Market Profile

Market Profile

Traditional technical analysis uses historical market-generated information to solve for profitable technical indicators by the process of optimization/back-testing; the resultant indicators are used to monitor market behavior on a day-to-day basis. This approach to technical analysis allows the market participant to deal with the markets on a part-time basis. Market Profile is a form of technical analysis, in that it utilizes market-generated price and volume data. However, it differs from traditional analysis, in that market behavior is monitored throughout the trading session. In order to gain market understanding, the profile trader observes the market in real-time, either on the trading floor, or away from the floor via price-quotation equipment. Following more than four years of development by J. Peter Steidlmayer and the Chicago Board of Trade(hereinafter, "CBOT"), the CBOT Market Profile and Liquidity Data Bank went on-line in 1984. The first vendor of the data was Donald L. Jones.

Figure 19 below displays a Market Profile

graphic with CBOT Volume, and a 30minute bar chart of CBOT January 1990 soybean futures for December 8, 1989. The graphic is a real-time, time-and-sales quotation ticker that displays time/price

relationships. The letters comprising the graphic designate the following standard 1/2hour time periods: "A" represents 8:00-8:30 A.M. Central Time, "B" represents 8:309:00, and so on. The price of SF0 ranged between 5770 and 5736 during the D period (the first period of this market), between 5762 and 5744 during the E period, and so on. The day's open and last prices are designated by the two triangles appearing adjacent to 5754 and 5790, respectively, while the third triangle designates the middle of the day's price range. Each letter comprising the graphic is a time-price-opportunity (hereinafter, "TPO"); a TPO is an opportunity to trade in a specific 1/2-hour period at a specific price.

Figure 20 illustrates the formation of the graphic that is displayed in the previous figure. In Figure 20, trading activity is depicted with the TPOs displayed as a 30minute bar chart; with the TPOs left-justified, the conventional profile graphic® displayed in Figure 19 results.

The CBOT Volume presented in turquoise at the left side of Figure 1 is generated from the CBOT Liquidity Data Bank . It is the distribution of contract volume at each tick over the day's price range, and is presented both numerically and graphically. With the availability of the CBOT Market Profile and LDB , the general public has access to market-generated information which previously had been available only to individuals who trade on exchange floors. Thus, it is possible to get the feel of a market, while trading away from the floor. Market Profile Some individuals trade, on the one hand, by following market fundamentals and/or by conducting technical analysis; as seen in previous chapters, the intent may be to trade by using some system or formula which is construed to represent market behavior. On the other hand, the discipline popularly known as market profile entails understanding what is happening in the market, thinking about it logically, and acting accordingly. The Market's Purpose The purpose of a market is to accommodate trade. Futures exchanges promote trade accommodation by providing such things as a location at which to trade, marketimposed time-frames (for example, the hours of the trading session, the life of futures contracts, and the timing of market reports), and the information captured in the profile graphic and the volume distribution.

The Market's Operational Procedure The market is self-regulating through the use of time and price, and market activity is interpreted by the acceptance or rejection of TPO's by market participants. The market operates through a dual auction process. As it is attempting to accommodate trade, the market seeks the activity of participants through rotation: that is, as can be seen in Figure 20, it uses price probes which move, alternatively, too high and too low in order to create trading opportunities. The acceptance or rejection of these TPO's by market participants is a function of their needs and objectives. The Behavior of Market Participants Market participants are categorized by their time-frames. Day-time-frame traders intend to conduct business in a specific trading session. They seek a fair price in order to accommodate trade: that is, they operate to buy the bid price, or to sell the asking price, so as to take the edge. Other-time-frame traders, who may not initially intend to conduct business in a specific trading session, may acquire a market position because of an attractive TPO. Their usual mode of behavior is to fade the market: that is, they usually operate to buy at the low end of the day's price range, or to sell at the high end. Day Structure As the day's trade progresses, a day structure develops that reflects the acceptance or rejection of TPO's by participants, and organizes seemingly chaotic market activity into a format that can be read and understood. Six types of day structure have been identified: normal, normal-variation, trend, non-trend, neutral, and running profile. Analysis of the day structure allows one to judge the degree of balance generated by market participants. Greater participation by the other-time-frame traders usually causes imbalance.

Normal Day A normal day occurs when 80-100% of the day's price range consists of the initial balance. The initial balance, delineated by the single vertical line appearing to the left of the graphic, is the price range established during the first two 1/2-hour periods of the trading session.

Another normal day. In this case, range extension occurred: that is, the price range was extended beyond the initial balance. A normal day is characterized by brief time/price relationships -- that is, few TPO's -- at the top and bottom of the graphic, as well as with an extended time/price relationship within the daily price range. The market is two-time-frame, in which rotation is occurring: that is, price-probes at the top of the graphic are met with selling, while price-probes at the bottom are met with buying. This activity promotes market consolidation, and results in the development of a value area wherein -- by definition -70% of daily market activity occurs.

Normal-variation Day On such a day, the initial balance comprises less than 80% of the day's price range, and range extension -- either up or down -- can more than double the initial balance. As the market probes toward the top of the initial balance, it is advertising for selling. Such a price move would be expected to produce sufficient selling to result in consolidation; instead, on the day in question, buying resulted in E-period buying range extension above the initial balance. Similarly, selling can result in selling range extension below the initial balance.

Trend Day When a trend day occurs, the market is moving through time, and must be monitored closely. Such a day is characterized by an unusually narrow initial balance. Additionally, the market moves consistently in one direction, but not sufficiently far at any one time to elicit a consolidation-promoting reaction that would result in a value area; the result is a long, narrow profile, generally moving in one direction. It is not unusual for a trend day to close within a few ticks of its high or low. Trend days are one-time-frame markets. The trend day depicted below is a one-timeframe up market, in which all participants are buying, and in which buying promotes additional buying. Each 30-minute bar generally has a higher high and a higher low than the previous one: that is, the market is not rotating.

Similarly, in the one-time-frame down market below (06/21 in PETE format), all participants are selling.

Non-trend Day Market participants are fading price probes, and the day's price range is narrow; the market is not accommodating trade, and is going nowhere. As in the case of a trend day, a non-trend day is characterized by an unusually narrow initial balance; thus, a day with an unusually narrow initial balance must be monitored with care, until it an be identified as either trend or non-trend.

Neutral Day A neutral day is characterized by range extension -- both up and down -- with little followthrough. Range extension occurred, and resulted in no net influence. Neutral days are relatively balanced and symmetric, and it is not unusual for such a day to close near the center of the day's price range.

Running Profile Day A running profile day is characterized by a change in the condition of the market during the trading session.

As seen below, in which a J-period split is imposed on the graphic, the market developed as a normal day through the I period; subsequently, the market condition changed to trend.

Initial and Secondary Auctions Price activity that occurs while the daily auction converges to an initial balance is attributed to the day-time-frame trader; this assumption is not inconsistent with the fact that, during any particular trading session, the other-time-frame trader may be participating during the first two 1/2-hour periods. Once this balance is established during this initial auction, the only possible development is imbalance caused by the other-time-frame trader, as range extension develops during a secondary auction that may proceed in periods subsequent to the initial auction. Depending upon the vigor of the other-time-frame trader during the secondary auction, one of the six types of day structure will result.

The other time frame trader's activity and his net influence level is lowest on normal days when he is patiently entering on the extremes and in the value area. His activity and his influence increase when he is upsetting the initial balance and causing a range extension on normal variation of normal days. He attains maximum influence when his activity reaches the highest level on trend days (J. Peter Steidlmayer and Shera Buyer, Taking the Data Forward, Market Logic Inc., Chicago, IL, 1986).

Value Area The market is composed of time, price, and volume. Each day the market -- attempting to accommodate trade -- develops a price range delineated by the high and low, and usually develops a value area. Volume is generated by the interaction of time and price. During each trading session a value area is usually established as the market uses price-probes which move, alternatively, too high and too low in order to create TPO's that seek the trading activity of market participants. These price-probes have the following impact upon the quantity supplied and demanded: the quantity supplied is stimulated and the quantity demanded is dampened as price rotates higher, while price rotation lower has the opposite effect. In this way, price consolidation is promoted, and a value area is established: that is, time and price produce volume, and volume validates value. The Chicago Board of Trade is the first futures exchange that released for all of its markets, the contract volume conducted at each tick of the day's price range; additionally, the Chicago Mercantile Exchange (hereinafter, "CME") began to release such information in late-1989. Since many market profile analyses require such volume information, they can be conducted for only these markets. There are two types of value area. The calculation of volume value area requires the contract volume conducted at each tick of the day's price range; in the chart below, volume value area is represented by the thin rectangle appearing to the right of the profile graphic .

To calculate volume value area, the highest volume tick is identified; beginning with the contract volume at that tick, the volume at the tick above or below it with the greater volume is added. This process is continued, until the total equals at least 70% of the day's contract volume. By comparison, the calculation of TPO value area adds TPO's using an analogous algorithm; as a result, it is able to be calculated for any market. In the chart below, TPO value area is depicted by the thin dashed rectangle appearing to the right of the profile graphic .

To calculate TPO value area, the highest time-price tick (that is, the one with the most TPO's) is identified; beginning with the number of TPO's at that tick, the number of TPO's at the tick above or below it with the greater number of TPO's is added. This process is continued, until the total equals at least 70% of the total number of TPO's comprising the graphic. The following market behavior is easily-observed. When a market opens within the range of the previous day's value area, the first time the high or low of that value area is approached, it will be resistance or support. When a market opens outside of the previous day's value area, it will be support or resistance the first time the market attempts to penetrate it; if value is penetrated, there is a high probability that price will move to the other side of the range. The extensive use of market profile allows such behavior to be observed. As perceived by Peter Steidlmayer, trading opportunity is predicated upon the fact that -- under the prevailing market conditions -- the current price can diverge from value. Having identified the value area, one can take advantage of a divergence of price and value, since either a divergent price will move back to value, or value will move to the current price. That is, the key to market opportunity is knowing when current price diverges from value, and correctly judging whether price will move to value, or value to price.

CTI Code, Contract Volume, Tick Volume, and TPO Count The CBOT and CME stratify market participants into four categories that are designated by customer trade indicator (i.e., "CTI") codes. CTI1 designates local floor traders, day-time-frame traders CTI2 designates commercial clearing members, other-time-frame traders CTI3 designates clearing members filling orders for other members or for non-clearing commercial traders, and

CTI4 designates clearing members filling orders for the public, or for any other type of customer. Market profile considers CTI1 participants to be day-time-frame traders, and CTI2 participants to be othertime-frame traders. It is recognized, however, that day-time-frame traders sometime conduct CTI2 business, and that other-time-frame traders sometime conduct CTI1 business. In the chart below, a cursor is positioned at 5762. The following information is displayed in the window that appears below the graphic: 1) VAH, the high tick of the volume value area, 2) VAL, the low tick of the volume value area, 3) VOL, the contract volume in value, 4) CTI2, the percent of contract volume conducted by commercial clearing members in value, and 5) TPO, the time/price opportunity count.

Calculation of the first four of these items requires contract volume at each tick. The CBOT releases such data hourly during the day trading session, as well as at approximately 17:00 and 20:00 hours Central Time. The CME releases such data prior to the open of the day session. At some time in the future, such data will be available in real-time. Additionally, on-the-minute tick volume is available for all markets: it is the distribution of the frequency at which a market trades at each tick. In the case of markets for which contract volume is not available, tick volume may be used with caution as a proxy; Figure 25 compares CBOT volume with tick volume. The highest time-price tick is the tick at which trading occurred during the most 1/2-hour periods; in that sense, it is the fairest price of the trading session. The time/price opportunity count (hereinafter, "TPO count") is concerned with the participation of other-time-frame traders in value, and reflects their willingness to buy at a higher price, or to sell at a lower price; the TPO count in Figure 30 is 18-over-34. The TPO count is defined as the number of TPO's above and below the highest time-price tick nearest the

center of the day's price range, excluding single-print ticks at the top and/or bottom of the graphic. On the one hand, an evenly-balanced TPO count suggests that there is no willingness to accept a divergent price. On the other hand, an imbalance in value, as reflected by the TPO count, suggests that price will move. Therefore,

it is important to watch for any small incremental change in the value area because this change can indicate the willingness of traders to buy or sell at a higher or lower price. The market is more vulnerable to volatility when there is less volume to give stability. Consequently, the market has a tendency to accept a divergent price on the short side of the distribution...the side with less volume (Chicago Board of Trade, CBOT Market Profile , Chicago, IL, 1984, page 51). As depicted in Figure 30, an unbalanced TPO count above the highest time-price tick indicates a propensity of other-time-frame traders to accept a divergent price above this level, if price were to probe there; that is, since other-time-frame traders have exhibited a greater willingness to buy than to sell, they may be willing to buy at a higher price. Similarly, an unbalanced TPO count below the highest time-price tick suggests a willingness to sell at a lower price. Long-term Auction Market activity can be monitored over several days with a long-term auction chart (hereinafter, "LTAC"); this chart displays information extracted from daily profile graphics , and relates to the activity of the other-time-frame participants. The activity of the other-time-frame trader is monitored, since that is the trader responsible for imbalance in the context of day structure. It is important to note here that both other-time-frame buyers and other-time-frame sellers can be active in the value area 1) at different times and at different prices, or 2) at the same prices at different times. The net result, however, is that one group (buyers or sellers) dominates, revealing the net flow of orders to the market that day (Steidlmayer and Buyer, page 21). Initiating and Responsive Market activity of the other-time-frame trader is defined as initiating or responsive with reference to the value area of the previous trading day, as follows: 1) activity within the range of the previous day's value area is considered initiating for both the buyer and seller, 2) activity above the previous day's value area is considered initiating for the buyer, and responsive for the seller, and 3) activity below the previous day's value area is considered responsive for the buyer, and initiating for the seller. This definition is relevant to the other-time-frame trader's activity relative to extremes, range extensions, and TPO count. Extreme, Range Extension, TPO Count One can detect the impact of the other-time-frame trader upon day structure by monitoring the other-timeframe trader tracks each day: that is, extreme(s), range extension(s), and TPO count. This activity is summarized on a LTAC. The chart below presents graphics of CBOT December 1987 corn futures for July 20-24, 1987. The othertime-frame trader tracks will now be identified for July 20.

First, when price is perceived to be sufficiently divergent from value, aggressive buying at the bottom of the day's price range and/or aggressive selling at the top of the range may quickly move price back to value, and single-print ticks may remain at the bottom and/or top of the graphic. On the day in question, a K-period single print appears at 1776, and D-period single prints appear at 1752 and 1750. For such single-print ticks to be an extreme, they must occur at two or more adjacent ticks; additionally, two or more single-print ticks left at the top or bottom of the graphic during the last 1/2-hour period are not an extreme, since there was not sufficient time during the trading session to test those ticks as a potential extreme. Thus, the single print at 1776 does not qualify as a selling extreme, while the D-period single-print ticks constitute a buying extreme. Second, as explained in a previous section, range extension occurs when the other-time-frame buyer or seller moves the price beyond the initial balance; on the day in question, there is K-period buying range extension. And, third, the TPO count is 12-over-23; this TPO count indicates that other-time-frame traders favored the buying side. Coding the Long-term Auction Chart The LTAC displayed in Figure 32 below...

summarizes the July 21-24 graphics presented in Figure 31. The center vertical fields of the LTAC designate price and value. To the left and right, respectively, of these fields appear six fields related to the other-timeframe sellers and buyers. Moving outward from the center of the LTAC, initiating activity appears first, since it is stronger than responsive activity. Within the initiating and responsive fields of the LTAC, the three other-time-frame trader tracks are arranged by their importance as one moves from the center of the LTAC. As seen in Figure 31, the value area of July 20 ranged from 1772 to 1760. In Figure 32, this information appears as a vertical line in the value area field of the LTAC; the date is shown on the left side of the chart, as well as in the vertical line that represents value. The other-time-frame tracks of July 21 will now be coded. First, the D-period single prints in the 1762-1752 range indicate other-time-frame initiating selling, since they occur within and below the previous trading session's value area; this extreme is indicated on the LTAC by a solid • under the selling/initiating/ext field. Secondly, following the initial balance, the other-time-

frame trader engaged in initiating selling range extension beginning in F period; this activity is indicated on the LTAC by a solid • under the selling/initiating/re field. Finally, the TPO count is initiating selling, since the day in question is a running profile down day; this TPO count is indicated on the LTAC by a solid • under the selling/initiating/TPO field. Note, that on trend days and running profiles, an actual TPO count is not executed; rather, the TPO count is specified as buying or selling, depending upon whether the day moved higher or lower. Initiating activity is coded on the LTAC with a "solid •", while responsive activity is coded with an "X"; this procedure is followed in order to emphasize initiating activity. Using this procedure, the activity of July 22-24 has also been coded in Figure 32. As will be illustrated below, a LTAC is used to read long-term balance and imbalance. 3-I Days, 3-R Days, and Free Exposure Certain market conditions suggest that a position may be held for some period of time at minimal risk exposure. For example, on the one hand, a 3-I day is one during which other-time-frame tracks include initiating activity on the extreme, initiating range extension, and an initiating TPO count; July 20 in Figure 31 is a 3-I buying day, while July 21 is a 3-I selling day. There is a propensity for the day following a 3-I buying day -- during which trade was accommodated, and during an up-trend -- to trade at the current price range or higher. Similarly, there is a propensity for the day following a 3-I selling day -- during which trade was accommodated, and during a down-trend -- to trade at the current price range or lower. That is, such days may offer free exposure. On the other hand, a 3-R day is characterized by three forms of responsive other-time-frame tracks. Although a 3-R day is not as strong as a 3-I day, it may also allow the opportunity to carry a position into the next day with free exposure -- provided that it accommodated trade, and had activity in the same direction as the prevailing trend. CBOT Liquidity Data Bank Figure 19 displays a Market Profile graphic with companion CBOT Liquidity Data Bank contractvolume distribution. As explained above, CBOT Volume displays the percent of total daily contract volume conducted at each tick within the day's range of the contract, as well as the percent of daily contract volume at each tick that is conducted by commercial clearing members.

In Figure 33, a cursor is positioned at 5760, the highest-volume tick. As seen in the window that appears below the CBOT Volume , 12.0% of total daily contract volume was conducted at that tick, while 13.4% of contract volume at that tick was conducted by commercial clearing members. And, as seen in the window that appears below the graphic, the CTI2 participation accounted for 6.3% of contract volume in value.

Subjective Analysis In the same way as the market utilizes rotation during the day to promote trade accommodation, it utilizes rotation on a day-to-day basis. In the context of market behavior as displayed on a LTAC, market activity proceeds from imbalance to balance to test day to imbalance, and so on.

For example, CBOT September 1987 T-bond futures had been balanced for approximately one month preceding July 16, 1987; that is, other-time-frame traders had engaged in nearly equal instances of buying and selling. Then, July 16 was a test day. From July 16 to July 20, the market remained balanced; another test day occurred on July 21, and value moved sharply lower on July 22. Figure 34 displays the LTAC for July 21 through August 3. From July 22 through July 30, the market was imbalanced on the selling side: that is, other-time-frame traders were primarily sellers. Specifically, there were 13 forms of initiating selling, compared with only three forms of initiating buying along with two forms of responsive buying.

Subjective analysis is conducted each day to help one to judge the likely position of the following day's value area. Subjective analysis consists of volume analysis, and analysis of commercial activity. Volume Analysis

Volume analysis involves five individual analyses, each of which -- as will now be illustrated for July 30 -will suggest whether value on July 31 will be higher-to-unchanged, or lower-to-unchanged. The five analyses are presented according to importance. Data are taken from the CBOT Liquidity Data Bank report displayed in Figure 35. Note, that the report includes the previous evening session; in the interest of brevity, the analysis will be conducted herein, so as to assume that the report's data are for the day session only.

Analysis 1. Total contract volume on July 30 was 460,568, compared with 338,638 on July 29. Since July 30 exhibited greater trade accommodation on lower value, lower-to-unchanged value is suggested for July 31. Analysis 2. The volume value area on July 30 was 15 ticks wide, compared with 9 ticks on July 29. Since July 30 exhibited greater trade accommodation on lower value, lower-to-unchanged value is suggested for July 31. Analysis 3. The top five ticks of the graphic accounted for 5.6% of total contract volume, while the bottom five accounted for 10.6%. Since there was greater trade accommodation at the bottom of the graphic than at

the top, lower-to-unchanged value is suggested for July 31. Depending upon the typical daily price ranges of the market of interest, more or less than the top and bottom five ticks would be used. Analysis 4. Total contract volume on the top half of the graphic was 27.1%, compared with 70.7% on the bottom half. Since greater trade accommodation occurred on the bottom half of the graphic, lower-tounchanged value is suggested for July 31. Analysis 5. The volume value area reflects the price range wherein 70% of the day's contract volume was conducted, while the TPO value area only reflects the price range wherein the market accumulated 70% of the TPOs. The volume value area reflects actual business. For the day in question, the range of the volume value area is 8922-8908, while the range of the TPO value area is 8925-8906; this analysis results in no conclusion, since the two value areas are symmetrically overlapping. By comparison, if the volume value area were positioned at a price range skewed somewhat lower than the TPO value area, then lower-to-unchanged value would have been suggested for July 31; and, if the volume value area were positioned at a price range skewed somewhat higher than the TPO value area, then higher-to-unchanged value would have been suggested. Analysis of Commercial Activity The analysis of commercial activity involves two individual analyses. Each of them suggests whether the value area on July 31 will be higher-to-unchanged or lower-to-unchanged. Analysis 1. Commercial participation in value amounted to 15.4%, compared with a usual participation of 13%. Since greater-than-usual commercial participation occurred at lower value, lower-to-unchanged value is suggested for July 31. Analysis 2. Commercial participation in value amounted to 15.4%, while it averaged 17.9% above value, and 9.5% below value. Since commercials were relatively active sellers above value, lower-tounchanged value is suggested for July 31. Conclusions The subjective analysis suggests lower-to-unchanged value on July 31: four of the five volume analyses suggested lower-to-unchanged value, and one resulted in no conclusion, while both of the analyses of commercial activity suggested lower-to-unchanged value. Note, that when these conclusions are summarized, one should focus upon getting a feel for what is going-on in the market and interpret the conclusions accordingly, rather than upon simply adding pluses and minuses. July 31 began with initiating buying on the extreme followed by initiating buying range extension that was terminated by D period; the TPO count reflected initiating selling. Thus, other-time-frame traders were buying early in the day, but selling was too strong to allow the market to move higher, and unchanged value resulted. Then on August 3, the next trading day, the strong selling that had been observed during the July 22-30 imbalance prevailed, and value moved sharply lower. Time Information List Each day, finally, these preceding analyses are supplemented with the time information list (hereinafter, "TIL"). The TIL consists of the following five components: 1) perspective...using fundamental and technical analysis, the short-, intermediateand long-term trends are categorized as upward, downward, or sideways; 2) LTAC...market balance/imbalance is evaluated; 3) day market activity...the other-time-frame trader tracks are analyzed; 4) day structure...the trading day is categorized; and,

5) free exposure...depending upon whether or not one has a market position, one's current free exposure, or the possibility of it, is evaluated. TIL components 1-3 are used to determine whether a long or short market position is favored, while components 3-5 are used for timing and trade management.

