Reading time and sales and volume profiles
Read the time-and-sales tape to see who was aggressive, and build a volume profile with its point of control and value area from a simple table.
What you will learn
- What the time-and-sales list shows and how to classify each trade as buyer- or seller-initiated
- How to calculate volume delta and why it is only a rough signal
- How a volume profile is built, and how to find the point of control and the 70% value area
- What these tools can and cannot tell you
Explanation
Volume as a confirmation tool on a chart was covered in the technical-analysis course. Here we look at the raw trade data behind the volume bars.
Time and sales
Time and sales (also called "the tape") is a list of every executed trade: time, price and size. Many platforms also show the best bid and ask at the moment of the trade. With this you can estimate the aggressor, the side that crossed the spread with a market or marketable limit order:
- trade at the ask (or above) → buyer-initiated (aggressive buy)
- trade at the bid (or below) → seller-initiated (aggressive sell)
- trade between bid and ask, for example at the midpoint → unclassified; it may come from an auction, a midpoint venue or an off-book trade
Volume delta = aggressive buy volume − aggressive sell volume. A positive delta means buyers were more willing to pay the spread in that period.
Watch for large prints (single trades much bigger than usual) and for trades reported late. Off-book and block trades may appear with a delay and at prices away from the current quote. In the EU, trades away from the lit book are published under transparency rules, but their timing and labels differ by venue.
Volume profile
A volume profile shows how much volume traded at each price level over a chosen period (a day, a week), drawn as horizontal bars. Three terms matter:
- Point of control (POC): the price level with the highest volume.
- Value area: the price range around the POC that contains about 70% of the period's volume. Its top is the value area high (VAH), its bottom the value area low (VAL). The 70% is a convention, not a law.
- High- and low-volume nodes: levels with much or little traded volume. Low-volume zones often show where price moved quickly, which can mean thin liquidity if price returns.
Building the value area (common method): start at the POC. Compare the volume of the next level above with the next level below, add the larger one, and repeat until the total reaches at least 70% of all volume.
Limits
Aggressor classification is an estimate; hidden orders, icebergs and fragmented venues mean one screen never shows everything. A volume profile describes where trading happened in the past; it does not predict where price will turn. Use these tools as context for execution, for example to place limit orders near levels where liquidity was high.
Worked example
Hypothetical example: You read eight lines of time and sales for a share. Bid and ask are shown at the time of each trade.
| Time | Price | Size | Bid / Ask | Classification |
|---|---|---|---|---|
| 10:01:05 | €50.42 | 300 | 50.41 / 50.42 | buy (at ask) |
| 10:01:07 | €50.42 | 500 | 50.41 / 50.42 | buy |
| 10:01:12 | €50.41 | 200 | 50.41 / 50.42 | sell (at bid) |
| 10:01:15 | €50.43 | 1,200 | 50.42 / 50.43 | buy |
| 10:01:20 | €50.42 | 400 | 50.42 / 50.43 | sell |
| 10:01:26 | €50.43 | 600 | 50.42 / 50.43 | buy |
| 10:01:31 | €50.42 | 800 | 50.42 / 50.43 | sell |
| 10:01:40 | €50.425 | 2,000 | 50.42 / 50.43 | unclassified (midpoint) |
- Aggressive buy volume: 300 + 500 + 1,200 + 600 = 2,600.
- Aggressive sell volume: 200 + 400 + 800 = 1,400.
- Delta: 2,600 − 1,400 = +1,200.
- The 2,000-share midpoint print is excluded: it is the largest trade but shows no aggressor.
Interpretation: in these 35 seconds buyers were more aggressive, and the bid moved up one tick. This is a short-term observation, not a forecast. Excluded: trades on other venues.
Common mistake
Practice activity
A day's volume by price is: €50.80: 1,000; €50.70: 2,500; €50.60: 4,000; €50.50: 6,500; €50.40: 9,000; €50.30: 7,000; €50.20: 5,000; €50.10: 3,000; €50.00: 2,000. (a) Find the total volume and the POC. (b) Build the 70% value area with the method above. (c) State VAH and VAL.
Show solution
(a) Total = 40,000 shares; 70% = 28,000. POC = €50.40 (9,000).
(b) Start 9,000. Compare 6,500 (above) with 7,000 (below): add €50.30 → 16,000. Compare 6,500 with 5,000: add €50.50 → 22,500. Compare 4,000 with 5,000: add €50.20 → 27,500. Compare 4,000 with 3,000: add €50.60 → 31,500, which is at least 28,000. Stop.
(c) VAH = €50.60, VAL = €50.20; the value area holds 31,500 ÷ 40,000 = 78.75% of volume.
Limitations: platforms use slightly different value-area methods (some add two levels at a time), so results can differ by one level.
Key takeaways
- Time and sales shows each trade; comparing its price with bid and ask estimates the aggressor.
- Volume delta summarises aggression but ignores unclassified and off-venue trades.
- The point of control is the highest-volume price; the value area holds about 70% of volume.
- Both tools describe past trading and help plan execution; they do not predict price.
Next step
In the final lesson of this course you will combine everything into a personal execution checklist and an execution log.
Self-check
Answer the questions, then check your answers. You can retry as often as you like.
Automatic self-check for your own revision. Your answers are checked in your browser and are not seen or assessed by us. It is not an exam and not a qualification.
Your progress
“Complete” only means you marked the lesson as done. It is not a test of your understanding. Progress and notes are saved only in this browser on this device — not in an account.