easy · Volume Profile Analysis profile-shapes
A large fund needs to exit a significant long position in ES futures over the course of a session. Looking at the composite volume profile for the prior week, they identify a major HVN at 5,380 where 35% of the prior week's volume traded.
Why would they prefer to begin their exit near this HVN?
- HVNs are the easiest places to exit because price always accelerates straight through them, providing fast fills with minimal slippage on each clip sent to the order book
- Exiting at the HVN guarantees the fund will achieve a fill above the prior week's POC regardless of the direction in which the broader market chooses to trend across the whole session
- The HVN at 5,380 represents a zone of high liquidity and two-sided participation; they can distribute their position within the heavy volume without causing significant price impact
- HVNs mark areas of low institutional interest and notably thin participation; so the fund will face less direct competition from the other large players working that same direction
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