Market Profile

and the Advent of 24-Hour Trading

This chapter has briefly considered the theory and use of market profile as developed by J. Peter Steidlmayer over a 25-year period, and as initially implemented by the Chicago Board of Trade in the early-1980s. Everything that I had learned about the markets through my experiences prior to 1981 was formalized in the CBOT Market Profile and LDB . Through these two media, I was able to organize the market, define market activity and describe that activity by means of volume…. Instead of trying to read the past and extrapolate to the future, as previous technical systems had tried to do, the object of Market Profile and LDB was to understand the present as would a local on the floor. (J. Peter Steidlmayer, Steidlmayer onMarkets, John Wiley & Sons, New York, 1989), page 64. This traditional use of the CBOT Market Profile and Liquidity Data Bank is being modified as markets have evolved in, primarily, two respects. First, during the 1980s, market volatility and daily price ranges increased dramatically. Secondly, with the growing importance of 24-hour markets, the combined role of the day-time-frame trader and the other-time-frame trader is diminishing, as a third type of market participant -- namely, the opportunity-time-frame trader -is becoming more active. "The opportunity time frame is a moment in the market that forces a participant to act because of the favorable price opportunity it offers" (Steidlmayer, page 114). Thus, the opportunity-time-frame trader has a mode of behavior completely unique from the day-time-frame and other-time-frame traders; this participant continually monitors market activity, and takes advantage of trading opportunities that may arise at any time. The emergence of the opportunity-time-frame trader is also contributing to market volatility. The idea of value -- wherein 70% of the day’s trading activity occurs -- is based upon the definition of the first standard deviation of a normal distribution. In a normal distribution, the first standard deviation is positioned around the mean, while the second and third deviations are positioned, in turn, outside of the first deviation. However, the Steidlmayer distribution may start from either end, though not from the middle. That is, development follows either from a first standard deviation or from a third standard deviation -- never from a second.... Parts of the Steidlmayer distribution have the characteristic of being initiating or responsive in relation to the developing distribution -- initiating in the second and third standard deviations, where the market moves quickly, and responsive in the first, where it moves slowly. This volume relationship gives us the speed of market movement, as the market will move quickly away from the third standard deviation but slowly away from the first (Steidlmayer, pages 119-121). As this evolution in market behavior was recognized by Steidlmayer, he reflected on this for quite some time and found myself beginning to explore my natural, intuitive feelings about trading. This led to the developments in the later half of this book, which I believe are far superior in methodology to the mechanical approach of Market Profile . I don’t mean that Market Profile and LDB aren’t valuable; in fact, I still use all the data developed for them

continually. But, I’ve learned to incorporate these data into my natural way of trading (Steidlmayer, page 68). Current Market Profile

Developments

J. Peter Steidlmayer, Donald L. Jones, and James F. Dalton continue their innovative Market Profile research programs, which were initiated in the early 1980s. Complimentary on-line material is available at their websites. All of this material is a must-read for Profile students. For, as Steidlmayer envisioned in the early 1980s, Market Profile is an evolving discipline. In 1990, one of my former students began developing Profile-based software to assist his futures/options trading; I participated with him in algorithm development and testing from Spring of 1992 until Fall of 1998. Traditional Market Profile theory does not allow days to be linked over time, the way they are by traditional technical indicators; additionally, Market Profile is not a parameter-based algorithm that is amenable to optimization and back-testing. The focus of this research was to develop such a Profile-based algorithm. The Current Research section of my Website traces the evolution of this research; the College of Business and Technology Investment Club is currently using two of these algorithms to manage trades of CME hog futures. Traditional technical analysis uses historical market-generated information to solve for profitable technical indicators by the process of optimization/back-testing; the resultant indicators are used to monitor market behavior on a day-to-day basis. This approach to technical analysis allows the market participant to deal with the markets on a part-time basis. Market Profile is a form of technical analysis, in that it utilizes market-generated price and volume data. However, it differs from traditional analysis, in that market behavior is monitored throughout the trading session. In order to gain market understanding, the profile trader observes the market in real-time, either on the trading floor, or away from the floor via price-quotation equipment. Following more than four years of development by J. Peter Steidlmayer and the Chicago Board of Trade(hereinafter, "CBOT"), the CBOT Market Profile and Liquidity Data Bank went on-line in 1984. The first vendor of the data was Donald L. Jones.

Figure 19 below displays a Market Profile graphic with CBOT Volume, and a 30-minute bar chart of CBOT January 1990 soybean futures for December 8, 1989. The graphic is a real-time, time-and-sales quotation ticker that displays time/price relationships. The letters comprising the graphic designate the following standard 1/2-hour time periods: "A" represents 8:00-8:30 A.M. Central Time, "B" represents 8:309:00, and so on. The price of SF0 ranged between 5770 and 5736 during the D period (the first period of this market), between 5762 and 5744 during the E period, and so on. The day's open and last prices are designated by the two triangles appearing adjacent to 5754 and 5790, respectively, while the third triangle designates the middle of the day's price range. Each letter comprising the graphic is a time-price-opportunity (hereinafter, "TPO"); a TPO is an opportunity to trade in a specific 1/2-hour period at a specific price.

Figure 20 illustrates the formation of the graphic that is displayed in the previous figure. In Figure 20, trading activity is depicted with the TPOs displayed as a 30-minute bar chart; with the TPOs left-justified, the conventional profile graphic® displayed in Figure 19 results.

The CBOT Volume presented in turquoise at the left side of Figure 1 is generated from the CBOT Liquidity Data Bank . It is the distribution of contract volume at each tick over the day's price range, and is presented both numerically and graphically. With the availability of the CBOT Market Profile and LDB , the general public has access to marketgenerated information which previously had been available only to individuals who trade on exchange floors. Thus, it is possible to get the feel of a market, while trading away from the floor. Market Profile Some individuals trade, on the one hand, by following market fundamentals and/or by conducting technical analysis; as seen in previous chapters, the intent may be to trade by using some system or formula which is construed to represent market behavior. On the other hand, the discipline popularly known as market profile entails understanding what is happening in the market, thinking about it logically, and acting accordingly. The Market's Purpose The purpose of a market is to accommodate trade. Futures exchanges promote trade accommodation by providing such things as a location at which to trade, market-imposed time-frames (for example, the hours of the trading session, the life of futures contracts, and the timing of market reports), and the information captured in the profile graphic and the volume distribution. The Market's Operational Procedure The market is self-regulating through the use of time and price, and market activity is interpreted by the acceptance or rejection of TPO's by market participants. The market operates through a dual auction process. As it is attempting to accommodate trade, the market seeks the activity of participants through rotation: that is, as can be seen in Figure 20, it uses price probes which move, alternatively, too high and too low in order to create trading opportunities. The acceptance or rejection of these TPO's by market participants is a function of their needs and objectives. The Behavior of Market Participants Market participants are categorized by their time-frames. Day-time-frame traders intend to conduct business in a specific trading session. They seek a fair price in order to accommodate trade: that is, they operate to buy the bid price, or to sell the asking price, so as to take the edge. Other-time-frame traders, who may not initially intend to conduct business in a specific trading session, may acquire a market position because of an attractive TPO. Their usual mode of behavior is to fade the market: that is, they usually operate to buy at the low end of the day's price range, or to sell at the high end.

J. Peter Steidlmayer: In step with the markets J. Peter Steidlmayer has been an independent trader and member of the Chicago Board of Trade (CBOT) for more than 40 years, but he is best known as the developer of Market Profile and the Liquidity Data Bank (LDB), which are data displays and resources that show price action in terms of how often (and how much) a market is trading at a particular price level. Steidlmayer conceived these tools from 1981 to 1983 while serving a three-year term on the CBOT's board of directors. After graduating from the University of California at Berkley in 1960 with an accounting degree, Steidlmayer moved to Chicago and began trading bonds and commodities as a pit trader at the CBOT. Monitoring market action led to the realization that prices tended to follow a "bell-curve"- type distribution throughout the day - most of the trading took place at certain price levels, with progressively less activity occurring the farther above and below the market moved from this "value area." This discovery, combined with measuring market action in 30-minute intervals, formed the basis of Market Profile . The LDB is Market Profile's complementary volume database.

Steidlmayer, 65, has written four books explaining his theories: Markets and Market Logic (with Kevin Koy, Porcupine Press, 1986), New Market Discoveries (with Heidy Steidlmayer, self published, 1990), 141 West Jackson (Steidlmayer Software , 1997), and Steidlmayer on Markets, Second Edition (Wiley, 2003). Since creating Market Profile and LDB, Steidlmayer and fellow trader Steven Hawkins, who co-wrote Steidlmayer on Markets, created Capital Flow software - a program based on their experiences trading these methods over the past 20 years. Steidlmayer's outlook has continued to evolve, and he has created several new CBOT data products, such as On Floor Information (OFI) - a ratio of average buy orders to sell orders - as well as short-term customized spreads called X-funds (see "CME hopes X marks the spot," Active Trader, January 2005), which consist of a portfolio of theoretical futures positions (long or short) picked to profit within a two-week period. The underlying contracts aren't traded, but their movement determines the X-fund's profitability. (The CBOT introduced X-funds in 2002 and has offered them in conjunction with the Chicago Mercantile Exchange since October 2004.) While Steidlmayer doesn't disavow the basic tenets of Market Profile , he is quick to point out that popular Market Profile trading methods used in the late 80s are no longer viable because "the imbalance between the buyers and sellers is overwhelming the immediate liquidity of the marketplace." Profile of a market Profile of a market Steidlmayer sees the market as an auction process, which moves up and down in search of price efficiency, or the level at which buyers and sellers are in balance. The market should move horizontally when buyers and sellers are in balance, and vertically (up or down) if demand exceeds supply or vice versa. Steidlmayer realized that during horizontal moves, the price levels at which a market traded tended to form a bell-shaped curve, in which prices are distributed around the mode (most frequently occurring) value. A Market Profile chart organizes price data according to this principle, except it turns the bell curve on its side 90 degrees. Market Profile charts group price into 30-minute intervals, intervals, called Time Price Opportunities (TPOs), re p resented by different letters. For example, a trading day (for equities) lasts six and a half hours, and each 30-minute segment of the day is designated by one of the 13 letters from A through M. Figure 1 shows a daily Market Profile chart of Dupont (DD). The stock traded above 47 during the opening TPO (9:30 a.m. ET to 10 a.m.) on June 15 before closing below that threshold. It climbed the next morning, retraced some of those gains, and closed higher. The stock slid on June 19 and 20 to close at 46.79.

The shape of a profile is what's important. The widest sections of the profile represent areas where the market traded most frequently; most of the day's volume also typically occurs there. The chart plots additional rows as subsequent TPOs trade outside the prior interval's range. Classifying daily profiles A profile's "initial balance" (IB) refers to the first hour of trading in any market when mainly specialists and independent traders place trades. (The light red lines to the left of Figure 1's profiles show each day's initial balance.) This area was a critical reference point for Steidlmayer when he began trading the Market Profile display in the 80s because it allowed him to organize price action in terms of the relationship between shorter- and longer-term traders. Steidlmayer classified different types of daily profiles into six groups (non-trend, normal, normal variation, trend, neutral, and running trend neutral) based on how the market's first-hour price action compared to the remaining periods' movement. For example, a non-trend day's trading activity occurs almost exclusively within its initial balance, and its range is narrow, as few longer-term traders take positions. In contrast, a trend day features a narrow IB followed by a large directional move (caused by longer-term traders entering the market) and a close near its high or low. The remaining three groups identify price action somewhere in between a flat and trending market. Although these groups helped Steidlmayer trade Market Profile on a daily basis, he also found these concepts made sense on longer-term timeframes. For example, the market's range from Monday to Tuesday could be that week's IB, while the market's price action from Wednesday to Friday determines which of the five categories describe that week's behavior. Four steps of market activity

The construction of profiles and their daily classifications rely on chronological time (e.g., 30-minute, daily, or weekly increments), but Steidlmayer urged traders to look beyond that to measure "market time," which means understanding how bell-shaped curves develop. Steidlmayer's "four steps of market activity" describe patterns the market forms as it attempts to find an efficient price. Figure 2 shows the process for an uptrend begins with a strong up move that eventually loses momentum as buying demand falters and sellers appear (steps 1 and 2). The market then trades sideways around the rally's end before filling in the lower portions of the bell curve (steps 3 and 4).

Although Figure 2 profiles an uptrend, the four steps evolve around sell-offs in a similar way. Traders who follow traditional profile analysis try to determine when a market has built a bell-shaped curve and then look for a directional move out of the "mode line" - the price level with the most horizontal movement. This process seems fairly straightforward, but it doesn't adhere to chronological time, which makes it difficult to spot on daily profiles. Instead, traders must combine TPOs from several days to find out what stage the market is in. And most charting platforms that offer Market Profile can't combine TPOs from

diff e rent days. (Aspen Graphics, CQG, and Steidlmayer's Capital Flow software let you consolidate multiday profiles.) For more information about Market Profile , visit the CBOT's Web site (www.cbot.com). Also, see "Trading order flow with Market Profile " (Active Trader, May 2005) for a detailed explanation of the four steps of market activity. Liquidity Data Bank While Market Profile is primarily a price display, the Liquidity Data Bank is only available on CBOT contracts and contains important volume information, including the number of cleared trades for each 30minute TPO and a percentage breakdown for the four types of traders - locals or specialists, commercial clearing members, members trading for other members, and general public (see Figure 3).

These categories, known as Customer Trade Indicator (CTI) codes, can be used to find out how different traders reacted to market conditions. For example, commercial traders, or hedgers (not speculators) tend to "fade" an intraday trend and take the opposite position at the day's extreme, according to Steidlmayer. The "commercials" may not be right, he says, but the LDB allows you to trade with them, or any other trader type, if you choose. The LDB, provided by the CBOT on an intraday or daily basis, also includes each contract's so-called "value area," at which 70 percent of trading occurs. The evolving nature of markets In the 60s Steidlmayer noticed that markets tended to form bell-shaped curves each day as they found an efficient price by the closing bell. He profited from selling daily highs and buying daily lows in anticipation of an intraday trend reversal. However, this "responsive" behavior shifted in the late 60s as commodity funds formed and their managers began buying high and (hopefully) selling higher in anticipation of a continuing trend. Steidlmayer altered his trading style to adapt to the changing environment, a shift that taught him to focus on the present tense as opposed to using historical patterns to predict the future. Steidlmayer says today markets don't actively form profiles each day because "imbalances," or directional moves, are now so overwhelming the market can't integrate them and form an efficient price by day's end as it did 40 years ago. "The market's basically changed to where we have selling followed by buying," he says. According to Steidlmayer, the market used to move sideways to integrate the imbalances (as it formed a bell-shaped curve), but it now moves down and back up in two separate phases. This means the basic tenets of Market Profile such as the five daily classifications and the four steps of market activity don't work as well as they did in the past. New concepts Many of Steidlmayer's new insights are based on volume analysis, which is an internal, or market-generated measurement as opposed to an external one, such as a moving average. Analyzing volume is essential for electronic traders because it's the only internal information they have. In contrast, pit traders had many cues such as activity and mood to gain insights regarding market direction. Steidlmayer's On Floor Information (OFI) calculation is one compelling example of his new discoveries since developing Market Profile and LDB more than 20 years ago. OFI is a ratio of each day's average buy order to its average sell order: (Bought contracts / buy orders) / (Sold contracts / sell orders) Steidlmayer has suggested going long if the OFI is above 1 and early buying occurs the next day; he recommended shorting the market in response to the opposite conditions (OFI below 1 followed by early selling). In Figure 4 for example, the numbers above or below each daily profile in the December corn contract show OFI values. Green profiles represent days in which the average sell order is larger than its buy-order counterpart (OFI < 1); blue profiles show the opposite scenario (OFI >1). Overall, corn tended to sell off when the OFI is less than 1 (April 27 to May 3) and rally as it crosses and remains above this threshold (May 13 to 23).

Figure 5 shows Barrick Gold Corp. in Steidlmayer's "block volume" format, which divides volume into several groups. For example, if a contract trades an average of 50,000 contracts per day, Steidlmayer labels each day's volume based on this level (i.e., 35,000 and up equals heavy volume, 20,000 to 24,999 is medium, and 12,000 to 19,999 is light). Here, volume is measured in half-day intervals and the morning's volume is compared to the afternoon's trading.

"From April 22 to 25, volume is usually heavy in the first half and lighter in the second half (red and blue TPOs, respectively)," Steidlmayer says. "The market has that pattern so there's no real imbalance. On April 26, though, ABX has a heavy-to-heavy (morning vs. afternoon) volume imbalance that can't be taken out because the price drop represents the weighted end of the volume spectrum. If you had sold on April 26, you would have made money because our study identified this imbalance." The same imbalanced volume pattern appeared the next day, but ABX leveled off before retracing day, but ABX leveled off before retracing this sell-off in the following five days. At this point, normal heavy-to-light activity precedes another heavy-to-heavy imbalance, yet ABX went nowhere. According to Steidlmayer, if ABX trades below May 10's low of 22.75 and volume becomes heavy, the stock should stay below that level without too much risk because afternoon volume can't take out the earlier heavy volume - therefore, May 11's price drop isn't surprising. Market Profile's

future as a database

Steidlmayer explained these concepts when we visited him in his CBOT offices in late May. We also spoke with him about the hurdles facing individual traders and the importance of proprietary databases, among other issues. AT: How can traders profit from Market Profile

and Liquidity Data Bank these days?

JPS: They need to get their own database, measure time, and find imbalances in the market. If you don't find imbalances, you have nothing. Trading's biggest cost is time, which is also its biggest lever. This trade (Figure 5) took time out of the market. Take the Long-Term Capital Management's (the high-profile hedge fund that collapsed in 1998) model of trying to find historic trades and borrowing money. That's very risky. Instead, expand your database so you don't have to rely on leverage. You'll get $10,000 in annual interest if you're making 10 percent, but what if I give it to you in a shorter time period? Saving time pays a higher rate of return vs. leverage, which decreases as time goes on. If your strategies don't measure time - which Market Profile AT: So Market Profile

does - you don't have much of a chance.

filters out the randomness?

JPS: Right. We're measuring time, so the market's on the clock, so to speak. AT: Similar to the way point-and-figure charts shift toward market time as opposed to chronological time? JPS: Yes. When I started trading, point-and-figure charts were my introduction to Market Profile . It's an outgrowth of (that methodology). Point-and-figure charts can move a trader forward in terms of understanding the market - not necessarily in terms of making trading decisions. Instead of making mechanical decisions based on pure technical analysis, if you use point and figure, you've gained a better understanding of the market. This wakes up your brain a little bit vs. other chart styles. AT: How do you compare Market Profile

to traditional price based technical analysis?

JPS: Market Profile does not use chronological time. And if time is your biggest cost, you'd better have a "market time." Everyone else uses chronological time and price-to-price relationships. Price has very little or no value as a data point. AT: Why? JPS: Because there's a buyer and seller at each price. Time only defines price in the past tense. Assume a new contract began trading at 10. There's nothing you can say about it. But you'll have some reference if it traded at 4 last month. Take a look at the trading industry. It's not using the database as an asset, and it's toiling instead of working. Technical analysis uses price against price, and price itself is not a data point. Moving averages don't exist in the real world. Market Profile has survived even though the market's changed dramatically in terms of how it's used. It differs from technical analysis because you are now closer to being a part of the market rather than just making observations. There's a big difference there. AT: What's wrong with back testing trading ideas against historical price data? Doesn't that have some value? JPS: Well, the markets have changed a lot so you're comparing apples to oranges. First, you don't have a constant. If you're not testing the market, what are you really testing? AT: The probability of whether a trade idea might be profitable.

JPS: No, you're testing how your tolerance works. Back-tests miss all the ingredients that may have been good. AT: Such as? JPS: When you look to the past for references, you're going to be late (making trading decisions) because you don't know a high or low has occurred until it's in the past. So you're looking for one scenario and the market's doing something else. Market Profile , however, shows development that you won't see in a backtest; they only show how good your external parameters are and these (variables) dominate the results. AT: What would you say to traders who are using Market Profile platforms and are studying your original theories?

as a visual display on different charting

JPS: It's a pass-through cost (i.e., it won't be very helpful), not an asset. I'm building a database with Market Profile . Everyone should have their own database and understand the nature of the markets they're trading, which allows them to create opportunities instead of finding them - a big step. In the future, 75 percent of bond volume will be a part of something else. If there are 200,000 bonds traded per day, there will be 800,000 contracts trading the yield curve, among other possibilities. AT: Do you mean trading different spreads with the bonds? JPS: Right. And spreads measure time, don't they? So as 75 percent of bond volume will be related to other products, why doesn't the CBOT relate soybeans to other products too? Why don't we combine gold with other products? The Board of Trade could take $7 trillion sitting in passive stock funds, and the game would be over - it'll be ours. Our industry is already in the time-cost business, so we should take time out of the equation. The X-funds have already proven this works. The two Xfunds we introduced at the CBOT in 2002 were products created from various contracts. Each fund had a 10-day time horizon. They gained $23,000 within six months. One small-margin ($1,500) grain fund made around $7,500, and another commodity fund ($3,500 margin) returned about $17,000. The products also had no drawdown. I told the CBOT it would be successful because they're investment products that take time out of the market. We made 104 trades with a winning percentage of 51 percent, yet the funds climbed 69 percent. Although we had one winner for every three losers, the winner was bigger. X-funds are just the beginning of what exchanges can do. It was a viable product, but it wasn't successful because it required a change in nomenclature. There wasn't enough volume in 2002, but we're reintroducing them because (they per - formed so well). AT: So now the CBOT and CME together are bringing back X-funds? JPS: Yes. X-funds were created opportunities since their overall winning percentage (69 percent) exceeded the individual trades' (percentage of gains). There are a lot of products that could help the CBOT become the leading financial institution in the world without too much effort. It's in our grasp now - the only question is whether our leadership will take these opportunities. We have to service a new industry that will grow about 10 times by 2010. People who are buying memberships to the CBOT at these high prices aren't joining to trade soybeans.

AT: Will customized spreads - not only yield curve bets that traders have placed for years - but spreads involving commodities and even stocks, really become viable products? JPS: Yes. It's going to happen. I've put stocks together and a lot of these do very well. In the future at the CBOT, someone will be able to buy IBM, 10 bonds, and 20 soybeans (futures) along with it. And what happens to the zero sum when a third party's involved? Both principle parties win. AT: How does that work? JPS: The changing open interest takes care of the zero sum. Assume, for instance, you and I are in a contract (that consists of multiple positions). We share the gain, and the third party carries the loss. Third-party transactions really open up the field. That's what's happening in the yield curve. It's not one vs. one. Say we have four products put together like an X-fund. Here, the four contracts' changing open interest flushes the zero sum elsewhere. AT: Because they're related to other things? JPS: Yes. (The zero sum isn't just related to one product.) Imagine buying a coupon bond and taking the coupon off. Structured products divide these instruments and trade both parts. We'll do the same thing.

Who should start reading a Market Profile chart? Market Profile is not a trading system but a market generated information and a decision supportive system along with your existing trading systems. It provides you knowledge about who is in control in the market (Long Term Players, Short Term Players, Day Traders), directional conviction. Market Profile gives an idea to a day trader about where to take a trade and which trend to play for the day based on trend conviction. Nifty Futures – Day Profile

Market Profile study is different from traditional technical analysis indicators. You need to unlearn lots of your so called traditional technical analysis learnings before diving deeper into it. Like any other technical analysis studies, Market Profile consumes lots of time in learning. It requires at-least a live observation for 3 months and parallel reading is needed to understand what other market players are trying to do and how the pro traders and institutional players are driving the market. As a human trader, it often happens that we tend to see what we want to see and react based on limited information. Market Profile solves this perceptual blindness to some extent.

Watch Live Market Profile Charts Market Profile talks about how auction takes place in the market. Financial Market is all about two way auction process where buyers and sellers both drive the price up and down. The byproduct of the two-way auction process is market-generated information. By reading the market-generated information one can learn who is in control in the market(Buyers or Sellers) and how much confident they are in driving the prices higher or lower. It also helps a day trader to stay away from the retail style crowd play most of the time. How to Read a Market Profile Chart Market Profile was developed by legendary CBOT trader Pete Steidlmayer in 1984. It shows where the auction of trading instrument, explains where the crowd trades most of the time for the day, where trading volume is accumulated most of the time, where trading volume is minimal or absent. Market Profile is not a time based chart rather it organized the trading data and charts the relative frequency of trading at various price levels. By organizing the trading data in terms of profiles (Alphabets) one can study the market structure and market dynamics. Typically Day profile is meant for Day traders where each and every day a free-flowing graphical format called profiles are plotted as shown above.

