Video Transcript:
Volume Profile is a trading tool used by professional traders. Being able to read and interpret it correctly will give you an edge that most traders will never have. So, congratulations on stumbling upon this video — let’s get started. What you’re looking at right now is something I got from my friend called a Galton board. It’s a tool that shows how probability works. Now, imagine that each ball represents one trade. As the balls fall, most of them end up in the middle — that’s where most of the trading happened. Only a few reach the far edges, meaning traders were not very interested in trading there.
A Volume Profile shows the same thing — where most trading activity happened and where the heaviest volumes were traded. The place where the highest volume was traded is called the Point of Control. I like to say it’s the most important level on the Volume Profile and the most important level on the chart because that’s where most of the trading activity took place. For that reason, the market often reacts strongly to this level. It frequently acts as a key support or resistance zone. The highlighted zone you see here is called the Value Area. It covers roughly 68% of all the traded volume and represents the price area where the market traded the most — in other words, where the market found value. The top of it is called the Value Area High, and the bottom is the Value Area Low.
If you think back to the Galton board, the Value Area is just like the cluster of balls that landed in the middle — that’s the market’s balance zone. The Point of Control and Value Area show where the market spent time and where most of the trading activity took place. But there are also Low Volume Areas — price zones that the market didn’t really accept. It just passed through them quickly and moved on.
Now that you know the main parts of the Volume Profile, let’s take a look at how it actually forms over time. Just like with the Galton board, every trading day starts fresh — there’s no volume at first. But as traders begin placing their trades one after another, the Volume Profile starts to build. By the end of the session, the final shape of the profile depends on how the trading volume was distributed throughout the day.
There are a few main shapes that the Volume Profile can form: the D-shaped profile, the P-shaped profile, the B-shaped profile, and the thin profile. Each one tells a different story about what’s happening in the market. The D-shaped profile is the most common one. It tells us that the market is in temporary balance — buyers and sellers agree on value, and price just rotates around it. The P-shaped profile shows that buyers are in control. You’ll often see it during an uptrend, but if you spot it after a downtrend, it can also signal that the move down might be ending. The B-shaped profile is the opposite — it tells us that sellers are in control. You’ll usually see this shape during a downtrend, but if it appears after an uptrend, it could actually mean that the uptrend might be ending.
Finally, there’s the thin profile. It forms when the market moves so quickly in one direction that almost no volume builds up — only small volume bumps. It’s a sign of strong momentum, often sparked by big macro news.
So that’s the theory — but how do we trade this? Let me share with you one of the most basic Volume Profile trading strategies, and I’ll demonstrate it on a trade I took yesterday on USD/JPY.
What you see here is the USD/JPY chart on the 30-minute timeframe. The trade I took was a short, and it was short from here. Let me show you why I took that short. If you look at the weekly Volume Profile — that’s this large profile on the left — it shows how volumes were distributed throughout the whole previous week. That means this whole zone, right? The weekly Point of Control was right here. That means that throughout the whole previous week, the heaviest volumes were traded here. That’s the weekly Point of Control.
The way you can trade this is simple: you wait until the price moves away from the Point of Control. You can see that here — the price moved away from it and went downwards. Then I waited for a pullback, and because it went down from the Point of Control, I went short from that same level. That was it — pretty simple, right? You just wait for the pullback to the Point of Control and then enter the trade.
It doesn’t need to be the weekly Point of Control — it could also be the daily Point of Control, which means the place where the heaviest volumes of that day were traded. You can see it here: this is the daily Volume Profile, this is the Point of Control, and as you can see, it nicely aligns. In this case, it aligns with the weekly Point of Control, though it doesn’t always have to. So, I waited for the pullback and went short from there. That’s it — that’s how you can trade with the Volume Profile. It’s the simplest strategy to use, but obviously, there’s much more to it.
If you find this interesting and want to learn more about Volume Profile trading, I recommend visiting my website Trader-Dale.com. Click the “Trading Course and Tools” button, and you can browse my trading education and custom-made indicators. If you’re interested in Volume Profile trading, take a look at the Volume Profile Pack, which includes a 15-hour course, my daily and swing trading signals (so you can trade alongside me every day using the same levels I use — like the ones I showed you on USD/JPY), and my custom-made Volume Profile indicators for various trading platforms such as TradingView, MetaTrader, or NinjaTrader.
There are also more packs available — you can get them separately or all together in one large discounted bundle.
Before we wrap up, I want to address one common mistake that many traders make. The Volume Profile often has two colors — for example, on TradingView, it’s blue and red. People often think that one color shows buyers and the other shows sellers, but that’s not exactly true. Those colors only show whether trades were executed at the bid or at the ask. They don’t actually tell you who was in control — buyers or sellers. This topic is much more complex, and I don’t want to go too deep into it now, but the key thing to remember is that the Volume Profile does not show buyers versus sellers.
That’s why my custom-made Volume Profile uses only one color. It might not look as flashy, but it avoids giving people a false sense of control and keeps the focus where it should be — on the shape and context of the profile itself.
All right, guys, that’s about it for today. I hope you liked the video. If you want to go a bit deeper into Volume Profile, I have a little gift for you — my Volume Profile book, an Amazon best-selling book on Volume Profile trading. If you want, I’ll send you a paperback copy for free. Just click the link below this video, fill in your address, and I’ll send it to you — I’ll even cover the shipping. So just order the book, I’ll send it — no strings attached. Enjoy it, and let me know how you like it.
That’s all for today — thanks for watching, and I’ll see you next time. Until then, happy trading.
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