Value Area Analysis

Value area analysis involves identifying the price range where a significant majority, typically 70 percent, of the volume has occurred during a specific period. This range represents the area of agreement between buyers and sellers regarding the asset's value.

Prices trading within this area are considered to be in balance, while prices outside this range are considered to be at a premium or discount. This analysis helps traders determine if the market is trending or consolidating.

When price breaks out of the value area, it often indicates a new phase of price discovery. By focusing on where the "smart money" has concentrated its volume, traders can better position themselves within the market's structural range.

It provides a clear picture of market sentiment and consensus.