What is Volume Profile?

Volume Profile, also known as Volume-by-Price (VbP), is a graphical representation of the total volume traded at each price level during a specified time period. It's a way to visualize the market's activity, highlighting areas of support and resistance, and revealing the intensity of buying and selling pressure.

Key Features:

• Price-Volume Relationship: Volume Profile shows the direct relationship between price and volume, helping traders understand how market participants react to different price levels.

• Support and Resistance: Identifies key levels of support and resistance, where market sentiment shifts from buying to selling or vice versa.

• Trend Confirmation: Confirms the strength of trends and identifies potential reversals.

• Entry and Exit Points: Helps traders plan entry and exit points, based on market sentiment and activity.

How Volume Profile Works:

• Data Collection: Volume data is collected from lower time frames, creating a comprehensive picture of market activity.

• Histogram Construction: The data is then used to construct a histogram, displaying the volume traded at each price level.

• Color Coding: The histogram is color-coded to differentiate between buying and selling volume.

By understanding the Volume Profile, traders can gain a deeper insight into market dynamics, making more informed trading decisions.