Analysis of Supply and Demand Within the Concept of Peter Steidlmayer

Introduction to Peter Steidlmayer’s Concept: What is Market Profile?

The analysis of supply and demand is a fundamental element of successful trading in financial markets, whether it’s stocks, futures, or currencies. Understanding how market participants — from retail traders to large institutional players — react to various price levels opens the door to identifying profitable trading opportunities. One of the most powerful and innovative tools for such analysis is Market Profile, developed by the renowned trader Peter Steidlmayer during his time at the Chicago Board of Trade (CBOT).

Unlike classical approaches to technical analysis, which often rely on indicators like moving averages or RSI, and chart patterns such as "head and shoulders," the Market Profile concept offers a fundamentally different perspective. It focuses on the interplay of price, volume, and time, enabling traders to gain a deeper understanding of market structure. This method helps identify key zones of supply and demand, determine the fair value of an asset, and predict reversal or continuation points in market trends with high accuracy.

Peter Steidlmayer developed Market Profile in the 1980s, aiming to create a tool that would reflect the real behavior of market participants. His approach is based on the idea that price does not move chaotically but is shaped by trading volume and time intervals. Today, this method is widely used by traders around the world to analyze futures markets, stock indices, and even cryptocurrencies like Bitcoin and Ethereum.

Key Principles of Market Profile: How Does It Work?

Fair Value (Value Area): This is the price range where the greatest volume of trading occurs. It reflects the equilibrium zone between buyers and sellers, where the asset is considered "fairly valued." Knowing this zone helps traders avoid overbought or oversold areas.
Supply and Demand Imbalance: When the market moves out of equilibrium, areas with low trading volume emerge, signaling a strong imbalance. This often precedes sharp, impulsive price movements that can be exploited for trade entries.
Dynamic Price Behavior: Market Profile allows traders to track how price interacts with high-volume nodes (HVN) and low-volume nodes (LVN). For example, HVNs often act as support or resistance, while LVNs serve as zones of accelerated movement.
Liquidity Zones: These are areas of the market where large players, such as hedge funds or banks, accumulate or distribute their positions. Identifying these zones enables traders to anticipate the actions of "smart money" and follow their lead.

Using Market Profile requires an understanding of both theory and practice. This tool helps traders build strategies based on real market activity data rather than mere assumptions. In this article, we will explore in detail how to apply Market Profile to market analysis, the advantages it offers over other methods, and how it can be used to forecast price movements across any timeframe — from minute to daily charts.

Whether you’re a novice in trading or an experienced professional, mastering Peter Steidlmayer’s concept can give you a competitive edge. Learn how to properly read the market profile, identify key levels, and use them to enhance the profitability of your trades.

What is Market Profile? A Complete Guide to the Market Analysis Tool

Market Profile is a powerful and unique market analysis tool designed to help traders understand how trading volume is distributed across different price levels during a trading session. Presented as a vertical histogram, it visualizes zones where price lingered the longest and highlights the concentration of key volumes. This approach is particularly valuable for professional traders working in futures, stock, or cryptocurrency markets, such as Binance or CME.

Unlike traditional candlestick or line charts, which only display price dynamics, Market Profile reveals the market structure. It enables the analysis of price movement through the interaction of supply and demand, making it indispensable for identifying support and resistance levels. Additionally, the tool helps detect high-liquidity zones where large players, such as institutional investors, execute their operations, influencing market trends.

First introduced by Peter Steidlmayer in the 1980s, Market Profile was originally used at the Chicago Board of Trade (CBOT) for futures analysis. Today, its popularity has grown due to its versatility: it is suitable for any asset — from stocks and indices like the S&P 500 to cryptocurrencies, including Bitcoin and Ethereum. This makes it a relevant tool for trading in 2025.

Main Components of Market Profile: How to Read the Market Profile?

POC (Point of Control): The price level with the maximum trading volume for a selected period. The POC often serves as a key reference point, indicating the zone of greatest agreement between buyers and sellers. This level can act as strong support or resistance depending on the market situation.
VA (Value Area): The fair value area, covering approximately 70% of the total trading volume for the session. Traders use the VA to find optimal entry or exit points for positions, avoiding overbought or oversold zones.
Initial Balance (IB): The price range formed during the first hours of trading (typically 30–60 minutes). The IB sets the initial structure of the session and is often used to assess volatility and the potential direction of market movement.
High Volume Nodes (HVN): Levels with a high concentration of volume where price tends to consolidate. HVNs often indicate zones where the market "rests" before its next move, making them crucial for scalpers and day traders.
Low Volume Nodes (LVN): Areas with low trading volume, through which price typically passes quickly. LVNs often act as separators between supply and demand zones, signaling potential impulsive breakouts.

