A volume profile groups a chosen measure of activity by price bins over a specified interval. Depending on the source, that measure may be traded quantity or quote updates. Its shape describes the supplied data, not prices the market must revisit. This article calculates how bins and Value Area rules change the result, then separates that description from a trade hypothesis.

What a volume profile actually is

For a transaction-based profile, distribute recorded volume among price bins; longer bars contain more of that volume. A quote-activity profile instead distributes its chosen tick measure. State the unit and allocation method: Sierra Chart documents that coarser underlying records can allocate volume across their price range rather than reproduce every trade at its exact price.

Ordinary bars organize activity by time; a profile groups it by price, as explained alongside read volume on the forex market. Distinguish this from Time Price Opportunity: TPO counts price presence in time blocks, not traded quantity. TradingView describes Market Profile’s origins at the Chicago Board of Trade in the 1980 s; that shared history does not make volume and time-at-price interchangeable.

Two equal maxima: which POC starts the Value Area?

Fix bins [100; 101), [101; 102), [102; 103), [103; 104), [104; 105), with activity 40, 5, 5, 40, 10. Total 100; maximum 40 occurs twice. Our algorithm starts at a chosen POC, adds the larger neighbor, chooses the lower-price neighbor on a tie, and includes whole bins until at least 70. “70%” alone does not choose the start.

Tied maximum bins change our VA resultFive fixed bins span 100–105 with activity 40, 5, 5, 40, 10. Maximum 40 occurs twice. Starting from the lower POC reaches 90% in bins 100 to below 104. Starting from the higher POC ends with all bins, 100%. Blue and ochre boundaries mark the areas; band widths represent activity.Two POCs, two starting choicesBinActivityVA[104; 105)10[103; 104)40[102; 103)5[101; 102)5[100; 101)40Lower POC: VA [100; 104), 90%Higher POC: VA [100; 105), 100%70% threshold; whole bins until reached
Profile bands are proportional to activity. The blue vertical marker shows the lower-POC start result; ochre shows the higher start. Both use identical bins.

Lower-maximum start: 40 → 45 → 50 → 90, boundaries [100; 104). Higher start: 40 → 50 → 55 → 60 → 100, boundaries [100; 105). The second first adds upper neighbor activity 10 rather than lower activity 5. Record POC ties, neighbor ties and threshold overshoot separately; identical histograms need not yield identical VA otherwise.

Assumptions: Fictional activity, not actual Forex turnover. Our algorithm keeps a contiguous area and permits threshold overshoot by including a whole bin; it does not interpolate bin fractions. Lower/higher POC selection is an explicit tie policy. We do not describe a universal terminal standard or current TradingView implementation. Official material: TradingView: Volume Profile concepts.

POC, Value Area and volume nodes

Assign seven fictional half-open one-pip bins starting at 1.1000 through 1.1006, with activity 5, 10, 20, 35, 15, 10, 5; one pip is 0.0001 and total activity 100. The unique largest bin, [1.1003, 1.1004), is the POC bin with 35. POC is not necessarily an exact traded price or fair value. Define how to select a POC when maxima tie.

Our illustrative Value Area algorithm starts at the POC, adds the larger adjacent bin, chooses the lower-price neighbor on a tie, and includes whole bins until reaching or exceeding the target. For 70%, totals 35 →55 →70 yield VA [1.1002, 1.1005): VAL1.1002 and upper external boundary VAH1.1005. At 80%, equal 10-activity neighbors choose the lower one, giving [1.1001, 1.1005). These are our explicit rules, not a universal platform standard.

The current TradingView documentation uses a different threshold and tie policy, including stopping if the next addition would exceed the target. A70% setting alone does not identify an algorithm. It is neither one standard deviation for arbitrary data nor a70% probability that future price stays inside the area.

