The concept of point of control (“POC”) dates back to the 1980s, and the introduction of Market Profile. In a traditional Market Profile display, the POC is the price with the most TPOs (time price opportunities).
A TPO equates to a letter printed on a Market Profile chart, signifying that the market traded at that price within a 30 minute period.
So the Market Profile point of control equates, more or less, to the price most frequented over the course of the trading session. In this example, the POC is highlighted in yellow:
In the world of modern order flow analysis, we use volume point of control (“VPOC”). What VPOC tells us is the price at which the most volume traded in a period. So volume traded versus time periods traded. While the two sound similar and look similar, they represent very different ideas.
Let me give you an example. For the last few years, the daily VPOCs for stock index futures have almost always been the price at the 4 PM stock market close. It might be a price that traded often throughout the day, and it might not have traded at all before 4 PM. The 4 PM volume so overwhelms every other bar, that it really does not matter what happened earlier. Make a one second chart of your favorite stock index symbol and see for yourself.
So why does this relationship exist? It exists because index funds use futures to adjust their positions based on new investments, redemptions, etc. Virtually none of this volume is a directional bet. It would be the same regardless of the closing price, because the driving factor is index funds’ desire to match the performance of the underlying index.
Now compare this to the Market Profile POC in the picture above. The market traded at the POC price in 10 different 30 minute periods throughout the day. It is a completely different concept. The original POC was a sort of balance point, a price which kept being retested throughout the day. VPOC is, for many markets, more of an institutional trading anomaly.
Another difference between the two is that VPOC is much more volatile throughout the day. Insider Bars now offers the option to show the prior period only, for those who wish to avoid the distraction of the intraday volatility.
Multi-Tick VPOC
Traditionally, VPOC has been calculated on single prices. However Insider Bars also offers the option to calculate multi-tick VPOC. Sometimes, this can offer a more meaningful measure than calculation based on a single price. A good example of this is stocks. Say the one tick VPOC for Apple is 223.57. Does anyone thing that it is that because Joe Institutional Trader placed an order at that price? (I promise it is not.) There is an element of randomness in VPOC, and you can reduce this with multi-tick calculation.
When charting stocks, please bear in mind that TradeStation intraday data is filtered in various ways. The most prominent is removal of trades of under 100 shares. While this can be useful on some markets, on large price stocks like Amazon, it means that a huge percent of trades do not get charted. Most individuals do not buy stocks in $100,000 chunks. Also, institutional traders now have software available to help disguise their trades by breaking up large orders into smaller pieces. The VPOC on filtered stock data will be different than that made using every trade.
Bar VPOC
VPOC on bars is a very valuable trading tool. It allows you to see where the biggest battle occurred between buyers and sellers in the bar, and see if volume is entering the market at some other support/resistance level you might be watching.
Large volume almost always occurs where conflict exists between large buyers and large sellers.
Insider Bars offers an enhanced kind of point of control for bar analysis called Auction Point of Control (APOC). Rather than looking at raw price data to determine the POC value, data is grouped as uptick/downtick pairs. This is a more precise measure, as it better captures the auction process. Here is an example of Bar APOC:
- A. APOC (white) shows high volume at previous week’s value area (black line).
- B. APOC showing high volume at current week value area.
- C. APOC highlights volume at weekly VWAP (yellow).