-sensitive.
• Volume Profile provides unmatched clarity into market intent. It turns the chart from a guessing game into a strategic map—making it not just useful, but essential for modern technical analysis.

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