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Volume profile

Volume profile shows, as a horizontal histogram, the quantity traded at each price level over a period. A standard chart shows volume per unit of time; this one shows it per price, which answers a different question: where did participants actually agree?

The formula

Traded volume distributed by PRICE level rather than by unit of time.

How to read it

The levels where the market did most business concentrate positions, so probable reactions.

Thick areas are where a lot of trading happened: price moves slowly there and often stalls. Thin areas get crossed fast, in both directions. It is a map of the ground, useful for placing a target or a stop, not a direction indicator.

The classic mistake

Reading it without knowing the period it covers. A session profile, a weekly profile and a swing profile draw different areas on the same chart. Changing the period changes the conclusions, which makes any undated reading unverifiable.

To go deeper on this : read the full guide. Every term is gathered in the glossary.