Readings : How to Get Market Profile and Footprint Profile Charts? Basic Market Profile Terminologies TPO – TPO or Time Price Opportunity is the basic building block of Market Profile. Each and every letter in the chart represents a TPO. Which in turn represents a point of time where the market touches a price. Each consecutive letter denotes a 30min period of Market Activity. In our example as shown below the letter ‘A’ represents how the price traded for the first 30min. Letter ‘B’ represents next 30min of activity. And Letter ‘C’ and ‘D’ represents subsequent market activity details and so on.

TPO Size : Practically speaking we need to define the size of TPO to make sure that your entire profile is visible. Generally one can try in Nifty Futures with TPO Size of 3 which mean each and every letter represents a block of 3 points in Nifty Futures. And TPO Size should depend upon the Trading Instrument. For greater accuracy of Key reference levels it is advisable to use TPO size as less as possible but with higher TPO Size more historical data can be seen and key reference levels out of range can be seen with higher TPO Size. Generally TPO Size = Tick Size x Price Per Row For example if Price Per Row = 6 and Tick Size is 0.5 then the TPO Size is 3 points. By default Ninjatrader uses tick size of 0.01 and can be changed depends up on the Symbols tick size. Settings in Ninjatrader are shown below

Initial Balance (IB) : Initial Balance represents the first hour of trade. Typically the high and low range of the letters ‘A’ & ‘B’. Longer the length of the Initial Balance stronger the conviction of Long term and Short term players.

Point of Control : Point of control is the price where most of the trade for the day happens. In other words the price where more number of TPO’s in a row. Todays ongoing POC levels are represented as DPOC (Developing POC) and Yesterdays POC (YPOC) and Previous POC levels are plotted as dotted green lines as shown above. Value Area : Value Area is the fair price zone where the Other Timeframe Players (Long Term players and Shorter Term Players) loves to trade in this zone. 70% of the day’s trading happens here. Value Area High (VAH) – The upper level of value area. (upper Red Bracket Level). YVAH – Yesterday’s value area high is marked as Red Dotted Line. Value Area Low (VAL) – The lower level of value area. (Lower Red Bracket Level). YVAL – Yesterday’s value area high is marked as Blue Dotted Line. Single Prints : When there is only one TPO in a Row. From the above picture you can identify that Letter ‘D’ and ‘L’ are single prints. Range : High-Low range for the day Open Range : First 10 minutes of the market movement range. It is represented as the Blue Vertical lines in the Initial Balance (IB) Range Extension – An extension of price above or below the initial balance. High Value Node (HVN) : An HVN is a price area of high TPO count or volume. The market traded for a long time at this level. These often form support or resistance levels when the price re-visits the area. Low Value Node (LVN) : An LVN is a price area of low TPO count or volume. The market did not trade for very long time at this level. These often form support or resistance levels when the price re-visits the area.

Market Profile : Balanced and Imbalanced Markets In the last tutorial we discussed how to read a market profile charts and in this section we will cover different types of markets (Balanced Markets and Imbalanced Markets) and provide a fair idea who is in control for the day. Balanced Market : It defines a range bound market(sideways) or a bracketed market [where price rotates within the bracketed range]. Balanced markets shows there is lack of conviction

among the other timeframe buyers and sellers and typically results in a two way auction process and the price movements occur withing the range.

The above image shows a typical balanced profile (Bell Curve Shaped) where the price rotates within the price range [8609-8654] for the whole day. Volume plays an important role in Market Profile. When Prices move outside a balanced area, or trading range, without the presence of volume, it tends to return to the area. Generally the participation of the Longer Timeframe trader(Buyers and Sellers) are minimal and they dont have a strong influence in the market direction. The whole day is either controlled mostly by shorter timeframe traders or the locals (Day Trader). Such rotational days provides very minimal opportunities for a day trader.

Watch Live Market Profile Charts Balanced profile days are typically slow and boring. Most of the trend trading strategies fails during these days and sometimes could yield consecutive losses in a stretch when the markets are highly compressed for more than 3 days. Identifying such days during the development of the profile are the key for a day timeframe players to set ‘what to expect from todays market’. Balanced Market Occurs 1)Before any bigger economic events, news are expected (e.g RBI policy announcement, FED meeting ..etc) 2)Consolidation in the market after the uptrend or downtrend. 3)Low Participation from the Other timeframe players or Institutional players (Christmas & New Year holiday season) 4)Lack of liquidity(both buy side and sell side) in the market. The result of this price rotational process is the discovery of prices that are acceptable to both the buyers and the sellers. Imbalanced Market : It represents a trending market (uptrend or downtrend). Imbalanced market shows the conviction of other timeframe players. The auction is said to be one sided or directional where there are either more Buyers than Sellers or more Sellers than Buyers depending on the direction of price.

Imbalance of buyers will drive the prices higher till the buyers exhausted and the sellers takes control of the market. And the Imbalance of Sellers drives the market lower till the sellers get exhausted and the buyers takes control of the market.

The above picture shown the imbalanced profile. The days are typically elongated and vertical. And the range extension is typically one sided most of the days. Range extension confirms the presence of other timeframe players. Typically these days are fast and highly volatile and the risk reward ratio for the day trader is much higher on trendy days. Imbalanced Market Occurs When 1)Major economic event days (RBI rate decision day, Election Results Day, GDP Announcements…etc) 2)Major catastrophic events. 3)Opening Gap Up or Gap Down days due to major positive or negative news impact. 4)Strong Global Markets Sentiment.

Market Profile : Different Types of Profile Days Welcome to Market Profile Series. In the last tutorial, we saw the different types of markets (Balanced and Imbalanced). In this tutorial, we will be discussing about the different types of Market Profile Days. By analyzing the shape of profile, one can easily identify  

who is in control in the market. whether other timeframe players are present for the day.

 

What the market is trying to do. Which direction market is attempting to move Which are the key levels market is attempting to test or re-visit

If you are new to market profile it is recommended to start here How to read a market profile charts Non Trend Day Non Trend day is a balanced market profile which occurs before an major economic event, news, earning result outcome to happen resulting in lack of participants and a typical dull boring day. Range (high-low) for the day is very compressed and the risk-rewarding nature for an intraday trader is very less. Market likes to auction both the sides centered to the point of control. Only scalping the market favors an intraday trader on these non trend days.

Non Trend Days are mostly inside day where the current day’s range is within the previous day’s high-low range and the price rejection (at high or low) happens near to the previous days high volume node. There is no range extension on either sides which shows lack of other timeframe traders and the price rotates within Initial Balance. Market shows very low volatility and the Initial Balance is very small. Normal Day Normal day is a balanced market profile but with a wider Initial Balance. It occurs generally when there is a news release post previous days market hours or due to global market sentiment(too negative or too positive). This action is followed by range extension on the direction of the sentiment and the long term traders or investors are responsible for the such action (driving the price outside (which can be identified with single prints) the range extension). But, due to lack of conviction among the participants, the one sided directional move comes to an end and the price reverses back to test the other side of range extension.

Price generally rotates near center of the profile and the maximum participation happens at the center of the profile with higher volumes at the POC (point of control). Single prints(Buying tails and Selling tails) on both the sides indicates lack of conviction among both the other timeframe buyers and sellers. Profile shape looks like a perfect bell curved shape. No one is control of this market type and the risk reward ratio is higher for a day trader at the extremes. More wider the initial range, more risk-rewarding for the day trader. However, the profile is low risk rewarding for new shorter term traders or long term players (who holds the position for more than a day) as the market closing is very close to the center of the profile. A Profile day with wider initial balance with no range extension is also considered as normal day. Normal Variation Day Normal Variation Day is typically an imbalanced profile and the day is dominated by large timeframe players (Buyers or Sellers). Long time-frame players are waiting for the market to settle down where they consider the price to be fair and then they take control who drives the market aggressively post 11.00a.m or 12.00p.m with the range extension outside the initial range. The range extension is more than 2 times the Initial Range And the Initial Balance is typically smaller than the normal day but higher than the trend day.

The above picture shows a typical normal variation up day where the range extension happens in the ‘G’ period and the length of range extension is 2x Initial Balance. Trend Day Trend day is an imbalance profile where the day is controlled by the long timeframe participants and the conviction is very strong among the long timeframe players right from the beginning of the market. A Perfect Trend Day looks like low of letter A > B > C > D in a uptrending market and the high of letter A > B > C > D in a down trending market. However price overlap in A,B,C,D may occur.

Profile shape is vertical, elongated and very few price rotation and clear sign of one sided trend right from the beginning. And the Value Area is typically very large on a trend day. RiskReward Ratio is typically higher for a day trader during Trend Days. Double Distribution Day Double Distribution is an imbalance profile where Initial Balance is small and the first price rotation (1st Balance Region) happens at Initial Balance. Then, the larger timeframe traders take control and drive the price in one direction. In the later session, another price rotation happens at the other side of the edge(2nd Balance Region). Both the price rotation regions should be separated by single prints. Risk-Reward Ratio is typically higher for a day trader during Double Distribution Days.

Neutral Day Neutral Day is a balanced profile where initial range is smaller than Normal day. Both the Other timeframe buyers and other timeframe sellers are Present. They don’t trade directly each other but the intraday trader will act like a mediator between both the larger time-frame buyer and seller.

a trader to assume as normal day or normal variation day during the development of profile but the failed range extension pushes the price to the other side of the edge and trade back and forth. Such profile days occur generally when the VIX is higher. If the price closes at the center/balance, then it is called Neutral Profile Center and if the price closes at the extreme edge of the profile it is called at Neutral Day Extreme. P Profile Shape P Profile days are short covering days and the letter A or B forms the bottom with single prints in the Initial Range and market opens at the bottom of the profile. The price rotation happens at the top of the profile (i.e at the range extension area).

b Profile Shape b Profile days are long exit days and the letter A or B forms the top with single prints in the Initial Range and market opens at the top of the profile. The price rotation happens at the bottom of the profile (i.e at the range extension area). Risk Reward ratio   

lower in Non Trend Day, Normal Day. neutral in normal variation day and Neutral Day higher in Trend Days and Double Distribution Day

Initial Balance Range     

Non Trend Day – Narrow IB Normal Day – Wider IB Normal Variation Day – less than Normal Day IB Trend Day – Narrow IB Double Distribution Day – Narrow IB

Market Profile – How to Play 80 Percentage Rule

Welcome to Market Profile Series. In the last tutorial we seen different types of Market Profile Daysand in this tutorial we will be discussing about a simple but very effective strategy based on value area which helps intraday traders to bring a lot of trade conviction. If you are new to market profile it is recommended to start here How to read a market profile charts Market Profile – 80% rule which was first mentioned in The Profile Reports (Dalton Capital Management 1987 – 1991). It says if the market opens either above or below the value area and test the value area high/low within 2 consecutive 30 minutes (i.e letter ‘A’ or ‘B’ touches value area) then there is a 80% chance that it will fill up the complete value area.

When the price open above value area and return back to the value area within the first hour indicates the Buyer or Seller are not confident about the direction and soon we can expect the auction to continue fill the complete value area. In the above picture you can see that market opened below previous days value area and reverses the direction soon to test the previous days value area at the letter ‘B’ which activates the 80% rule.

Here is another example in the above picture price opens above previous value area high and touches the value area at the letter ‘A’ however the next 30min price gone outside of the value area. Now to trade this rule one have to wait for the price to revert back to value area again and should trade for next 2 consecutive 30min bars. Letter ‘E’ and Letter ‘F touches the value area high and now one can expect the price to auction towards value area low. 80% rule is also applicable if the market open within the value area in the 2 consecutive 30min bars and moves out of the value area. One can trade this 80% rule if the price reverts back again to value area for two consecutive 30min bars. However if price opens above/below previous days value area and haven’t return back then it is a sign of one sided directional move

Watch Live Market Profile Charts 2 Bracket Rule 2 Bracket rule comes into play when the price open above/below value area and the price touches the value area within first 30min and the second bar trades within the value area then 80% play condition is satisfied and one can look for the value area to get filled up. Conservative traders may wait for the 2nd 30min bar to close but if the markets are faster it will fill the complete area within the available short duration.

Market Profile Open Type and Confidence Welcome to Market Profile Series. In the last tutorial we seen How to Play 80 Percentage Rule and this tutorial we will be discussing about the profile open types and the other timeframe

traders confidence. Reading the profile right from the market day open gives more confidence to a day trader towards trade conviction. The confidence level of the Other timeframe trader (Long Term or Positonal trader) can be analysed through market opening. If you are new to market profile it is recommended to start here How to read a market profile charts Open Drive When the price open above/below the value area and outside yesterdays trading range and auctions(moves) one sided right from the beginning towards the opening direction. It shows the high confidence level of other timeframe traders(OTF) with strong directional commitment.

The above picture shows, price opens lower on Day 2 and below the Yesterdays Value Area and Below Yesterdays low. Market Opens Imbalance which indicates the presence of Other timeframe players and start auctioning lower and closed near to the day low. Clear Sign of other timeframe seller in control right from the market open. Typically the low made in the first 30 min will not be breached during the intraday session.

Watch Live Market Profile Charts Open Test Drive When the price open above/below the value area and outside yesterdays trading range and test the key reference level(Value Area Level, POC level, Prev day high/low) on the reverse direction and auction back towards the market open direction. This type of market open type shows less confidence less than the Open Drive.

the above picture, price open high on Day 2 and above the yesterdays high value area and above yesterdays high. Market Open Imbalance but the traders reverses the price towards yesterdays POC level followed by Other Timeframe Buyers taking control and auctions higher on the upper side. Open Rejection Reverse Market Open Strongly higher/lower test a reference point (Resistance/Support) price rejects from there and auctions in the reverse direction.

In the above picture price opens higher and above value area but soon finds resistance at higher levels followed by price reversal towards the downside. Such kind of auction happens near the end of the bull market or end of the major trend. Open Auction In Range When the volatility is very low and market opens within previous value area and previous days high-low range indicates market is balancing and one can expect price rotation at this zone. Complete lack of Other timeframe traders and trading opportunity for a day trader is lower compared to other open types. In classical technical analysis the day is represented as ‘ínside day’ and price rotates around the day open. Other timeframe traders are not present till end of the market.

The above provide shows the open is in-between value area and inside previous high-low range. Days are boring till the market close. Open Auction Out of Range Price opens above or below the previous days range and auctions back and forth around that opening values. Such open lead to a conviction that the OTF buyers or sellers have stepped in and will manage to drive prices in their direction.

In the above example price gaps up and open higher but later the price rotates near the open most of the times. Later Other timeframe buyer entered and pushed the price higher. Open Auction generally shows low conviction on market direction by OTF buyers or Sellers compared to other open types.

Market Profile – Spike and Spike Rules Welcome to Market Profile Series. In the last tutorial we seen Market Profile Open Type and Confidence and this tutorial we will be discussing about What is Spike & Spike Rules. Spike In Market Profile terms spike is nothing but last minute rally or last minute sell off typically in last 30-45min. In technical terms it is defined as late price probe either on the upside(rally) or on the downside(sell off). By observing Spike action in market and the next days follow through

price action one can determine whether the previous days spike action is false move to confuse the traders or it is going to create a sustainable trend towards the spike direction.

Spike Rules Last 30-Minute Rally If previous day was a spike on rally and today’s open is above yesterdays spike high then possibly trend could continue in the upward direction. Previous days base of spike(bottom of spike) becomes the support. If previous day was a spike on rally and today’s open is below yesterdays spike bottom then possibly trend could auction in the reverse direction.

If previous day was a spike on rally and today’s open is between the spike zone then probably price may tried to follow two way auction process and may try to find a new acceptance zone. Last 30-minute Sell-off If previous day was a spike on sell-off and today’s open is below yesterdays spike low then possibly trend could continue in the downward direction. Previous days base of spike(top of spike) becomes the support. If previous day was a spike on sell-off and today’s open is above yesterdays spike top then possibly trend could auction in the reverse direction and could auction upwards. If previous day was a spike on sell-off and today’s open is between the spike zone then probably price may tried to follow two way auction process and may try to find a new acceptance zone. LVN = “Low Volume Node” This describes a single price or price area where there has been a dip in the profile because of a particularly low amount of volume. LVN’s typically represent areas on the profile where little trading took place between buyers and sellers and will generally be a price level that gets quickly rejected by traders. Trading in the area of an LVN is typically fast and aggressive, meaning there is not a lot of time to get in or out. The market usually tests the level and then passes through or gets rejected. HVN = “High Volume Node” This describes a single price or price area where there has been a bulge in the profile because of a particularly high amount of volume. HVN’s typically represent areas on the profile where heavy trading took place between buyers and sellers and will generally be a price level that the markets gets stuck trading around. Price moves into and out of this area are slower as the market digests volume. HVN’s do not need to contain the VPOC – volume point of control or high volume node for the profile – to be considered an HVN.

A Few Reasons They Work 1. HVN and LVN’s represent break even points for longer time frame traders (institutions). Whether institutions realize it it or not, HVN’s and LVN’s often end up being a “benchmark” level they reference and trade around. The profiles help us know these levels and trade accordingly. 2. HVN’s and LVN’s provide a “structure” by which trades can logically be identified. Profiles give us a way to categorize the price and volume data in a different way, allowing us to see things most of the trading world misses. 3. HVN’s and LVN’s complement normal price bars/candles by providing a time and price context. What this means is using MarketDelta we can construct profiles to take into consideration any amount of time we wish and provide that view right along side an intraday price chart. This provides the context of the big picture while still allowing us to be focused on the intraday price swings.

Market Profile – Basic Concept N Terminology

Market Profile – Basic Concept N Terminology, is a part of the section I had started for posting few descriptions and uses of various Technical Analysis Tools and Indicators and off late have been busy with work so must not have posted in recent times and finally making an attempt to write down this piece as I was trying to accumulate as much information I can and then present this article and hope it will be of use for newbies as well as few other conventional traders and analysts as well. Market Profile is an important tool under the Auction Market Theory. No. This is not the so called Holy Grail indicator that the snake oil vendors sell for various trading software and in fact this is not an indicator at all… Its a graphic presentation of the developing market price which was devised and developed by J. Peter Steidlmayer who was an active trader at the Chicago Board of Trade (CBOT), He was interested in seeking the information to evaluate the Market Value as it develops during the day. In this pursuit he developed this charting technique which was later introduced to the public in 1985 as a part of the CBOT product (Market Profile is the registered trademark of CBOT ). Before we get into a detailed illustration of Market Profile, let me tell you again that this is not a Holy Grail and as a trader it needs a lot of patience, perseverance, determination and understanding to use any of the available charting techniques. There are many people who want to learn trading and keep searching the Internet for what they have to do or what they should do to make profits from the market. They come across various studies and start following a particular indicator or an average. Lets say, they start following a ‘X’ period Simple Moving Average or ‘X’ period Exponential Moving Average. My friends, there is also a way to trade that Simple Moving Average as well but patience is the key. Now after few days they trade and trade and trade until they can bear the losses and then again their search for the new indicator starts. Now they come across Stochastic Oscillator and they merge the

Stochastic Oscillator with the Simple Moving Average and then make profits for the 1st, 2nd and 3rd day and on the 4th or 5th day give away all the gains as those averages or oscillators will take time to react to what is happening in the market and by the time they can get a sell signal from their already long position, the price will be below their buying price or vice versa for a sell trade. I am not at all an critic of SMA or EMA or any indicators and to be frank ; Until I could come across Market Profile, I had started using those Averages and Indicators and had been able to devise a strategy on how to trade using them. But the mind was always questioning that will I get to chase the complete up move/down move or will I have to be satisfied with few points of profits before they run into losses. It is not that those averages, average crossover of the shorter and longer average, indicator divergence related to price, price making higher high and and lower high and lower low, candlestick patterns, gaps etc. are not good trading tools, but they do not give a clear picture of the Market Structure. Basically, the fact is that, all traders are trying to device some trading method or trying to learn some technique that can make them successful and fetch good returns. What these traders are looking at is a mathematical formula which moves/oscillates with the price and is not constant. As the markets are ever changing, we either need something constant or solid/concrete technique, in other terms we require a technique to determine the fair value. Markets do not produce a sine wave that can be read on an oscillator (few of my friends who are really seasoned traders always argue that they trade with indicators and they have made decent profits and I am not at all denying that fact). There are many who trade with Averages crossover combined with indicators and then the last pane on the chart is Volume. They say that if the breakout or breakdown is with Volume then its considered that the trend will stay there for sometime. When it comes to Volume, then on a simple Candlestick/Bar/Line chart we can have volume as an overlay or in the other pane; but how do we know what that volume is all about ?? whether the big boys are buying or selling or adding or liquidating and what not. Few say that high volume created before any important event day with a rise in price is buying. They start making assumptions based on this volume bars and also have mathematical targets fixed in their minds and few of them say that if Inflation comes lower, then next day markets will rise and if comes higher it will fall and if Industrial Production Index Data comes better then expected then it will rise and if comes poor then expected, then it will fall. All these assumptions and predictions don’t work in the markets as the term Future Contracts itself is an evidence that the Markets always discount the Future. Coming back to the Volume chart, the volume bars in the next pane of the bar chart are not a representation of anything else, but the overall volume traded in the particular Stock, Index or Commodity during that particular time frame. This is exactly where we need to look into the Market Profile. J. Peter Steidlmayer developed this method to determine the Volume distribution during a trading day and for that reason he created a graphic representation of the Volume distribution in terms of Price over Time. Price and time are very important to determine the volume distribution and as the price and volume develop during the day, a bell curve develops. This curve shows the acceptance and rejection of price on that day. We are now able to make out when the market is in balance and when its imbalanced. Have a look at this chart below.

Value Area

In the above chart of Havells, each letter represents 30 minutes of trading time. So “A” represents the first 30 minute of the trading and “B” represents the second 30 minutes of trading and so on. Its not necessary though to have different letters for every 30 mins but the objective is that we have 30 minute interval each to calculate the volume generated for every 30 mins during the day. On a line chart it would look like the red and green line in this chart where we do no have any idea where exactly the buying and selling took place. But on the Letter graphic we can see that the middle area had more concentrated lettering than the upper and lower end. In Market Profile terminology we call it the Value Area – Approximately, the 70% area of the price move wherein the price trades over time in the entire time frame. Value Area – Volume is the 70% are where the 70% of the volume is traded. The yellow line in the middle is the Volume Point of Control (POC- Where the most of the volume activity of the day took place) and the lower line is the Value Area Low (VAL) and the upper line is the Value Area High (VAH). The opening half hour is letter A and closing is letter M here. Lets think of this graphic in terms of an auction. Why did it form a bell curve ? The reason is simple that when the market opened, there were few traders who kept asking for higher price till no one was interested to bid for such higher price and in few hours the bidders started bidding at much lower price where there were no traders interested to sell so finally both came to a consensus at the middle price where the buyers were happy to buy and the sellers were comfortable to sell. Hence, after stretching towards both the ends the prices settled in the middle which both the Buyers and Sellers considered to be a fair price. So we have a clear picture in the mind now that the market auctions higher and lower till the buyers and sellers agree to a fair price and thus the value is established. Different software have different density for the letters to be plotted for the price but normally I use density as 1 for most of the scrips above 500 as there will be too much concentration of letters if we follow the tick increment price of each scrip. Though there will be a difference in Value area depending upon the density but will be very much negligible.

