What it means
Market Profile counts how much time (or volume) the market spent at each price. The point of control (POC) is the price with the most activity. The value area is the range around the POC that holds about 70% of all activity; its top is the value area high (VAH) and its bottom the value area low (VAL).
A TPO (time price opportunity) profile counts one letter for each period that traded a price; a volume profile counts traded volume instead.
Why traders use it
Auction theory sees the market searching for prices where both sides are willing to trade. The value area is where most of that agreement happened; prices outside it were rejected quickly or have not been accepted yet.
Traders use yesterday’s VAH, VAL and POC as reference levels for today.
Chart examples
Profile, POC and value area
How to identify it objectively
- 1Choose the session and the price bucket size, and keep them fixed.
- 2Count the TPOs (or volume) in each bucket.
- 3POC = the bucket with the most activity.
- 4Value area: start at the POC and add the larger neighbouring bucket until about 70% of the total is included. Its edges are VAH and VAL.
Bullish use
- 1Price opens above yesterday’s value area and holds: acceptance higher.
- 2A pullback to VAH that holds is watched as support.
- 3POC below acts as a magnet only if price returns into value.
Bearish use
- 1Price opens below the value area and holds: acceptance lower.
- 2A rally to VAL that fails is watched as resistance.
What confirms it
- Several periods (TPOs) trading beyond a value edge show acceptance.
- Reaction at VAH, VAL or POC.
What invalidates it
- A quick move outside value that returns inside: rejection, not acceptance.
- Different session or bucket settings giving different levels.
How a hypothetical setup is built
Entry
Price opens above yesterday’s VAH; enter on a pullback to VAH that closes back up.
Stop
Back inside value, below the POC.
Target
The next higher-timeframe level or a range extension.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Market Profile & Auction TheoryInitial Balance and Range Extension
- Market Profile & Auction TheoryThe 80% Rule
- Technical IndicatorsVWAP and Anchored VWAP
- Full guide on The TradeskillFootprint Chart Explained
Historical testing
Not tested on The Tradeskill. In the drawing, the profile, POC and 70% value area are calculated from the candles shown, using 1-point buckets and one TPO per candle.
Limitations: when it fails
- Results depend on session times and bucket size.
- Candle-based TPOs are an approximation of true 30-minute profiles.
- In strong trends the value area moves every day and old levels matter less.
Knowledge check
Pick an answer to see the explanation. Nothing is saved.