Volume, Volume Profile
& Market Profile

1.1  When vs where

The volume bars under a normal chart answer one question: when did trading happen? Volume Profile answers a different one: where, at which prices, did trading happen? It adds up every contract traded at each price and draws the total as a horizontal bar beside the price axis.

1.2  How the profile is built

Your charting software does this for you, but knowing the steps helps you read the result:

1. Pick a time window: usually one regular trading session (9:30 AM–4:00 PM ET for ES).
2. Split price into rows: on ES each row is often one tick, 0.25 points.
3. Count the contracts traded in each row.
4. Draw a bar for each row, as long as its volume. The longest bar is the POC.

1.3  The five levels to know

2.1  The Value Area

The Value Area is the price range where about 70% of the session's volume traded. The 70% figure is a convention borrowed from statistics (about 68% of a normal distribution sits within one standard deviation). It is a useful rule of thumb, not a law of markets.

2.2  How it's calculated

One common method starts at the POC and grows outward, always adding the busier neighbouring row, until 70% of the volume is inside. Some platforms compare two rows at a time, so values can differ slightly between platforms.

2.3  Using yesterday's levels today

Many traders mark the prior day's POC, VAH and VAL before the open. Where today opens relative to yesterday's value is useful context: inside value often means a calmer, two-sided day; outside value means the market is testing new prices.

2.4  POC migration

While the session is live, the POC can move. Charting software calls this the developing POC. A POC stepping higher means the busiest trading is happening at higher prices, and vice versa. It tells you how the day is developing, not where it will end.

3.1 One day, one shape

In Lessons 1 and 2 you learned where the busiest price (the POC) and the value area sit. Now zoom out and look at the outline of the whole profile. The outline is called its shape, and it shows how the day's trading was spread across prices.

Shape reading is pattern recognition, not forecasting. A shape tells you how the session unfolded once it is finished, or mostly finished. It does not tell you what the next session will do. Keep that sentence in mind; it will save you from the most common mistake in this lesson.

3.2 The shapes in plain language

A balanced (bell) profile looks like a bell curve. Volume piles up in the middle and fades toward both ends. It is consistent with a session where buyers and sellers largely agreed on a fair price and neither side pushed far.

A P-shape has a fat top and a thin tail pointing down, like the letter P. Most trading happened in the upper part of the range. A b-shape is the mirror image: a fat bottom and a thin tail pointing up. The letters are only a memory trick for where the bulk of volume sits.

A thin or elongated profile has no clear fat node. Price kept moving, so little volume built up at any one level. A double distribution has two separate fat nodes with a thin zone, an LVN, between them. It is consistent with price moving from one area of agreement to another, then settling again.

3.3 P and b shapes are context, not predictions

You will read in many places that a P-shape is bullish and a b-shape is bearish. That is too strong. A P-shape often forms when a rally is driven by sellers closing out positions, called short covering. When that buying runs out, price can drift or fall back. A P-shape built from short covering often fails to continue higher.

The same is true in reverse for a b-shape. A b-shape can form when buyers are closing out positions, called long liquidation, and a bounce can follow. So treat the letter as a hint about where business was done, then check the next session. Did price stay near that fat node, or leave it behind? What price does next is what tells you whether the shape mattered.

3.4 The trend day profile

On a strong one-directional day, the profile is usually thin in volume at each price and long in range. October 30, 2026 is a real example: an ES trend day down with an intraday range of about 196 points. Because price kept moving, no single level collected much volume, so the profile is thin and stretched.

A double distribution is not the same thing as a trend day. A trend day is a move that keeps going. A double distribution has a move, then a pause and a new area of agreement, so it forms two nodes. Both involve a fast stretch of price, but the second has a settling phase that creates the second fat node.

3.5 Labelling honestly

Write your label in pencil, not ink. A profile that looks like a P at 1 PM may look like a bell by 4 PM. Decide your label after the session, or mark it 'developing' if you must label during the day.

A simple habit is to log three things: the shape name, where the POC sits in the day's range (top, middle or bottom), and what the next session did around that area. After a few weeks you will have your own record of how often each shape was followed by a continuation and how often by a reversal. Your record is worth more than any rule of thumb you read.