Applying Market Profile gives traders a competitive edge, allowing for deeper analysis of market behavior, forecasting trend changes, and identifying reversal points with a high probability of success. This tool is especially useful for intraday trading (day trading) as well as for building long-term strategies based on volume analysis. For example, traders can combine Market Profile with other methods, such as Volume Spread Analysis (VSA) or volatility indicators, to enhance the accuracy of their predictions.

By mastering how to read the market profile, you’ll not only be able to identify key levels but also understand how large participants manipulate price in their favor. In the following sections, we’ll break down practical examples of using Market Profile and provide tips on integrating it into your trading system.

How Market Profile Reflects Supply and Demand: A Deep Analysis of Market Dynamics

The primary goal of Market Profile is to identify zones of equilibrium between buyers and sellers, as well as to pinpoint areas of imbalance, which often serve as catalysts for powerful trending movements. This tool, developed by Peter Steidlmayer, enables traders to gain a deeper understanding of how price is formed under the influence of market forces and to leverage this insight to build effective trading strategies.

Unlike standard technical analysis indicators such as MACD or Bollinger Bands, which focus on historical data, Market Profile offers a dynamic visualization of volume distribution across various price levels. This allows for real-time analysis of the interplay between supply and demand, which is especially critical for intraday traders operating in volatile markets like oil futures, gold, or cryptocurrencies, including Bitcoin and Ethereum.

Market Profile doesn’t just show where the price has been—it reveals why it was there. It helps traders uncover hidden market mechanisms, from accumulation zones of large players to points where retail participants lose control. This approach makes it an invaluable tool for forecasting market movements and managing risks.

Principles of Supply and Demand Balance in Market Profile: Key Aspects

High Liquidity Zones (High Volume Nodes, HVN): These are levels with the maximum concentration of trading volume, where price tends to consolidate. Such zones indicate equilibrium between buyers and sellers and often become key support or resistance levels. For example, on the S&P 500 market, an HVN might signal a point where institutional investors are defending their positions.
Low Liquidity Zones (Low Volume Nodes, LVN): Areas with minimal trading volume, through which price passes quickly due to weak supply or demand. LVNs often serve as indicators of potential breakouts or trend acceleration zones, making them essential for identifying entry points into impulsive movements.
Fair Value Areas (Value Area, VA): A price range covering about 70% of the session’s trading volume. The VA shows where the market deems the price "fair" and helps traders find optimal points for entering positions or taking profits, while avoiding overbought or oversold zones.
Trading Ranges and Breakouts: Market Profile clearly displays consolidation phases, when price moves within a narrow range, and breakout moments that signal the start of a trend. This allows traders to adapt their strategies to the current market phase—ranging from scalping within a range to trading breakouts.
Imbalances in Market Profile: When price moves beyond the Value Area, it indicates an imbalance between supply and demand. For instance, if price sharply exits the VA upward, it may suggest buyer dominance, often leading to a sustained uptrend.

Analyzing supply and demand through Market Profile empowers traders to make informed decisions based on real market activity rather than assumptions. This tool not only helps assess the strength of the current trend but also enables precise determination of optimal levels for placing stop-losses and take-profits. For example, positioning a stop-loss beyond an LVN reduces the likelihood of it being triggered by random fluctuations.

Whether you trade on daily timeframes or engage in high-frequency trading, Market Profile helps unveil the true picture of market dynamics. In the following sections, we’ll explore how to apply these principles in practice, including examples of analyzing real charts and tips for integrating Market Profile with other tools, such as volume delta or footprint charts.

Applying Peter Steidlmayer’s Concept in Trading: A Practical Guide

Market Profile is a powerful analytical tool created by Peter Steidlmayer that has become indispensable for professional traders worldwide. It enables the identification of zones of interest for market participants, the analysis of supply and demand balance, and the forecasting of probable price movement directions with high accuracy. Unlike traditional technical analysis, which relies on historical data and indicators like RSI or moving averages, Market Profile focuses on trading volumes and the time price spends at specific levels, revealing the true structure of the market.

