Volume Profile: Price-Level Distributions and Trading Ranges
Summary
This indicator guide explains volume profile as a histogram of trading activity across price levels within a chosen time range. Depending on the data available, it can count estimated trades or aggregate real volume, and it can display distribution modes, maxima, medians, and volume-weighted average price. The standard profile divides a chart into time-based intervals, while a range version lets users define a segment with chart lines or minute-based boundaries. The distributions are described as tools for examining potential support and resistance areas; the author cautions that nearby price clusters can obscure apparent modes, so levels should be assessed in context.
The calculation uses the most accurate available terminal data, typically minute bars, and interpolates estimated trades within each bar. Broker tick data can be used in supported setups. The author says tests found broadly similar distributions across brokers, while noting that quote histories differ and gaps can shift range boundaries. Results therefore depend on data source, history depth, settings, and broker coverage; the document offers indicator operation guidance rather than evidence of predictive performance.
Key ideas
- A volume profile summarizes trade counts or volume at price levels over a selected interval.
- Profile modes and related distribution measures can help traders inspect candidate support and resistance zones.
- The range tool supports boundaries set by vertical lines or minute-based rules, with different histogram placements.
- Trade distribution is estimated by interpolating available bar data unless broker-provided ticks are selected.
- Sparse or differing broker histories can change boundary alignment and affect the resulting profile.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.