Volume profile and the market auction

Every level on this site comes from one idea: a market is an auction, and the volume it trades at each price shows where buyers and sellers agree on value. This guide explains how that auction works, how to read a volume profile, and what each level means when price comes back to it.

The market is an auction

A market exists to bring buyers and sellers together. It does that by moving price. When there are more buyers than sellers, price rises until it is high enough to bring out new sellers or put buyers off. When there are more sellers, price falls until buyers step in. Price is how the market advertises for the other side of the trade.

Price on its own doesn't tell you whether the advert worked. Time and volume do. If the market moves to a new price and trades a lot of volume there for a long time, buyers and sellers have accepted it as fair. If it moves to a new price and trades very little before snapping back, nobody wanted to do business there and the price was rejected.

That gives the market two states:

Balance. Buyers and sellers broadly agree on value. Price rotates up and down inside a range, and volume builds in the middle of it. Markets spend most of their time here.
Imbalance. One side has taken control, usually because new information has changed what the market thinks the asset is worth. Price moves directionally, often quickly, until it finds enough trade on the other side to start a new balance.

Reading the market from a volume perspective comes down to three questions, asked again every session:

Where is value? The prices where most volume has traded.
Is the market accepting or rejecting prices away from value? Time and volume at the new prices, or a quick return.
Who is in control? Buyers pushing price to new value above, sellers pushing it to new value below, or both sides trading back towards the middle.

What a volume profile shows

A normal chart shows price against time, with one volume bar under each candle. That bar tells you how much traded, but not where. A volume profile splits the volume up by price: it adds up everything traded at each price over a chosen period and turns the result on its side, as a horizontal bar at each price.

The same session twice. On the left, one candle and one volume bar, which only gives the total. On the right, the volume split by price: most of it traded in the lower half of the range, so that is where the market found value.

Long bars are prices where the market did a lot of business. Short bars are prices it passed through quickly.

An example profile. The long bars in the middle are where the market agreed on value. The blue bars make up the value area, the bronze bar is the point of control, and the shaded band runs from the value area low to the value area high.

The profile throws away the order in which trades happened. That is the point. It doesn't matter whether 96.00 traded in the morning or the afternoon. What matters is that it traded more than any other price, so it is where the market thought crude was worth the most.

A note on the data. The profiles on this site are built from a CFD feed. CFD volume is tick volume, a count of price changes, not the number of futures contracts traded. For a liquid market like crude oil, tick volume tracks the shape of exchange volume well, so the levels sit in the same places, but they can differ by a few cents from a NYMEX futures profile and from your broker's prices. That matters less than it sounds, because volume analysis is relative: what counts is whether volume is high or low compared with what came before on the same feed. Use one feed consistently and the comparisons hold.

The levels and what they mean

Point of control (PoC)

The single price with the most volume in the profile. It is the market's best estimate of fair value for that period. Price tends to be drawn back to the PoC while the market is in balance, and it often stalls or chops around it, because both sides are happy to trade there. A PoC that is far from the current price is a target. A PoC that price is sitting on is a reason to expect a slow, two-sided market.

Value area (VA), value area high (VaH) and value area low (VaL)

The value area is the range of prices around the PoC where about 70% of the volume traded. It is built by starting at the PoC and adding the busier price next to it, above or below, until 70% of the volume is inside. The top of that range is the value area high and the bottom is the value area low.

The edges are where the market's opinion is tested. Prices above the VaH are expensive compared with recent trade, so sellers often respond there. Prices below the VaL are cheap, so buyers often respond there. When price breaks out of the value area, the question is whether it gets accepted outside or falls back in. That question decides most of the trades on this site, and the acceptance section covers it.

High-volume node (HVN)

A peak in the profile: a price area where a lot of volume traded, other than the PoC. HVNs are smaller areas of agreement on value. Price tends to slow down when it reaches one, because there is plenty of trade on both sides. They act as support and resistance, and as places where a move can pause before it continues. The deeper the node, the stronger the level: a balance area where the market spent days builds far more volume than one it left after a few hours, and it takes far more trade to push through it later.

Low-volume node (LVN)

A trough in the profile: prices the market moved through quickly without much trade. That usually happens when one side was in control, during a breakout or a sharp sell-off. LVNs work in two ways:

As a boundary. An LVN often separates two areas of value. Price coming back to it from either side tends to react, because it is the edge of where the market has been accepting price.
As a fast lane. If price gets into an LVN and keeps going, it tends to travel through quickly, because there was little trade there before. Don't expect an LVN to hold price the way an HVN does.

