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How to Use Volume Profile in Trading?

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Technical Analysis

How to Use Volume Profile in Trading?

Posted by NIFM
23-Dec-25 12:47PM

Many traders who rely on technical analysis place great emphasis on the timing of a price movement, but professional traders focus on where price movement occurs with the greatest degree of volume. One tool that allows traders to assess where volume occurs is the Volume Profile indicator.


While the conventional volume indicator (which shows volume in the form of vertical bars below the chart) displays historical trading volume over time, the Volume Profile displays trading volume at each price level, thus allowing the trader to see where "Big Money" or institutional traders are placing their bets.


In this post, I will describe and demonstrate how to use Volume Profile in order to improve the accuracy of your trading decisions.

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What is Volume Profile?

Volume Profile is an advanced charting tool that shows how much volume was traded at different prices during a specified period of time. In contrast to standard volume, which is shown vertically on the chart, Volume Profile is shown horizontally along the vertical axis (Y-axis) of the chart.


Using the horizontal bars on the Volume Profile, a trader can find "Value Areas," which are areas where the market believes the price is fair, and "Gaps," which are areas where there is not enough liquidity for an order to be filled quickly. This is one of the basic elements that new traders learn when they read the Ultimate Guide to Technical Analysis in the Stock Market.

What Are The Important Terms?

In order to fully gain mastery of the Volume Profile Trading methodology, it is imperative that you become familiar with the fundamental elements of the Volume Profile Trading Methodology.


  • Point of Control (POC): This is the price at which the highest trading volume occurred for the specified time period and is like a magnet to price.

  • Value Area (VA): The price range that represents 70% of the total volume traded in a given time frame.

  • Value Area High (VAH): This refers to the highest trading price within the Value Area.

  • Value Area Low (VAL): This refers to the lowest trading price within the Value Area.

  • High Volume Nodes (HVN): High Volume Nodes (HVN) are the peaks (or working tops) within a Volume Profile that indicate significant consolidation and acceptance of price by both buyers and sellers.

  • Low Volume Nodes (LVN): Low Volume Nodes are low points (or working bottoms) in the Volume Profile that show limited activity/buyers/sellers at those price locations. Price movement tends to occur rapidly from these price levels.


Knowledge of these terms is as critical to a strong foundation of trading as knowledge of candlestick patterns.

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Why Use Volume Profile?

The Value Profile: Why Should I Incorporate It Into My Trading Toolbox Alongside Top Technical Analysis Tools?


  • Hidden Support and Resistance: The Value Profile can identify hidden support & resistance that price peaks cannot provide. Since the Value Profile uses actual dollars spent in the market (as represented by High Volume Nodes), it provides more reliable support and resistance zones.

  • Market Context: The Volume Profile provides market context, whether the market is “balanced” (trading within the Value Area) or “imbalanced” (trending outside the Value Area).

  • For Better Entry and Exit: Volume Profile can keep you from making trades into volatile areas or "no-man's land."

  • Institutional Footprints: You will be able to identify where the Smart Money has been accumulating or distributing shares.

Top 3 Trading Strategies with Volume Profile

The Volume Profile can help you improve upon your Successful Intraday Trading Strategies. Below are the three top-utilized ways.

The POC Retest (Mean Reversion)

The Point of Control represents the “fairest” price. Price can reverse towards it after trending away from it, so the POC can be an excellent Support or Resistance Level.


  • How to trade: Allow the price to trend away from it, then await a reversal that occurs as the price retests the POC.

Trading the Value Area Breakout

The value area indicates that there is sufficient buying and selling action to make this a range-bound market. As a result, the price will typically trend once it successfully breaks above the VAH or below the VAL.


  • How to Trade: If the price breaks out of the VAH and has a Shooting Star candlestick pattern rejection indicative of a failed breakout, then it can be viewed as a confirmation of the breakout and possible trend formation.

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Filling the Low Volume Nodes (The Gap Play)

The Low Volume Nodes are those areas on a price chart where, in the past, markets had no historical interest and therefore their price will move quickly through these areas.


  • What to Trade: When you enter an LVN, anticipate that the price will rapidly reach the next HVN. You can scalp it or build momentum trading.

Common Mistakes to Avoid

Traders will often err even with the best of tools, and if you wish to be a successful trader, be aware of the following:


  • UsingVolume Profile Alone - Always use Volume Profile in conjunction with the Support & Resistance Trading Principles, and/or indicators such as the MACD.

  • Ignoring the Context - If you run a Session Volume Profile on a stock that has zero liquidity, you'll get misled.

  • Chasing the POC - Although many traders perceive the POC as a magnetic line, and will trade every time it touches a POC when there's a strong trend, be very cautious that it doesn't "break" through.

  • Neglecting Risk Management - Remember that no tool is 100% accurate, so be sure to read up on the Understanding Risk Management in Stock Trading Manual.

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Conclusion

Volume Profile is an innovative tool to help you transition from looking at "price" as the major factor in your trading policy to market conviction, through knowing where the Point of Control (POC), Value Areas, and Volume Nodes are located. By knowing these areas of volume accumulation, the volume profile can be used to help you trade in the direction of Institutional Flow rather than merely trying to guess where the next level of support may occur.


Regardless of whether you are a swing trader or day trader, utilizing volume-at-price (VAP) to inform your trading strategies will provide you with the greatest level of advantage over the mass of retail traders.

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