This approach is particularly valuable for traders operating in highly liquid markets, such as futures (CME, E-mini S&P 500), currency pairs (Forex), stock indices (Nasdaq, Dow Jones), or even cryptocurrencies (Bitcoin, Ethereum). Market Profile not only helps identify key levels for entries and exits but also provides insight into the behavior of major players—banks, hedge funds, and market makers—offering a competitive edge in 2025.

Main Ways to Apply Market Profile in Trading: Practical Strategies

Identifying Supply and Demand Levels: Analyzing zones with maximum volumes, such as the Point of Control (POC), allows traders to pinpoint key levels where price might reverse or continue its movement. For instance, in the futures market, the POC often acts as a magnet for price during consolidation.
Finding Fair Value Zones (Value Area): The Value Area (VA), encompassing about 70% of the session’s trading volume, indicates where market participants consider the price "fair." Traders use the VA to locate entry points within a range or to lock in profits before price exits the equilibrium zone.
Detecting Resistance and Support Levels: Zones with high volume concentration (High Volume Nodes, HVN) often serve as barriers to price movement. If price repeatedly tests the POC or HVN, it confirms their significance as strong levels for building positions.
Identifying Breakout Points: Price exiting the Value Area signals a shift in market balance. Such a breakout can indicate the start of a trend, especially if accompanied by rising volume, making it an ideal opportunity for trend-following strategies.
Determining Market Imbalance: Rapid price movement through zones with low volumes (Low Volume Nodes, LVN) suggests weak participant interest at those levels. LVNs often act as separators between supply and demand zones, and their breakout can lead to a sharp impulse.
Analyzing Market Dynamics: Comparing the current market profile with previous sessions helps identify recurring patterns and shifts in participant behavior. For example, an expanding Value Area may signal increasing volatility, while a narrowing one could indicate upcoming consolidation.

Market Profile is particularly effective in futures, forex, and stock markets due to its ability to reflect the real structure of supply and demand. For example, on the Forex market, traders use it to analyze price price behavior around round levels (e.g., 1.2000 on EUR/USD), while on cryptocurrency exchanges, it helps identify accumulation zones of "whales." Integrating Market Profile with tools like volume delta or footprint charts allows for an even deeper understanding of large players’ intentions and improves forecast accuracy.

By mastering the application of Peter Steidlmayer’s concept, you can build flexible trading systems tailored to any style—from scalping to positional trading. In the following sections, we’ll explore real-world examples of using Market Profile and provide step-by-step instructions for setting it up on popular platforms like Thinkorswim, NinjaTrader, or TradingView.

How to Analyze Supply and Demand Imbalance Using Market Profile?

The imbalance between supply and demand is the driving force behind any market movement. When demand exceeds supply, prices surge upward, and when supply outweighs demand, a decline begins. The Market Profile concept, developed by Peter Steidlmayer, enables traders to identify these critical moments by detecting areas of large order accumulation and predicting shifts in market structure.

Unlike traditional analysis methods such as candlestick patterns or indicators like Stochastic, Market Profile focuses on volume and the time price spends at specific levels. This allows traders to peek "under the hood" of the market, observe the actions of major players—hedge funds, banks, or "whales" on crypto exchanges—and leverage this information for precise forecasts in 2025.

Key Indicators of Supply and Demand Imbalance in Market Profile

Value Area Expansion: When the fair value zone (Value Area, VA) increases in size, it signals rising liquidity and heightened market participant activity. This expansion often precedes the formation of a sustained trend, particularly when accompanied by an increase in trading volume.
Point of Control Shift (POC Shift): A shift in the Point of Control (POC)—the level of maximum volume—upward or downward reflects a change in market sentiment. For example, an upward POC shift on an E-mini S&P 500 futures chart may indicate buyer dominance and the continuation of a bullish trend.
Volume Accumulation Beyond VA: If significant volumes build up above Value Area High (VAH) or below Value Area Low (VAL), it suggests that large players are preparing for a breakout. This scenario is often observed before sharp movements on cryptocurrency markets like Binance.
Low Volume Nodes (LVN): Zones with low volume (LVN) indicate levels where participant interest is minimal. Price typically moves through LVNs quickly, making them key indicators for spotting trend acceleration points or breakout zones.
Behavior at Value Area Boundaries: Repeated testing of VA boundaries (VAH and VAL) without a breakout suggests temporary supply and demand equilibrium. However, if price lingers at these levels for too long, it may foreshadow accumulation ahead of a strong move.

