Master the volume profile indicator to unlock hidden mechanisms in trading

Everyone is talking about the importance of price, but true trading experts know: Trading volume is the behind-the-scenes hero that determines price movements. Today I want to share a heavily underestimated technical tool—the Fixed Range Volume Profile (FRVP)—which can help you identify key levels in the market that other traders might overlook.

Why focus on trading volume?

Take a moment to think: if price is just an illusionary number, then what is real? The answer is—trading volume. Many professional traders share a consensus: price is essentially just a vehicle for market information, with time controlling the rhythm of this information, and trading volume ultimately deciding the success or failure of each price movement. In other words, price trends supported by large participation are often difficult to sustain.

Understanding Volume Profile: The Basic Framework

Imagine a vertical heatmap. The Volume Profile indicator displays the level of trading activity at different price levels using vertical bars. The taller the bar, the more trading transactions occurred at that price. Those particularly high bars often evolve into support levels because they represent areas where many traders have built positions.

This indicator was created by trader Peter Steidlmayer in the late 1980s. Simply put, its function is to clearly display the total trading volume at different price levels over a period, allowing you to visually see where market participants are most active.

How is FRVP calculated?

The fixed-range volume profile works in a straightforward way:

It breaks down the total trading volume at a specific price level within a certain time frame into two parts—upward trading volume (trades pushing prices higher) and downward trading volume (trades pushing prices lower). Through this decomposition, traders can see whether buyers or sellers are dominant at each price point.

From theory to practice: Steps to apply FRVP

When you decide to use FRVP to analyze the market, first find it in the “Prediction Tools” or “Measurement Tools” menu on TradingView or similar platforms. After selecting the tool, you need to mark the start and end points of your analysis range.

This tool is especially suitable for analyzing clear upward or downward impulses. For example, looking at DOGE/USDT daily chart: if the market experiences a long-term rally and then suddenly pulls back, you can draw the FRVP from the top and bottom points. The system will automatically calculate the volume distribution for this price movement.

Three key concepts in FRVP

Mastering these three components will give you most of the insights:

Point of Control (PoC)—the price level with the highest traded volume during the entire period. This is the most important, as it indicates the market’s “consensus price.”

Value Area High (VAH)—the highest point within the volume-rich area.

Value Area Low (VAL)—the lowest point within the volume-rich area.

In addition, there are two important volume nodes to identify: High Volume Node (HVN) and Low Volume Node (LVN).

Practical example: How FRVP guides your trading

Look at this specific example: a certain coin has experienced a long-term uptrend, then suddenly retraced, forming a clear “peak” pattern. We apply FRVP at the top and bottom of this peak.

First, observe the PoC—this line acts as a strong resistance. When the price rises again and approaches the PoC, many traders will establish long positions here, hoping to break through. But once the PoC is effectively broken, the next target naturally becomes the LVN (low-volume node), an area with sparse trading. Since few traders are active there, the price often passes through quickly.

Continuing upward, the price approaches the HVN (high-volume node, the area with the largest volume besides PoC). This should be viewed as a supply pressure zone. Traders can expect selling pressure at the HVN. Indeed, when the price hits the HVN, a clear reversal signal appears—perhaps a “engulfing pattern” or other technical confirmation. At this point, shorting becomes a very confident trade.

Common mistakes made by beginners

Using FRVP in isolation

Many traders treat FRVP as a magic key but ignore other technical indicators. This is deadly. FRVP is best combined with momentum indicators like RSI, MACD, to form multi-angle validation.

Believing in historical data blindly

FRVP is good at explaining what happened in the past, but it’s not a crystal ball. Past volume-rich areas may not repeat the same role in the future. Especially when market fundamentals change, old support and resistance levels can be broken instantly. So, don’t forget to incorporate industry news and policy changes into your analysis.

Mechanically treating each node equally

Not all HVNs or LVNs are equally important. In a strong uptrend, high-volume nodes may be easily broken; but in a ranging market, the same nodes could become critical support levels. The market context determines the true significance of these nodes.

Summary: Turn FRVP into your advantage

The fixed-range horizontal volume indicator reveals a fundamental truth about markets—the relationship between volume and price never lies. By identifying PoC, VAH, VAL, and various volume nodes, you can find where market participants are concentrated and anticipate how prices will behave in these areas.

At this moment, you have mastered the core knowledge of using FRVP: when to look at it, how to interpret it correctly, and what common pitfalls to avoid. The next step is to continuously test in live trading, combine it with other tools, and gradually build your own trading system.

Trust me, traders who take the time to truly understand volume indicators often go further in the market.

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