4.1 Nodes as places to pay attention

Support is a price area where buyers have stepped in before. Resistance is an area where sellers have. These are loose ideas; a zone is more realistic than a single price. The profile gives you a way to mark those zones from real activity rather than from a guess.

Remember the nodes from Lesson 1. An HVN (high-volume node) is a fat part of the profile where price spent time. An LVN (low-volume node) is a thin part where price moved quickly. Many traders mark both on a map before the session starts.

4.2 How HVNs and LVNs behave

An HVN is a zone of past agreement. When price returns to it, some traders expect it to slow down or turn into a range again. That is a tendency seen on many charts, not a rule. Price can also slice straight through an HVN when a strong move is underway.

An LVN is a zone where price saw little acceptance. When price returns to an LVN, it often passes through quickly toward the next node. Some traders also watch LVNs as places where a reaction can be sharp, because there is little past business to cushion the move. The reaction can go either way.

4.3 Making your map

1. Mark yesterday's POC, VAH and VAL as zones, not lines. Give each a cushion of a few points.
2. Scroll the profile back several days and mark the biggest HVNs above and below current price.
3. Mark the thin LVN gaps between them. Label them 'fast zone'.
4. Decide in advance what you will watch at each zone: does price stall, reject or accept?

Why build the map before the open? Because decisions made in the middle of a fast move tend to be worse than decisions made calmly beforehand. With a map, you already know which areas matter, so you spend the session watching what price does there instead of hunting for something to do. If nothing happens at your zones, nothing happens, and that is an acceptable day.

A zone of a few points is realistic on ES. A single tick (0.25 points, worth $12.50) is far smaller than the normal noise of a 5-minute bar, so a one-tick line will often be touched, crossed and crossed again. Keep your map to zones.

4.4 Confluence with prior highs and lows

Confluence means two or more reference points sit in the same area. A common example is a profile node close to the previous day's high or low. Some traders pay extra attention there because several tools point to the same zone.

It also helps to ask what would change your mind. If price pushes through a node and stays on the far side for a while, the node did not act as support or resistance that time. The same node may matter again on another day, or it may not. Write down which one happened so that your map stays honest.

Confluence raises your attention, not your certainty. Two weak reasons do not make a strong one. If a zone had both an HVN and a prior high and price still sliced through it, record that too. A journal of failures is as valuable as a journal of successes.

5.1 Same market, different windows

A volume profile always answers the question 'where did volume trade in this window?' The window is up to you. Change the window and the profile, including the POC and value area, changes with it. Neither answer is wrong; they answer different questions.

Think of it as choosing a lens. A wide lens shows the large areas the market keeps returning to. A narrow lens shows what happened today. Using the wrong lens is a common reason two traders look at the same market and disagree about where 'the' POC is.

Three windows appear on almost every platform. Learn what each is for, then pick one per question rather than switching until you find a picture you like.

5.2 The three windows

A session profile is the one you have used so far. It is the right choice for 'where was fair price yesterday?' and for studying a single day's shape.

A composite profile adds several sessions together. It reveals larger areas of agreement that no single day shows clearly. A composite of five or ten days often has a steadier POC than any one session.

A visible-range profile builds itself from whatever bars are on your screen. It is quick and flexible, but its levels move when you scroll. Do not draw conclusions about levels from a profile that changes every time you pan the chart.

5.3 Choosing a window and sticking to it

A good rule is to attach a window to each question. 'Where did yesterday trade?' uses the session profile. 'Where has this market done most of its business over the last two weeks?' uses a composite. 'What is the shape of this move I am looking at?' uses the visible range.

Then write the window down next to the level. A note that says 'POC 7,770.75' is incomplete. A note that says 'session POC, Oct 28, 7,770.75' is something you can check later. That Oct 28 session had a value area from a VAL of 7,762.00 to a VAH of 7,777.25 around that POC.