Value Area High (VAH)

The highest price of a Value area of the TPOs or the highest point of the 70% area where the volume was concentrated in any time frame is known as the Value Area High (VAH). It can be a daily, weekly, monthly or a composite profile for any defined period. Value Area Low (VAL)

The lowest price of a Value area of the TPOs or the lowest point of the 70% area where the volume was concentrated in any time frame is known as the Value Area Low (VAL). It can be a daily, weekly, monthly or a composite profile for any defined period. Point Of Control (POC)

The price of a Value area at which the highest number of the TPOs are placed in the 70% area in any time frame is known as the Point Of Control (POC). It can be a daily, weekly, monthly or a composite profile for any defined period. Volume Point Of Control (VPOC)

The price of a Value area at which the highest volume is concentrated in the 70% area in any time frame is known as the Volume Point Of Control (VPOC). It can be a daily, weekly, monthly or a composite profile for any defined period. Initial Balance

Initial Balance or the IB in Market Profile means the first two brackets A and B of the opening hours or in simple terms, two initial 30 mins brackets after the opening where the price traded. Many traders like to use two initial 30 mins brackets and few also use one or four 30 mins brackets depending upon the trading hours of the markets, personal observation and trading style. Few popular concepts of trading with Market Profile

The most popular of the Market Profile Trading strategy is the 80% rule. Please have a look the chart below :

In the above chart we can see the LT established a value area of 1664 VAL, 1681 POC and 1695 VAH on 18-07-14 and opened at 1655.55 on 21-07-14. As we waited till the initial balance to form it just went above the VAH in the 2nd 30 mins and was back into

the previous day’s value area. As J. Peter Steidlmayer has discovered, if price trades for 2 consecutive brackets inside the value area then there are 80% chances that it pushes through the entire value area from VAL to VAH or VAH to VAL. Here the we can open a Low risk High reward short trade nearest to the VAH and book out near the POC and VAH. Though LT just fell shy of the VAL target and closed at 1670 near the VAL. Other way of trading on the basis of Market Profile is if after a balanced distribution day if the market opens below the value area and trades there to form initial balance then initiate a short trade nearest to the previous days Value Area Low (YVAL) with a Stop loss of YPOC and the opposite for a long trade if the market opens above previous days value area and trades there to form initial balance then initiate a long trade nearest to the previous days Value Are High (YVAH) with Stoploss of YPOC. Few traders combine this technique with Key Retracement Levels or Weekly highs and lows as a guidance for their trades. Remember that Market Profile is a technique to determine the structure of the market and not an indicator on its own. Unfinished Auction and Minus Development

According to Steidlmayer, the auction normally distributes volume in the entire price range of the day with concentration in the middle as we discussed before. Contrary to this we can see an unusual profile in the LT chart on 18-07-14. The market auctioned higher from 17th July’s value area leaving behind single or double prints. Such single or double prints develop when there is unopposed buying or selling (In this case buying) and the market becomes imbalanced ( A trending market on either side is known as an Imbalanced Market in Market Profile Terminology). An imbalanced market has a tendency to revisit such areas where there is minus development and fill that area. The same happened in LT on 21-07-2014. LVN and HVN

Low Volume Node (LVN) and High Volume Node (HVN) are other important reference points in Market Profile.

In the above chart we can see that the volume distributed separately in two stages in the lower and upper area leaving behind the highest concentration near the green lines and the lowest concentration near the red line. The price with the highest concentration

is the High Volume Node (HVN) and the lowest concentration is the Low Volume Node (LVN). Though its better to see HVN and LVN on a tick chart rather than a 30 minute chart as it gives the precise price value of the HVN and LVN. These are important reference points for future reference as these prices show the intention of the buyers and sellers at those prices. Though there is high concentration of volume at the HVNs they do not become the POCs. But they do state the intention of the traders at that particular price and hence there is bulge in the profile. The above chart also represents a Double Distribution day which we will discuss later in the day types. TPO (Time Price Opportunity)

Auction is a process where prices travel from one point to another in a particular time. This activity related to time is known as TPO which represents the time spent at a particular price. In the above chart of Indusind Bank we can see there are 30 TPOs below the POC and 139 TPOs above the POC so the price traded for a longer time above the developing POC and for a very little time below the developing POC. Auction Point

Auction Point is the first price outside the Initial Balance once the Initial Balance is formed. Responsive Buying

A trader may think that the market is undervalued even though its trading below the value area. The buying that takes place below the value area is known as Responsive Buying. Responsive Selling

A trader may think that the market is overvalued even though its trading above the value area. The selling that takes place above the value area is known as Responsive Selling.

Initiative Buying

A trader may think that though the market is trading above the value area but still the fair price should be higher. Such buying that takes place above the value area is known as Initiative Buying. Initiative Selling

A trader may think that though the market is trading below the value area but still the fair price should be lower. Such selling that takes place below the value area is known as Initiative Selling. Range Extension

Prices trending upwards or downwards above or below the Initial Balance is known as Range Extension. Buying Tail

Long term buyers or OTF (Other Time Frame) buyers tend to auction prices higher and leave behind two consecutive single prints at the bottom of the Profile. Such an action is called a Buying tail in Market Profile Terminology. Selling Tail

Long term sellers or OTF (Other Time Frame) sellers tend to auction prices lower and leave behind two consecutive single prints at the top of the Profile. Such an action is called a Selling tail in Market Profile Terminology. Poor or Unfair High

A price where the Buyers do not have buying interest anymore and think that they cant find a fair value any higher is known as a poor or unfair high in Market Profile Terminology. Poor or Unfair Low

A price where the Sellers do not have selling interest anymore and think that they cant find a fair value any lower is known as a poor or unfair low in Market Profile Terminology. J. Peter Steidlmayer had stated various types of trading day types and opening types as the Opening price has a lot to say about a traders intention. Normal Day

There is minimal or negligible range extension above or below the Initial Balance and the market stays in balance forming a Gussain Profile (A bell shaped curved profile). This day is known as a Normal Day. Normal Variation Day

The range extends twice above or below the Initial Balance. This day is known as a Normal Variation Day. Neutral Day

The range extends considerably above and below the Initial Balance but the OTF buyers and OTF sellers get involved in the auction and indicate uncertainity of driving the price away from the previous days Value Area and the day ends with a very little change. This day is known as a Neutral Day.

Trend Day

The OTF buyer or OTF seller take control of the prices since the opening of the market and drive prices in up or down from open until close. This day is known as a Trend Day. Open Auction

A type of open where the price rotates around the opening price without any directional conviction is known as an Open Auction. Open Auction In Range (OAIR)

An opening type that opens within the previous days range and auctions back and forth around that opening values. Such open generally closes into a Neutral or a Normal Trend Day. Open Auction Out Of Range (OAOR)

An opening type that opens above or below the previous days range and auctions back and forth around that opening values. Such open lead to a conviction that the OTF buyers or sellers have stepped in and will manage to drive prices in their direction. Open Drive (OD)

An opening type that opens and auctions aggressively in any direction away from the opening values. Such open has a better conviction due to the aggressive price movement. Open Test Drive (OTD)

An opening type that opens and auctions with lack of conviction initially and visits a reference area to check if there is no unfinished business left in that area and swiftly auctions back through the open. Such open has a lesser conviction but still a preferred open type for a swift directional move. Open Rejection Reverse (ORR)

An opening type that opens and auctions in a single direction but finds strong OTF participants and auctions back through the Opening price. Such open is understood to be rejected by the OTF participants and hence leaves behind a buying or selling tail.

Market Profile simple strategy September 16, 2017



tradeWinger



Market Profile, Volume Profiles

A)

For

a

declining

(bearish)

trend

In case a new session opens within Value Area (an area of 70% sessions´ volume), then it is good to enter the short position on the VAH along with a stop loss order on the previous sessions´ POC. See the picture below.

B) For a growing (bull) trend A similar bull market situation allows you to open a long position on VAL. Similarly, the POC of the previous session is used as stop loss. Let´s take a look at the picture below.

This strategy is not difficult to understand. However, you should always consider the distance of previous sessions´ POC and possible risk to reward ratio. The situation is clearly viewed on tradeWinger visualizations Volume Profile and Market Profile Plus as you can see on the picture below:

Calculating DIB in Market Profile Calculating Calculating Double Initial Balance (DIB) is easy: 1. Wait for the Initial Balance (IB) to form. This is usually the first hour of trading. 2. From this we get the IB High and Low: IBH and IBL. (The high and low during the first hour of trading.) 3. Calculate the IB Range (IBH - IBL) from these two figures. Let's call that IBR. 4. Add the IBR to the IBH and this gives us the Double Initial Balance High: DIBH 5. Subtract the IBR from the IBL and this gives us the Double Initial Balance Low: DIBL

More Calculations Triple and Quadruple the IB can also be calculated. Add and subtract the IBR to and from the DIBH/DIBL to get the etc. to get the subsequent levels.

Using DIB levels are used in Market Profile trading as support and resistance lines. We usually look for the market to turn at these lines which make them counter trend trades. DIB appears to be more effective when the IB is normal to large in size and not as good with small IBs. (This has not been quantified in tests but is the general belief in Market Profile.)

A question was asked about using the POCs as trend determination. Let's take a look. Suppose we define trend in the following ways: 1. 2. 3. 4.

Two Two Two Two

consecutive lower POCs (POCvs) is a down trend. consecutive higher POCs (POCvs) is an up trend. lower POCvs out of the last three days is a down trend. higher POCvs out of the last three days is an up trend.

http://robinmesch.com/home/tradereducation/

I was hoping to ask you about your auction market indi. The one with the Initial Balance and and double IB levels. There are MP strategies that commercial traders use . Any price moves out of the IB range is caused by Commercial/Institutional traders. Only they have the volume to push prices outside the IB range. I use your Auction Market indi. But it would be great to have these levels to use in conjunction with your newest indi. I have attached a chart where I use a similar indi. to plot these levels But it leaves a lot of clutter on the chart. From my chart you can see that these levels are hit almost to the tick. I would love to use a combination of both your awesome indicators to achieve this. Commercial Capping: 1 ½, 2x’s and 3x’s, the IB (Initial Balance), and used exclusively by Institutions and Commercial traders as Support or Resistance and Profit targets that work to the tick. Do not trade these levels blindly. Make sure you understand the logic to know when to use these levels as support or resistance. Commercial Capping Solution: The Institutions us the Initial Balance Levels as profit targets and as support or resistance. With market profile training you will then understand the day type and when to use the initial balance, 1 ½ times IB, 2 times IB and 3 times IB with your day trading. Daily IB = first 60m Weekly IB= first 2 days Monthly IB= first week Quarterly IB =first month Yearly IB = first 3 months Most Powerful Forex Market Profile Strategy https://youtu.be/Z_i9u-xgNRU Volume Profile Swing Trades: February 2018 https://youtu.be/ii6_ux5x0tE

Trader Dale - Market Profile webinar

https://youtu.be/JVmv9x33hpA Applying Market Profile® Analysis in your Trading

https://youtu.be/G1USWsmM9II J Dalton Trading June 21, 2017 Let the Trade Come To You

https://youtu.be/zE4iNITOKLw Discussion of Value Area

https://youtu.be/Ns5Qkeh8YiA Time Price Opportunity: What Brokers don't want you to know

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https://youtu.be/OWX2UJdG3Ng What are Time Price Opportunities "TPO's"

https://youtu.be/oizXaCSiT9w ShadowTrader Uncovered | The Basics of Market Profile Part 1 https://youtu.be/h2jtuMqA5iQ Market Profile 101 - Applying the Basics https://youtu.be/p2D4YfDGN5Q Trading with Market Profile https://youtu.be/cARAu7XbhRo Webinar : Using Market Profile and Auction Theory to Trade Stocks https://youtu.be/E3tgD1iiwEg Scalping with the Market Profile https://youtu.be/HeWdnIt5tGk Two Distinct Day Trading Timeframes https://youtu.be/IERG4KHC2C4 Getting passed using MP as an indicator was difficult for me, lol I work full-time so most of the week, the only information I have to work with is the end-of-day profile and data - this is why I keep a record. My method involves speculating as to who was dominant in the market for the day and how far are buyers and sellers willing to let prices go before one or the other loses steam. Primarily, I use the information to gauge directional performance: Was the day up or down? Was today's volume higher or lower than yesterday's? Was today's perceptive value(VA) higher or lower than yesterday's?

Was today's volume higher or lower than the 30-day average?* What quadrant of the day's range (H-L) did we close in? How far were buyers and sellers willing to let prices go(spread)? Was today's activity primarily initiative or responsive?** Who dominated the auction rotations(RF)? Did we close above value today or below? Did we close above yesterday's value or below? What was the net change for the day(the result of the day's activity)? http://www.traderslaboratory.com/forums/topic/65-market-profile-trading-concepts/

1. Opening Price: If the opening price is higher or lower than the previous days close this creates a gap on a price chart. In market profile, this gap represents a shift in market sentiment. Like all gap, the greater the gap the more its significant. For example, a market gapping up 80 points on a CCI economical news has alot more significance than a market gapping up on 30 points with no news and light premarket volume. The first gap has a chance of being a contiunation gap while the latter one has a high probability of a gap fill. 2. Opening Price in relation to the value area: Here is a rank of market balance vs market imbalance. If price opens above/below value and the previous days range, this creates a complete market imbalance. This offers a high risk but high reward trading opportunity. If price opens above/below value but within the previous days range this indicates a market imbalance but not as significant as the earlier example. This creates a medium risk and medium reward trading opportunity. If price opens within value and within the previous days range, this indicates a complete market balance. Unless price extends above/below value, this creates a low risk but low reward trading opportunity. 3. Previous days close in relation to todays open: Any late afernoon rally or decline can mean two things: either the longer time frame participant has stepped in to buy/sell aggressively or the short term traders are liquidating their position. To understand the difference is crucial. For example, let's say the previous days late afternoon market action was a rally and price closed at the upper extreme of its range. This could indicate a short covering which fueled a rally or actual longer-time frame buyers stepping in. The opening price action is crucial to understanding this. If prices can remain above the previous days high and value high, this means that the rally was valid and longer time frame buyers was present. The previous days high and value high will act as support. However, if the markets opened above the previous days high and was quickly rejected falling below value, this indicates short covering. Understanding price acceptance from rejection is crucial. 4. Look for market excess: Market excess exists when prices have extended too far above/below value. Other time frame buyers or sellers will enter aggresiviely to return price back into value. A single print tail below/above value is a good sign of market excess. On a price chart, this is where prices find support/resistance with a quick reversal never to test that support/resistace again.

"Excess is created when the other timeframe recognizes an opportunity and aggressively enters the market, returning price to the perceived area of value." from Mind over Markets Why are these levels important? They can as key future support and resistance points. These levels represent price rejection. No time = no acceptance. 5. Previous days close: If the previous days close remains in value, this indicates market balance. If the close remains above/below value this indicates market imbalance. If the markets rotated above and below the opening price to close at its upper extreme, we have a temporary victory by the bulls. If the markets closed at its lower extreme, we have a temporary victory by the bears. 6. Understanding the POC: The Point of Control is the price level in which the highest volume occurred. This can act as a key support or resistance point. This is also commonly used as a level to place stops. 7. Value high and value low: These are two important pivots when using market profile. When prices are trading within value, the value high will act as resistance and the value low as support. If prices do break out of value, the VAH will act as support and VAL as resistance. 8. Opening Range: Also known as the initial balance. If the initial balance is narrow in the morning session, any break above/below willl most likely be the trend for the day. A wide initial balance can indicate a market rotation from the upper range to the lower range for the trading day. 9. Type of Days: 1. Normal Day - profile structure in which prices auction between two extremes. Extremes are usually established in the opening hour causing a wide initial balance. Prices will then rotate back and forth without upsetting the initial balance. 2. Normal variation of a normal day - similar to a normal day in which prices auction back and forth between two points. However, the initial balance is usually narrower until the other time frame market participant will extend the range sometime during the trading session. The initial balance is usually upset during the morning session. 3. Trend day - Buyer or seller remains in control the entire day. Prices usually will not return to the opening price. There is a high level of confidence attracting new market participants fueling the rally or decline. 4. Double distribution trend day - Similar to a Trend day except for a quiet morning session. Confidence among market participants are not as strong as a Trend day. However, later in the trading session strong buyers or sellers enter the market extending the range. Example: late afternoon decline

5. Nontrend day - Usually occurs before a significant news. Low confidence among market participants causing prices to remain choppy with no direction. Usually a good day to take a break. 6. Neutral day - Both sellers and buyers are present but hold similar opinions on value of price. Prices will usually rotate below and above the opening price. The market is in balance. Please remember that MP does not give you a stategy per se but is one of the best tool to give you a perfect map of the interactions of different timeframes implications in any two way auctions process. I do think that it helps a lot in understanding the interaction of supply and demand forces present in a everchanging market. https://www.forexfactory.com/showthread.php?t=277528&page=253

"Spike: A spike is a late price probe either to the upside or downside during the market’s two-way auction process. It happens too late in the day to be verified as having been accepted or rejected. For example, if an upside probe was rejected we would be left with a selling tail. Similarly, if a downside probe was rejected a buying tail would emerge. If the spike was accepted, price would trade within the range of the spike over time. We are forced to await the market’s opening during the pit session of the following day for the market’s verdict." When we think about how to measure volume in the market one of the key indicators is Market Profile. This indicator not only plays a role in determining what kind of day the trader will be confronted with but also provides us valuable clues and potential opportunities to trade. We will explore in this introduction to market profile these two issues.

What is Market Profile?

The indicator was the result of the ingenious work of J. Peter Steidlmayer that first suggested its use in the 1980s. The idea behind it was to understand precisely how different market conditions can be assessed through the use of three core elements: price, time and volume. Throughout a trading day different orders to buy and sell a particular financial instrument – be it currencies, stocks, commodities, etc. – are placed on the market. This indicator uses a mathematical formula that tracks precisely how these moves occur. Whenever these orders are placed on the market a value area is established. And this area represents an equilibrium between the forces of demand and supply. The distribution of these forces forms a normal distribution curve. The main driver of changes within this distribution curve is, of course, volume. Pick periods during the day make the distribution curve move towards a different value area. And it is precisely these move that traders are concerned about. The key to understanding the importance of market profile is, therefore, to follow the moves from value area to the new value area. The main driver of these moves is volume. And what new value areas allow us to understand are new ranges within which prices will tend to oscillate during that trading day. If you want a free version of this indicator for Metatrader 4/5, you can download it here.

How it Works: The Formula behind the Indicator

Market Profile is constituted by what are called Time Price Opportunities (TPO). Within a specified time period – 30 mn, 1 hour, 4 hour, etc – a different letter is associated with a new condition of the market. These letters are in themselves representatives of volumes of orders. The market picks at what is called Point of Control (POC) – this is the row where the most number of TPOs were registered with the most volume associated. And this is the area that traders should be carefully considering because it settles the value area that will most likely be associated with a particular day.

Prices will tend to pick at a particular POC, establishing a particular value area and then oscillate around those numbers.

Identifying Trading Days through Market Profile

But how can we use this indicator – is it at all possible? Throughout this text, some hints were already stressed on how to take advantage of this data but now is time to look at this issue in a bit more detail. Whenever the day starts or whenever there is a big spike during the day established, for example, by a big news announced or some other event, it is commonly understood that these events will drive the value area to a particular point. The question becomes whether this trend will continue, whether the market will stay choppy or whether we will see a complete reverse of this trend. Through the use of Market Profile we can, therefore, identify different types of days and these can be explained precisely because of the establishment of new value areas:    

Trend days – when a particular value area is constantly being redefined in the long direction or short direction Semi-trend days – when an events cause a sudden move in the market but the trend stagnates Choppy days – when no directional move in the market is recorded and the value areas do not change enormously throughout the day Semi-reversal days – when we see a directional move in one direction or the other but that move is completely shaken by a partial reversal. The day ends up being choppy but towards the opposite side of the initial move



Full reversal days – the market makes a strong directional move that is completely nullified by a move towards the opposite side.

Trading Using Market Profile? If traders need to be aware of different types of days – and can spot these different types of days through an analysis of the POC – they should also understand that trading using Market Profile demands a broader understanding of this indicator. Market profile is particularly useful in trading ranges and reversals – it doesn’t do so well with trending days. It also should be used in intraday timeframes, from 1 hour and below. As indicated, POC – and the associated value area – can change throughout the day. Surrounding the POC area are, however, extreme values. One could say that they represent the boundaries of price volatility during a particular day. Surrounding the POC are therefore two boundaries: the upper extreme and the lower extreme. Traders can take advantage of this information and trade whenever price hits particular extreme boundaries. For example, a reversal trading opportunity would occur if price moves to the lower extreme and we see a drop in the eagerness to sustain this move further to the downside by traders. This drop would be registered in the Market Profile indicator. Traders could place buy orders at this extreme with a very short stop loss just below this point. As a target, the other end of the extreme – in this case the upper extreme – should be used. We strongly suggest however to align this approach with a more consolidated understand of other forces in the market, such as more immediate supply/demand signs. The use of market profile is therefore just one tool that can be looked at in order to fully optimize our investment opportunities. Other elements such as volume analysis should inform traders when they make trading decisions. http://www.ranchodinero.com/volume-tpo-essentials/

VOLUME AND TPO ANALYSIS ESSENTIALS We’ve heard many times that all the acronyms and jargon used by volume profiliers is, to the uninitiated, like another language. We’d have to agree… intimidating it can be. Because there really is a lot of jargon, and some of it stands on some readily explained but not-so-obvious theory. Though once you begin to understand what all of it means, any feelings of confusion and intimidation evaporate. In the spirit of lifting that particular fog, below we present our illustrated primer of profiling and volume analysis concepts and common terminology. Which is to say that it’s specifically focused on the Acme-style uses of the terms, liberally infused with editorial comments where they add value (or humor?), and the examples displayed will be of Acme charts. That said, all the entries should be generally applicable to the greater volume profiling world. Also, one quick note about organization. Rather than an alphabetical listing, the entries below are intentionally ordered from conceptually general to conceptually specific. That way you can read top to bottom, and it may make more sense than skipping all around as you encounter a term or concept with which you’re not familiar. This is by no means exhaustive (it says essentials in the title after all, right?) and we’ll add to it as necessary, so be sure to stop back by from time to time. And away we go…

Profiles (General)

Profiles are histograms of the volume transacted or time spent at each price over a specific span of time such as a day, month, year or even a single bar. The Acme suite has specialized profile types for pretty much any span of time, with special support for the “standard” units of time such as sessions, weeks, quarters and years. Some of the most commonly-used profile types are:  Composite Profiles typically span several days to a few years and include all volume in the profiled range without respect to session, day or weekly boundaries.  Intermediate Profiles (aka micro-composites) are very similar to composite profiles and are used much like composites, but they tend to span a few days to a few weeks, and as such their user interface is optimized for this use.  Session Profiles are a specialized kind of volume profile, and are probably the most-used variety of short term profiles. They are specifically designed to profile a single session (or a single day) and usually include lots of “landmark” short term levels such as the initial balance, open, previous close, floor pivots and more.  Intraday Profiles are an ever more specialized type of profile used on very short spans of time such as one or a few bars, or maybe a regular interval of time such as 15 minutes.

