A volume profile shows how much volume traded at each price during a session. The price with the most volume is the point of control (POC); the range holding about 70% of the volume is the value area, bounded by the value-area high (VAH) and low (VAL). A naked POC is an earlier session's POC that price hasn't traded back to.
How a profile is built
Instead of plotting volume over time (the usual histogram under the chart), a profile plots it by price: a horizontal histogram on the side of the chart. Long rows are prices where a lot of trading happened; short rows are prices the market passed through quickly.
Point of control (POC)
The POC is the single price row with the most volume — the price the session spent the most effort trading. Many traders treat it as the session's 'fair value'.
Value area (VAH and VAL)
Starting from the POC, the value area expands outward one row at a time, adding the larger neighbouring row, until it contains about 70% of the session's volume. Its top is the value-area high (VAH) and its bottom the value-area low (VAL).
Prior-day value and naked POCs
Yesterday's POC, VAH and VAL (often written yPOC, yVAH, yVAL) are common reference levels for today. A naked POC is a POC from an earlier session that price hasn't returned to; it stays relevant until a later bar trades through it.
What held up in our testing
- As standalone fade levels (buy every VAL touch, sell every VAH touch), value-area edges did not hold up out of sample.
- As confluence, they did: supply/demand zones that contained the prior day's POC or a value-area edge performed much better than zones that didn't.
Bar-based profiles estimate volume by spreading each bar's volume across its range; a tick-based profile is more exact but needs tick data.