Naked (untested) PoC

A previous session's PoC that price hasn't traded back to since. Because the PoC was fair value at the time, an untested one tends to act as a magnet, and it is a common target. It loses its pull once price has traded through it.

Developing PoC and value

During a session the PoC and value area keep moving as volume builds. If the developing PoC climbs with price, buyers are building value higher. If price is rising but the developing PoC stays behind, the move hasn't been accepted yet.

Level	What it is	How price tends to behave there
PoC	Price with the most volume	Magnet in balance; slow, two-sided trade around it
VaH	Top of the 70% value area	Sellers respond; a break and hold above means value is moving up
VaL	Bottom of the 70% value area	Buyers respond; a break and hold below means value is moving down
HVN	Secondary volume peak	Support and resistance; moves slow down
LVN	Volume trough	Reaction at the edge; fast travel once inside
Naked PoC	Earlier PoC not yet retested	Target; loses its pull once traded through

Treat every level as a zone, not a line. Profiles from different feeds and settings differ by a few ticks, and the market doesn't respect a level to the cent. The setups on this site give an entry zone and a stop beyond the level for that reason.

Reading the shape of a profile

The shape of a session's profile shows who was in control and how the auction went.

D-shape: balance. Volume centred, tapering at both ends. Buyers and sellers agreed. Expect rotation inside value next session unless news changes it.

P-shape: buyers in control. A thin tail below and volume piled at the top. Often short covering: sellers buying back, which can run out of fuel.

b-shape: sellers in control. A thin tail above and volume piled at the bottom. Often long liquidation: buyers selling out.

Thin profile: trend. Volume spread thinly over a long range. One side drove price all session and never let value form.

Double distribution. Two areas of value with an LVN between them. The market moved from one value to another during the session, often on news.

Five common profile shapes. Blue bars are the value area, the bronze bar is the PoC.

A long, thin tail at the top or bottom of a profile is called excess. It shows the market went too far, found no trade, and was pushed back hard. Excess makes a strong high or low. A session that ends flat at its high or low, with no tail, is a poor high or poor low: the auction there isn't finished, and price often comes back to it.

Balance, imbalance and value migration

Comparing one session's value area with the next shows whether the market is balancing or moving. Draw each day's value area side by side and watch where it goes.

Days 1 and 2 overlap: balance. Day 3 breaks out and builds value higher: imbalance. Days 4 and 5 overlap again, higher up: a new balance, and the old VaH becomes support.

Today's value compared with yesterday's	What it says
Higher, not overlapping	Buyers in control; value is moving up
Overlapping, but higher	A cautious move up; buyers have the edge
Inside yesterday's value	Balance; the market is waiting for news
Wider on both sides	Both sides active; often before a bigger move
Overlapping, but lower	A cautious move down; sellers have the edge
Lower, not overlapping	Sellers in control; value is moving down

Balance doesn't last forever. The longer the market rotates in a range, the more positions build up inside it and the more stops sit just outside it, so the bigger the move tends to be when it finally breaks. In crude oil, the trigger is usually fundamental: an EIA inventory report, an OPEC+ decision, or a supply headline from the Gulf.

Initiative and responsive trade

It also helps to ask what kind of trader is active:

Responsive trade goes against a move away from value: selling above the VaH, or buying below the VaL. It pushes price back towards the PoC and keeps the market in balance.
Initiative trade goes with a move away from value: buying above the VaH, or selling below the VaL. It is how new value gets built.

Responsive trade at the edges is the normal state of a balanced market. Initiative trade that gets accepted is the start of an imbalance.

Acceptance and rejection

When price leaves the value area, it either gets accepted outside it or rejected back in. This is the most important judgement in volume profile trading, and most of the setups on this site are built around it.

Acceptance: price breaks above the VaH, retests it from above, and holds. The VaH turns into support. Rejection: price pokes above the VaH, finds no trade, and falls back inside value, heading for the PoC and then the VaL.

Acceptance means the market is trading at the new prices with time and volume. In practice, look for:

closes beyond the level on the timeframe you trade (the setups here usually ask for an hourly close);
a retest of the broken level from the other side that holds;
the developing PoC and value moving towards the new prices.

Rejection means price went outside value, didn't trade there, and came back in quickly, often leaving a tail. A failed break above the VaH is called a look above and fail. A failed break below the VaL is a look below and fail. Both point back through the value area, because the market has shown it doesn't want the prices outside it.

