A volume profile sorts traded volume by price level rather than by unit of time. Where a classic chart answers 'how much traded between 9 and 10', the profile answers 'how much traded between 1.0955 and 1.0960', which is not the same question.
Volume sorted by price level
Contents
A volume profile takes every transaction over a period and stacks it by price. The result is a horizontal histogram placed next to the chart: the longer the bar, the more the market traded at that price. This is information a candlestick chart contains nowhere, since it sorts everything by time.
The price carrying the longest bar is called the point of control, often shortened to POC. That is where the most positions were built, so where the most people have something to defend or correct. The reasoning stops there, and it is enough: a price where many people traded is a price many people watch.
The reverse reads just as well. Nearly empty levels, called low volume nodes, are prices the market crossed without stopping. When it comes back, it tends to cross them fast, for lack of anything to hold it. Our lesson on order flow and the volume profile covers the full method.
Profile = for each price level, the sum of volume traded there over the period
The period is a choice, and it changes everything: the session profile, the weekly one, or that of a specific move do not give the same levels.
The step size is a second setting. Too fine and the reading becomes noise; too coarse and the point of control moves.
In Forex, no central volume exists: each broker publishes its own, computed on its own clients. Two profiles of the same day at two brokers are not comparable, and that is a limit of nature, not of setting.
| What the profile shows | How it reads |
|---|---|
| A sharp peak, the point of control | Many positions at the same price. The most watched level of the period. |
| An almost empty level | The market passed through without trading. It tends to cross it back quickly. |
| A bell-shaped profile | A balanced session, extreme prices were refused. A ranging market. |
| A P shape | Volume concentrated at the top. Often a rise that stopped and is consolidating. |
| A b shape | Volume concentrated at the bottom. The mirror of the P, after a fall. |
P and b shapes are the most quoted and the most misused part. They describe where volume concentrated, at the top or the bottom of the session, and nothing more. A P profile does not announce a fall: it says an upward move stopped and positions accumulated near the high. What comes next is not readable in the shape.
The genuinely useful reading is more down to earth: the point of control and the thin levels give prices, and prices can be compared with what the market does afterwards. A shape gets narrated, a level gets checked, and only the second belongs in a journal.
The session's point of control is 1.0960, and it concentrates almost half the activity. At the other end, 1.0920 saw almost nothing: it is a level price stands a good chance of crossing without stopping if it returns. Both pieces of information come from the same calculation, and no candlestick chart contains them.
This is the profile's main contribution, and it is real: the point of control and thin areas appear on no candlestick chart. They are extra levels, obtained with no indicator and no setting, from data the platform already holds.
Their quality comes from their origin. A profile level does not come from a formula applied to price, it comes from what actually traded. That is what separates it from most indicators, which recompute price from price.
A thin level above current price is a place the market crosses quickly, so a poor place to aim an exit. A point of control, on the contrary, is a place price often slows down. So the profile is mostly useful for placing realistic targets, and that use measures very well.
It is also the most honest use given the tool's limits: aiming at a level does not require believing it will hold, only that it will be reached.
The most serious flaw concerns Forex, and it is structural. There is no central market, so no market volume: what your profile displays is your broker's volume, sometimes even a plain tick count. Two traders at two brokers see two different profiles of the same day, and neither describes what the market did. On futures, where volume is central, the problem does not exist.
The second is the chosen period, almost always left at the default. A session profile, a weekly profile and a move's profile give three different points of control, and each looks convincing on its own. With no written rule about the period, you look at the one that confirms.
The third is the talk about shapes. A P profile tells a good story, is quick to recognise and predicts nothing. Levels, on the other hand, can be checked. A method built on shapes produces no statistic because it produces no prices: there is nothing to compare afterwards.
The classic mistake. Reading a Forex profile like a futures profile. On a market with no central clearing, the volume displayed is not the market's but your broker's, and two traders at two brokers see two different profiles of the same day. Conclusions drawn from such a profile transfer nowhere.
| Indicator | Formula | What it measures | When to use it |
|---|---|---|---|
| Volume profile | Volume sorted by price over a period | Where the market traded most | Placing targets, spotting thin areas |
| DOM | The order book displayed vertically | RESTING orders, at a given instant | Seeing displayed intent, not a fact |
| Footprint | Each candle opened into two columns | What ACTUALLY executed, level by level | Reading aggression inside a candle |
| Classic volume | Total volume under each candle | How much traded per unit of TIME | Spotting an abnormally active candle |
Open your profile's settings and check whether the source is real volume or a tick count. That does not make the tool useless, but it changes what can be said about it: a tick profile describes your broker's activity, not the market's, and it compares to nothing outside. On futures, the question does not arise.
Session profile, weekly profile, profile of a move: choose, write it down, apply it. The point of control moves from one profile to another, so three profiles displayed at once guarantee some level will always confirm what you already thought.
That is the easiest use to measure and the quickest to validate. Log the target you aimed at and compare it with what the trade actually returned: if your exits at the point of control are reached more often than your arbitrary ones, you have checked something instead of believing it.
It is a histogram that sorts traded volume by price level instead of by unit of time. It shows at which prices the market traded most over a period, information a candlestick chart contains nowhere.
It is the price carrying the largest volume of the period, that is the profile's longest bar. It is where the most positions were built, so the most watched level, and it most often serves as a target rather than an entry.
The levels it supplies are real and are not found elsewhere, which is already value. But a volume profile strategy cannot be judged in the abstract: any volume profile trading strategy depends on the market, on the chosen period and above all on the source of the volume. On futures, where volume is central, the reasoning holds; in Forex, the profile describes your broker and nothing else.
A P shaped volume profile has its volume concentrated at the top: an upward move stopped and positions accumulated near the high. A b shape is its mirror, after a fall. These shapes describe where volume settled, they do not announce what comes next, and that is the most frequent mistake made about them.
Not in the same way. Forex has no central market, so no market volume: what you see is your broker's volume, and sometimes a plain tick count. The tool stays usable for locating activity in your own feed, but the levels compare with nobody else's, unlike on futures.
Tradoshi does not display a volume profile, and that is worth saying plainly rather than letting it be assumed: it is a journal, it records what executed on your account, not how market volume is distributed. What it does is answer the next question, whether your profile levels earn you anything.
The tool for that is MFE, the peak unrealised gain reached before closing, shown in the Reports screen. If you aim at the point of control as a target, MFE says whether price actually got there or whether you exited first, and the gap between average MFE and average gain banked puts a number on exactly what you leave to the market. Tag those trades and the Performance by tag block in the Journal screen isolates them from the rest.
To go deeper on this: read the full guide. Every term is gathered in the glossary.