I felt that we needed a thread dedicated to the discussion of Volume Profile.
Some basics, you can hover over these and click on most of them to get more info in the wiki. I also encourage you guys to improve the wiki articles by editing them and adding more info or images.
POC = Point of Control, the price where the most volume of the session traded
VA = Value Area, the area in which 70% of the volume traded (VAH = Value Area High, VAL = Value Area Low)
Both of the above also have "naked" extensions. A line is naked until price trades at this level again. For example, if yesterday's POC was 1300.00 then you can extend a line forward in time until price trades at 1300.00 again, whether it be today, or 3 years from now. The same is true of the VAH and VAL lines, you should extend them forward until price trades at that level.
The purpose of extending the naked lines forward is support/resistance.
Composite profiles are also popular. A composite profile is made up of long periods of data, usually from the last major swing. For example, we are currently trading at multi-year lows on the Euro, so my composite profile goes back over 3-years.
Within the composite profile are High Volume Nodes (CHVN) and Low Volume Nodes (CLVN). These refer to the distribution of the profile, in other words - the peaks and valleys of the profile. In an area where there is a peak, that is a HVN. In an area where there is a valley, that is a LVN.
HVN and LVN's act as support and resistance, as these are areas where price is most or least accepted.
There are two primary categories for a days range within the profile or recent profiles -- balance and imbalance. Balance means the market is trading primarily within a recent range. Some call this consolidation. The other option is imbalance, and that is when the market is trading outside of the recent range. This is also called trending.
Balance leads to imbalance. Imbalance leads to balance. In other words, the market tends to go back and forth. It does not tend to be range bound for weeks at a time, nor does it tend to be trending for weeks at a time.
You can also create a micro profile around recent balance areas. For example, if the SP500 has been in a 20 point range within the last 3 days and each day is "in balance" when viewed in context of the 3 days as a whole, then you can draw a micro composite around just these three days. The micro composite gives you the most accepted prices for these three days as a whole. The number "3 days" and '20 points" is an arbitrary example and has no special meaning.