Value Area High (VAH) is a technical analysis concept derived from market profile theory, representing the upper price boundary within which approximately 70% of the trading activity, based on either volume or time, occurred during a specific period. It indicates a price level where market participants demonstrated significant acceptance or consensus.
Mechanism
The calculation of VAH involves constructing a distribution of trading activity over price levels for a given session. This typically begins by identifying the price with the most activity (Point of Control) and then iteratively expanding outward in both directions until the cumulative volume or time within that range reaches approximately 70% of the total, establishing the upper limit.
Methodology
Traders and analysts utilize VAH as a key reference point for assessing market structure and potential price behavior. The methodology involves identifying VAH as a significant resistance level or an area where price action might reverse. Its observation informs strategic decisions regarding entry, exit, and risk management by providing context for current price movements relative to past consensus.
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