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Lesson 5: 10.4: Defining the Value Area (VAH, VAL, POC)
Calculate Value Area High, Value Area Low, and Point of Control to identify institutional zones.
1. The 70% Value Area Rule
To quantify the fair value zone, Auction Market Theory utilizes a strict statistical measure known as the Value Area.
The Value Area is the range of prices where exactly 70% (representing one standard deviation in a normal distribution curve) of total volume was traded during a specified period.
This 70% zone represents the 'fair' price range where institutions were highly comfortable executing transactions.
2. The Key Reference Levels
By plotting volume-at-price, we derive three critical institutional reference levels:
• Point of Control (POC): The single price level where the absolute highest volume was executed. It represents the ultimate fair value and acts as a massive price magnet.
• Value Area High (VAH): The upper boundary of the Value Area. Prices above VAH are considered expensive (unfairly high).
• Value Area Low (VAL): The lower boundary of the Value Area. Prices below VAL are considered cheap (unfairly low).
Click to enlargeKNOWLEDGE RECONNAISSANCE
What percentage of volume is contained within a standard Value Area?
What does the Point of Control (POC) represent on a Volume Profile?
More lessons in this module
- 10.0: Introduction to Auction Market Theory
- 10.1: The Continuous Auction Process
- 10.2: Price Discovery and Valuation
- 10.3: Balance vs. Imbalance
- 10.5: Understanding Market Excess & Rejection
- 10.6: Initiative vs. Responsive Activity
- 10.7: Market Acceptance vs. Rejection
- 10.8: Constructing an Auction Market Framework
- 10.9: Practical Application: Profile Playbook
- 10.10: Summary & Auction Mastery
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