How to use the volume distribution chart to identify the resistance zone of the contract?

Volume distribution charts reveal key resistance zones by highlighting price levels with high trading activity, helping traders anticipate market reactions.

Jun 20, 2025 at 08:14 am

Understanding the Volume Distribution Chart

The volume distribution chart is a specialized tool used in cryptocurrency trading to visualize where significant trading activity has occurred over time. Unlike traditional volume indicators that show volume per candlestick, this chart aggregates volume across price levels. This allows traders to identify areas of high interest, such as support and resistance zones.

Volume clustering at specific price points can indicate institutional or large-scale trading activity, which often influences market direction. When analyzing contracts — especially futures contracts — understanding how volume accumulates at certain levels helps anticipate potential resistance zones where selling pressure might dominate.

How to Access and Read the Volume Distribution Chart

To effectively use the volume distribution chart for identifying resistance zones, you must first know how to access it on popular trading platforms like TradingView or Bybit. Most platforms offer it under custom indicators or advanced tools.

• Navigate to the indicator section
• Search for “Volume Profile” or “Volume Distribution”
• Apply it to your chart

Once applied, you’ll see vertical bars representing volume at different price levels. The highest bar indicates the Point of Control (POC) — the price level with the most traded volume during the selected period. Other prominent bars around it represent secondary volume clusters.

Identifying Resistance Zones Using Volume Clusters

A resistance zone typically forms where there’s a concentration of sell orders or where the price has previously struggled to move higher. In the context of the volume distribution chart, these zones are often marked by significant volume clusters above the current price.

Here’s how to pinpoint them:

• Look for high-volume nodes above the current market price
• Observe historical price action near those levels
• Check if previous attempts to break through were met with strong rejection

If a cluster appears tall and narrow, it may suggest a sharp increase in selling activity at that level. Conversely, a wide and moderately tall cluster could imply ongoing accumulation or distribution over time.

Combining Volume Distribution with Price Action

Using the volume distribution chart alone may not be sufficient. To strengthen your analysis, combine it with key price action signals such as:

• Rejection candles (like pin bars or engulfing patterns)
• Failed breakouts at clustered volume levels
• Confluence with Fibonacci extensions or moving averages

For example, if a volume cluster aligns with a 50-period moving average and the price repeatedly fails to close above it, that level becomes a stronger candidate for a resistance zone.

Additionally, watch how price behaves when approaching these levels. If the price stalls or reverses near a known volume cluster without breaking through, it confirms the presence of strong resistance.

Practical Steps to Mark and Monitor Resistance Zones

After identifying potential resistance zones using the volume distribution chart, the next step is to mark and monitor them for trade setups or risk management purposes.

• Use horizontal lines to highlight key volume clusters above the current price
• Label each zone based on its strength and relevance
• Set alerts for when price approaches these levels
• Continuously update the chart to reflect new volume data

Monitoring these zones allows traders to anticipate potential reversal points. For contract traders, knowing where resistance lies helps in setting stop-loss levels, profit targets, or even planning short entries if other confirming factors align.

Frequently Asked Questions

What is the difference between volume profile and volume distribution chart?

While both terms are often used interchangeably, the volume profile generally refers to the broader concept of displaying traded volume at various price levels. A volume distribution chart specifically visualizes this data on the price chart, often highlighting key metrics like Point of Control and Value Area.

Can I rely solely on the volume distribution chart for identifying resistance?

It’s not advisable to rely solely on any single indicator. While the volume distribution chart provides valuable insights into where past trading activity was concentrated, combining it with price action and other technical tools improves accuracy and reduces false signals.

How often should I update my volume distribution settings?

This depends on your trading timeframe. For intraday traders, updating the chart daily or even intra-session may be necessary. For swing traders, a weekly or monthly view might suffice. Adjust the period to match your strategy and ensure you’re capturing relevant volume data.

Why do some resistance zones identified via volume fail?

Market conditions change, and volume from the past doesn’t always guarantee future behavior. Liquidity shifts, news events, and sudden volatility can override historical volume clusters. Always consider real-time context before making decisions.