Volume and Volume Profile
Volume is the number of shares, contracts, or units traded during a given period. It's often called the "fuel" of the market because price moves need volume to sustain them. Understanding volume can significantly improve your trading decisions.
Basic Volume Analysis
Key volume principles:
- Rising price + rising volume = Strong uptrend (confirmed)
- Rising price + falling volume = Weak uptrend (potential reversal)
- Falling price + rising volume = Strong downtrend (confirmed)
- Falling price + falling volume = Weak downtrend (potential reversal)
- Volume spikes often occur at tops and bottoms
Volume Profile
Volume Profile is an advanced indicator that displays trading volume at specific price levels rather than time periods. It creates a horizontal histogram on the side of your chart, showing where the most trading activity occurred. The level with the most volume is called the Point of Control (POC) and often acts as a magnet for price.
Key Volume Profile Concepts
- Point of Control (POC) — The price level with the highest volume
- Value Area — The range containing 70% of total volume (represents "fair value")
- High Volume Nodes (HVN) — Areas of high acceptance/consolidation
- Low Volume Nodes (LVN) — Areas price moved through quickly; act as support/resistance
Pro Tip
Volume Profile is a paid feature on TradingView but is incredibly valuable. Low Volume Nodes are some of the best support/resistance levels you can find because price tends to move quickly through these areas.
Key Takeaways
- Volume confirms price movements — strong moves need strong volume
- Rising price with falling volume warns of a potential reversal
- Volume Profile shows trading activity at specific price levels
- Point of Control (POC) is the highest-volume price level
- Low Volume Nodes create excellent support/resistance levels