The valves can be divided into two groups.
Pressure regulating valves, and those that direct flow and pressure are flow control valves.
Spool type valves are more suitable for pressure regulation in automatic transmissions as variable pressures must be provided.
In this regulating valve, the valve spring is compressed when the pump or supply pressure becomes high enough.
The larger land then uncovers an exhaust port to maintain a regulated output pressure.
Similarly with this regulating valve in a fluid circuit, the valve is forced downwards against its spring until it begins to uncover a port leading to another part of the circuit.
Since the port is not fully uncovered, there is a restriction to flow and this causes a pressure drop across it.
The pressure of the fluid in this part of the circuit is now less than the pressure of the fluid being supplied.
If the port was fully uncovered, then pressures on both sides of the valve would become equal.
Source: CDX Global
