Value Area
The Value Area is the price range within which 70% of a session's volume (or TPOs) were traded. It represents the zone of fair value: where both buyers and sellers agreed price was acceptable: and is a primary reference framework for the following session's trading decisions.
The Value Area (VA) is the range of prices containing 70% of the session’s total volume or TPO activity. It is the statistical core of the Market Profile and Volume Profile frameworks: the zone where the most business was transacted and where the market demonstrated acceptance of price.
Why 70%?
The 70% threshold approximates one standard deviation of a normal distribution. Steidlmayer’s original framework used this as the boundary of “fair value”: the range within which the market was in balance and conducting normal two-sided business.
Value Area components
| Component | Description |
|---|---|
| Value Area High (VAH) | Upper boundary of the value area |
| Value Area Low (VAL) | Lower boundary of the value area |
| Point of Control (POC) | Price with most volume: center of value |
How the value area is used
Opening inside the value area: when price opens within the prior session’s value area, the market is returning to a zone of established fair value. The expectation is mean-reversion: price may test the POC and rotate between VAH and VAL.
Opening outside the value area: when price opens above the VAH or below the VAL, the market is reacting to new information that has shifted perceived value. The question becomes: will the market accept the new price (trend away) or reject it and return to value (revert)?
Value area acceptance: if price pushes above the VAH and holds there, buyers are accepting higher prices. The value area is migrating up. Bullish.
Value area rejection: if price pushes above the VAH but quickly falls back inside, buyers rejected the higher price. Bearish. Fade the VAH.
Prior session vs developing value area
Traders mark the prior session value area before the open as a key reference. During the session, platforms can display the developing value area in real time, showing where value is being established as the day unfolds.