CL 6-Month Composite Profile

CL Monthly Micro-Composites

CL Session Profiles – 5m Bars

TPO Profile (a.k.a. Market Profile®) Similar to volume profiles, time-price-opportunity (TPO) profiles are histograms of how much time was spent at each price within the span of the profile rather than volume-atprice. Generally, TPO profiles are less precise than volume profiles over shorter terms like a session. That does not detract from their value, however. TPO profiles be used on their own to find areas of support and resistance, and can also be used in conjunction with volume profiles. Contrary to what many say, we believe them to be complimentary forms of analysis rather than competitors. When time-at-price and volume-at-price agree, this

can be a form of confluence. Put simply, confluence is market structure, and market structure is tradeable. Rather than bars, TPOs are defined as units of time called brackets or periods and the traditional length for one bracket is 30 minutes, though brackets can be any length of time. The shorter the time, the more granular the profiles created. Traditionally, a letter is assigned to each price touched in each period, but TPOs can be represented by other visual glyphs such as square or rectangular blocks. Brackets and other meaningful periods can be colored to make it easy to tell them apart when they are packed into a profile. TPO profiles, because of their simplicity, are especially good at revealing specific kinds of patterns, such as: 

Weak and poor highs or lows. These are upper and lower edges of profiles that appear very blunt and contain multiple TPOs at or near the edge. This is an indication that buyers or sellers were not provoked to respond at the range edge and it is likely that further range expansion’ll occur.  Single prints. Often just called “singles” TPO single prints occur in the middle of a profile (not at the upper or lower edge) and are created by an impulsive move and have potential to be revisited in the near future. If the single prints are not revisited soon after they are made, then they should be considered a boundary between auction/balance zones. It’s typical to see TPOs in either profile form or expanded into bars where the prices touched in each time bracket is represented much like a bar chart, sans the bars. Examples below:

ES TPO Profiles

ES TPO Bars + Volume Profiles

ES Weekly TPO Profiles

POC & VPOC The point of control (POC) and volume point of control (VPOC) are sibling terms used in TPO and volume analysis, respectively. In TPO profiles, the POC is the price at which the most time was spent over the course of the profiled range – usually the price closest to the profile midpoint if there is more than one price at which the same amount of time was spent. Likewise, for a volume profile the VPOC (usually pronounced vee-pock) is the price at which the most volume was transacted. Even though there is a difference of one letter, the thing they are both trying to gauge is the most accepted price in a given period of time. That is, the price at which most buyers and most sellers were in agreement over “fairest value.” The concept of “fairest value” is really important – the VPOC and POC are not just the peaks of chubby profile bellies (or, er, “headlights” if higher up). The POC/VPOC is the price the market thought was the most fair, based on currently known information. Think about that for a second. That means there’s nothing magic about the POC or the VPOC. They are simply the “most fair” price for a given range of bars. (V)POCs are based on what the market participants actually did, and not a complex or predictive mathematical formula. Many people ask us how the VPOC or POC is calculated when, interestingly, it’s not calculated at all. It’s accumulated, then because of what it means it’s given a special color. Have a look at an example of both techniques on the same instrument, bars and sessions:

TPO Points of Control

Volume Points of Control

Initial Balance The initial balance (IB) is traditionally the range of prices transacted in the first hour of trade. Many regard the IB as a significant range because, especially for the index futures which are tied to the underlying stocks, orders entered overnight or before the open are typically executed prior to the end of the first hour of trade. Some use it to try to understand how the rest of the day may develop, while others use it as a span of time to avoid trading altogether because of its potential for volatility.

While the IB, sometimes also called the opening range, is typically used as reference levels during the session by both volume and TPO profilers. While 60 minutes is the traditional IB duration, it can be longer or shorter depending on your instrument and session definition. In addition to the IB high (IBH) and IB low (IBL), many profilers regard initial balance extensions as reference levels – what we here at the Ranch call landmarks. Each extension represents 50% of the IB range, and can be useful reference points on days where there is range extension trade. The further away the extension from the IB range, the less likely price is to get there. Want to know how much less likely? Have a look at this market study. Here’s how the IB looks in the volume and TPO profiles:

ES Volume Profile IB

ES TPO Profile IB

Opening & Closing Prices The open price is the first price of the session, the close is the last price of the session. While not really specific to volume and TPO profiling, they are critical price landmarks. For example, during an RTH session (see below), when price drops below the opening price it may be ill-advised to initiate new longs as this can be considered weakness – a lack of interest from buyers or overpowering interest on the part of sellers. Conversely, the closing price is important because in many instruments recent closing prices are frequently revisited, or tested, in subsequent sessions to see if buyers or sellers are still present and motivated to take action. More on this later in the naked price definition.

Naked Prices So-called naked prices are ones that have a propensity for being revisited or tested in subsequent sessions. It’s pretty widely known among both TPO and volume profilers that past POCs, VPOCs and recent closing prices are common targets for re-testing and revisiting. In fact, there are many traders who have special setups just for these prices. So these special prices that have yet to be re-tested are called naked or virgin. Forgive the obvious innuendo. We didn’t make this up. ;-} But it sure sticks in the mind, no?

Let’s look at so-called open gaps. The difference between a session’s opening price and a previous session’s closing price is called a gap. Gap closures are where the distance between the current open and a previous close is, well, closed. Half-gaps are, as the name implies, is 50% of an open-to-previous-close distance. The more recent the open gap, the more magnetic it can be. And so it is also with naked VPOCs. They are common targets for closure in the same manner as gaps – sometimes even when they are months or years old (one example of why we refer to them as landmarks… they tend to endure). Once the gap or VPOC is touched in a subsequent session, it’s no longer naked or virgin and therefore loses a great deal of magnetic appeal. OK, stop giggling out there. Yes, we mean you. ;-} Here’s an example:

ES Open Gaps and Naked VPOCs

Value Areas Of all TPO and volume profiling concepts, the value area has to be a top contender for the title most widely used but least well understood. It uses standard deviations, a basic statistical measurement device, to identify the range of most-accepted prices. Here’s where it’s important to editorialize… the value area should be used more as a guideline than a rule. Why? 2 reasons. How the standard deviation is used in calculation of a value areas is not really the same as it’s used in straight-up statistical analysis. More on that below. Next, there are several ways to calculate a value area, each subtly different but none of them “right” and none of them “wrong.” Follow along, you’ll see what we mean. Let’s take the first reason, well, first. In statistics, the standard deviation is a method for calculating how much of a normal distribution can be expected to be included at a specific distance from the distribution’s mean (aka the average). One standard deviation, when applied to a normal distribution, will include 68.2% of that distribution. That’s 34.1% on each side of the mean:

Standard Deviation Diagram

Now you’re probably saying to yourself “hey! that looks like a volume profile!” And it does, for the most part. Except that it’s only the exceptional volume profile that could be classified as a normal distribution (“normal” in this case is a type of distribution, not a value judgement). And there is a name for that rare-ish breed, as we’ll see below. Most volume and TPO profiles are anything but normal. They frequently have multiple peaks and valleys, are nowhere near symmetrical and the mean is often not in the center. Below are some more key differences: Rather than using the distribution’s mean, or average price, volume and TPO value areas use the POC or the VPOC (which is actually the mode and not the mean) as the origin of the value area. If the POC or VPOC is skewed far to one side of the profile/distribution, that still counts as the mean. As a result, in such profiles the value area will also weighted to the side of the profile containing the VPOC or POC.  Rather than having equal amounts on either side of the distribution, value areas can be pretty lop-sided in the number of prices above and below the POC/VPOC/origin.  Value area widths are user-configurable in many products. In normal distributions, one standard deviation is a specific, known amount. It includes just under 70% of the most-frequently occurring values in the distribution. Again, in many products – Acme included – users can redefine the width of the value area. Which is something to keep in mind when making cross-product comparisons – make sure the value area widths are equal.  Most value area calculations have several special, traditional rules that have nothing to do with the mathematical definition of the standard deviation. For example, in TPO profile implementations, when there are multiple prices which have the highest number of TPOs in them, the price closest to the middle of the distribution is counted as the POC. Thus, the origin of the value area will be there. Additionally, most value area implementations favor prices on either side of the (V)POC that have the most volume or TPOs, which often makes them asymmetrical. Some examples of skewed VPOCs and asymmetrical value areas: 

6E Value Areas

So you see, value areas are not really what you might call examples of mathematical precision and simplicity, unlike the strictly-defined standard deviation. This does not mean value areas are not useful – they very much are. But they can vary a bit from product to product and even data feed to data feed, and this is normal. As we said above – value areas should be considered more of a guideline than a rule. Lastly, it’s worth noting that certain instruments “respect” value and value areas more than others.

Balance Areas & Balanced Profiles Areas of balance are those “exceptional” profiles, or parts of a profile, mentioned above. They are characterized by an overall resemblance to a normal distribution. That is to say, most notably, a nice fat middle with gently reducing extremes and readily apparent symmetry. Balance areas are important because they display areas where buyers and sellers came together and agreed on “fairest value.” When you see balanced profile, you want to look at two things: range and volume (or depth of TPOs). Generally speaking, balanced profiles may convey one of two important pieces of information, when compared to other profiles of the same instrument and period: 1. Small range, high-volume/TPO balance areas and profiles tend to signify that there was a significant but roughly equal clash of buyers and sellers at a given range of prices. You can expect that a breakout of the balance range will occur… eventually. These kinds of balance areas signify that a war is raging under the surface, and the loser will probably be the side that runs out of ammunition first. 2. Small range, low-volume/TPO balance areas and profiles tend to mean that the market is in no hurry to go anywhere and is waiting for new information. These kinds of profiles are often seen when significant economic news is expected but not generally known. Simply put, there’s no real motivation for acting on the part of buyers or sellers, so price flops and chops around a small range until that new information is known and motivates a revaluation of a market. What’s most important about the concept of profile balance is that it’s a clue that a market has done its job and a cycle has ended, a fair price been achieved. And… now the market’s cycle needs to start anew and attract buyers and sellers with new prices. In other words, once a market reaches balance, time adds new information that must be repriced. Balance time is also, ironically, go time. Some examples:

ES Balanced TPO Profiles

ES Balanced Volume Profiles

GC Composite Balance Areas

High Volume Areas/Nodes HVAs or HVNs, as they are often called, are really nothing more than balance areas. So now that we know what they look like, let’s touch briefly on what they mean for the auction and price action. In general, high-volume areas are ranges of accepted prices – prices that were deemed “fair” by the market and where aggressive action was not called for. In addition, HVAs can signal other things too, depending the time frame on which you’re looking at them. In the short term, HVAs are areas where price can be expected to move slowly, flopping and chopping around, because of the lack of impetus for action on the part of market participants. In the longer term, HVAs can be viewed as safe areas to which price tends to retreat when it’s in discovery mode. Follow along in the example below:

GC Big Picture HVAs

Low Volume Areas/Nodes In contrast to HVAs, LVAs or LVNs are considered “unfair” prices in auction theory terms. These are prices which generally spur market participants into action – often aggressively. LVAs are formed simply because they are prices that have never (or barely) been seen before, or they are prices that have not seen much time or volume because participants took swift action there in the past. Markets are always seeking equilibrium between buyers and sellers. That is, essentially, they are always trying to form HVAs and balance areas. So, as the name implies, LVAs are prices where the auction has come moved away from some previous area of balance (a.k.a. acceptance, fair value), because participants took some decisive action. If you think about it from the detached perspective of Mr. Market – this makes a lot of objective sense. If you’re a participant, not detached but engaged, it also makes sense but the motivations are different. For example, if buyers view a price as unfairly low or sellers as unfairly high, they are going to to buy or sell until price moves to a level where: 

buyers become unwilling to buy

  

buyers run out of buying power sellers become unwilling to sell sellers run out of inventory to sell

Regardless of what side of the trade you’re on, once one or a combination of the above conditions occur the market achieves balance once again. And so the balance/imbalance/re-balance cycle is complete and will inevitably start anew. LVAs also exhibit another important characteristic, one that dovetails beautifully with the HVA concept above. Once prior HVAs have been re-tested and rejected, the LVAs in between often become a vacuum for price. That is, prices tends to become attracted to LVAs that are sandwiched between HVAs, and often what was an LVA becomes a new balance area. Conversely, what was recently an HVA will often become an LVA at a later time. This LVA to HVA back to LVA cycle is not a perfect process, it’s a tendency. It does not always happen, but it frequently happens, regardless of instrument. Learning to read and interpret profiles in this manner can help you understand the possibilities of what could come next for price. Some examples below on the weekly time frame:

GC LVAs and HVAs

EURUSD LVAs and HVAs

ES LVAs and HVAs

RTH, ETH and O/N Sessions Many instruments, especially the futures, have a cash/pit session where both electronic and human-initiated, open outcry trade takes place. The pit or cash hours are called the real-time hours (RTH). The after-hours session, where only electronic trading takes place, is called the extended trading hours, or ETH for short. The ETH session – the time between the close of one RTH session and the open of the next RTH session – is also

often referred to as the overnight session. It’s often abbreviated as O/N or with just the letters ON. All this session-specific terminology is relative to the location of the exchange, which is good to keep in mind if you’re in a time zone that is far away from your instrument’s physical exchange.

Volume Deltas Volume deltas are used in indicators such as the Acme Volume Balance, Volume Breakdown and Volume Impression in order to gauge real-time buying and selling pressure. Basically, a volume delta is the difference between the total volume attributed as buying minus the total volume attributed as selling for a given period of time. Positive numbers indicate more buying volume than selling volume, negative numbers indicate more selling than buying. Some examples can be found here and here. One of the most common (and best?) uses of volume deltas is to aid in visualizing realtime reaction when prices reach or near important price levels. Volume deltas can be used by themselves, but when coupled with volume and TPO profiling we think each compliments, reinforces and amplifies the strengths of the other. How so? Profiling is all about what has happened, and order flow analysis (volume deltas) are all about what’s happening right now. Only when considered together can the auction story be understood as it’s unfolding. https://www.sierrachart.com/index.php?page=doc/StudiesReference/TimePriceOpportuni tyCharts.html https://www.prorealtime.com/en/market-profile

Market Profile – A Primer On March 28th, 2009 I gave a lecture to the Northwest CCI Traders Club on Market Profile. It was my aim to introduce the concept of using market-generated information. This is a concept quite the opposite of what other traders in this group, as well as most traders in general, use to make trading decisions. I’ve been involved in trading for a very long time; in fact I passed my Series 7 exam in 1974 and worked for major Wall Street brokerage firms, as well as working as a CTA in the early 1980s. From the length of time I’ve been involved in the markets I’ve been able to see just about every possible trading methodology out there. The one constant that I see, whether among brokers or wannabe traders include the following traits: 1 – The constant search for someone to give them a trading methodology or trading signals. Currently this seems to take the form of finding the current hot chat room that has the answers. In the past it was a market letter or advisory service, or someone promising the secret to trading by selling an expensive trading “school.” It is natural to want to believe that someone out there holds the secret to the markets, and that they want to give away or sell that knowledge. It is also a comfort to want to belong to a larger group of like-minded traders. Seeking this type of comfort almost always works against trading success. Expecting someone else to provide the answer is unrealistic. Chat room moderators present themselves as expert and experienced traders. The truth is quite the opposite. Very few have been successful as traders. Some may indeed mean well, but most just want to get into your wallet one way or the other.

2 – Holding on to the belief that a certain indicator or methodology will produce profits even after rigorous objective backtesting proves that profitability is an illusion. It is amazing to see traders that are invested in a particular methodology stubbornly adhere to the claims of great profits if only they just have a little more screen time or take additional classes. It is difficult to give up on an idea when much time and money have already been invested. A key part of becoming a successful trader is knowing when to cut a loss short. No amount of screen time will create a winning approach from an unsound methodology. 3 – Looking outside of market generated information for the answer. I see many traders turning to approaches to timing the market that come from information that has nothing to do with the markets. Many believers of Gann, Elliot, and Fibonacci and those who turn to the moon and tides fall into this category. These traders must know at some level that chat rooms and indicators are not working for them. Instead of turning toward the market, they turn away and try to find a correlation between price action and unrelated causes. This type of approach is as old as there are markets, and has never, ever worked. And it never will, but traders will keep falling for the false claims until common sense returns, or their money runs out. 4 – Forming a belief that a market must reach a certain objective or move in a certain direction. This is actually a result of the first three items. Often an opinion will be formed based on some old tired chart pattern or indicator set-up, and the trader forms the opinion that a certain result must occur. Or it could be an Elliot wave count, or fibonacci retracement level with great confluence of support from past chart points. The market doesn’t really care about any of this. Markets look forward to discount the future. The market can and will do what it wants to do, regardless of the position of the moon, a CCI divergence, or what George Soros says will happen next week. These patterns and formations are there for all to see. The gurus and forecasts on CNBC are all over the internet and known by all. What all can see cannot create an edge. The trader cannot tell a market what it must do. The job of the trader is to listen to what the market intends to do. The antidote to the conditions above, in my opinion, is to try to understand and to interpret what the market is trying to communicate. And the best way to achieve this is to use the information the market is generating, rather than relying on derivative indicators, useless opinions, or non-market related events.

Refer to the graphic above courtesy of Linda Raschke. The vast majority of traders focus only on #3 – Indicators and Oscillators. Indicators and oscillators can be useful tools, but they cannot predict where a market will go, at least not with enough consistency to generate trading profits over time. When I first purchased a PC in the early 1980’s, I purchased Compu-Trac software and a huge database of commodity and stock index data. I tested every indicator I could get my hands on, and every trading system that could be programmed into the software. Nothing worked. I could not find any entry/exit rules and indicator combinations that would produce enough profit to overcome trading costs. I tested systems that were being sold for very high prices, systems that were under management at major brokerage firms, systems of my own development, and anything else I could get my hands on. I sought the advice of gurus. I went to trading conference after trading conference to get ideas. I finally met George Lane, the creator of the stochastic indicator, at one of the trading conferences. I talked with him and decided to fly to Chicago to study with him. At the end of the study he said that price was the most important consideration. Volume followed. The indicator, which we had been studying for a week, was last and least in importance, and was only used for confirmation. This at least had me consider viewing indicators from a more realistic perspective. It is easy to attach greater significance to indicators than they deserve. Most indicators have relatively simple code and can only do, or indicate, so much. It is unrealistic to think that a simple formula derived from price can actually lead the function from which it is derived. It is silly to think it can. It is also a mathematical impossibility. As much as I’ve tried to convince other traders of this, I get disbelief and an argument to the contrary. It is difficult to argue a mathematical fact to those who believe in the tooth fairy. Now I just smile and hope they don’t give away all their money to those who know better. To be fair this concept of leading indicators had to have a basis for its origin. I believe that many think certain indicators can lead because at times, when the market is in a very cyclical mode, and if an indicator such as a stochastic has the correct input parameter, it can turn ahead of price. But it is important to remember

that the indicator is not leading price. It is derived from price. It is to assume a lot that the market is trading in a nearly perfect sine wave, and that the indicator happens to have the perfect lookback period to track and turn up at its half cycle to give the appearance of leading. If the market were cyclically as stable as a light wave, then one could use an indicator with great success. In the real world, in real markets, this approach is doomed to failure. To believe otherwise is to believe in fantasy. Markets are constantly changing. They do not represent a stable sine wave. The cycles are constantly changing, and at times disappearing as trends develop. With that being said, indicators can still be a useful tool just like a hammer can be useful if you are building a house. But a hammer cannot build a house by itself, and a hammer isn’t of much use in laying the foundation. If one were to accept some of the concepts as stated above, then what is the best method to gain insight into what the actual market is trying to communicate? Most traders would probably agree that volume might have some importance in the overall picture of market structure. But how does one look at volume? A bar chart will show the total volume of trading during the trading session. It can be useful to know if overall volume is increasing or declining. But how does one know what the volume represents? Is it just a large fund buying or selling for some reason unrelated to the developing structure? Is it shorts covering or new longs entering? Is it earnings related? Is it arb activity in the pits or new money entering long term positions? One can look at intra-day price bars such as on a five-minute chart, with volume bars under the prices. But every day will show a similar pattern of heavy volume at the beginning and end of each day, with a dip in the middle, drawing a pattern similar to the shape of a bowl. How does this help? Peter Stiedlmayer developed a method of representing the distribution of volume during the trading day. He attempted to create a visual representation of the thought process of traders in the trading pits. Instead of using actual trade volume, he displayed a representation of volume as price over time. This is an important distinction. As price movement is displayed over time, a bell curve develops, and the areas of price acceptance and price rejection are readily apparent. Areas of market balance and imbalance become clearly visible. Changes in the direction of value provide more insight than changes in the closing price.

Refer to the graphic above. The yellow bars are 30-minute price bars of the S&P 500 ETF, or SPY. Each half-hour period is assigned a letter. As each period is completed, the next 30-minute period is assigned the next letter in the alphabet. Some vendors start each trading instrument with the letter “A” while some vendors fix each half-hour increment to the same letter. In the latter case, if a market started the trading day later, such as the grains, the first time period would be the letter “C.” I doesn’t matter which method is used as long as the letters increment. Next, if you collapse all the price bars to the left, you would have the bell curve graphic as shown on the left side of the chart. You can see that the prices that were revisited the most during the day will have the thickest part of the bell curve, and those that were spikes at higher and lower levels were represented by thin rows of letters. The purple line to the left of the graphic represents where approximately 70% of the volume took place. In Market Profile terminology, it is called the value area. This is close to where one standard deviation of the activity took place. The thicker dot in the middle of the purple line is called the point of control. This is the closest point to the middle of the value area where the most activity took place. The blue row of letters is the opening price, and the red row is the closing price. The first two time periods, in this case A and B, are referred to as the initial balance. Different vendors will display these concepts in slightly different ways, but all market profile graphics will contain these basic elements. Some vendors will display an actual count of the letters above and below the point of control. I prefer to keep my profiles as lean as possible. Scaling can be

changed to allow the entire group of profiles to display within the size of the chart. Obviously each letter cannot represent a one-penny price change on a high-priced stock trading in one-cent increments, or you would need a monitor ten feet tall to encompass the complete profile. Changing scale does little to alter the use of the profile, although some timing sensitivity can be lost if the resolution is set with too large a price increment.

Above is another graphic explaining the concept of price over time with the resulting standard deviation bell curve. Graphic courtesy of Markets in Profile. It might be helpful to think of the developing bell curve in terms of an auction, which is really what the market is. Picture an auction for a rare automobile with hundreds of bidders representing volume. Actual volume in this illustration would actually be one, as there is only one car being sold, but for the sake of argument, visualize volume being the number of bidders. If the auctioneer starts the bidding at $20,000 for the rare car, every hand would go up. Everyone in that room would be willing to purchase the car at that price, which everyone would believe to be far below value. As the price increases, at some point some of the hands go down. There is less volume at the higher prices, as some of the bidders perceive price is getting ahead of value. As price continues to climbs, more and more bidders drop out. Therefore, the high prices begin to shut off activity. At a certain price the transaction is complete with the seller responding to the high price by selling the car, with the buyer paying higher than anyone else was willing to pay. Value was probably established at some point in the middle of the bell curve, but the winning bidder had to pay far over what the auction determined to be fair value. If the auctioneer had suddenly put a price far too high, all activity would have shut off and prices would have had to come back down in order to facilitate the trade. Of course, in stock and commodity markets the trade is more two sided than a traditional auction, but the concept of the markets being an auction is still important to keep in mind. Stiedlmayer created categories for various types of trading days. It is often the case where a particular trading day won’t match a particular category precisely. There is often overlap between various day structures. But it is important to try to understand what type of structure is developing and what the implications are of each.

Please click on the thumbnail to the left to blow up the chart. (Note: chart will open in separate window so can be arrange by the side of this text.) The first and most basic day structure is the Normal Day. It is characterized by a wide-ranging initial balance, or first two time periods of the day. It is thought that the initial balance was the pit locals trying to establish value for the day. On a normal day the bell curve will develop generally within the range of the initial balance, with little outside influence to tip the market much beyond the initial balance. When a market extends beyond the established range development up to that point in the day, it is called range extension. On a normal day there is often limited range extension, that is the market may extend beyond the initial balance by a small amount, and then return back into the value area. Some days will show little or no range extension. In current markets that often have around-the-clock trading with much of the trading activity from computer terminals rather than in a trading pit, some concepts seem to require some updating. However, the trading implications of these concepts, even if not precisely accurate in the current market, still seem to be valid. I wide range in the first hour of the day session still seems to imply a normal day.

If you click on the thumbnail to the right you’ll see another example of a normal day. You can see a wide range in the A and B periods. There was a small range extension in the D period, but prices quickly returned back into the value area. The bell curve formed with a skew to the lower part of the range. The implication of value developing lower might make the trader watch out for weakness the following day, which is exactly what happened in the case. One subtle but important distinction in that last section are the words “watch out for.” Notice I did not say “predict.” If you trade markets long enough you will become disenchanted with any sort of predictions. The Market Profile does not predict. Rather, it communicates intention. One must be open to trying to interpret the clues for possible scenarios. A prediction implies a scenario where the traders is telling the market what it must do, rather than listening to the market and following what it is telling the trader what it is trying to do. This might seem like a trivial point, but it is a very important point and key to successfully using the Market Profile.

