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Market Profile
Now you will wonder, what this market profile now? and how it differs from volume
profile?

In a nutshell, both profiles will look like same and fundamentals will remains same,
but there is a difference how both profiles get plotted.

Volume Profile.

Market Profile 1
 It is true representation of volume distribution.

Volume Focused: It displays the total volume traded at each price level,
highlighting where most of the trading activity occurred.

Horizontal Histogram: The profile is typically displayed as a horizontal

histogram on the price axis of a chart, with bars extending to the right to
represent the volume at each price level.

High Volume Nodes (HVNs): Areas with high trading volume, indicating strong
support or resistance levels.

Low Volume Nodes (LVNs): Areas with low trading volume, indicating
potential breakout or breakdown zones.

Market Profile.
It is true repression of market distribution. This is also called as TPO - Time Price
Opportunity.

Time and Price Focused: It plots price against time, organizing price levels
into time brackets (typically 30-minute intervals) to create a distribution of
prices over a trading session.

TPO (Time Price Opportunity): Each time bracket where the market traded at
a certain price is marked, often with letters or blocks, forming the profile.

Bell Curve Shape: The resulting profile often resembles a bell curve, showing
the distribution of prices over time.

Value Area: The range of prices where a significant percentage of trading

took place (usually 70%). This is divided into the Value Area High (VAH), Value
Area Low (VAL), and Point of Control (POC), which is the price level with the
highest number of TPOs.

Initial Balance: The price range established in the first hour of trading,
providing an early indication of the day's potential range and volatility.

Market Profile 2
 Comparison

Focus
Volume Profile: Emphasizes volume traded at each price level.

Market Profile: Emphasizes time spent at each price level.

Visualization
Volume Profile: Displayed as a horizontal histogram alongside the price axis.

Market Profile: Displayed as a series of letters or blocks (TPOs) representing

time intervals, forming a bell curve shape.

Key Concepts
Volume Profile: High Volume Nodes (HVNs), Low Volume Nodes (LVNs), and
volume-based support/resistance levels.

Market Profile: Value Area, Point of Control (POC), Initial Balance, and TPO
count.

Time Frame Flexibility

Volume Profile: Can be applied to any custom time frame (e.g., intraday, daily,
weekly).

Market Profile: Typically applied to daily sessions, but can be adjusted to

different intervals.

Purpose
Volume Profile: Identifying key support and resistance levels, understanding
volume distribution, and price acceptance.

Market Profile: Analyzing market structure, identifying value areas,

understanding market sentiment, and time distribution.

Poor High and Low Concept..

Market Profile 3
 Both Volume Profile and Market Profile are valuable tools for traders, each offering
unique insights into market behavior. Volume Profile focuses on where trading
activity is concentrated at different price levels, helping to identify support and
resistance. Market Profile, on the other hand, provides a time-based view of
market activity, highlighting the market structure and value areas over a trading
session. Depending on their trading strategies and what they aim to analyze,
traders might choose to use one or both tools in conjunction to gain a
comprehensive understanding of market dynamics.

Profile Shapes
P Profile
The P-shaped profile resembles the letter "P" when plotted on a chart. This shape
indicates a market that has experienced a strong buying interest, often after a
significant news event or breakout from a consolidation phase. Here’s what the P-
shaped profile typically signifies:

1. Initiative Buying: The market opens and sees a burst of buying activity, often
pushing prices higher quickly. This initial phase results in a spike in volume at
higher price levels as buyers are aggressive and drive the prices up.

2. Balance at Higher Levels: After the initial surge, the market starts to balance
out and the trading volume accumulates at these higher price levels. The wide
part of the "P" shows the area where most of the trading volume has taken
place, indicating that buyers and sellers have found a temporary equilibrium.

Interpretation and Implications

Bullish Sentiment: The P-shaped profile generally indicates bullish market
sentiment. Buyers have been dominant, pushing prices up, and the market has
accepted these higher prices.

Support Levels: The base of the "P," where the volume was initially low but
increased significantly, can act as a strong support level. If the price returns to

Market Profile 4
 this level, it's likely to see buying interest again.

Potential Continuation: A P-shaped profile often suggests that the market

may continue in the upward direction, especially if the volume at higher levels
indicates strong buying interest and acceptance of higher prices.

Fade the Edges: Traders sometimes look to trade against the extreme ends of
the profile. In a P-shaped profile, the bottom edge (the tail) represents a
potential support area.

