Value Area Levels in Market Profile Study

The value area levels have a number of key reference points that need to be identified on the Profile chart. The value area on a Profile chart contains 70 percent of the market’s trading activity for the specified period. The value area high and the value area low provide the boundaries of the value area. The value area high is the upper limit of the value area for the market data and the value area low is the lower limit of the value area of the market data. These two lines identify the extreme limits of the value area, as seen in the image.

The distance or price range between the lower and upper limits of the value area defines for us the range or the width of the value area levels. The greater the range, the wider the value area becomes. Since the value area is developed based on real-time market data and actual market activity, it is very dynamic. The Market Profile charts allow us to view and track the value area as it develops. A growing or expanding value area indicates acceptance in the market for the directional expansion in the value area. An expanding value area usually indicates the presence of increased or sustained trading volume that is fueling the expansion. A small value area range that is not growing is a sign of an uncertain market, a market with low trading volume that is not committed to any specific direction in the market.

Ankit Maheshwari

Ankit is an avid writer with experience of working Investment Banking domain for over 7 years. He has been tracking Indian markets for over 10 years now for educational and learning purpose.

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