Here is a small worked comparison. Imagine the session POC for the last day sits at one price, but the ten-day composite POC sits several points higher. The session tells you where yesterday's business was done. The composite tells you where the market has done most of its business over a longer stretch. If price opens near the composite POC, the larger area of agreement is in play; if it opens far from it, price is trading in less-visited territory. You describe that, you do not predict from it.

Be careful with composites. If a one-off event day (very large or very thin) is included, it can distort the whole profile. Look at the individual days inside your composite before you trust the combined levels. Also remember that the number of days is your choice; five days and fifteen days can give different POCs from the same market.

6.1 A study routine, not a signal

This lesson ties Lessons 1 to 5 into a simple routine. Everything here is an illustrative framework for study. It is not a recommendation to trade and it does not predict results. Real trading involves slippage, gaps and the possibility of losing more than you plan.

The last step matters. Skipping a setup is an action you can take every day. A study framework that never says 'skip' is not a framework.

6.2 The risk maths on ES

Futures risk is simple arithmetic once you know the contract. On ES, 1 point = $50 and 1 tick (0.25 points) = $12.50 per contract. Risk is the distance from entry to your stop, times the dollar value, times the number of contracts.

Reward-to-risk compares the distance to your target with the distance to your stop. A 4-point stop (16 ticks, $200) with an 8.75-point target (35 ticks, $437.50) has a reward-to-risk of about 2.2 to 1. That is only arithmetic; it says nothing about how often the target is reached.

6.3 Hypothetical example 1: a framework that fails

Hypothetical example. This uses the real levels from Oct 28 and Oct 29, 2026, but the trade itself is invented for study and was not taken.

Oct 28's value area was VAL 7,762.00 to VAH 7,777.25, with a POC of 7,770.75. On Oct 29 price opened at 7,747.25, below the prior VAL. Suppose a student writes the plan: 'If price trades back above VAL, buy with a target of the prior POC and a stop 4 points below the VAL.'

What happened: price traded above 7,762 only between 11:30 and 11:40, reaching a high of 7,767.25. It never reached the target. It later fell to 7,725.25 at 1:50 PM and the day closed at 7,754.25. The hypothetical stop would have been hit for a loss of about $200 per contract, before slippage.

Lesson: re-entry into value was not acceptance. The Lesson 2 note about time spent inside value applies. A written plan that required time inside value (two 30-minute periods is a common convention) would have kept the student out.

6.4 Hypothetical example 2: a setup that is skipped

Hypothetical example. Same day, a different student marks the entry at 7,762.00 but places the stop below the day's open, at 7,747.25, because that is where the idea is clearly wrong. That stop is 14.75 points (59 ticks), or $737.50 per contract.

The target is still the prior POC at 7,770.75, 8.75 points away. Reward-to-risk is 8.75 divided by 14.75, about 0.6 to 1. The student's rule says to require at least 1.5 to 1, so the verdict is skip. No order is placed. The day later fell to 7,725.25, so skipping avoided a loss, but that was partly luck; the correct reason to skip is the arithmetic.

Skipping is not a failure. It is the result of a rule applied consistently. Write it in your journal as a plain 'no trade: reward 8.75 points vs risk 14.75 points'.

6.5 Sizing and the journal

Decide the dollar risk first. If your plan allows $200 of risk and the stop is 4 points ($200 per contract), the size is one contract. If the stop is 14.75 points ($737.50), one ES contract already exceeds the plan, so the answer is to skip or to use a smaller contract such as Micro E-mini S&P 500 (one tenth the size). Check the exchange specifications for its tick value.

1.1 Time at price

Lessons 1-6 counted volume at each price. Market Profile counts something simpler: time at each price. Instead of asking how many contracts traded, it asks how long price spent at each level. The result is a sideways stack of letters that looks like a bell, a lopsided bell or something stranger.

Here is how it is built. The regular session (9:30 AM to 4:00 PM ET) is cut into 30-minute periods. Each period gets a letter: A for 9:30 to 10:00, B for 10:00 to 10:30, and so on. For every period, you place that letter at each price the market touched. Each placed letter is called a TPO, short for Time Price Opportunity. Where many letters stack up, price spent a lot of time.

