Average Volume Profile

The Average Volume Profile indicator provides a specialized volume profile that visualizes the average volume distributed across price levels by dividing total volume by market profile frequency. This tool identifies key structural areas by highlighting the Highest Average Volume (HAV) point and its associated Value Area, offering a unique perspective on where market activity is most concentrated relative to time spent at price.

Usage

The Usage section describes how the script can be used to identify liquidity zones and significant price levels. Unlike a standard Volume Profile which shows total volume, this script normalizes the data to show average volume per price visit.

• Identifying High-Value Nodes: The indicator highlights the Highest Average Volume (HAV) level. This serves as a significant point of interest where high volume was transacted in a relatively short amount of time.
• Value Area Interpretation: The Value Area (VAH and VAL) is calculated based on the average volume distribution (typically 70%), showing where the majority of "efficient" trading occurred.
• Real-Time Volume Comparison: A floating vertical line represents the volume of the current candle. If this line extends beyond the profile bars for the current price, it indicates that current activity is higher than the historical average for that level.
• Visual Scaling: Users can adjust the horizontal scale of the profile using the "Display Size" setting to fit their chart layout without affecting the underlying data calculations.

Details

The script functions by partitioning price into discrete rows (buckets) based on the user-defined sensitivity. For every bar within the specified timeframe, it tracks two primary metrics: the volume traded at each price level and the number of times price has visited that level (Market Profile component).

The "Average Volume" is calculated by dividing the accumulated volume in a bucket by the count of visits. This method helps traders distinguish between price levels that see high volume due to prolonged consolidation versus those that see high volume due to intense, rapid participation.

The HAV is the row with the highest average volume, and the Value Area is determined by expanding outward from the HAV until the specified percentage of total average volume is captured.

Settings

Profile Settings

• Timeframe: Determines the data lookback period for the profile (e.g., Daily, Weekly).
• Sensitivity: Adjusts the granularity of the price rows. Higher values create more granular rows; lower values aggregate price into larger buckets.
• Value Area %: Sets the percentage of total average volume used to calculate the Value Area (default is 70%).

Display Settings

• Display Size: Controls the horizontal width of the profile. This value represents the number of bars the profile will extend.
• Display Offset: Moves the profile's vertical axis left or right on the chart.
• Display Current HAV/VAH/VAL: Toggles the visibility of the current period's key levels.
• Display Historical HAV/VAH/VAL: Toggles the visibility of historical key levels across the chart.

Colors

• Highest Avg Volume Color: The color for the HAV (Point of Control) line/box.
• Value Zone Color: The color for the bars within the Value Area.
• Profile Color: The color for the bars outside the Value Area.
• Lowest Avg Volume Color: Highlights the level with the minimal average participation.
• Volume Line Color: The color of the floating line representing current candle volume.

FAQ

What is the difference between this and a standard Volume Profile? A standard Volume Profile shows total volume at price. This indicator shows the average volume per visit, which helps identify areas of intense participation regardless of how much time price spent at that level.

Why does the profile change when I adjust the Sensitivity? Sensitivity changes the "tick size" or height of the price buckets. More granularity allows for precise level identification, while less granularity provides a broader view of market structure.

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