The hAnDbOOk Of TeChnICAl AnAlysIslines of TPOs that appear close to the middle of the distribution, the lower line of
TPOs will be the POC.
To calculate the value area, we need to first locate the POC. To find the POC,
find the range of the distribution and locate the middle of it. The range of a dis-
tribution is simply the difference between the highest‐ and lowest‐priced TPOs.
Finally, identify the longest line of TPOs that is closest to the middle of the range.
That will represent the POC. See Figure 17.7.
In Figure 17.7, the range is $24 and the middle of the range is $84. The longest
line of TPOs closest to the middle price is $84. Therefore, the POC is located at
$84 and it comprises nine TPOs. Sometimes the opening price is denoted by the
letter O, as seen at $88. If each period of lettering represents a half hour, the total
duration of the entire distribution, assuming that M is the last price, is simply 13
× ½ hour = 6 ½ hours long (since M represents the thirteenth letter).
The value area is now calculated by:
- Adding up all the TPOs in the distribution
- Calculate 68 percent of the total number of TPOs
- Compare the number of TPOs two prices above and two prices below the POC
- Add the side with the larger amount of TPOs to the number of TPOs along the
POC - Go two prices further on the side that was just included and add the side with
the larger amount to the running total - Continue until 68 percent of the TPOs are accounted for within the distribution
See Figure 17.8.
Therefore, the area containing approximately 68 percent of all TPOs represents
the value area. See Figure 17.9.
figure 17.7 Finding the Point of Control (POC).