The thumbnail on the left (please click to enlarge) shows the next day structure. It is called a normal variation day. This day structure is characterized by a still wide, but somewhat smaller initial balance. In this case the initial balance represent closer to half the finished profile, with range extension early enough in the day to create a fairly normal bell curve. When watching this day structure develop, it is not known that the day will result in a normal variation day until it is well into development. But there are some clues. If you notice the open in the A period. It is well below the value area of the previous day and prices quickly rejected those lower prices. The range of the A period and subsequent B period was fairly wide, however there was little rotation and development, as prices were quick to reject the lower prices and prices started to build value in the range of the previous day value area. When range extension occurred in the D period prices quickly moved to the upper range of the previous value area and began rotating, thus building a value area encompassing the initial balance as well as later time periods. In fact in this case the value area was built without any of the prices from A period. The rejection of the lower prices and the building of value higher in the day structure and slightly higher than the previous day value area had implications for continuation higher the next day. Again, not a prediction of higher prices, but a reason to be watching for continuation.

The graphic to the right, when you enlarge it will show the next day structure. This appears similar, at first glance, to the normal day structure. However, there are differences that make this a neutral day. The main difference is that the initial balance is somewhat smaller, similar to the normal-variation day. However, the range extension does not extend far enough to allow development of the bell curve above or below the initial balance. Instead, prices return into the initial balance, and most often will try a range extension on the opposite end of the developing structure. Again prices will fail to extend far enough to allow rotation to change the developing value area. Thus, a normal shaped bell curve begins to develop in the middle of the range, with only moderate range extension on either side. This example is quite symmetrical. No two profiles are the same, so there will always be some variations and possibly overlap with other types of day structures. Another characteristic of the neutral day is the close proximity of the open and the close. A candlestick chart would often show a doji, perhaps with similar implications depending on where the doji occurred within the price trend. However the market profile graphic contain much more useful

information than the candlestick. One more important characteristic of the neutral-day is that quite often the value area will overlap with the previous day. In this example the value area of the following day also overlapped, which would not have been apparent by looking at a price bar. As the name would suggest, there is little forward price implication from the neutral day.

The chart to the left shows the next day structure. It is the non-trend day. This is characterized by a narrow range day with a fat profile. There seems to be random rotation with little price movement on either side of the profile, thus developing a short and fat profile. These days can occur prior to a fed announce, prior to long weekends or holidays, or at market exhaustion points. Most traders will simply complain that the market is choppy and untradable on these days. They will often look for excuses to leave the market alone and focus on something else. This is often a big mistake. On non-trend days the Market Profile trader, in other words, the aware and astute trader, should be on the lookout for clues and ready for a breakout. It is when the market is making a narrow range that a large range, and possibly trend day, will occur in the next day or two. If you study enough charts it will become evident that small range days often precede large range days, sometimes with major trends following. And conversely, large range days often exhaust the buying or selling power, and smaller range days are seen the next day. Often the direction of the breakout of the non-trend day is difficult to anticipate. However, since a range expansion is likely, it is best to be ready with a plan for when the breakout occurs, which is often the very next day.

The next day structure is the trend day. A trend day will usually begin with a small initial balance, much the same in appearance to the non-trend day. However, early in the day structure range extension occurs. This range extension does not allow a value area to develop in the initial balance, and the range extension continues throughout the day. There are often periods of single prints on the profile. Most important, there is very little rotation from time period to time period. In other words, each half-hour segment drive prices further in the direction of the trend. Sometimes one of the time segments will have a bit of rotation in the opposite direction, but price usually will resume the trend. The range of a trend day is wide and the profile, absent rotation, is thin. Obviously the open will occur at one end of the trend day, and the close will be

near the opposite end. Often a bar on a candle or traditional bar chart will appear to resemble a trend day, but often these days, when viewed with the Market Profile, will actually not be a true trend day. An example would be a day that rotates back and forth all morning, developing a fat profile, and then some news enters the market late in the day extending the range. This type of day would have a different implication than a true trend day. It is easy to spot a trend after the fact. But during the early stages of development, it is often difficult to determine whether the developing structure is that of a trend day or a non-trend day. A non-trend day wills often have range extension, with what might look like the start of a trend day, but prices fail to extend and return back into the initial balance. If enough rotation occurs and the profile begins to become wide, especially with small range extensions on either side, a non-trend day is usually forming. But one clue to anticipate the greater likelihood of a developing trend day is to look at the prior days. If range has been contracting, and the prior day is a neutral day, or even a non-trend day, range expansion is a likely consequence. Range extension following such contraction should be monitored closely. The market may have been in balance, but it is possible new information is causing the balance to be upset. The market will then drive to a new price level to facilitate trade. That drive to a new price level can often be persistent, thus causing the one time frame price movement, and the long, thin profile. On the other hand, if a narrow initial balance begins to form after a large trend day, the power behind the move may have exhausted or overshot. The developing price structure could be one of pause and regaining balance. In that case a non-trend or neutral day could develop. The are no specific or mechanical rules to follow. There is an art to trading and much study and experience should improve ones ability to judge the developing day structure.

A variation on the trend day is the double distribution trend day. This day starts off much like a trend day, however there begins to be rotation with a bell curve beginning to develop during much of the day. It appears that more of a normal variation day will result. But then new information enters the market and range extension occurs and drives prices to a new area. At some point the move is shut off, usually overshooting, and then another bell curve begins to develop. The resulting profile will have two areas of price rotation, which are usually separated by an area of single prints. These days can often occur on Fed days, or days where a surprise announce or event occurs. The market goes from balance, to imbalance as the news drive the market to a new level, and then back to some sort of balance as the news is digested.

Another important market profile concept is to define the type of buying or selling in relation to the previous value area. This is especially important when trying to position a trade in the early part of the trading session. If a market opens above the previously established value area, buyers are said to be initiating buying. They are taking charge and trying to propel prices to a higher level. Those selling to the initiating buyers or said to be responsive sellers. In other words, they are responding to higher prices. And conversely, if a market opens below the previously established value area, the sellers are taking charge and the activity is called initiating selling. There must be buyers to take the other side of the trade, and that activity is called responsive buying. Both scenarios are illustrated in the slide to the right, that is if you click the thumbnail to enlarge. An important point to keep in mind, and is apparent on most profiles, is the concept of price rejection at the extremes. On both ends of the middle two profiles are areas of single prints. On the profile to the left showing responsive selling, it is clear that prices in A period rejected the attempt to move higher. Buying activity was shut off, and the responsive sellers took the lead. This area of single prints at the top of the profile is called a selling tail. Candlestick people might call this an upthust. It means the same. It has bearish implications. On the same profile, but later in the session, there was a small area of single prints in the N period. Prices overshot just a bit to the downside, with prices closing just a bit up from the lows. This would normally be called a buying tail, however in strict Market Profile terms, a buying tail cannot happen on the last time period of the day. Had those single prints occurred during M period, those prints would have been a buying tail. You can see an example of this in the profile to the right where initiating selling occurred with a buying tail in M period. Price, in this case, drove to a level low enough to shut off selling and attract some responsive buyers, thus creating the buying tail, confirmed by subsequent prints in the next time period.

Along the same lines as buying and selling tails is the open drive. Often when a market opens, price will make a large range, directional move in the first time period. You can see on the chart to the left that A period opened with a gap up, and price quickly shut off any further buying activity, and responsive sellers took charge right from the open to drive prices back into the previous value area. The open drive can be

either responsive or initiating. It seems more examples are responsive, as prices often overshoot on the open from overnight news, and then quickly go the other way. It seems with 24 hours trading that any news causing gaps would be handled by the constant trading activity rather than pent-up demand from the market opening after being closed when the news was announced. However, many of the concepts of Market Profile that were formulated long before 24 hours trading still seem to be true. The profiles in this article were from data in 2009.

The slide to the right displays about eight full day profiles for your study. I have included notes of some relevant points on the chart. Notice how the five days in the middle of the chart show overlapping value areas, with prices generally in balance and not moving in a directional way. The first day in that five-day series, February 20th, saw price close higher than the open. Bar or candlestick traders might have viewed the higher close as rejection of the attempt at lower prices. Market Profile traders might have viewed the lower value area with caution, despite the late day strength. The gap higher into the area of the previous price rejection might have been reason to attract responsive sellers. Once price range extended down in C period, also driving down through the previous days value area, it was clear that the day structure would be bearish. Value areas tried to move back up toward resistance in subsequent days until market finally gave up late on the 26th.

Again, this slide shows about eight days of profiles with notes on the chart. The bottom of this move was interesting. On March 6th price tried to drive down, bringing the value area lower, however there was a late day rally with a close back up near the open. Price was able to close above the previous point of control and well into the previous value area. The following opening, if higher, could have set up a bullish day. However the following day, March 9th, price opened lower, but still into the value area. There was no drive lower. In fact, price rallied all through the initial balance and drove the value area higher despite price being mostly negative for the day. A late day sell-off created a weak close. A bar or candle trader would have most likely viewed the day as negative, especially being an inside day during a longer term market decline. However, Market Profile traders would have seen the higher value area and have been on alert for the next opening to see if there would be initiating selling or buying. The market opened higher, right above the previous value area and point of

control, and the initial balance became an open drive higher to kick-start a substantial move higher.

The last slide to the right again has eight days of profiles with commentary on the chart. Some additional points on the chart: notice on March 12th that price opened right at the previous point of control, and A period had a buying trail, which was evident once B period pushed higher. This buying tail reaffirmed the buying tail in J period in the previous profile. On March 13th price tried to regain balance during the session, with value area driving higher. On March 16th the value area continued to push higher despite the lower close. The responsive buying tail in A period on March 17th indicated that this market has more work on the upside. The overlapping to slightly lower value area would be sign of caution depending on the next days open. In this case the value area and point of control held with a narrow initial balance, range extension higher, and a buying tail in C period. See additional notes on the chart. The preceding overview of the Market Profile is only meant to be an introduction to the methodology. It is by no means intended to be a complete trading approach. Much time and study is required to learn this approach. It probably requires more time and study than most traders are willing to spend. One would not read a short summary on the principles of aviation and then try to fly solo in a single engine airplane. The results would certainly be disastrous. The same applies to trading, although far too many traders begin a trading approach without adequate preparation and without a plan. In summary, the Market Profile is one way, and one of the best ways in my opinion, to listen to and interpret the market’s intention. Many traders may prefer to view the market with traditional bar charts, or to simply read the tape, or trade from the action in the pits. In fact, many of the most successful traders of all time did not have the advantage of the computer and the market profile graphic. However, the concepts and thought process that the Market Profile represents were still in use by many of these traders. The concepts that Market Profile illustrates so well is the important consideration, even if one prefers a different method to display market activity. Market Profile often does not give specific entry and exit points. That is probably why the vast majority of traders rely on indicators. It is difficult to backtest objectively the Market Profile concepts. Indicators can easily be put into a formula and numbers can be crunched on past data in seconds. But remember that the vast majority of

traders lose money. The greatest traders have a market understanding that goes beyond the obvious. Again, there is no edge in what everyone knows. For those who rely on indicators, chat room gurus, and non-market generated information, I wish you good luck in your trading. You WILL need it. For those willing to pursue the difficult path of market understanding, you have a much better chance of creating your own luck, with a much better chance of success. Additional Notes: I was going to include a large reference section, but decided against it. If one wishes to pursue this direction of study, one will find many resources. I just Google Market Profile Charts and came up with over 19 million hits. Of course many of those entries may be unrelated to trading, but many are. Two names to include in your searches are James Dalton and J. Peter Steidlmayer. Both are good. Dalton is probably the easier and more skilled educator. The person I studied with was Steidlmayer, the originator of Market Profile. They both have excellent books on the subject. Another excellent resource is the CBOT website. There you can download and print out for free the Market Profile Handbook, which expands in great detail many of the concepts in this article. For TradeStation users, the code for the Market Profile, along with instruction, is easy to find in the Easy Language forum. It is not the same as the TradeStation activity bars. It is not included with TradeStation, but is a separate indicator, with several versions in ELD form. Market Profile should not be considered an indicator, but in TradeStation it must be inserted as an indicator. There are also third party plug-ins. Ninja Trader also has a plug-in that can be purchased. CQG was the first vendor that offered the profile, and was the platform that Steidlmayer preferred at least when I studied at his Market Logic School in 1987. Many vendors offer superior profiles to what is available in TradeStation, but the TradeStation profile suits me. Developing Point of Control(DPOC): It is the Point Of Control which is forming for the current day of trading i.e POC forming in the current section of 5th AUG is DPOC and 4th Aug is POC Below is the Small setup for Intraday trading based on DP concept of POC Step 1 : Note down the POC of Previous day (in 30min HTF) Step 2 : Note down the High and Low of Previous day Step 3 :Mark them on the current chart as DP (Decision points) and trade them with simple price action Just posting the image of simple setup discussed in post #25 4th Aug NF FUT basing on POC,PDH,PDL of 3rd Aug

Morning candle Opened between the previous day high and low and pierced the POC basing on this conclusion: PDL and PDH will act as support and resistance and POC can be used as trade anchor for the day Market profile is a market's price activity recorded in relation to time in a statistical bell curve and TPO's are opportunity created by the market at a certain price at a certain time Number at the edge of the Profile chart 33 and 50 represent TPO count !!! TPO count of 33/50 means 33 above the POC and 50 below the POC. This indicates buyer dominance or buying control. The TPO count above the POC represents sellers willing to short above value while a TPO count below the POC represents buyers willing to buy below value. Buyers below POC view the markets as undervalued while sellers above the POC view the markets as overvalued.

As per the setup discussed in post# 26 DP for Monday trade of Nifty Fut are as follows PDH: 8717 PDL :8631.6 POC :8679 Poor High and Poor low :In a bull trend with HL and HH ,we often we find people who short the market or exit there position seeing market is over valued or indicators overbought so they start a swift move of selling ..there after market takes a breath and recovers from lows but time taken to recover is some what longer and that high is called Poor high ...reverse of this is called Poor low Context-wise two days having the same high or same low is also treated as poor high/poor low and such zone requires repair. In classical technical analysis we call such pattern as double bottom or double tops and such zones are meant to be revisited which in classical technical analysis we call such zones as support/resistance zones Excess :Many times we seen sudden gap gown and gap ups , there after swift recover happens with in no time,Generally Excess is seen in the extremes of the profile with strong pullback as shown below. Excess occurs across various timeframes (Hourly, Daily, Weekly Charts) Tomorrow i will post some charts on this(Poor high and low and excess ) POOR HIGH/LOW and EXCESS

Just showing a candlestick pattern to explain in details PoorHigh/Low and excess.. Let us discuss to candle stick patterns which you all know hammer/hanging man except on basics of close there is nothing special for us in classical TA ,but profile user sees this on basics of time Bullish hammer (with respect to the recovering from LOW) if it is done is swift manner within very short time then it is Excess and profile users give more importance to this one.On basics of time POOR HIGH/LOW AND EXCESS are very vital for profile traders If that hammer is formed near any support with in uptrend which almost makes it double bottom or a revisting area (demand) and time taken to recover is much longer then it is called “POOR LOW” If that hanging man is formed near any resistance in downtrend( rally in downtrend) which is also a revisting resistance and time taken to crack form that high longer then it is “POOR HIGH” In uptrend we will have poor low’s i.e; market moves away from trend and resuming previous trend after spending some time in opposite direction (poor low ) if the time spent is very less then it is excess low Below chart of Nifty Spot and demand and supply zones marked Just classify date marked into Poor high/low and excess and post charts watching intra day charts ..on basics of this I can move further Note:Manual drawn lines not from any AFL In profile Language Poor High – When exactly 2 TPO’s exist at the high for the day. A poor high will generally lead to higher prices unless it occurs against resistance. This is referred to as a double top in most trading circles but a poor high should generally never be shorted as it indicates acceptance at the market high. Poor Low – When exactly 2 TPO’s exist at the low for the day. A poor low will generally lead to lower prices unless it occurs against support. This is referred to as a double bottom in most trading circles but a poor low should generally never be bought as it indicates acceptance at the market low

Few more important terms of reference to be used... Initiative Buying – Buying above the value area. Initiative buying would imply that you expect the current uptrend to continue as you are willing to buy at a higher price than you could have bought during the previous day. With initiative buying you are looking to capitalize on a fast moving market that is making new highs. Initiative Selling – Selling below the value area. Initiative selling would imply that you expect the current downtrend to continue as you are willing to sell at a lower price than you could have sold during the previous day. With initiative selling you are looking to capitalize on a fast moving market that is making new lows. Responsive Buying – Buying below the value area. Responsive buying would imply that you expect the market to return to the mean (the center). Buying responsively in an uptrend is a strong play. Responsive Selling – Selling above the value area. Responsive selling would imply that you expect the market to return to the mean (the center) Selling responsively in a downtrend is a strong play. Initiative Buying/selling is almost Break out version of classical TA Responsive activity is something which comes at important support or resistance. For example: Previous day high/low, morning range high/low, congestion zone high or low criteria

Rotation Factor (RF) – A calculation that shows the strength of the current market trend. It is calculated by assigning a value from -2 to +2 to each TPO. A value of -1 is assigned to the low of the current TPO if its low is lower than the low of the previous TPO, a value of 0 is assigned to the low of the current TPO if its low is the same as the low of the previous TPO, and a value of +1 is assigned to the low of the current TPO if its low is higher than the low of the previous TPO. The same applies to the highs. A value of -1 is assigned to the high of the current TPO if its high is lower than the high of the previous TPO, a value of 0 is assigned to the high of the current TPO if its high is the same as the high of the previous TPO, and a value of +1 is assigned to the high of the current TPO if its high is higher than the

high of the previous TPO. All of the values are then added together to get the rotation factor for the current day. Below (RF) Code for Daily charts /////////////////////////////////// //Coded by Rajandran R //Date : 05th July 2015 /////////////////////////////////// _SECTION_BEGIN("Rotational Factor - Market Profile");

RF = 0; NewDay = month() != Ref(month(), -1); for(i=1;iH[i-1] AND L>L[i-1] AND !NewDay) { RF=RF[i-1]+2; } //If Current Bar Makes LH and LL if(HH[i-1] AND LL[i-1] AND !NewDay) { RF=RF[i-1]; } if(H==H[i-1] AND L>L[i-1] AND !NewDay) { RF=RF[i-1]+1; } if(H>H[i-1] AND L==L[i-1] AND !NewDay) {

RF=RF[i-1]+1; } if(H0,colorGreen,colorRed),styleHistogram | stylethick); _SECTION_END();

But calculating strength of each TPO manually is difficult RF-AFL for 30MIN charts /////////////////////////////////// //Coded by Rajandran R //Date : 05th July 2015 /////////////////////////////////// _SECTION_BEGIN("Rotational Factor - Market Profile");

RF = 0; NewDay = day() != Ref(day(), -1); for(i=1;iH[i-1] AND L>L[i-1] AND !NewDay) { RF=RF[i-1]+2; } //If Current Bar Makes LH and LL if(H
..thanks to Rajendran for this AFL's

//If Current Bar Makes HH and LL if(H>H[i-1] AND LL[i-1] AND !NewDay) { RF=RF[i-1]; } if(H==H[i-1] AND L>L[i-1] AND !NewDay) { RF=RF[i-1]+1; } if(H>H[i-1] AND L==L[i-1] AND !NewDay) { RF=RF[i-1]+1; } if(H0,colorGreen,colorRed),styleHistogram | stylethick); _SECTION_END();

80 % rule if market opens above VA or below VA and coming into VA and remaining there for 1 hour i,e., 2 consecutive candles of 30 min then there is 80 % probability that it (va) will be filled However if price opens above/below previous days value area and haven’t return back then it is a sign of one sided directional move

https://www.marketcalls.in/market-profile/market-profile-different-types-of-profile-days.html

How to Read a Market Profile Chart? Who should start reading a Market Profile chart?

Market Profile is not a trading system but a market generated information and a decision supportive system along with your existing trading systems. It provides you knowledge about who is in control in the market (Long Term Players, Short Term Players, Day Traders), directional conviction. Market Profile gives an idea to a day trader about where to take a trade and which trend to play for the day based on trend conviction.

Nifty Futures – Day Profile

Market Profile study is different from traditional technical analysis indicators. You need to unlearn lots of your so called traditional technical analysis learnings before diving deeper into it. Like any other technical analysis studies, Market Profile consumes lots of time in learning. It requires at-least a live observation for 3 months and parallel reading is needed to understand what other market players are trying to do and how the pro traders and institutional players are driving the market. As a human trader, it often happens that we tend to see what we want to see and react based on limited information. Market Profile solves this perceptual blindness to some extent.

Watch Live Market Profile Charts Market Profile talks about how auction takes place in the market. Financial Market is all about two way auction process where buyers and sellers both drive the price up and down. The byproduct of the two-way auction process is market-generated information. By reading the market-generated information one can learn who is in control in the market(Buyers or Sellers)

and how much confident they are in driving the prices higher or lower. It also helps a day trader to stay away from the retail style crowd play most of the time. How to Read a Market Profile Chart Market Profile was developed by legendary CBOT trader Pete Steidlmayer in 1984. It shows where the auction of trading instrument, explains where the crowd trades most of the time for the day, where trading volume is accumulated most of the time, where trading volume is minimal or absent. Market Profile is not a time based chart rather it organized the trading data and charts the relative frequency of trading at various price levels. By organizing the trading data in terms of profiles (Alphabets) one can study the market structure and market dynamics. Typically Day profile is meant for Day traders where each and every day a free-flowing graphical format called profiles are plotted as shown above.

Readings : How to Get Market Profile and Footprint Profile Charts? Basic Market Profile Terminologies TPO – TPO or Time Price Opportunity is the basic building block of Market Profile. Each and every letter in the chart represents a TPO. Which in turn represents a point of time where the market touches a price. Each consecutive letter denotes a 30min period of Market Activity. In our example as shown below the letter ‘A’ represents how the price traded for the first 30min. Letter ‘B’ represents next 30min of activity. And Letter ‘C’ and ‘D’ represents subsequent market activity details and so on. TPO Size : Practically speaking we need to define the size of TPO to make sure that your entire profile is visible. Generally one can try in Nifty Futures with TPO Size of 3 which mean each and every letter represents a block of 3 points in Nifty Futures. And TPO Size should depend upon the Trading Instrument. For greater accuracy of Key reference levels it is advisable to use TPO size as less as possible but with higher TPO Size more historical data can be seen and key reference levels out of range can be seen with higher TPO Size. Generally TPO Size = Tick Size x Price Per Row For example if Price Per Row = 6 and Tick Size is 0.5 then the TPO Size is 3 points. By default Ninjatrader uses tick size of 0.01 and can be changed depends up on the Symbols tick size. Settings in Ninjatrader are shown below Initial Balance (IB) : Initial Balance represents the first hour of trade. Typically the high and low range of the letters ‘A’ & ‘B’. Longer the length of the Initial Balance stronger the conviction of Long term and Short term players.

Point of Control : Point of control is the price where most of the trade for the day happens. In other words the price where more number of TPO’s in a row. Todays ongoing POC levels are represented as DPOC (Developing POC) and Yesterdays POC (YPOC) and Previous POC levels are plotted as dotted green lines as shown above. Value Area : Value Area is the fair price zone where the Other Timeframe Players (Long Term players and Shorter Term Players) loves to trade in this zone. 70% of the day’s trading happens here. Value Area High (VAH) – The upper level of value area. (upper Red Bracket Level). YVAH – Yesterday’s value area high is marked as Red Dotted Line. Value Area Low (VAL) – The lower level of value area. (Lower Red Bracket Level). YVAL – Yesterday’s value area high is marked as Blue Dotted Line. Single Prints : When there is only one TPO in a Row. From the above picture you can identify that Letter ‘D’ and ‘L’ are single prints. Range : High-Low range for the day

Open Range : First 10 minutes of the market movement range. It is represented as the Blue Vertical lines in the Initial Balance (IB) Range Extension – An extension of price above or below the initial balance. High Value Node (HVN) : An HVN is a price area of high TPO count or volume. The market traded for a long time at this level. These often form support or resistance levels when the price re-visits the area. Low Value Node (LVN) : An LVN is a price area of low TPO count or volume. The market did not trade for very long time at this level. These often form support or resistance levels when the price re-visits the area.