Trading Strategies
Breakout Confirmation: Traders may look for confirmation of a breakout when
a P-shaped profile forms. If prices remain stable at higher levels and volume
continues to accumulate, it suggests a sustainable upward movement.

Pullback Entries: Some traders wait for a pullback to the high-volume node
(the thick part of the "P") to enter long positions, betting that this area will act
as support.

Volume Clusters: Identifying volume clusters within the P-shaped profile can
help pinpoint exact entry and exit points. High volume nodes within the profile
are critical areas to watch.

Example Scenario
Imagine a stock that has been trading in a range. Suddenly, positive earnings are
reported, causing the stock to gap up at the opening bell. The initial surge pushes
the price significantly higher, and heavy trading volume is seen at these new,
higher levels. As the day progresses, the price stabilizes and most of the trading
activity is concentrated at the higher prices, forming a P-shaped volume profile.
This pattern suggests that the market has reacted positively to the earnings news,
and the higher price level is accepted by traders.

In conclusion, the P-shaped profile in volume profile analysis is a powerful

indicator of bullish market sentiment and potential continued upward movement.
Traders use this profile to identify key support levels and plan their trades around
the high-volume areas that signify market acceptance.

Market Profile 5
 b Profile

The lowercase "b"-shaped profile resembles the letter "b" when plotted on a
chart. This shape indicates a market that has experienced strong selling interest,
typically after an initial drop in prices, followed by stabilization and balance at
lower levels. Here’s what the lowercase "b"-shaped profile typically signifies:

1. Initiative Selling: The market opens and experiences a significant drop due to
strong selling activity. This phase results in high trading volume at lower price
levels as sellers are aggressive and drive the prices down.

2. Balance at Lower Levels: After the initial sell-off, the market stabilizes and
trading volume accumulates at these lower price levels. The wide part of the

Market Profile 6
 "b" indicates where most of the trading volume has taken place, showing that
buyers and sellers have found a temporary equilibrium at these lower prices.

Interpretation and Implications

Bearish Sentiment: The lowercase "b"-shaped profile generally indicates
bearish market sentiment. Sellers have been dominant, pushing prices down,
and the market has accepted these lower prices.

Resistance Levels: The top of the "b," where the volume was initially high
before dropping off, can act as a strong resistance level. If the price returns to
this level, it is likely to see renewed selling interest.

Potential Continuation: A lowercase "b"-shaped profile often suggests that

the market may continue in the downward direction, especially if the volume at
lower levels indicates strong selling interest and acceptance of lower prices.

Fade the Edges: Traders sometimes look to trade against the extreme ends of
the profile. In a lowercase "b"-shaped profile, the upper edge (the tail)
represents a potential resistance area.

Trading Strategies
Breakdown Confirmation: Traders may look for confirmation of a breakdown
when a lowercase "b"-shaped profile forms. If prices remain stable at lower
levels and volume continues to accumulate, it suggests a sustainable
downward movement.

Pullback Entries: Some traders wait for a pullback to the high-volume node
(the thick part of the "b") to enter short positions, betting that this area will act
as resistance.

Volume Clusters: Identifying volume clusters within the lowercase "b"-shaped

profile can help pinpoint exact entry and exit points. High-volume nodes within
the profile are critical areas to watch.

Example Scenario
Imagine a stock that has been trading in a range. Suddenly, negative news is
reported, causing the stock to gap down at the opening bell. The initial selling
pressure pushes the price significantly lower, and heavy trading volume is seen at

Market Profile 7
 these new, lower levels. As the day progresses, the price stabilizes and most of
the trading activity is concentrated at the lower prices, forming a lowercase "b"-
shaped volume profile. This pattern suggests that the market has reacted
negatively to the news, and the lower price level is accepted by traders.

Summary
Shape: Resembles a lowercase "b"

Volume Distribution: High volume at lower price levels, indicating selling

interest followed by stabilization

Market Sentiment: Bearish

Key Areas: Top of the "b" as resistance, high-volume node as a potential

pullback point

In conclusion, the lowercase "b"-shaped profile in volume profile analysis is a

powerful indicator of bearish market sentiment and potential continued downward
movement. Traders use this profile to identify key resistance levels and plan their
trades around the high-volume areas that signify market acceptance.