1.2 Reading the letters

Read a TPO chart from left to right in time and bottom to top in price. Letters at the far left are early; letters at the far right are later. A single letter standing alone on a row is a single print. It means price moved through that level in one period and did not return. Single prints often mark fast, one-sided movement.

A quick example of reading the shape: if the letters pile up in the middle and thin out above and below, the day spent most of its time around one price. If the letters keep marching higher with each new letter, price was moving rather than resting. The order of the letters tells the story of the day, which is something a volume profile alone does not show.

Notice that these are the same ideas as in Guide 1: a most-visited price, a 70% zone, and thin areas. The vocabulary is shared. What changes is the thing counted: letters (time) instead of contracts (volume).

1.3 TPO versus volume profile

Time and volume often agree, but not always. A price where the market lingered quietly gets many letters but modest volume. A price where heavy trading happened in a few minutes gets few letters but large volume. Looking at both on the same day shows you which kind of agreement the market showed.

Neither is more correct. Market Profile has been used since the days of floor trading, and its structure of lettered periods makes the day's story easy to read from the chart alone. The volume profile adds the participation level. The first is built from the clock; the second from the tape.

In the rest of this guide we use the TPO profile to read the shape and structure of the day: how the market opened, how the first hour set the frame, and where value was built. You do not need Guide 1 to follow, but if you want a refresher on value area and POC, Lessons 1 and 2 of Guide 1 cover them.

2.1 The market as an auction

Auction Market Theory is a way of thinking, not an indicator. Its core idea is that a market exists to facilitate trade. Price moves higher to look for more buyers' interest, and lower to look for more sellers' interest. When it finds a price where trade flows easily in both directions, it tends to stay near that price. When it stops finding willing counterparties, it moves again.

Think of an ordinary auction. The auctioneer calls out higher prices until buyers drop out. If no one bids, the price drops until someone does. Price is not 'right' or 'wrong'; it is the market's way of finding where business gets done.

2.2 Balance and imbalance

Auction Market Theory describes two main states. In balance, price rotates inside a range and builds overlapping value. Profiles tend to look like a bell, and each day's value area overlaps the previous one. In imbalance, one side dominates and price moves out of the range to find new value. Value areas move higher or lower from day to day.

These states are not predictions. Balance can last two days or two months. A move out of balance can hold or fail. What the framework gives you is a plain question to ask every day: is the market rotating in a range, or is it looking for new value?

2.3 Responsive versus initiative

Auction Market Theory also describes two kinds of activity. Responsive activity is trade that pushes price back toward value after it has moved away, such as buying below value or selling above it. Initiative activity is trade that pushes price away from value into new territory, such as buying above the prior high or selling below the prior low.

Initiative activity needs follow-through to matter. If price pushes above a prior high and then falls straight back, the initiative attempt was rejected. If price pushes above and builds value there, it was accepted.

2.4 Open types and the first minutes

How a day opens relative to prior value gives early context. Some traders classify the open: a fast drive in one direction, a test followed by a drive, a rejection and reversal, or a rotation inside the prior range. The sketch below illustrates the four commonly named open types. Treat them as descriptions of the first minutes, not signals.

2.5 Top-down context

Top-down means you start with the big picture and work in. First: where is price relative to the multi-day balance range? Second: where did yesterday's value form, and where did today open relative to it? Third: what type of open and early range do you see? Only then do you look at the detail.

On Oct 29, 2026, for example, the open was 7,747.25, below the prior day's VAL of 7,762.00. That is context: the market opened outside the previous value. It did not tell anyone what would happen; price traded above 7,762 only for a few minutes and later reached 7,725.25. The context framed the questions, and the day answered them.

3.1 Why day types exist

Not every day looks the same. Market Profile traders group days into types based on how the profile develops. The groups help you describe a session, compare it with past ones and notice when something unusual is happening. Guide 1 introduced profile shapes (bell, P, b, thin, double). Here we look at how those shapes relate to the structure of the day.

3.2 The four types

Why bother naming them? Because naming forces you to look at structure, not just direction. Two days can both close higher, yet one was a quiet rotation inside the first hour and the other was a long one-way push. They call for different questions the next morning, such as whether the market is still in balance or has moved to new value.

