Value area is not a support line

The most common mix-up in the room: treating last session’s value area as a place the next session is obliged to respect.

What the 70 percent actually is

In market profile, the value area is the band of prices that contained about 70 percent of the session’s TPOs, built outward from the point of control. It describes where the day’s two-sided trade concentrated. It is a statement about yesterday’s (or this morning’s) completed auction, not a forecast of where buyers must appear tomorrow.

When a student draws a horizontal line at the value-area low and waits for a bounce, they have imported a candlestick habit into a distribution. We spend a good part of Saturday two unpicking that.

A SET example from the binder

One page we keep in the Silom binder shows a Tuesday on SET50 futures where value sat in the upper third of the range, with a poor low — a low that was not accepted, no excess. Wednesday opened inside Tuesday’s value and then walked through the poor low without pausing. People who had boxed Tuesday’s value as support were already framing a ‘break’ as a surprise. It was not a surprise. Tuesday had not finished business at the low; Wednesday did.

The useful question was not ‘will value hold?’ It was ‘did Tuesday leave unfinished trade below, and is Wednesday opening in a position to go and look for it?’ That is auction language. It is slower than a support-line call, and it is the language we insist on in the room.

What we ask you to write in the margin

After you finish a profile, write one sentence that starts with the prior session, not with a prediction: ‘Prior value was… overnight inventory was… today’s open was inside/outside.’ Only then do you add what the first hour actually did. If your sentence begins with a price level you hope will hold, start the page again.