D Profile

The "D"-shaped profile in volume profile analysis, often referred to as a balanced

profile, is a pattern indicating a market that is in a state of equilibrium, with price
acceptance at a particular range. Here’s a detailed explanation:

"D"-Shaped Volume Profile

The "D"-shaped profile resembles the letter "D" when plotted on a chart. This
shape indicates a market that is in a balanced state, with trading activity spread
relatively evenly around a central price level. Here’s what the "D"-shaped profile
typically signifies:

1. Equilibrium: The market has found a balance between buyers and sellers,
resulting in a bell-shaped distribution of volume. The price fluctuates within a
defined range where most trading activity occurs.

Market Profile 8
 2. High-Volume Node (HVN): The widest part of the "D" represents the high-
volume node, or the price level where the most trading activity has taken
place. This level is often seen as fair value by both buyers and sellers.

3. Tails: The narrow ends of the "D" represent the tails, which are areas of lower
trading volume at the extremes of the price range. These tails indicate price
levels that were tested but rejected by the market.

Interpretation and Implications

Market Balance: The "D"-shaped profile generally indicates a balanced
market where supply and demand are in equilibrium. There is no clear trend,
and the price oscillates around the central high-volume area.

Support and Resistance: The high-volume node acts as a magnet for price,
serving as a strong support or resistance level. The tails represent potential
reversal points, as they indicate price levels that were not accepted by the
market.

Range Trading: This profile suggests that the market is range-bound, and
trading strategies should focus on this range.

Trading Strategies
Range Trading: Traders can buy at the lower end of the range (support) and
sell at the upper end of the range (resistance), capitalizing on the market's
tendency to revert to the mean (the high-volume node).

Fade the Extremes: Traders may look to fade the price when it moves to the
tails of the profile, expecting it to revert back to the high-volume node.

Breakout and Breakdown: While the "D"-shaped profile indicates balance,

traders should be prepared for potential breakouts or breakdowns. A
significant move outside the established range, with volume, can indicate the
beginning of a new trend.

Example Scenario
Imagine a stock that has been trading within a defined price range for several
days. The volume profile for this period shows most of the trading activity
concentrated around a central price level, with volume tapering off towards the

Market Profile 9
 higher and lower extremes of the range. This pattern forms a "D"-shaped profile,
indicating that the market views the central price level as fair value, with buyers
and sellers agreeing on this range.

Summary
Shape: Resembles the letter "D"

Volume Distribution: High volume at the center (high-volume node) with

tapering volume towards the extremes (tails)

Market Sentiment: Indicates a balanced market with no clear directional bias

Key Areas: High-volume node as a central pivot, tails as potential reversal

points

Characteristics
Balanced Profile: Reflects market equilibrium where trading is concentrated
around a central price level.

Support and Resistance: The high-volume node acts as strong

support/resistance, with tails indicating potential rejection areas.

Trading Range: Indicates a range-bound market suitable for mean reversion

strategies.

In conclusion, the "D"-shaped profile in volume profile analysis is a powerful

indicator of a balanced market where supply and demand are in equilibrium.
Traders use this profile to identify key support and resistance levels and to
implement range trading strategies, understanding that the high-volume node
represents fair value, while the tails indicate areas of potential rejection and
reversal.

B Profile
The uppercase "B"-shaped profile in volume profile analysis, often referred to as a
double distribution profile, is a distinctive pattern indicating a market with two
distinct areas of high volume at different price levels. Here’s a detailed
explanation:

Uppercase "B"-Shaped Volume Profile

Market Profile 10
 The uppercase "B"-shaped profile resembles the letter "B" when plotted on a
chart. This shape indicates a market that has experienced significant trading
activity at two separate price levels, suggesting periods of consolidation or
acceptance at these levels. Here’s what the uppercase "B"-shaped profile
typically signifies:

1. Two Areas of High Volume: The profile features two distinct high-volume
nodes (the wider parts of the "B"), separated by an area of lower volume.
These two high-volume areas represent price levels where the market has
found equilibrium twice, often because of changes in market sentiment or
reaction to news events.

2. Volume Valleys: The area of lower volume between the two high-volume
nodes is called the volume valley. This indicates a price range that was
transited quickly, with little trading activity, suggesting it may act as a support
or resistance zone in the future.

Interpretation and Implications

Market Transitions: The uppercase "B"-shaped profile indicates a market that
has transitioned between two price levels. This can happen because of
various reasons such as economic data releases, geopolitical events, or
significant corporate news.