Traders who use market profile have an old rule of thumb, the 80% rule: if price opens outside the value area, gets back inside and stays there for two 30-minute periods, it often travels all the way to the other side of value. Treat it as a tendency to look for, not a statistic. The idea behind it is sound: once a break has failed, the far side of value is the next place the market will find trade.

Reading the volume bars

The profile shows where volume traded. The volume bars under the chart show when, and that is how you judge a break as it happens. The question for each bar is simple: does the volume back the price move? A real move, up or down, needs participation behind it. Compare each bar's range with its volume and there are only four combinations.

Wide range, high volume. A big move with plenty of trade behind it. The volume backs the move.

Narrow range, low volume. A small move on little volume. Also consistent, and it says nothing much is happening.

Wide range, low volume. A big move on little trade. Few traders joined in, so the move is easy to reverse. Treat it with suspicion, especially on a news spike.

Narrow range, high volume. Lots of trade, little progress. The other side is meeting every order: sellers into a rally, or buyers into a sell-off. Often a sign a move is tiring.

The dashed line is average volume. The bronze bars are the warnings, where volume and range disagree. Volume is always judged against recent bars on the same chart.

The same test works over several bars. A rising market should see volume rise with it, and so should a falling one. When price keeps going but volume fades, fewer traders are willing to push it, and the move is running on empty.

Rising volume: each up bar trades more volume than the last, so the volume backs the trend. Falling volume: the ranges get wider but volume peaks on the second bar and falls away, a warning that the buying is drying up.

Breakouts and retests

Put the two views together and you get the most useful check in this guide. A break out of a value area that is going to be accepted usually comes with strong volume, because it takes real participation to move the market away from where it has been trading. Then price often pulls back to retest the level it broke. That retest should come on low volume: the other side isn't returning in size. After it, volume should pick up again as the new trend develops.

A break above a balance area. Volume spikes on the break (bronze), dries up on the pullback to the old ceiling (lighter bars), and builds again as price trends away. A break on weak volume, or a retest on heavy volume, is a warning that the break may fail.

Read the warnings the other way round too. A break on low volume is a look above or below that nobody backed, and it often falls back into value. A pullback that trades heavy volume at the old level means the other side has come back, and the break is in trouble.

Volume spikes

Two more patterns are worth knowing:

A spike at the end of a long move. When volume explodes after a long run, often with a long wick and a close back away from the extreme, late traders are piling in or panicking out. If the next bars make no further progress, that leg is often finished, and the spike usually marks excess on the profile.
Heavy volume with no progress. Bar after bar of high volume on narrow ranges at the same price means the other side is taking everything offered. It builds an HVN, and that price tends to become support or resistance later.

Reading the open

Where a session opens compared with the previous session's range and value tells you which kind of day is more likely.

Open inside value. The market is still in balance. Expect rotation between VaH and VaL, with the PoC in the middle. Fade the edges, and only trade a breakout once it is accepted.

Open outside value, inside the range. The market is testing whether yesterday's value still holds. If price gets back inside and is accepted, look for a move across value. If it holds outside, value is moving.

Open outside the range. The strongest sign of imbalance, often after weekend or overnight news. If price doesn't return into the range quickly, a trend day is possible. Don't fade it early.

Today's open (the bronze dot) against yesterday's range, value area and PoC. Opens below value work the same way, the other way up.

The first hour or so then shows how confident the market is. A market that drives away from the open without looking back (an open drive) is confident. One that tests a level first and then drives the other way is less so. One that rotates around the open in both directions is still in balance and waiting for information.

Timeframes and composite profiles

A profile can be built over any period. The levels on this site use three:

Daily (session) profiles. One trading day. The previous day's PoC, VaH and VaL are the levels for the next session. Labels with a d in front, like dPoC and dVaH, are daily levels.
Composite profiles. Several days merged into one, usually the last 5 sessions or a whole balance area. They show where value is over the bigger picture, and they carry more weight than a single day.
Higher-timeframe profiles. Weeks or months, used to find the big areas of value and the LVNs between them that a trend can run through.

The profiles nest inside each other. A daily VaH that sits just under a composite VaH is a stronger level than either on its own. When daily and composite levels disagree, the higher timeframe usually wins: a breakout above a daily VaH that runs straight into a composite HVN is likely to stall there. Each post's level board says which profile every label comes from.