High- and low-volume nodes describe local concentrations and sparse bins in the chosen histogram. They do not establish participant intent or a future support, resistance or transit speed. Regroup the same data into two-pip bins anchored at 1.1000: activity 15, 55, 25, 5, with POC [1.1002, 1.1004). Anchor instead at 1.0999:5, 30, 50, 15, with POC [1.1003, 1.1005). Midpoints 1.1003 and 1.1004 differ by one pip without changing a single event.

Three ways traders use the profile

Traders may test node levels as support or resistance, alongside the rules in support and resistance on the chart. Agreement with another drawing is not independent evidence of a profitable reaction. Specify whether levels are frozen from a completed window or updated as new data arrives.

A return toward POC and a move away from Value Area are different hypotheses, requiring separate entries and exits. Add 35 activity units to our 1.1005 bin: its 10 becomes 45, total 135, and the POC moves there. That final histogram was unavailable before the new observations. Testing earlier decisions against it introduces future information. The linked order-flow trading methods require their own source and classification; this profile alone cannot distinguish informed orders from noise.

A step-by-step hypothetical example

Use a separate fictional EUR/USD profile with directly assigned POC1.0850 and Value Area 1.0810–1.0890. These levels are not reconstructed from the seven-bin example. A preceding bounce and a reversal candle may be specified as filters; neither guarantees a reaction at the POC.

For a short hypothesis, assume an actual Bid entry 1.0850, ordinary protective stop triggered on Ask 1.0868, and target close at Ask 1.0810. Planned price loss distance is 18 pips and reward distance 40 pips, giving 40/18 ≈ 2.22 before commissions and funding. Actual stop execution can be worse. These quote-side assumptions make the distances explicit; the profile supplies no probability of either outcome.

For an alternative long hypothesis, first observe a completed Close above VAH1.0890, then separately assume an actual Ask fill 1.0895. A stop triggered on Bid 1.0872 has a23-pip planned distance. No target price is supplied here, so no reward-to-risk ratio can be calculated. Specify the target, costs, order and expiry before testing; a later fill is not automatically the signal Close.

A profile depends on its data source, time window, bin boundaries and algorithm. Different choices can change POC and Value Area, including tie and threshold policies demonstrated here. Predefine them before testing. A protective stop defines a planned trigger and distance, not a guaranteed maximum loss; execution and costs still matter.

Spot FX: actual venue volume is not global volume

Spot FX is decentralized and OTC. BIS’s December 2019 study describes fragmented execution and dealer internalization. A venue can record genuine transactions, but its own volume does not cover all global FX trading. Conversely, quote updates are not transaction quantities. “There is no true spot volume” obscures this distinction between real local observations and consolidated coverage.

Identify the volume field and profile implementation before interpreting it. TradingView documents tick volume for forex and CFD profiles, representing price updates, and up/down classification from lower-timeframe bars rather than buy/sell aggressor volume. MetaTrader tools and custom indicators can use different fields. A provider-specific quote-activity profile is not consolidated global FX turnover or a calibrated probability map. Currency-futures profiles measure their own contracts and require quote-direction and session alignment before comparison with spot.

Volume profile versus time-based indicators

OBV cumulatively signs a volume field using price direction; see the OBV indicator. A profile groups its activity by price. Both can depend on the same feed, so agreement is not automatically independent confirmation or a stronger profitable signal. Test each added rule and its information timing rather than treating two displays as proof.

What to do tomorrow

Use a documented histogram to audit assumptions before evaluating a trade rule. A visually plausible profile, a demo month or thirty entries cannot by itself establish a durable edge.

  1. Record source, activity unit, price basis, time zone/window, bin width and origin, POC tie and VA expansion policy. Reconstruct the seven-bin model, then check sensitivity to regrouping.
  2. When comparing spot with currency futures, align quote direction, contract, session, expiry and roll treatment. Futures volume measures those contracts; differences are not simply errors in a spot proxy.
  3. Freeze the profile available at each decision, define entries/exits and actual quote-side fills, and include costs. Keep rejected cases and evaluate complete rules on data not used to choose them; do not treat a fixed number of observations as proof of an edge.