Practical Application of Imbalance Analysis: Strategies and Examples

Uptrend: If the POC shifts upward and the Value Area expands in the same direction, it confirms buyer strength. Traders can open long positions with a stop-loss set below VAL to minimize risks.
Potential Reversal: A narrowing Value Area (VA) and a downward POC shift amid declining volumes may indicate weakening liquidity and an impending bearish reversal. This is a signal to prepare for short positions.
Breakouts and Bounces: Abnormally large volumes near significant support or resistance levels (e.g., round levels on Forex like 1.3000 on EUR/USD) often predict either a breakout or a bounce. Combining volume delta analysis with Market Profile can refine the direction of the move.
Scalping at LVN: Low-volume zones are ideal for short-term trades. Price typically exits LVNs quickly, allowing scalpers to profit from impulses.

Analyzing supply and demand imbalance through Market Profile provides traders with a powerful tool for making informed decisions. It helps minimize risks by precisely placing stop-losses (e.g., beyond LVNs) and increases the likelihood of successful trades by enhancing understanding of market dynamics. Whether you trade on daily charts or engage in high-frequency trading, this method adapts to any style and market—from stocks and futures to cryptocurrencies.

Advantages and Disadvantages of Market Profile Analysis: A Comprehensive Overview

Market Profile, developed by Peter Steidlmayer, is a unique tool that helps traders gain a deeper understanding of market dynamics and participant behavior. However, like any analytical method, it comes with its strengths and weaknesses. In this section, we’ll thoroughly examine the advantages Market Profile offers for trading and the limitations to consider to use it most effectively in 2025.

Advantages of Market Profile: Why Should You Use It?

Deep Market Insight: Market Profile unveils the actions of major players—banks, hedge funds, and market makers. By analyzing levels of liquidity accumulation and distribution, traders can track "smart money" and predict its impact on price, whether trading futures on CME or cryptocurrencies on Binance.
Clear Support and Resistance Levels: Unlike traditional technical analysis, where levels can be subjective, Market Profile highlights real zones of volume concentration (e.g., POC and HVN). This enables traders to make informed decisions based on actual market activity.
Flexible Application: The tool suits various trading styles—from intraday scalping on minute charts to medium- and long-term strategies on daily timeframes. For instance, Forex traders can use it to analyze pairs like EUR/USD, while investors can assess indices such as the S&P 500.
Detecting Market Anomalies: Market Profile clearly shows moments when the market shifts out of equilibrium (e.g., a Value Area breakout), often signaling the start of a trend. This is particularly useful for capturing impulsive moves in volatile markets like oil or Bitcoin.
Adaptability to Different Instruments: The method is versatile and applicable to futures, forex, and cryptocurrency markets. Whether you’re trading Tesla stocks or Ethereum, Market Profile helps identify key supply and demand zones.

Disadvantages of Market Profile: Limitations and Challenges

Steep Learning Curve: For beginners, Market Profile can feel complex due to the need to understand market structure and concepts like POC, VA, HVN, and LVN. Without experience or training, its interpretation may be inaccurate, reducing its effectiveness.
Lack of Automated Signals: Unlike indicators like RSI, MACD, or Bollinger Bands, which provide clear buy/sell signals, Market Profile requires manual analysis. This increases the risk of subjective errors, especially when identifying breakout or reversal zones.
Ineffectiveness in Low-Liquidity Markets: In markets with low trading volume (e.g., small-cap stocks or obscure cryptocurrencies), Market Profile levels lose accuracy. Low liquidity makes the data less reliable, limiting its applicability.
Need for Additional Tools: To maximize its potential, Market Profile is often combined with other methods, such as Volume Profile, Time & Sales, or Order Book data. Without these, the analysis may be incomplete, particularly in fast-moving markets.
Platform Dependency: Not all trading platforms support Market Profile out of the box. High-quality analysis requires specialized software like NinjaTrader, Thinkorswim, or ATAS, which may inconvenience users of popular platforms like MetaTrader.

