Volume Profile Skew

The Volume Profile Skew indicator provides a statistical measure of volume distribution to identify whether market participation is concentrating at lower prices (accumulation) or higher prices (distribution). By analyzing the skewness of a rolling volume profile, the tool quantifies market structure as a regime-based oscillator while providing key levels like POC, VAH, and VAL for actionable context.

Usage

The Usage section describes how the script can be used to interpret market structure through volume concentration. This indicator treats volume-at-price as a statistical distribution, allowing traders to see beyond simple volume peaks.

• Regime Filtering: Use the skew oscillator to determine the current auction bias. Positive skew (Accumulation) suggests heavier participation at lower prices within the lookback range, while negative skew (Distribution) suggests participation is heavier at higher prices.
• Mean Reversion and Magnetism: In "Neutral" regimes (skew near zero), the Point of Control (POC) and Volume-Weighted Mean Price (VWMP) often act as price magnets. Traders can use these levels as anchors for mean-reversion strategies.
• Targeting Naked POCs: Untested historical POCs (Naked POCs) serve as significant reaction zones. When price approaches a Naked POC, it represents "unfinished business" where the market previously found high interest, often leading to support or resistance.
• Value Area Rotations: The Value Area (VAH to VAL) defines where 70% of volume occurred. Price breaks outside this zone can signal the start of a new auction trend, especially when supported by a shift in skewness.

Details

The script approximates volume-at-price by distributing each candle's volume evenly across the bins its high-low range touches. This method provides a consistent approximation of volume distribution without requiring tick-level data.

Statistical Moments

The indicator calculates the distribution of volume using the following concepts:

• Volume-Weighted Mean Price (VWMP): The "center of mass" for traded activity within the profile.
• Standard Deviation: A measure of how spread out the volume is across the price range.
• Skewness: The third standardized moment of the distribution. A standardized value that describes if the "tail" of the volume distribution is leaning toward higher or lower prices.

Profile Styles

Users can choose between three visual modes for the on-chart profile:

1. Gradient: A heat-map style using a "jet" color scheme based on volume intensity.
2. Solid: All bins use the current regime color (Bullish/Bearish/Neutral) to emphasize the bias.
3. Skew Highlight: Emphasizes the specific bins contributing most to the current skewness value.

Settings

Calculation Settings

• Lookback Period: The number of bars used to calculate the rolling profile (20–500).
• Profile Resolution: The number of price bins used to divide the high-low range.
• Skew Smoothing: The length of the EMA applied to the raw skewness to filter market noise.

Historical POC Levels

• Track Historical POCs: Enables the storage and display of developing POC levels.
• POC Update Interval: Minimum number of bars that must pass before a new historical POC is recorded.
• POC Change Threshold (%): The minimum price difference required to register a new POC level.
• Highlight Naked POCs: Visually distinguishes POCs that have not been retested by price.

Current Levels & Profile

• Extend Levels Left: Extends the VAH, VAL, POC, and VWMP lines across the chart for better visibility.
• Profile Width (%): Adjusts the horizontal scale of the volume profile.
• Right Offset: Determines how far to the right of the current bar the profile is drawn.
• Profile Style: Toggles between Gradient, Solid, and Skew Highlight visual modes.

FAQ

How does "Accumulation" differ from "Distribution" in this script? In this context, Accumulation (positive skew) means the volume is concentrated at the lower end of the price range with a tail extending upward. Distribution (negative skew) means volume is concentrated at the higher end with a tail extending downward.

What is a "Naked POC"? A Naked POC is a price level that had the highest volume during a previous lookback window but has not been revisited by price since that window closed.

How do I access the Volume Profile Skew? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.