Market Profile : Balanced and Imbalanced Markets In the last tutorial we discussed how to read a market profile charts and in this section we will cover different types of markets (Balanced Markets and Imbalanced Markets) and provide a fair idea who is in control for the day. Balanced Market : It defines a range bound market(sideways) or a bracketed market [where price rotates within the bracketed range]. Balanced markets shows there is lack of conviction among the other timeframe buyers and sellers and typically results in a two way auction process and the price movements occur withing the range.

The above image shows a typical balanced profile (Bell Curve Shaped) where the price rotates within the price range [8609-8654] for the whole day. Volume plays an important role in Market Profile. When Prices move outside a balanced area, or trading range, without the presence of volume, it tends to return to the area. Generally the participation of the Longer Timeframe trader(Buyers and Sellers) are minimal and they dont have a strong influence in the market direction. The whole day is either controlled mostly by shorter timeframe traders or the locals (Day Trader). Such rotational days provides very minimal opportunities for a day trader.

Watch Live Market Profile Charts Balanced profile days are typically slow and boring. Most of the trend trading strategies fails during these days and sometimes could yield consecutive losses in a stretch when the markets are highly compressed for more than 3 days. Identifying such days during the development of the profile are the key for a day timeframe players to set ‘what to expect from todays market’. Balanced Market Occurs 1)Before any bigger economic events, news are expected (e.g RBI policy announcement, FED meeting ..etc) 2)Consolidation in the market after the uptrend or downtrend. 3)Low Participation from the Other timeframe players or Institutional players (Christmas & New Year holiday season) 4)Lack of liquidity(both buy side and sell side) in the market. The result of this price rotational process is the discovery of prices that are acceptable to both the buyers and the sellers. Imbalanced Market : It represents a trending market (uptrend or downtrend). Imbalanced market shows the conviction of other timeframe players. The auction is said to be one sided or directional where there are either more Buyers than Sellers or more Sellers than Buyers depending on the direction of price. Imbalance of buyers will drive the prices higher till the buyers exhausted and the sellers takes control of the market. And the Imbalance of Sellers drives the market lower till the sellers get exhausted and the buyers takes control of the market. The above picture shown the imbalanced profile. The days are typically elongated and vertical. And the range extension is typically one sided most of the days. Range extension confirms the presence of other timeframe players. Typically these days are fast and highly volatile and the risk reward ratio for the day trader is much higher on trendy days. Imbalanced Market Occurs When 1)Major economic event days (RBI rate decision day, Election Results Day, GDP Announcements…etc) 2)Major catastrophic events. 3)Opening Gap Up or Gap Down days due to major positive or negative news impact. 4)Strong Global Markets Sentiment.

Market Profile : Different Types of Profile Days Welcome to Market Profile Series. In the last tutorial, we saw the different types of markets (Balanced and Imbalanced). In this tutorial, we will be discussing about the different types of Market Profile Days. By analyzing the shape of profile, one can easily identify    

who is in control in the market. whether other timeframe players are present for the day. What the market is trying to do. Which direction market is attempting to move Which are the key levels market is attempting to test or re-visit

If you are new to market profile it is recommended to start here How to read a market profile charts Non Trend Day Non Trend day is a balanced market profile which occurs before an major economic event, news, earning result outcome to happen resulting in lack of participants and a typical dull boring day. Range (high-low) for the day is very compressed and the risk-rewarding nature for an intraday trader is very less. Market likes to auction both the sides centered to the point of control. Only scalping the market favors an intraday trader on these non trend days.

Non Trend Days are mostly inside day where the current day’s range is within the previous day’s high-low range and the price rejection (at high or low) happens near to the previous days high volume node. There is no range extension on either sides which shows lack of other timeframe traders and the price rotates within Initial Balance. Market shows very low volatility and the Initial Balance is very small. Normal Day Normal day is a balanced market profile but with a wider Initial Balance. It occurs generally when there is a news release post previous days market hours or due to global market sentiment(too negative or too positive). This action is followed by range extension on the direction of the sentiment and the long term traders or investors are responsible for the such action (driving the price outside (which can be identified with single prints) the range extension). But, due to lack of conviction among the participants, the one sided directional move comes to an end and the price reverses back to test the other side of range extension.

Price generally rotates near center of the profile and the maximum participation happens at the center of the profile with higher volumes at the POC (point of control). Single prints(Buying tails and Selling tails) on both the sides indicates lack of conviction among both the other timeframe buyers and sellers. Profile shape looks like a perfect bell curved shape. No one is control of this market type and the risk reward ratio is higher for a day trader at the extremes. More wider the initial range, more risk-rewarding for the day trader. However, the profile is low risk rewarding for new shorter term traders or long term players (who holds the position for more than a day) as the market closing is very close to the center of the profile. A Profile day with wider initial balance with no range extension is also considered as normal day. Normal Variation Day Normal Variation Day is typically an imbalanced profile and the day is dominated by large timeframe players (Buyers or Sellers). Long time-frame players are waiting for the market to settle down where they consider the price to be fair and then they take control who drives the market aggressively post 11.00a.m or 12.00p.m with the range extension outside the initial range. The range extension is more than 2 times the Initial Range And the Initial Balance is typically smaller than the normal day but higher than the trend day.

The above picture shows a typical normal variation up day where the range extension happens in the ‘G’ period and the length of range extension is 2x Initial Balance. Trend Day Trend day is an imbalance profile where the day is controlled by the long timeframe participants and the conviction is very strong among the long timeframe players right from the beginning of the market. A Perfect Trend Day looks like low of letter A > B > C > D in a uptrending market and the high of letter A > B > C > D in a down trending market. However price overlap in A,B,C,D may occur.

Profile shape is vertical, elongated and very few price rotation and clear sign of one sided trend right from the beginning. And the Value Area is typically very large on a trend day. RiskReward Ratio is typically higher for a day trader during Trend Days. Double Distribution Day Double Distribution is an imbalance profile where Initial Balance is small and the first price rotation (1st Balance Region) happens at Initial Balance. Then, the larger timeframe traders take control and drive the price in one direction. In the later session, another price rotation happens at the other side of the edge(2nd Balance Region). Both the price rotation regions should be separated by single prints. Risk-Reward Ratio is typically higher for a day trader during Double Distribution Days.

Neutral Day Neutral Day is a balanced profile where initial range is smaller than Normal day. Both the Other timeframe buyers and other timeframe sellers are Present. They don’t trade directly each other but the intraday trader will act like a mediator between both the larger time-frame buyer and seller. a trader to assume as normal day or normal variation day during the development of profile but the failed range extension pushes the price to the other side of the edge and trade back and forth. Such profile days occur generally when the VIX is higher. If the price closes at the center/balance, then it is called Neutral Profile Center and if the price closes at the extreme edge of the profile it is called at Neutral Day Extreme. P Profile Shape P Profile days are short covering days and the letter A or B forms the bottom with single prints in the Initial Range and market opens at the bottom of the profile. The price rotation happens at the top of the profile (i.e at the range extension area).

b Profile Shape b Profile days are long exit days and the letter A or B forms the top with single prints in the Initial Range and market opens at the top of the profile. The price rotation happens at the bottom of the profile (i.e at the range extension area). Risk Reward ratio   

lower in Non Trend Day, Normal Day. neutral in normal variation day and Neutral Day higher in Trend Days and Double Distribution Day

Initial Balance Range     

Non Trend Day – Narrow IB Normal Day – Wider IB Normal Variation Day – less than Normal Day IB Trend Day – Narrow IB Double Distribution Day – Narrow IB

In the next tutorial we will be discussing about the how to trade 80% rule , a simple and effective strategy to trade value area Onetimeframing against Initial Balance is one of my favorite intraday trading strategy with a fairly decent win rate(60-70%). Concept is adopted from market profile to trade against majority of the weak intraday players. Initial Balance is nothing but the first 1 hour high and low range. Whenever price started one timeframing against the Initial Balance direction it shows the presence and confidence of day timeframe players. To Measure the overall IB direction first three bars of 30min is taken in this case and the direction is measured relative to day open.

Trading Rules Timeframe to Practice : 30min Strategy Buy – When Initial Balance direction is up (First Three Bars turns green) and price starts one timeframing down (consecutive 4 or 5 bars (30min) making consecutive lower high then look for a potential target towards the test of day high. Short – When Initial Balance direction is down (First three bars turns red) and price starts one timeframing up (consecutive 4 or 5 bars (30min) making consecutive higher lows then look for a potential target towards the test of day low. Amibroker AFL Code to implement the rules. However the trading system implmented in Amibroker is semi systematic as mostly stoploss is decided based on market profile charts (mostly adopting structural stops rather than a conventional stops). Trades will be initiated only post 12:45p.m. so one have really learn to wait to trade this trading system. What are the other stop loss rules can be praticed : One can adopt ATR based stops. However trailing stops might not work towards the trading strategy Does the code looks into the future : Yes it looks into the future bars as it is required part of the coding Does the code repaints the signals : No the code does not repaint the signals. Signal comes ones the new bar opens and the condition satisfies in the previous bar setups. Amibroker Database Settings Amibroker Database setting is essentially required to set the time of the first candle to set from 9:15-945a.m to align with market profile trade setups Goto File->Database Settings->Intraday Settings and set the time settings as shown below

Amibroker Preference Settings Goto Tools->Preferences ->Intraday and select the check box Start time of the Interval (recommended)

_SECTION_BEGIN("Price"); SetChartOptions(0,chartShowArrows|chartShowDates); _N(Title = StrFormat("{{NAME}} - {{INTERVAL}} {{DATE}} Open %g, Hi %g, Lo %g, Close %g (%.1f%%) {{VALUES}}", O, H, L, C, SelectedValue( ROC( C, 1 ) ) )); marketstarttime = 091500; IBendtime = 101500; tradestarttime = 124500; tradeendtime = 144500; sqofftime = 144500; SetPositionSize(1,spsShares); IBup = Null; IBdn= Null; newday = Day() != Ref(Day(),-1); DayOpen = TimeFrameGetPrice("O",inDaily); DayHigh = TimeFrameGetPrice("H",inDaily); DayLow = TimeFrameGetPrice("L",inDaily); ORBH = IIf(TimeNum() < IBendtime, Null ,ValueWhen(TimeNum() == IBendtime,HighestSince(newday and TimeNum() < IBendtime,H))); ORBL = IIf(TimeNum() < IBendtime, Null, ValueWhen(TimeNum() == IBendtime,LowestSince(newday and TimeNum() < IBendtime,L))); color = IIf(ORBH - DayOpen > DayOpen - ORBL, colorGreen,IIf(ORBH - DayOpen < DayOpen - ORBL, colorRed,colorGrey40)); IBup = TimeNum() > 101500 AND ORBH - DayOpen > DayOpen - ORBL; IBdn = TimeNum() > 101500 AND ORBH - DayOpen < DayOpen - ORBL; OTbuy = Ref(H,-4)>= Ref(H,-3) AND Ref(H,-3)>= Ref(H,-2) AND Ref(H,-2)>= Ref(H,-1); OTsell = Ref(L,-4)<= Ref(L,-3) AND Ref(L,-3)<= Ref(L,-2) AND Ref(L,-2)<= Ref(L,-1); SetTradeDelays(0,0,0,0);

Buy = IBup AND OTbuy AND TimeNum() >= tradestarttime AND TimeNum() <=tradeendtime; BuyTarget = HighestSince(newday,H); Sell = TimeNum() >= sqofftime OR Cross(H,Ref(BuyTarget,-1)); Short = IBdn AND OTsell AND TimeNum() >= tradestarttime AND TimeNum() <=tradeendtime; ShortTarget = LowestSince(newday,L); Cover = TimeNum() >= sqofftime OR Cross(Ref(ShortTarget,-1),L); Buy = ExRem(Buy,Sell); Sell = ExRem(Sell,Buy); Short = ExRem(Short,Cover); Cover = ExRem(Cover,Short); BuyPrice = Open; SellPrice = Open; SellPrice = open; CoverPrice = open; PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorGreen, 0, L, Offset=-40); PlotShapes(IIf(Buy, shapeSquare, shapeNone),colorLime, 0,L, Offset=-50); PlotShapes(IIf(Buy, shapeUpArrow, shapeNone),colorWhite, 0,L, Offset=-45); PlotShapes(IIf(Short, shapeSquare, shapeNone),colorRed, 0, H, Offset=40); PlotShapes(IIf(Short, shapeSquare, shapeNone),colorOrange, 0,H, Offset=50); PlotShapes(IIf(Short, shapeDownArrow, shapeNone),colorWhite, 0,H, Offset=-45); PlotShapes(IIf(Sell,shapeStar,Null),colorGreen); PlotShapes(IIf(Cover,shapeStar,Null),colorred); Plot( C, "Close", IIf(newday OR Ref(newday,-1) OR Ref(newday,-2), Ref(color,2),IIf((Ref(OTbuy,1) OR Ref(OTbuy,2) OR Ref(OTbuy,3) OR Ref(OTbuy,4)) AND TimeNum() >= 104500 AND TimeNum() <=150000,colorBlue, IIf((Ref(OTsell,1) OR Ref(OTsell,2) OR Ref(OTsell,3) OR Ref(OTsell,4)) AND TimeNum() >= 104500 AND

TimeNum() <=150000,colorYellow,colorGrey40))) , styleNoTitle | ParamStyle("Style") | GetPriceStyle() ); Plot(ORBH,"ORBH",colorBlue); Plot(ORBL,"ORBL",colorred); _SECTION_END();

Intraday Volume Profile Distribution – Amibroker AFL Code

Intraday Volume Profile Distribution – Amibroker AFL Code //Coded by Rajandran R //Author - Marketcalls //Date : 01st Jan 2017 _SECTION_BEGIN("Intraday Volume Profile Distribution"); SetChartOptions(0,chartShowArrows|chartShowDates); // Implementation of Intraday Volume Ladder Distribution overlay using PriceVolDistribution and low-level graphics bi = BarIndex(); //Bars_so_far_today = 1 + BarsSince( Day() != Ref(Day(), -1));

StartBar = ValueWhen(Day() != Ref(Day(),-1), BarIndex(),1); TPOSize = Param("TPO Size",1,0.01,1000,0.01); //Set TPO Size LotSize = Param("Lot Size",75,1,50000,1); // Set LotSize sdvb = LastValue(Startbar); fvb = FirstVisibleValue( bi ); lvb = LastVisibleValue( bi ); TH = TimeFrameGetPrice( "H", inDaily, 0 ); TL = TimeFrameGetPrice( "L", inDaily, 0 ); tbin = LastValue(ceil(TH-TL))/TPOSize; mx = PriceVolDistribution( H, L, V, tbin, true, sdvb, lvb ); GfxSetCoordsMode( 1 ); GfxSelectPen( colorRed ); bins = MxGetSize( mx, 0 ); largest = mx[0][1]; lbar = Null; for( i = 0; i < bins; i++ ) {

if (largest < mx[i][1]) { largest = mx[i][1]; lbar = i; }

} for( i = 0; i < bins; i++ )

{ price = mx[ i ][ 0 ]; // price level relvolume = mx[ i ][ 1 ]; // relative volume 0..1 relbar = relvolume/LotSize; GfxMoveTo( fvb, price ); //GfxLineTo( fvb + relbar, price ); GfxSelectFont("Tahoma", 8, 300 ); if(i==lbar) { GfxSetBkColor( colorred ); } else { GfxSetBkColor( colorblue ); } GfxSetTextColor( colorwhite ); str = NumToStr(ceil(relbar),1); len = StrLen(str);

if(len == 3) { str = str +" "; } if(len == 4) { str = str +" ";

} if(len == 5) { str = str +" "; } GfxTextOut(str, fvb, price ); } Plot( C, "Price", colorDefault, stylecandle ); _SECTION_END(); Volume profile is a key study when comes to understanding the auction trading process. Volume Profiles will show you exactly how much volume, as well as relative volume, occurred at each price as well as the exact number of contracts for the entire session. It is a visualization tool to understand the high activity zone and low activity zone. Volume profile measures the confidence of the traders in the market. From short term trading perspective monitoring the developing volume profile in realtime make more sense to track current market participation behavior to take better trading decisions. Here is the simple AFL Code we developed to understand the Intraday Volume Profile Distribution using Amibroker PriceVolDistribution and low-level graphics functions. Volume Point of Control is highlighted with red color block as it is the place where market finds its equilibrium and where most of the traders agree to trade at the fair value for the day. External Chart Control is added to vary the TPO Size and Lot Size for each and every individual scripts. After applying the indicators one can control the values by right clicking over the charts and select parameters. Note : 1)Code is compatible with Amibroker 6.0 and above and will not work in lower versions as lower Amibroker versions doesn’t support matrix operations. 2)If you are applying the indicator to cash markets then set the Lot Size as 1. In case of future scrips relevant lot size. Final output of the volume profile on the left side is shown in term of no of contracts traded at each and every price level for that given day.

One Timeframing and Amibroker Exploration Code One Timeframing is a simple, powerful and popular concept when comes to a market profile trader. One Timeframing generally refers to a market that is trending in one direction. In simpler terms candlesticks constantly making higher high and higher lows lows and the consecutive candles should not breach the lows of previous candle by not more than 2-ticks in the up trending move then it is called One Timeframing Up. IF the candles/bars are constantly making lower high and lower lows lows and the consecutive candles should not breach the high of previous candle by not more than 2-ticks in the down trending move then it is called One Timeframing Down.

One timeframing happens across all the timeframes but from a intraday trading perspective 30min daily profile charts provides meaningful indication for mean reversion trading. Either one can practice mean reversion trading, partial profit booking or tighten/trail his stops when one timeframe occur on 30min charts. Post One Timeframing occurrence either the market can balance(move side ways) near the Onetimeframe zone or mean revert. One Timeframing is a very good visual concept for a day timefram traders perspective. The following One Timeframing Indicator and Amibroker Exploration provides onetimeframing indication with red and green circles and indicate the presence of one timeframing visually. The afl code looks for a minimum of 4 consecutive candles for the occurance of onetimeframe activity. One Timeframing Amibroker Exploration Code //Coded By Rajandran R //Date : 12 Jan 2016 _SECTION_BEGIN("One Timeframing Exploration"); SetChartOptions(0,chartShowArrows|chartShowDates); _N(Title = StrFormat("{{NAME}} - {{INTERVAL}} {{DATE}} Open %g, Hi %g, Lo %g, Close %g (%.1f%%) {{VALUES}}", O, H, L, C, SelectedValue( ROC( C, 1 ) ) )); Plot( C, "Close", ParamColor("Color", colorDefault ), styleNoTitle | ParamStyle("Style") | GetPriceStyle() ); OTsell = Ref(H,-4)< Ref(H,-3) AND Ref(H,-3)< Ref(H,-2) AND Ref(H,-2)< Ref(H,-1) AND Ref(L,-4)< Ref(L,-3) AND Ref(L,-3)< Ref(L,-2) AND Ref(L,-2)< Ref(L,-1); OTbuy = Ref(H,-4)> Ref(H,-3) AND Ref(H,-3)> Ref(H,-2) AND Ref(H,-2)> Ref(H,-1) AND Ref(L,-4)> Ref(L,-3) AND Ref(L,-3)> Ref(L,-2) AND Ref(L,-2)> Ref(L,-1); shapes = IIf(OTsell,shapeHollowCircle,IIf(OTbuy,shapeHollowCircle,Null)); color = IIf(OTsell,colorred,IIf(OTbuy,colorgreen,Null)); offset = IIf(OTsell,H,IIf(OTbuy,L,Null)); PlotShapes(Ref(shapes,1),Ref(color,1),0,Ref(offset,1),-12,0); Filter = OTsell OR OTbuy; AddColumn(C,"Close",1.2); AddColumn(Ref(OTbuy,1),"OT Buy",1);

AddColumn(Ref(OTsell,1),"OT Sell",1); _SECTION_END(); Naked POC: It is a POC from a previous days that price has not returned to on any of the following days. Since POC is point were price has retured max times ,it will act as magnet and any untouched POC (Naked/virgin) will pull the price to that level. 09-08-2016 Values :VAH: 8745 POC 8679 VAL 8610 Basing on this if NF don’t close above 8745 then it will move towards 8679 if not returned from this then it can move towards 8610 levels for this week Today action: Today nifty rested above 8745 and retured towards lower areas forming Poor High there and touched 8679. VAH :8721 POC :8697 VAL :8673 With respective to daily if NF not crossed 8721 With in IB then 8697 and 8673 , 8610 but if moved Above 8745 then NF will resume its upwards trend Upon on this I will plan my intraday for tomorrow For all this study use 30min charts mp daily for intraday, weekly( for broader out look for entire week)

Pls share ur views, how to read this level? This image taken @ Today 10.30 AM Note : As a beginner wanna read this chart by parallel reading of ur contents. Now CMP @Crude Mini – 2830 Please note that ,Market Profile is a way to simplify the market price action and determine the area which traders found to be fair value. While the Market Profile is not an entry and exit method in itself, we can use it as a gauge of market sentiment to determine what levels are likely to see lots of action, and to identify early on what type of day is forming. XRAY, does it mean that when we start every morning, we should be clear with yesterday's analysis with following things: All for yesterday : POC, VAH, VAL, DH, DL, type of day and ongoing trend Once at 9.15 when market opens, we get open value and based on open value and first hour of trade, we define day as one of the five? yes is the answer !!! To understand the market perfectly yesterday's Market Profile is very important, especially if you are a day trader, it gives a referral point..just refer the books i recommended adding time factor makes any trading system much more robust !!! My one query is how many types of days we can have in MP? I guess 4 days : Balanced day which is tight day with perfect bell shape distribution, "P" type imbalanced day, "b" type imbalanced day & "B" type double distribution day. So can these 4 types summarise MP day type for any given day? Or is there any different type of classification? Just go through Post No :58 read the entire link i have shared all that... P is shorting covering rally b is Long liquidation and B is nothing but two way action !! these are just ways of describing last day action ..what can we do with that for todays trading !!! profiler use this to recognize the way of balance and imbalance and distributions .. ...only factors we can use and trade are Va's POC and NPOC as DP!!! On Amibroker Major Disadvantages: TPO Lettering works only in the 30min charts. In the 5/15min charts letters repeat horizontally. It is recommended to use only 30min timeframe if you are using a Daily Profile Charts. You have to vary the TPO Density (Default value = 3) to get the proper Alphabet alignment. And the TPO size varies from stock to stock. One has to manually set the TPO Density (mostly depends upon stock price and intraday price movement). However lower TPO density values are preferable to get close to accurate values.

Extensive zoom out will collapse the charts and scroll back will work only to certain extent. It is recommended to use bar replay feature in amibroker to simulate the past historical profile charts. POC, VAH, VAL levels calculation methodologies are still with some flaws but the values are very close to the actual on most of the days. Suits for beginners who want to learn market profile at a minimal cost. But definitely not for professional traders. Source:market calls Naked POC: It is a POC from a previous days that price has not returned to on any of the following days. Since POC is point were price has retured max times ,it will act as magnet and any untouched POC (Naked/virgin) will pull the price to that level.