Support and Resistance: The high-volume nodes act as powerful support and
resistance levels. The lower volume area between them can also act as a pivot
zone where price may move quickly if revisited.

Market Acceptance: The double distribution pattern shows areas where the
market has accepted price levels. These are key zones for traders to watch, as
they can provide clues about future price movements.

Trading Strategies
Trading the Edges: Traders often look to trade at the edges of the high-
volume nodes, entering positions when price approaches these areas,
expecting them to act as support or resistance.

Breakout or Breakdown: If the price moves out of one high-volume node and
enters the lower volume area, traders may look for potential breakouts or

Market Profile 11
 breakdowns. Quick price movement can be expected in the volume valley.

Reversion to Mean: In some cases, traders may look for reversion to the mean
trades, expecting the price to return to one of the high-volume nodes if it
strays too far.

Example Scenario
Imagine a stock that has been trading at a lower price range for a while, creating a
high-volume node at these levels because of prolonged consolidation. Suddenly,
positive news is released, causing the stock to surge to a higher price range. After
the initial spike, the stock consolidates again at this new higher level, creating a
second high-volume node. The resulting volume profile resembles an uppercase
"B," with two distinct areas of high trading activity separated by a lower volume
range.

Summary
Shape: Resembles an uppercase "B"

Volume Distribution: Two distinct areas of high volume, indicating two

separate price levels of market acceptance

Market Sentiment: Indicates transitions in market sentiment or reaction to

significant events

Key Areas: High-volume nodes as strong support/resistance, low-volume area

as potential pivot zone

In conclusion, the uppercase "B"-shaped profile, or double distribution profile, in

volume profile analysis is a powerful indicator of market transitions and dual areas
of price acceptance. Traders use this profile to identify key support and
resistance levels and to plan their trades around these high-volume nodes,
understanding that the low-volume area between them can act as a crucial pivot
point.

Summary.

Market Profile 12
 In volume profile analysis, there are several distinct profile shapes that traders use
to understand market sentiment and behavior. Each profile shape indicates
different market conditions and potential future price movements. Here are the
main types of volume profiles:

1. P-Shaped Profile
Description: Resembles the letter "P"

Market Condition: Indicates strong buying interest

Key Characteristics:

High volume at higher price levels

Indicates a breakout or bullish sentiment

Lower volume at the base, indicating initial support

Trading Implications: Look for potential continuation upward or support at the

high-volume node.

2. b-Shaped Profile
Description: Resembles the lowercase letter "b"

Market Condition: Indicates strong selling interest followed by stabilization

Key Characteristics:

High volume at lower price levels

Indicates a breakdown or bearish sentiment

Lower volume at the top, indicating initial resistance

Trading Implications: Look for potential continuation downward or resistance

at the high-volume node.

3. B-Shaped Profile (Double Distribution)

Description: Resembles the uppercase letter "B"

Market Condition: Indicates two distinct areas of market acceptance

Key Characteristics:

Market Profile 13
 Two high-volume nodes separated by a low-volume area

Indicates transitions between two price levels

Trading Implications: Use high-volume nodes as support/resistance; watch

for quick movements through the low-volume area.

4. D-Shaped Profile (Balanced Profile)

Description: Resembles the letter "D"

Market Condition: Indicates market equilibrium

Key Characteristics:

High volume concentrated around a central price level

Tapering volume towards the extremes

Balanced, range-bound market

Trading Implications: Range trading strategies; buy at support, sell at

resistance, fade extremes.

5. Spike Profile
Description: Sharp, narrow volume spike at a specific price level

Market Condition: Sudden price movement due to news or significant event

Key Characteristics:

Sharp increase in volume at one price level

Indicates potential reversal or continuation

Trading Implications: Be cautious of potential reversals; look for confirmation

before entering trades.

Summary of Profile Types

P-Shaped: Bullish breakout with higher price acceptance.

b-Shaped: Bearish breakdown with lower price acceptance.

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 B-Shaped: Double distribution with two high-volume areas, indicating two
accepted price levels.

D-Shaped: Balanced market with a central high-volume node, indicating

range-bound conditions.

Spike: Sharp volume increase at a specific price level, indicating potential for
quick reversal or continuation.

Each volume profile type provides valuable insights into market behavior and
helps traders make informed decisions based on the observed volume distribution
and price action.

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