Indicator:
Volume Profile
Volume Profile Indicator
Type of Indicator
The Volume Profile is a technical analysis tool that displays the volume of trades executed at different price levels over a specified time period. Unlike traditional volume indicators that show volume over time, Volume Profile shows volume at various price levels. It is a volume-based indicator that helps traders understand where the most buying and selling activity has occurred.
Purpose
The primary purpose of the Volume Profile is to identify key price levels where significant trading activity has taken place. This helps traders:
Determine support and resistance levels,
Identify areas of high and low trading interest,
Analyze market structure and potential reversal points.
Calculation Method
Volume Profile is calculated based on the number of transactions (volume) at different price levels over a chosen period. Key components of Volume Profile include:
Point of Control (POC): The price level where the highest volume of transactions occurred.
High Volume Nodes (HVN): Price levels with significant trading activity.
Low Volume Nodes (LVN): Price levels with minimal trading activity.
Volume Profile is typically displayed as a histogram alongside the price chart, where the length of each histogram bar corresponds to the volume of transactions at that price level.
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