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Key Takeaways
- The value area selects a contiguous band around the POC using a chosen target percentage and expansion rule.
- VAH and VAL mark the upper and lower boundaries of the selected price bins.
- This example adds the larger neighboring row until the cumulative volume reaches or exceeds its 70% target.
- Value area levels move when the session window, lookback, row size, percentage setting, or data feed changes.
- Read both the enclosed volume and the full histogram to see the concentrations inside and outside the band.
- Use prior-session VAH, POC and VAL to define the price levels in a trade setup.
What is the value area (VAH and VAL)?
The value area is the band of adjacent price rows around a profile’s Point of Control that holds a chosen share of activity, commonly 70%. Value Area High, or VAH, marks its upper boundary, and Value Area Low, or VAL, marks its lower boundary. Traders carry the prior session’s VAH, POC and VAL forward as price levels for the next setup.
The calculation uses a chosen activity percentage and expansion rule. A volume profile weights rows by shares or contracts. A TPO profile counts the time brackets that touched each row.
How is the value area calculated?
This example uses a 70% volume target. Multiply the profile’s 2.8M shares by 0.70 to get 1.96M shares.
Begin with the POC. Compare the immediately adjacent rows and add the larger one. Repeat until cumulative volume reaches or exceeds the target. Choose the lower-price row on equal volumes.
This is the specific construction used here. Implementations can use other row, tie and stopping rules; the chart’s declared rule defines its selected band.
Formula
Target = total volume × selected percent. In this example, start at POC and add the larger adjacent row until cumulative volume ≥ target. VAL = lowest selected lower edge; VAH = highest selected upper edge.- Total profile volume is the sum of all price rows inside the selected session or lookback window.
- Rows are labelled by their lower edge. Each $0.25 interval includes that lower edge and excludes its upper edge.
- Time-based profiles substitute time price opportunity counts for traded volume, which can produce different boundaries on the same data.
- This example adds one adjacent row per step and chooses the lower-price row on ties. Use the stated expansion and stopping rules for the profile being calculated.
Value area example: the four selected rows
A 2.8M-share session profile uses $0.25 bins labelled by their lower edge. The $48.75 bin holds 620,000 shares, the largest total. The target is 70%, and expansion adds the larger adjacent row until that target is reached or exceeded.
- Target: 2,800,000 × 70% = 1,960,000 shares must sit inside the band
- Start at the point of control: $48.75 holds 620,000 shares
- Compare neighbors: $48.50 holds 540,000 versus $49.00 at 460,000, so add $48.50 for 1,160,000
- Compare again: $49.00 at 460,000 versus $48.25 at 340,000, so add $49.00 for 1,620,000
- Compare again: $48.25 at 340,000 versus $49.25 at 320,000, so add $48.25 for 1,960,000
The selected rows total 1.96M shares, exactly 70%. Their interval is $48.25 ≤ price < $49.25, with the POC bin beginning at $48.75. Above the band are 630,000 shares, or 22.5%; below it are 210,000 shares, or 7.5%.
Start with 620,000 shares in the $48.75 row. Add $48.50 with 540,000 shares to reach 1.16M. Add $49.00 with 460,000 to reach 1.62M. Add $48.25 with 340,000 to reach exactly 1.96M.
Each label marks the lower edge of a $0.25 bin. The selected price interval is $48.25 ≤ price < $49.25. VAL is $48.25 and VAH is the exclusive $49.25 upper boundary.
The 30% outside volume is unevenly split: 630,000 shares above the band, or 22.5%, and 210,000 below it, or 7.5%.
Reading value area width and enclosed volume
The selected rows in this example reach exactly 70%. Adding whole rows can also take the total above the target. Calculate actual enclosed volume after selecting the rows.
Width measures the distance between the selected outer edges. Inspect the row totals as well: a contiguous band can include thin rows between heavy concentrations, while another heavy cluster sits outside it.
Compare the band with the complete Volume Profile, VWAP and the session high and low. Keep the session, bin width and origin, percentage and volume coverage consistent when comparing sessions.
How traders use the prior value area
Carry the prior session’s VAH, POC and VAL onto the current chart. An opening price inside or outside the band gives the setup a defined starting location.
For a return-inside setup, specify the required closing event and the entry that follows. For an outside continuation, define the break or retest rule. Set invalidation, size and the target for the chosen setup. The Options Profit Calculator prices each structure at the levels the setup already names: the POC, the far edge of the value area and your invalidation.
Limitations of the value area
- Match the construction before you compare platforms. Row size and origin, the target percentage, the expansion, tie and stopping rules, and volume or TPO counts can each move VAH and VAL on the same data.
- The levels also move with the session window, lookback and data feed, so compare sessions only on the same settings.
- Read the full histogram with the band. The band can include thin rows and leave a heavy cluster outside, and in the example 22.5% of volume sits above it against 7.5% below.
- Plan the outside-continuation trade as well as the return inside. A prior-session edge is a reference level, and price can open outside the band and keep moving away from it.
Bottom line
The value area marks where most of a session’s activity traded, with VAH and VAL as its edges and the POC inside. State the row size, percentage and expansion rule, read the band alongside the full histogram, and define the return-inside or outside-continuation event before trading a prior-session edge.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Schwab thinkorswim Learning Center: Volume Profile study
- Schwab thinkorswim Learning Center: TPO Profile study
How entries are sourced, calculated and updated: editorial methodology.