Volume Profile

10/1/2020 

Volume Profile is a technique which allows traders to analyze actual traded volume over a user defined period of time using a vertical histogram. On the e-mini S&P 500 chart below Volume Profile histogram bars are shown on the right-hand side of the price axis. Click here to watch a video one how to add Volume Profile to the ATCharts™.

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The height of each histogram bar is defined by the user. In the above example the height is set to four (4) tics to correspond to one (1) full point of the e-mini S&P 500 market.

The numbers in each bar represent the volume of contract traded within those four (4) tics over the entire predefined time frame that the volume profile is set for. In this example the number in each bar represent volume that has traded in that four (4) tic range since the market opened at 5:00pm (CT). Note: The e-mini S&P 500 trading session is 23 hours long.

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Volume Profile is broken down into three areas 1. The Value Area (the grey bars), 2. Prices Above Value (blue bars at the top) and 3. Prices Below Value (blue bars at the bottom). The Value area is generally set to be one standard deviation of volume.

The red histogram bar is called the Point of Control or POC. It is simply the histogram bar with the more volume. Some analysts consider this the area of equilibrium or price happiness and this level sometimes acts as a "magnet" for price action.

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Areas of interest, excluding the POC are the transition between the Value Area and Prices Above Value and the transition between the Value Area and Prices Below Value. Traders can use these areas to identify areas to enter position or areas to guide in placing stop loss orders.

Volume Profile is free on ATCharts™. For more information, click here to visit one of Infinity Futures live broadcasts.

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