What is the Value Area?
The Value Area represents the price range where most trading activity occurs, specifically encompassing 70% of the total volume traded during a given period. This concept comes from Market Profile theory and auction market theory, showing where the market finds "fair value" through the balance of buyers and sellers.
The Value Area is bounded by the Value Area High (VAH) and Value Area Low (VAL), with the Point of Control (POC) representing the price level with the highest volume. Understanding these levels helps traders identify areas of price acceptance and potential support/resistance zones.
Value Area Components
Key Levels in Value Area
POC (Point of Control)
- • Highest volume price level
- • Most accepted price
- • Strong support/resistance
- • Market equilibrium point
- • Price magnet effect
VAH (Value Area High)
- • Upper boundary of value area
- • 70% volume distribution top
- • Key resistance level
- • Breakout signal above
- • Fair value upper limit
VAL (Value Area Low)
- • Lower boundary of value area
- • 70% volume distribution bottom
- • Key support level
- • Breakdown signal below
- • Fair value lower limit
Volume Distribution Theory
70-20-10 Rule
- • 70% of volume occurs in Value Area
- • 20% of volume in upper/lower tails
- • 10% of volume outside extremes
- • Statistical distribution pattern
- • Market efficiency principle
Auction Theory
- • Market seeks fair value through auction
- • High volume = price acceptance
- • Low volume = price rejection
- • Balance between buyers and sellers
- • Efficient price discovery mechanism
Sponsored Insight
Types of Value Areas
Single Prints vs Volume Nodes
High Volume Nodes (HVN)
- • Areas with high trading activity
- • Price acceptance zones
- • Strong support/resistance
- • Consolidation areas
- • Market equilibrium points
Low Volume Nodes (LVN)
- • Areas with minimal trading
- • Price rejection zones
- • Weak support/resistance
- • Fast price movement areas
- • Imbalance between buyers/sellers
Value Area Shapes
Balanced Profile
- • Bell curve distribution
- • POC in center
- • Symmetrical value area
- • Efficient price discovery
- • Normal market conditions
P-Shaped Profile
- • POC near top of range
- • Buying pressure dominance
- • Accumulation pattern
- • Bullish bias indication
- • Potential upside breakout
b-Shaped Profile
- • POC near bottom of range
- • Selling pressure dominance
- • Distribution pattern
- • Bearish bias indication
- • Potential downside breakdown
Sponsored
Value Area Trading Strategies
Mean Reversion Strategies
Value Area Return
- • Price outside VA tends to return
- • 70% probability of return to VA
- • Trade back toward POC
- • Use VAH/VAL as entry triggers
- • Target POC for profit taking
Risk Management
- • Stop beyond extreme of session
- • Position size based on VA width
- • Time-based stops for slow moves
- • Multiple timeframe confirmation
- • Volume confirmation required
Breakout Strategies
Value Area Expansion
- • Break above VAH = bullish
- • Break below VAL = bearish
- • Volume expansion on breakout
- • New value area development
- • Trend continuation signal
Poor Structure Trades
- • Gaps in volume profile
- • Single print areas
- • Unfilled value areas
- • Market imbalances
- • Fast price movement zones
Multi-Timeframe Analysis
Daily Value Area
- • Intraday trading reference
- • Session-based analysis
- • Short-term S/R levels
- • Scalping opportunities
Weekly Value Area
- • Swing trading framework
- • Medium-term S/R levels
- • Position trading guidance
- • Weekly trend context
Monthly Value Area
- • Long-term analysis
- • Major S/R zones
- • Investment decisions
- • Market structure shifts
Market Context & Interpretation
Market Acceptance Levels
Price Above Value Area
- • Market showing strength
- • Buyers in control
- • Potential continuation higher
- • VAH becomes support
- • Look for pullback entries
Price Below Value Area
- • Market showing weakness
- • Sellers in control
- • Potential continuation lower
- • VAL becomes resistance
- • Look for bounce short entries
Value Migration Patterns
Value Area Up
- • Higher value areas
- • Bullish migration
- • Uptrend confirmation
- • Buy the dips strategy
Value Area Down
- • Lower value areas
- • Bearish migration
- • Downtrend confirmation
- • Sell the rallies strategy
Overlapping Value
- • Balanced conditions
- • Range-bound market
- • Mean reversion trades
- • Wait for breakout
Advantages vs. Limitations
Advantages
Volume-Based Analysis
Shows where actual trading activity occurred
Market Structure Insight
Reveals price acceptance and rejection zones
Multiple Timeframes
Applicable from intraday to long-term
Objective Analysis
Based on actual market data, not subjective
Limitations
Historical Data
Based on past activity, not predictive
Learning Curve
Complex concept requiring practice
Market Condition Dependent
Less effective in trending markets
Platform Dependent
Requires specialized charting software
Key Takeaways
Volume-Driven Zones: Value Area represents where 70% of trading volume occurs, showing true market acceptance levels.
Key Reference Levels: POC, VAH, and VAL provide crucial support/resistance levels based on actual trading activity.
Mean Reversion Tendency: Prices outside the Value Area have a statistical tendency to return to fair value.
Market Structure Tool: Value Area analysis reveals market balance, imbalance, and structural changes.
Master Volume Profile Analysis
Learn advanced value area and market profile techniques
Related Trading Concepts
Volume Profile
Horizontal histogram showing volume distribution at price levels.
Point of Control
Price level with the highest volume in the value area.
Market Profile
Time and price relationship analysis showing market structure.
Support & Resistance
Key price levels that complement value area analysis.
Volume Analysis
Foundation of value area calculation and interpretation.
Auction Theory
Theoretical framework underlying value area concepts.
Value Area Trading Risk Disclaimer
Value Area analysis is based on historical volume data and does not guarantee future price movements. Market conditions can change rapidly, invalidating value area levels. Low volume periods may produce unreliable value areas. Mean reversion tendencies are statistical, not certain. Always use proper risk management, combine value area analysis with other indicators, and never risk more than you can afford to lose. Consider consulting with qualified financial professionals before implementing value area strategies.