A second reason is comparison. When you label forty sessions, you can see what share were normal, what share extended and how the next day tended to open after each type. That is far more useful than a single memorable chart, because it is your own sample, with the boring days included.

A normal day is one in which the early range, set in the first hour, does the heavy lifting. The rest of the session mostly rotates within it. A normal variation day starts similarly but then breaks out of the early range on one side, building a somewhat shifted value area.

A trend day is a strong, mostly one-way session. October 30, 2026 was a trend day down with an intraday range of about 196 points. Profiles of trend days are thin because price does not stay anywhere long enough to pile up letters. A double distribution day shows a first area of trade, a fast move through a thin zone, and a second area of trade. It is a different pattern from a trend day: the second area is where the market settles again.

3.3 Labels come after the fact

You can only be sure what type of day it was when it is over. At 11 AM, a normal day and a normal variation day look the same. The label is useful for review and for studying how often each type follows a certain opening, but it should not be treated as a forecast during the session.

A more practical habit is to keep a short list of possibilities as the day develops. 'So far the day is inside the first hour's range. If it breaks out and builds value, it may become a variation or a double distribution.' That keeps your mind open without pretending to know.

If you want to see the shapes without the structure, compare these pictures with the five profile shapes in Guide 1, Lesson 3. The shapes are the same family. This lesson adds the question of how the day got there.

4.1 The Initial Balance

The Initial Balance (IB) is the high and low of the first hour of the regular session: letters A and B on a 30-minute TPO chart, or 9:30 to 10:30 AM ET. The idea is that the first hour contains the most active participation of the day, so its range is a useful frame.

Why the first hour? In many sessions the opening period carries heavy participation as overnight orders meet fresh interest, so the early range tends to capture how the day began. The IB is not magic; it is simply a consistent, easy-to-mark frame that lets you describe every day the same way. Consistency is the point, because it lets you compare days fairly and build a record.

Mark the IB high, the IB low and the IB midpoint halfway between them. The midpoint is simply a reference line; many traders glance at it to see which half of the first hour's range price is in.

4.2 Narrow versus wide

IB width is the distance between the IB high and the IB low. A narrow IB is a small first-hour range compared with recent days. A wide IB is a large one. Width is relative: compare today's IB with your last several sessions rather than with a fixed number.

The textbook pairing is: narrow IB, more chance of a big extension; wide IB, more chance of staying inside. Treat that as a pattern to test, not a rule. Look at the four examples above and in your own data, and see how often each description held.

4.3 Range extension

Range extension is trading outside the IB. It can happen on one side or, less often, both. Extension up means price traded above the IB high; extension down means it traded below the IB low. What matters is whether the extension is accepted (time and volume build outside) or rejected (price quickly returns inside).

It also helps to separate the size of the extension from its meaning. A small poke of a few ticks beyond the IB high is a very different event from a push of many points that spends hours above it. Ticks are $12.50 each on ES, so even a small poke is worth recording in points and ticks, but it should not be given the same weight as a sustained move. Describe each extension by how far, how long and whether it came back.

An extension that returns inside the IB is sometimes called a failed extension. It is a description, not an instruction. The same applies to extensions that hold: a hold is a description of what happened, not a promise that it continues.

Record the time of the first extension and how long it lasted. Many sessions extend once and then settle. Recording the details teaches you what is typical in the market you study.

5.1 The value area in Market Profile

You met the value area in Guide 1: the range that holds about 70% of activity. On a TPO chart it is the range that holds about 70% of the letters. One common method starts at the TPO POC, then adds the pair of rows above or below that has the most letters, repeating until 70% is reached. Platforms differ in the details, so levels can vary by a row or two.

If you already know the volume-based value area from Guide 1, you will notice the TPO version is usually close but not identical. Time and volume are different measures, so the two zones can differ by a few points. Neither is wrong. Many traders mark both and treat the overlap as the more stable zone, and note the difference when they disagree.