Despite its drawbacks, Market Profile remains a powerful tool for analyzing supply and demand. It assists traders in making well-informed decisions, minimizing risks (e.g., placing stop-losses beyond LVNs), and identifying high-potential entry points. Its versatility and depth make it especially valuable for professionals willing to invest time in learning and setup.

Examples of Market Profile Analysis in Practice: Real Trading Scenarios

The concept of Peter Steidlmayer, embodied in Market Profile, is not just a theory but a practical tool for analyzing market structure. It enables traders to identify key supply and demand levels, find optimal entry and exit points, and predict price behavior based on real volume and liquidity data. In this section, we’ll break down specific examples of applying Market Profile in futures, Forex, and cryptocurrency markets in 2025, demonstrating how this method works in real-world conditions.

1. Reversal Scenario: Identifying a Turning Point

When price consolidates within the fair value zone (Value Area, VA) for an extended period and then sharply exits with a surge in volume, it often signals a shift in the balance of supply and demand. This reversal scenario is typical in highly volatile markets, such as oil futures or Bitcoin, where large players begin to actively intervene.

How to Trade a Reversal:

If price breaks below Value Area Low (VAL) with a volume spike, it could mark the start of a downtrend. For example, on an E-mini S&P 500 chart, this signal often confirms bearish sentiment.
A breakout above Value Area High (VAH) with volume support likely indicates the birth of a bullish trend—an ideal opportunity for long positions.
A retest of the breakout zone (VAH or VAL) after the exit often provides a low-risk entry point. Set a stop-loss inside the VA to protect against false moves.

This scenario is particularly useful for intraday traders catching reversals on 5- or 15-minute timeframes.

2. Trend Continuation: Amplifying Market Momentum

When price decisively breaks through the value area and moves in the direction of an imbalance, it highlights the strength of the current trend. Such situations are frequently observed in Forex (e.g., EUR/USD) or cryptocurrency markets (Ethereum), where trends can persist for hours or days. Pullbacks to key Market Profile levels become ideal entry points to join the move.

How to Trade Trend Continuation:

Monitor the shift of the Point of Control (POC): if the POC moves in the trend’s direction (e.g., upward in a bullish market), it confirms its strength. On daily futures charts, this can signal holding a position.
Use high-liquidity zones (High Volume Nodes, HVN) as targets for profit-taking. HVNs often act as a "magnet" for price before an impulse concludes.
Identify low-liquidity zones (Low Volume Nodes, LVN) to spot breakout points. Rapid movement through an LVN reinforces the trend, making it perfect for scalping or breakout trading.

This approach allows traders to maximize profits by entering on pullbacks and avoiding overbought zones.

3. Finding Strong Levels: Relying on Volume Analysis

Market Profile highlights levels with maximum volume concentration (HVN) and minimal liquidity (LVN), serving as benchmarks for building trading plans. For example, in the Tesla stock or Nasdaq index markets, these levels often align with key reversal or breakout points used by institutional players.

How to Trade Strong Levels:

Low-volume zones (LVN) act as potential support or resistance levels. If price bounces off an LVN, it could signal a short-term trade opportunity.
Track the dynamics of the POC: its upward or downward shift indicates where supply or demand is gaining strength. In crypto markets, this helps identify "whale" accumulation zones.
Open positions as price approaches an HVN or POC, observing the reaction (bounce or breakout). For instance, testing an HVN on a 1-hour gold chart might provide an entry signal with a take-profit at the next level.

This analysis is especially effective for setting stop-losses (e.g., beyond an HVN) and take-profits (at the next LVN).

Mastering Market Profile in practice enables traders to adapt flexibly to any market condition—from ranging markets to strong trends. This tool helps uncover profitable trading opportunities, whether scalping on minute charts or position trading on daily timeframes. In the following sections, we’ll explore how to set up Market Profile on popular platforms (NinjaTrader, TradingView) and integrate it with footprint charts for even greater precision.

How to Use Market Profile for Successful Trading: A Step-by-Step Guide

The concept of Peter Steidlmayer, implemented in Market Profile, is a powerful tool that helps traders analyze market structure and make informed decisions. However, to apply it successfully in real trading, knowing the theory isn’t enough—you need to interpret Market Profile signals based on the current market situation, whether it’s futures on CME, currency pairs on Forex, or cryptocurrencies on Binance. In this section, we’ll outline practical steps and recommendations to help you effectively use Market Profile in 2025.

