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Market profile

A way of organising a session by price rather than time, showing how long the market spent trading at each level.

A volume profile beside a price chartA price line on the left and, on the right, horizontal bars showing how much volume traded at each price; the longest bar marks the point of control and a shaded band marks the value area.52.051.050.049.0timePRICE OVER TIMEVOLUME AT EACH PRICEVALUE AREAwhere most ofthe volume tradedPOCthe single pricewith the mostvolumeLonger bars mean more shares changed hands at that price.
Volume profile, point of control and value area. Turn the chart on its side and count how much traded at each price instead of at each moment. The longest bar is the point of control, and the shaded band around it is the value area where most of the session's business was done.

Developed by Peter Steidlmayer at the Chicago Board of Trade, market profile builds a distribution of activity across prices, usually producing a bell-like shape with most time spent in the middle and less at the extremes.

The framework treats the market as an auction searching for a price that satisfies both sides. The fat middle is acceptance, the thin edges are rejection, and price moving away from a developed area is the market seeking a new balance. Key derived levels include point-of-control, the value-area, and the initial-balance.

It is descriptive rather than predictive, and it works best in instruments with a clearly defined session such as index futures. In continuously traded markets the session boundary is arbitrary, which weakens much of the logic.

Related: tpo, volume-profile, value-area, initial-balance, balance-area

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