The top of that range is the Value Area High (VAH) and the bottom is the Value Area Low (VAL). On Oct 28, 2026, the volume-based levels were a VAL of 7,762.00 and a VAH of 7,777.25 around a POC of 7,770.75. Treat them as reference levels, not as walls.

5.2 The 80% rule, done honestly

You will often read: 'if price opens outside the prior value area and then moves back inside, it has an 80% chance of crossing the whole value area.' This is the 80% heuristic. As stated online it is incomplete and the number is unverified.

The original condition is more specific. Price should open outside the prior value area, re-enter it, and then stay inside for two consecutive 30-minute periods (two TPO letters). The idea is that time spent inside suggests acceptance, which makes a rotation across the range more plausible. Without that acceptance, re-entry alone is just a touch.

The 80% figure itself comes from trading folklore. It has not been verified for ES and your own records may show a different number. Use it as a hypothesis to test, not as a probability to rely on.

5.3 Value area relationships across days

Comparing today's value area with yesterday's gives a simple description of the market's direction. Higher value means today's value sits above yesterday's. Lower value means below. Overlapping value means the two share a large area, which is consistent with balance.

A practical way to use these relationships is as a morning question, not an answer. If the last three sessions stepped higher with little overlap, ask whether today opens inside that new area or back below it, and what you will consider acceptance. If the last three overlapped, the better question is whether the range is about to be tested. The same framework applies in each case: describe, then watch.

These are descriptions of what happened, and the market can change its mind at any time. A run of higher values can end in one session. Use the relationship to frame your questions, then watch what the next session does.

6.1 What a breakout is, and what it is not

A breakout is a move beyond a reference level, such as the IB high, a prior day's high or the edge of a multi-day balance range. A breakout is only an event. What matters is what happens afterwards: price either finds acceptance outside the level or goes back in.

Everything in this lesson is an illustrative study framework. It is not a recommendation to trade. Futures involve substantial risk of loss, including from gaps and slippage.

6.2 Acceptance and rejection checklist

Time outside is the key idea. A break that spends two or more 30-minute periods outside, with new trade building there, is consistent with acceptance. A break that returns inside within one period is consistent with rejection. The first tells you value may be moving. The second tells you the market found no takers at the new price.

You may also see a rule of thumb about the 'next day follow-through'. As with the 80% heuristic, treat it as a hypothesis for your own sample, not a fact.

6.3 Risk maths on ES

On ES, 1 point = $50 and 1 tick = $12.50. Risk per contract is stop distance times $50 per point. A stop must sit where the idea is clearly wrong; a stop only a few ticks away often sits inside normal 5-minute noise. Size comes from your dollar risk, not from the order you want to place.

6.4 Hypothetical example 1: a breakout that fails

Hypothetical example. Use the Oct 29, 2026 levels. Prior VAL was 7,762.00 and price opened at 7,747.25, below it. Suppose a student studies a 'break back above value' idea: entry at 7,762.00, a stop 4 points below (7,758.00; 16 ticks; $200 per contract) and a target at the prior POC of 7,770.75 (8.75 points; 35 ticks; $437.50).

Result: price traded above 7,762 only from 11:30 to 11:40, with a high of 7,767.25. It spent only about ten minutes above the level and never held two 30-minute periods inside value. The target was not reached. The low of 7,725.25 came at 1:50 PM and the close was 7,754.25. The hypothetical stop at 7,758.00 would have been hit for about $200 per contract, before slippage.

What the student learns: the checklist question 'did it stay inside?' answered 'no'. A plan that required two periods of acceptance before acting would have produced no trade.

6.5 Hypothetical example 2: a setup that is skipped

Hypothetical example. Another student reuses the entry at 7,762.00 but puts the stop below the open at 7,747.25. That is 14.75 points, 59 ticks, or $737.50 per contract. The target is still 8.75 points away, so reward-to-risk is about 0.6 to 1. The student's rule requires at least 1.5 to 1, so the setup is skipped and the reason is written in the journal.

On Oct 30, 2026 a trend day moved about 196 points in one direction. A student who had treated every move back toward a reference as an automatic fade would have been fighting the whole day. Whether an idea is a breakout study or a fade study, the context question comes first: balance, or imbalance?