Analyze Volumes to Identify Key Zones: Pinpoint areas of maximum market participant activity, such as High Volume Nodes (HVN), where price tends to consolidate, and Low Volume Nodes (LVN), which indicate potential breakouts. For example, on the Bitcoin market, an HVN zone might signal accumulation by "whales," while an LVN suggests readiness for a sharp move.
Monitor POC and VA as Benchmarks: The Point of Control (POC)—the level with the highest volume—and the Value Area (VA)—covering 70% of the volume—serve as reliable support and resistance levels. If price tests the POC on a daily E-mini S&P 500 futures chart, it often precedes a reversal or trend strengthening.
Distinguish Trending and Ranging Markets: In a trending market, POC and VA gradually shift in the direction of price movement (e.g., upward in a bullish EUR/USD trend), confirming momentum. In a flat market, these levels remain stable, indicating consolidation and potential range trading. This helps select the right strategy—trend trading or waiting for a breakout.
Combine Market Profile with Other Tools: To enhance signal accuracy, integrate Market Profile with volume analysis (Volume Profile), candlestick patterns (e.g., "engulfing" near VAH), Fibonacci levels, or footprint charts. On the gold market, combining POC with the 61.8% Fibonacci level can provide a strong entry signal.
Test Strategies on a Demo Account: Before risking real capital, practice using Market Profile on simulators or demo accounts in platforms like NinjaTrader or Thinkorswim. This allows you to understand how the tool performs in various conditions—from sideways movement in Tesla stocks to trends in Ethereum.

Mastering Market Profile takes time and practice, but this tool can significantly improve your trading. It not only increases the precision of entries and exits but also deepens your understanding of market mechanics—from institutional player actions to supply and demand dynamics. Whether you’re scalping on minute charts or position trading on daily timeframes, Market Profile adapts to any style.

To get the most out of this method, set up Market Profile in your trading platform (e.g., TradingView or ATAS) and start by analyzing historical data. In the following sections, we’ll explore specific trade examples using Market Profile and show how to avoid common beginner mistakes when working with volumes and levels.

Conclusion: Why Market Profile is Worth Mastering in 2025?

The Market Profile concept, created by Peter Steidlmayer, is more than just an analytical tool—it’s a philosophy of understanding market balance. It helps traders identify key supply and demand levels, uncovering hidden market mechanisms inaccessible through traditional methods. Whether you trade futures, currency pairs, or cryptocurrencies, this approach remains relevant and in demand in 2025.

Unlike classical technical analysis, which focuses on indicators like RSI or moving averages, Market Profile offers a deeper perspective on market structure. It reveals where liquidity concentrates (High Volume Nodes), where it depletes (Low Volume Nodes), and how price interacts with equilibrium zones (Value Area) and maximum volume levels (Point of Control). This enables traders to precisely determine entry and exit points, predict breakout or reversal probabilities, and manage risks with greater confidence.

Despite its complexity and learning curve, Market Profile remains one of the most accurate market analysis methods. Its strength lies in its versatility: it applies to any asset—from Tesla stocks and S&P 500 indices to Bitcoin and Ethereum on Binance. By combining Market Profile with additional tools like volume analysis (Volume Profile), Time & Sales, footprint charts, or candlestick patterns, traders can build a robust trading system adaptable to any condition—from sideways markets to strong trends.

To master Market Profile and integrate it into your strategy, start practicing on a demo account in platforms like NinjaTrader, Thinkorswim, or TradingView. Analyze historical data, track how price reacts to POC and VA boundaries across different timeframes (from 5-minute to daily), and test your hypotheses. Gradually incorporating this tool into live trading will help you better understand the behavior of major players—banks, hedge funds, and "whales"—and spot profitable opportunities where others see chaos.

Ultimately, success with Market Profile depends on your patience and discipline. Regular practice, studying market patterns, and adapting to specific assets (e.g., gold, oil, or Forex pairs like EUR/USD) will turn this method into a competitive edge. Start small, and over time, you’ll be able to use Market Profile to improve trade accuracy, minimize risks, and achieve consistent profits in any market.