VWAP and anchored VWAP

The volume-weighted average price is the average price paid for every unit traded in a session, weighted by volume. The PoC is the price traded most often. The VWAP is the average price paid. Price above the VWAP means buyers who traded that session are, on average, in profit and comfortable. Price below it means they are under water and more likely to sell into rallies.

An anchored VWAP starts the calculation at a chosen moment instead of the session open, such as an EIA release, an OPEC+ decision, or the low of a move. It shows the average price of everyone who has traded since that event, so it often acts as support in a trend that started there, and its loss is a sign the event's move is being given back.

Volume and the fundamentals

Volume profile shows where the market agrees on value. The fundamentals help explain why value moves. Inventory reports, OPEC+ decisions, production data and supply disruptions are what push crude out of balance. The profile then shows whether the market accepted the new information.

The EIA weekly report, at 15:30 London time on Wednesdays, is the clearest example. On 15 October, an 8.6M-barrel draw pushed WTI out of a balance around 94.13, through the composite PoC, and above the composite VaH, leaving a thin LVN behind it. The next morning's question was purely about acceptance: would price hold above the daily VaH, or fall back into the old value?

Big news doesn't always move value. A surprising headline that produces a spike and a quick return into the value area is a rejection. The market has looked at the news and decided it doesn't change what crude is worth.

Putting it together: a routine before each session

Start with the higher timeframe. Mark the composite PoC, VaH and VaL, the main HVNs and LVNs, and higher-timeframe support and resistance. Know whether the bigger picture is in balance or trending.
Mark the previous session. Its PoC, VaH and VaL, any naked PoCs above or below, and any poor highs, poor lows or excess.
Compare value. Is yesterday's value higher, lower or overlapping the day before? That tells you who has had control.
Check the calendar. Know when the EIA report, US data and any OPEC+ meetings are due, and keep size down around them.
Find the pivot and write both scenarios. Pick the level that decides the day, then write what happens on acceptance above it and on acceptance below it, with targets at the next levels in each direction.
Wait for the market to show you. Let price accept or reject the level before trading, and check the volume on the break and on any retest. Put the stop where the idea is wrong, usually back inside the value area you expected price to leave.

That routine is how each daily note is built: a pivot, a buy if price is accepted above it, a sell if price is accepted below it, and targets at the next volume levels.

Common mistakes

Trading levels as exact lines. They are zones. Leave room for a few ticks either side.
Fading every break of value. Responsive trades at the edges work in balance. In an imbalance, they get run over. Check what kind of market you are in first.
Treating an LVN like support. An LVN is where price travelled fast. Once price is inside one, expect it to keep going to the next HVN.
Ignoring the higher timeframe. A daily breakout into a composite HVN is a trade into resistance.
Trusting a break on thin volume. A move outside value that nobody traded is a look above or below, not a breakout, until volume says otherwise.
Trading the first touch. The first touch of a level tells you very little. The reaction to it, accepted or rejected, is the information.
Mixing data sources. Profiles from futures, CFDs and different session settings put levels in slightly different places. Use one source consistently.

Glossary

Acceptance: Price trading at new levels with time and volume, showing the market treats them as fair.
Anchored VWAP (aVWAP): VWAP calculated from a chosen event or swing instead of the session open.
Balance: A market rotating inside a range while buyers and sellers agree on value.
Composite profile: A profile built from several sessions merged together, for example the last 5 days.
dPoC, dVaH, dVaL: The previous session's daily PoC, value area high and value area low.
Excess: A thin tail at the top or bottom of a profile, where price was rejected hard. It marks a strong high or low.
HVN: High-volume node: a peak of volume in the profile, which tends to act as support or resistance.
Imbalance: One side in control, with price moving directionally to find new value.
Initiative trade: Buying above value or selling below it. It builds new value.
LVN: Low-volume node: a trough of volume that price passed through quickly. A boundary between areas of value, and a fast lane once price is inside it.
Naked PoC: A previous PoC that price hasn't traded back to yet.
PoC: Point of control: the price with the most volume in the profile.
Poor high, poor low: A session high or low with no tail, which suggests the auction there is unfinished.
Rejection: Price leaving value and returning quickly with little trade outside it.
Retest: A pullback to a broken level. Low volume on the retest supports the break; heavy volume questions it.
Responsive trade: Selling above value or buying below it. It pushes price back towards the PoC.
Value area (VA): The range around the PoC holding about 70% of the volume. Its edges are the VaH and VaL.
Value migration: Value areas moving higher or lower from one session to the next.
VWAP: Volume-weighted average price: the average price paid for everything traded in the period.