Volume profile zones

The Volume profile zones indicator calculates and displays the volume profile for higher timeframe ranges to identify key support and resistance zones based on high-volume areas. This tool automates the detection of supply and demand levels by analyzing volume distribution and scoring specific price areas to highlight the most significant market structures.

Usage

The Usage section describes how the script can be used to identify institutional interest and price pivots. Users can apply this indicator to visualize where the most trading activity occurred within a specific "Range" (e.g., Monthly, Weekly, or Daily).

• Identifying Zones: The script automatically plots support and resistance boxes based on the Point of Control (POC) and Value Area (VA) of previous sessions.
• Scoring System: Each zone is assigned a score based on factors like "Virgin POC" status, price reaction, and time spent in the zone. High-score zones typically indicate stronger historical relevance.
• Trade Confirmation: Use the "Zone Touch Labels" to identify market actions such as "T" (Touch), "R" (Retest), "B" (Breakout), or "FB" (False Breakout). These labels help traders determine if a zone is holding or failing.
• Visual Customization: Users can toggle between showing a specific number of zones or focusing specifically on support/resistance levels to clean up the chart.

Details

The indicator constructs volume profiles using a lower timeframe data source (defined by the "Volume profile data source" setting) to ensure granularity. It divides price action into a user-defined number of "Levels" and calculates the volume distribution for both bullish and bearish movements.

Key concepts include:

• Point of Control (POC): The price level with the highest traded volume within the range.
• Value Area (VA): The price range where a specified percentage of total volume (default 68%) was traded.
• Zone Evaluation: The script evaluates historical performance by looking back at previous ranges. It calculates retests and breakouts within an ATR-based tolerance to filter out market noise.
• Advanced Scoring: The scoring logic incorporates "Price Away" metrics (how far price moved after leaving the zone) and "Pivot Score" (alignment with major pivot points) to weight the significance of each zone.

Settings

Volume Profile

• Levels: Determines the number of rows/price steps used to calculate the volume distribution.
• Lookback: Sets the number of previous profiles to analyze for zone calculation.
• Volume profile data source: The timeframe used to gather sub-bar volume data.
• Range: The higher timeframe period (e.g., Daily, Weekly) used to define the profile boundaries.
• Value area %: The percentage of total volume used to define the Value Area.

Zones

• Type: Choose between displaying "Support or resistance" or a specific "Number" of zones.
• Support/Resistance Zones: Define the maximum number of support and resistance areas to display simultaneously.
• Zone Info Label: Toggles detailed statistics for each zone, including volume-to-mean ratios and breakout counts.
• Show Zone Touch Label: Enables visual markers for Touches, Retests, and Breakouts.

Scores

• Virgin POC Score: Points awarded to profiles where the POC hasn't been revisited.
• Reaction Score: Points awarded if the price showed a significant ATR-based move away from the zone.
• Pivot Score: Points awarded if the zone aligns with historical pivot highs or lows.

FAQ

How do the scoring settings affect the zones shown on the chart?
The scoring settings (such as Virgin POC, Reaction, and Pivot scores) determine which volume profiles are prioritized. Profiles with the highest cumulative scores are converted into support or resistance zones, while lower-scoring areas may be hidden depending on your "Zones to Show" limit.

What is the difference between the "Range" and the "Data Source" timeframe?
The "Range" defines the start and end of the volume profile (e.g., a Weekly range). The "Data Source" is the lower timeframe (e.g., 60 minutes) used to calculate the volume within that range. A lower data source timeframe provides more precision but may be limited by the platform's historical bar limits.

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