Amit !! it is "POC" which is untouched at that in the above case it is weekly also... we have to check in that manual untouched "POC".. i don't found proper AFL for that NPOC... if found in daily then its NPOC ,if we wound that in weekly then it is weekly NPOC... as i said these acts as magnets and price often comes there !!!! The most useful characteristic of Market Profile is how it paints the picture of acceptance and rejection of price over time. Just Morning opening and IB told it will be a balance day ( non trending) holding that 80 % rule,done two trades one ended in minor loss and another was good one !!! red and green lines are VAL and VAH blue is POC. NPOC :Naked Point Of Control I think some confusion is there in understanding NPOC & as requested by members i’m once again explaining this concept in details Naked POC: a POC from previous days trading range that price has not returned to on any following days. So in any given day if market was traded above or below the POC with out touching it …then for next day it will be a naked POC … If we see daily profile in 30 mins we get poc of daily and if that was not touched it will be come daily NPOC and Weekly NPOC and as per MP theory they act like magnets and price drifts to there location. Just see Day 1 DPOC of will be next day POC on that day 2 market action never touched POC 1 so that makes it Naked POC , in same way day 2 POC was not touched on day 3 and day 4 poc was untouched on Day 5 these NPOC's acts as magnets and price pulls to then as per profiler language. if first 1 hour of trade in case we are just in the previous day VA range then (open and closed with in that range) we can presume that day 80% chances are end up as non trending day.

So generally if market opens in range, should we simply wait for first one hour? If it stays in range like today, its tight day and look for range day techniques. If market opens in range and moves one way( as it did on 10th that is yesterday, then simply look for pull back in the direction of ongoing trend. Right? irst of all weekly Profile is important ..then daily 10 th was a day which was already in down move for a target of 8610 and 8595 levels ,yesterday failed at PDVAH which is perfect area to short !!! But today after reaching all targets in weekly we have to go by previous day va 's and dp so there we have to wait for 1st hour as it opened in range and 2 nd 30 mins was also closed in range... Bottom line :Higher time frame rules...so we are just riding higher time frame profiles if not available then previous day is the only option !! OTF TF gets me to draw !!!

Trading impulsive moves are much better then corrective moves,An impulsive move is one whereby the market moves quite strongly or heavily in on direction, covering a great distance in a short period of time. These moves tell you when the imbalance between the buyers and sellers is really strong and there is heavy participation from the institutional side. Logically, more money can be made during these impulsive moves, as they cover more points in less time.They are generally more volatile, and thus provide us with great opportunities to get more R (reward) with less risk since the market will stretch more easily in one direction. But no matter what, we want to be trading with these moves as much as possible, not against them. Three Characteristics of Impulsive move 1) Large Candles (bodies) 2) Mostly of one color (blue/bullish, or red/bearish) 3) Closes towards highs/lows of the move Corrective moves character

1) Smaller Candles 2) Greater mix between red/blue or bull/bear candles 3) Closes more towards the middle with larger wicks Thus, if you apply the logic of impulsive moves, you can easily understand and identify corrective moves. Impulsive moves about 75% of the time are followed by corrective moves. These corrective moves can either be horizontal, slightly against the impulsive move, or even slightly in the same direction, but they denote a change in the order flow and participation. Always remember :

A TA follower duty is to -Find the right direction -Staying in the trend -Spotting great pullback opportunities to get back in with trend

-Knowing when the market will continue and when the market is likely to reverse -How to find some of the more profitable moves in the market (impulsive) -Knowing who is in control of the market A big mistake many traders make is that they treat price action like a blueprint or template trading methodology :lol: and just hunt for candlesticks that fit their textbook criteria In trading, everything is relative and you need to put price information in relation to what has happened before.. Just go through logic of candle stick in context .

Sturgeon's law. "Ninety percent of everything is crap". Derived from a quote by science fiction author Theodore Sturgeon, who once said, "Sure, 90% of science fiction is crud. That's because 90% of everything is crud."

Taking this in to account in science 90 % experiments fail ,90 percent of poetry, 90 percent of philosophy books, 90 percent of peer-reviewed articles in mathematics- is crap. :lol: In trading 90 to 95 % traders fail, simply they follow crap as per Sturgeon's law which applies to trading as well... Example : 1. Price action basing on tens of DP's

2. Swing points based methods on after event..the method offers 90 % failure rate

3. S& R trading in which most people fail ,when they use too much vertical lines

To come out of this JOOTSING is the bestway JOOTSING is a term collected by D. Hofstadter and stands for “Jumping Out Of The System”. This is an important tactic not just for creative writing, philosophy but also in science and trading. JOOTSING made me to understand D and S as well as MP in most unconventional way Trend trader swift points which he must always remember: 1.Trend trading is not forecasting or predicting 2.Trend Trading is reactive in nature. 3.Trend Trading demands following the market not guessing or wild emotions 4. Trend trader Avg profit per trade is significantly higher then average loss per trade

Trading discipline : Discipline is the ability to construct a set of trading rules and to stick to those rules as unemotionally as possible .

An excellent trader should have the ability to trade the markets with a detached mindset, respecting the market as a wild beast that cannot be tamed, but one that can be beaten over the long term but setting rules and abiding by them with steadfast strength and discipline, knowing that those rules will give him an edge over the market forces.

Pulling the trigger The ability to pull the trigger is another key discipline that must be respected. This comes down to selfconfidence in the traders rules.:clapping: Methodology A solid trading methodology is of course very important to a trader success. Work out what works for you. Every trader will have different objectives, timeframes, risk tolerances and trading setups that appeal.

This week task is to rise my self for new F.Y ..in terms of trading swiftly in OTF in intraday..rising quantity in Initial order..then at add -on

Trading system strike rate: Trading system which huge strike rates of 70 are very rare in intraday,but positional side it is possible.why because of the time factor Question is can we find this 90 % strike rate in intraday.. it is snake oil :lol: ,as trading days of trending is 20 % and if we can catch that at max 70 to 80 % of the trend then..u la la..but what you will do on remaining 80 % of the time ??? lose what we got in those 20 % trending D and S protected me up to 60 % of the drain,but after putting MP protection level reached 80 %. 50 % strike system gives number of trades,40 to 30 % strike rate you will be in 20 20 match .90 % strike rate trades are very very rare, this rarest occurrence waiting time for this causes trading fatigue

A 50% strike rate for example is liable to suffer consecutive losing runs of 6-7, a 40 to 30 % strike rate liable to experience losing runs of 11+ at some point. A 90% strike rate is liable to experience a consecutive losing run of max 2, more commonly 1, when it occurs . I got that setup in positional side with VPOC and VOL.Divergence ,but very rare setups which offers 90 % stike rate…in last one year it come just one time ..in that case I take maximum relaxation in MM to capture this. Psychological issue in trading lower strike system In trading a lower strike rate system/methodology there are naturally more losing trades and crucially more consecutive losing trades. Our brains remember past losses and irrationally place more emphasis on them than the winners, resulting in it fearing more losses to come. Further to this, such a consecutive run of losing trades can also interfere with the ability to actually place the next trade when the trading edge presents itself, fearful of further losses, thus interfering with the natural flow of probability upon which all trading edges rely. Physical discomfort and Fear are powerful debilitating factors on the ability to profit from a trading edge. Confidence in a trading edge can be shaken because it's user does not understand it's potential for delivering a consecutive losing run over any given sample and how long that consecutive losing run can be. This in turn can lead to the mis-management Solution The only effective solution in helping to overcome these potential physiological barriers, available to trader is to seek a trading edge that has a high strike rate over any sample of set-ups or to get protection from drain of losses,by avoiding tight range days and sharp edge days ,I took the second option with MP as i'm a trend trader. Finally words of Michael Marcus are most important..

Failure in trading !!! 1. The vast majority of new traders fail simply because they did not do their homework before they started trading. 2. A trader has to build a trading system that matches their own personality and risk tolerance levels. 3. A trader that chooses to be master a specific type of trading method or trading vehicles has a much better chance of success than the traders that just dabble in many different things and never make much progress. 4.Pro traders also fail when arrogance is reached in there mind,which make him believe he him self is the market 5.Another reason for Pro failure is to move is swift phase to lower risk setups without distinguishing between low risk setup and lowering of risk in trading first is a trade setup and second is MM segment Any method intra/swing/positional is not a cup of tea !!! it is the trader who has to make it cup of tea !! if a person fails whether he is coder or doctor or engineer it is problem of his own...trading success and qualification has no correlation !!!

Fat finger error akka self goals A fat-finger error is a keyboard input error in the financial markets such as the stock market or foreign exchange market whereby an order to buy or sell is placed of far greater size than intended, for the wrong stock or contract, at the wrong price, or with any number of other input errors This is problem with me ,which i put 1 or 2 trades in every quarter which gives a current shock to trading account Notes to self to avoid this error: 1.Repetitive data entry can lead to fatigue and what is known as familiarity blindness. If your hands get used to typing in the same number over and over, muscle memory might ensure they continue to do so, regardless of what you meant to type. 2.Remind yourself you’re never an expert, because with greater skill comes greater unconscious automation of your actions, which means paying less attention to the display.

3.Pay attention to the units. 4. Trade only on days of trend (Va'gaps,PDH,PDL blow out) and avoid other days,quality of trades are more important then number of trades. Who is trader is he can be called as “Professional Uncertainty Manager.” Trading is a business of possibilities, not certainties. Despite our best efforts to predict financial markets, we’ll inevitably be wrong time and time again. Many of our bets will lose purely due to bad luck or unforeseen It doesn’t matter if they were objectively good bets. We want to risk capital when the odds are in our favor. The goal is to continuously place positive expected value (EV) bets. If a bet has positive expected value, it means that over time placing it again and again will result in net positive profits. The outcome of any single bet may be negative, but that doesn’t matter. The net profits at the end are the focus

Calculating EV before placing a trade is crucial. But it’s important to remember that markets are a continuous event, not a discrete one This means that expected probabilities and payoffs change as time passes. Bayesian analysis, it is a statistical program that answers unknown it is based on observed distribution ,rather prior distribution ,which means we update probabilities and payoffs as new information becomes available. Say we are short and RBI meet interest rate is reduced, This new information and subsequent price action would force us to re-evaluate the expected value of our short bet, possibly causing us to exit the trade altogether. Best way to trade event risks like RBI,FOMC ,Budget days with separate pattern which based on Bayesian analysis named as “Event Pattern” Psychology (quick points for self) 1. Trading affects psychology as much as psychology affects trading. 2. Emotional disruption is present even among the most successful traders. 3. Winning disrupts the trader’s emotions as much as losing. 4. Successful traders possess rich mental maps

An effective market selection is important and you should only look for markets that offer clear price action and stay away from markets that are too erratic and noisy. In my case of two index trading effective market can be spotted with first 15 mins and if that is not trading then i should stop trading in intra..as trend moves are just 5 to 10 % these days There is no issue in swing/positional !!!! Revamp plan is placed for intra and now scaling is possible in meaningful way..is my quest for intra finished !!!! Simplicity in trading and optimization: (notes to self) Traders often think that price action is superior and very good arsenal for getting big but fact of the matter is a confused form of simplicity leads to greater pit falls in trading, in simple words after a series of losses ,traders remove all indicators and if he names it as simple approach and once again he focuses on entries ,but finds himself in mess with regard to Profit booking (PB) then it will lead him into greater problems Trader should know that simple does n’t mean easy,he should know his system as a whole or else he will find hole in the ledger

:lol:

Similarly traders often add points as observations,but they don’t check on larger sample size before addition ,

Secondly each point added becomes a trade setup and he has to frame the MM rules for this but he grossly ignores this point and this is another factor for blowing the accounts

Bottom line: Simplicity means certainty and clarity not ifs and buts akka guesswork and confusion Belief system Growth is painful. Change is painful. But nothing is as painful as staying stuck somewhere you don't belong. - Mandy Hale. Stop the pains and start creating new beliefs i have been stuck in quantity growth in intraday at par with swing/positional system !!! :yahoo:

!!! now added new belief system,and i can move

New beliefs (notes to self) You need to tell yourself that you will succeed in trading. If not, you will NEVER succeed in trading and anything in life. To gain success, you need to put in the time and efforts. You need to make sacrifices. It means you need to spend hours in reading, back-testing your strategies and trade journaling to improve the way you trade. Sad to say, success is not guaranteed even when you commit the time and efforts. However, if you don't even put in the time and efforts it is a guarantee for failure. Don't aim to make a millions first however it can be your ultimate goal. Your FIRST and ONLY goal in trading is CONSISTENCY and not just profits. CONSISTENCY it is having a trading plan which follows a daily, weekly and monthly routine which are based on rules and conditions for entry, exit and risk management. Balance with all sides !!! Only points i should carry is to Maintain a positive trading attitude that will improve your money management and risk management skills. A negative trading mentality will alter your thinking and mindset. Your attitude will determine whether or not you are profitable with your trading. Your attitude is more important than your market knowledge and even your level of experience. It is important how you react to the market and not what the market will do to you. When to break the rules !!! i have to implement this rule 5

“Losing a position is aggravating, whereas losing your nerve is devastating.” – Ed Seykota Three components of trading that have to be managed correctly for the trader to be successful. Risk management, System management, and Mental management. The majority of the 90% of traders that fail not because of their system or risk management but because of their own mind. This also includes professionals along with retail traders. A trader can be mentally ruined by stress, ego, arrogance, stubbornness, fear, greed, and emotional instability. These factors cause the bad decisions that inflict so much emotional and mental pain that it leads to just giving up. Vertical scaling in quantity: Till NF/BNF lot size was small , scaling phase is excellent in intraday with 1 min TF,but once the lot size increased intra-day scaling is a minefield even with 3 min TF with quantity gaps swing/positional i can go with quantity of my choice !!!

,thanks to

with in given circumstance is vertical quantity rise is possible in intraday ??? well, if you can restrict yourself to trend time it is possible, what are they ?? first va gap,price moving past pdh, or cracking below pdl, and offcourse 2pdh and 2pdl also important...most importantly atleast 80 % of the trend should be captured and move towards 15min is a must This changed tactics must be implemented from April series after all in words of Henri Simoes

so i have to launch my self in all 3 sides of trading. Support and resistance in trading also leads to emotions factor

Hard Fact A trading edge in the financial markets can be described as a set of conditions that when present, give a higher probability of a trade working than not working. Despite having an edge, there will be losing trades as well as winning trades. Trading in the direction of a trend does not guarantee a winning trade,

merely a higher probability of a trade working out.

The first trade that you take in the direction of the trend could be a losing one However, taking a series of trades in the direction of the trend is likely to result in trades that win. SECOND LEVEL THINKING Does Big players,in other words smart money knows what we are going to do !!! ?? I.e., where and when they(Retailers) are buying/selling and where they put their stop orders? That’s because the big players know what are being taught in the books!:lol::lol: Does this means TA is useless ?? no ,it helps us to understand what the amateur traders are thinking or doing To become a profitable trader, you need to have a deeper understanding. You need to play the game behind the game. What do I mean by that? Simply said, you need to anticipate what other people are anticipating. You need to do second-level thinking.

Offensive and Defensive Trading • Your entry signals are your offense • Your trailing stops for winning trades are your defense for not losing your open profits. • Letting a winner run is your offense, cutting your loser short is your defense. • Your automatic buy stop is your offense and your automatic stop loss is your defense. • Buying a monster stock is an offensive move, planning on how you will exit with your profits is your defensive move. • Identifying a trend is your offensive play while creating a trading plan on how to trade it is your defensive play. • Your choice on what to trade is playing offense, choosing your position size is playing defense. • Your watch list is playing offense choosing how much capital to risk on any one trade is playing defense. • In trading your wins are not permanent and your profits can be taken back, when you score you have to next ensure that you are not scored on. The goal of keeping your hard earned profits has to be far above the desire for making quick money with big risks.

Five pointer for self 1. Price has memory. What did price do the last time it hit a certain level, Chances are it will do it again.

2. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action akka jhand market 3. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers. 4. Bottoms take longer to form than tops. Fear acts more quickly than greed 5. Beat the crowd in and out the door. You have to take their money before they take yours.

Construction of trading plan needs analysis to frame the edge, if it is "try and fail" concept end result will be "Quit"

Passion For Trading!!! You probably think you have passion for trading, but do you have what it takes. The wannabe traders have a passion for trading. They just want to find opportunities to trade. It should not be the case as by doing so it is the ingredient for failure. If you are having the wannabe mindset, I suggest that you change your mindset now after seeing this post. Real traders have a passion for trading well and are commit to mastery. They want to get better and

will put in the hours to improve their skills. That is why I always remind my students that they should continue the back-testing process while they are waiting for trading opportunities. By doing so, it helps to increase the screentime and build the confidence they need on their trading system. Show me what you are doing outside of market hours, and I'll show you the odds of your success. By :Alvan Sue Bing Teck Start of Trading journey and success

Trading price action versus your own opinion will help you magically be on the side of the majority most the time. Trading in the direction of the trend will enable you to be right more times than wrong most of the time. Market Wizards interview Bruce Kovner is one of the world’s most successful traders. The following below is extracted from his Market Wizardsinterview: “A greedy trader always blows out. I know some really inspired traders who never managed to keep the money they made. One trader at Commodities Corporation – I don’t want to mention his name – always struck me as a brilliant trader. The ideas he came up with were wonderful; the markets he

picked were often the right markets. Intellectually, he knew markets much better than I did, yet I was keeping money, and he was not.” Q: So where was he going wrong? “Position size. He traded much too big. For every one contract I traded, he traded ten. He would double his money on two different occasions each year, but still ended up flat”. And, from further on in the interview: “First, I would say that risk management is the most important thing to be well understood. Undertrade, undertrade, undertrade is my second piece of advice. Whatever you think your position ought to be, cut it at least in half. My experience with novice traders is that they risk three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks.” Prudent risk control, combined with the power of compounding, can lead you a long way in this game.

Trading is is often depicted as a dream job. Indeed, I can trade from anywhere in the world. I can spend time with my family, work out, go out, read, travel, meet with friends,… whenever I want to. No boss, no employees and no customers. Well, all this freedom is the byproduct of having developed my own trading strategy, and having become consistently profitable.

“Good trading requires a particular set of mental skills that will need to be developed. Since those skills are counterintuitive in nature and tend to go against normal human tendencies, they will have to be developed and built over years of practice and engagements in the markets” – Yvan Byeajee

“If I’m going to succeed, I need to make sure that I’m not just motivated by the end goal, but I’m so passionate about the process that I will love the journey and stay on track” – Unknown

What does it take to become a better trader? It takes courage, commitment, persistence, hard-work and most of all- character! A lot of self-proclaimed “trading gurus” out there are saying it is easily accomplishable- the truth is that if it is one thing, that thing is definitely not EASY. I hope you will understand me and stop looking for a Holy Grail- it is inside of you and you- just reach out! -steve

"Cutting your losses short and letting your winners run” may seem logical, it can be extremely difficult to follow when money is on the line. If it was easy, everybody would be making tones of money.

But why is it so difficult? The short answer is because of how our brain is wired.Indeed, we, humans, have a very old brain which makes us prone to many cognitive biases. Those biases cause us to often act irrationally when faced with a stressful situation. In trading, when we’re faced with the risk of losing money, one of the main cognitive bias we tend to suffer from is “Loss Aversion”, a concept that was demonstrated by psychologists and behavioral economists Amos Tversky and Daniel Kahneman. Basically, “loss aversion” refers to our tendency to prefer avoiding losses rather than acquiring equivalent gains.In other words, our nature dictates that we are more likely to let our losers run, in order to avoid taking a loss, and cut our winners short in order to avoid losing the small gain we have. Yes, that is the exact opposite of what we have to do in order to make money consistently in the markets. Source: Lonestocktrader. Reality check.. A trading system is component of method and psychology, in that time scale for entry is vital...say intraday 1 ,3,5,15 mins ,swing/positional,30, hourly,daily ...which one is best !!! Half of traders life is wasted in dancing between the time scales ...How to fix the time scale ??? Answer is backtesting given method on different time scale/s..many don't even do that on any time scale and just jump with real money and blow there account if a successful mentor is there who is guiding you in real terms ,story may be different,but many don't have this luck of grooming hands Sleepless nights to fix a system,is hard reality ,but this will prevent you from blowing the account,when you do back test ,many methods in internet,forums etc will fail.

Don't worry you can search new one or can fix,but blowing the account leads to self destruction of confidence to trade which is hard and almost impossible to fix

As an individual trader it is simply impossible to remain emotionless, making the proper trading decisions at all times, when the action is heated. Even when there is a lull, our emotions kick in and we feel a change is needed or something should be done, when in reality our rules may say to stay out or do nothing. We need an objective temperament, an ability to control emotions and carry a position as per the rules. After all Time is your Friend, Impulse is your Enemy Behaviour of learner is that they want a robust system from a successful trader,but when if any trader starts sharing his method in open forum ,people doubts his nature,..so shared ITR,tradelogs,…still many question his intent,even doubt the authenticity of this logs .. I have accepted this very nature but after wasting long time ,which made my self ignore my research in swing/positional ,but later realized that and started swing/positional on fixed qty for 6 months to come out of psychological issues, then started with full qty !!! Bottomline :Many learners will not come out from this notion that successful traders don’t come to forum (off course many successful traders never visit forum at large), or they never share there trading system,so don’t try to convince any body, share ,learn & earn from forum !!!

Trading system completes when it has positive expectancy,next leg is to follow it,without any errors. Market direction is divided into trending days and non trending days,trend trader earns max in trend days and loses in non trend days So, what he has to do, try to earn in non trending days or avoid those days,first option does not work,since market will be much shallow in the move,but can do second one,MP given me great

advantage in that avoiding mechanism varun obv with my tweaks added to MP ,this given edge in days when open makes 80 % rule (MP terminology) now intraday system formidable (Don’t send PM’s every thing was updated in the forum) Swing/positional had no issues…what I need is to follow all three(intra/swing/positional) consistently Always remember consistence, All highly successful people, all professionals that operate at the top of their fields—the masters—are all consistent. They do it at the same time, the same pitch, with the same level of enthusiasm over and over again. This is an incredible truth about all successful people. The one thing that I see in people that want to be successful is that they go for 2 or 3 days and then they stop. Consistency builds discipline, disciplined actions done consistently create success. A consistent approach starts with getting consistent in your day-to-day operations. If a particular approach doesn't work and you keep changing it, then you’ll think nothing works. Come up with an approach and be consistent with it until you’re sure which parts of it don’t work.

Patience is a virtue that is vital to success in trading. A large amount of patience is required in order to go through the learning curve.

You need patience to wait for a trade where all the variables from your system align. And then patience is needed when in a position, in order to maximize profits. “Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week, waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame; only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading” – Mark Weinstein It took me 5 years for understanding this with respect to swing/positional

POINT OF RETURN “If a man does not know what port he is steering for,no wind is favorable to him.”seneca A trader who got a valid system with positive expectancy , with some known limitations, often try to optimize it ,to have much better results by adding these new points which may be from open source , like forum,Internet,books,etc or with some observations, which may be practical or may fail at execution , temptation of betterment will make us try this at onces . Quest of optimization may endanger the existing system which may loses its positive expectancy and will be thrown to miniature level with all this new addition, so before adding any new point always maintain notes of your existing method so that there is point of return Never forget Point of return is much better then become mad with additions and lose the shine of the system.

Reality of trading Foundation of successful trading is built on an understanding of the randomness of every trade. Once you truly understand and accept that every trade has a random outcome, regardless of what happened on your last trade, you shouldn't be disappointed or even excited about the result of your current trade; because you should have no expectations. Vital point !!!

Profitable trading does not depend on the knowledge of large number of theories, rather it depends on successful implementation of Few....Explained by Sunil Minglani in conversation with Sumit Agrawal https://youtu.be/eEuBC1abQ1c When a trading system with positive expectancy, added with risk management along with trade managing skills can be called as robust trading Thanks to Rayner !!! who made this check list :clapping:

Becoming a consistently profitable trader is the goal of all traders. Let’s assume you a have a methodology with an edge and you apply it consistently. Let me ask you something… Is your emotional state consistent each and every time you place a trade? An automated system run by a computer places all trades under a consistent “emotional state”. The PC is emotionally consistent. How about yourself? For the purpose of this article, I will assume that you already have a methodology with an edge and confidence on it, which is the first prerequisite for consistency. Maybe you have that system with an edge and still, despite having it, you are not consistently profitable yet. Why? Do you maybe fail at executing it? And if so… why do you fail at executing it? Does it happen to you that you place stupid trades, then analyze them after closing, realize that they were invalid and why they were invalid, promise yourself not to do it again, and then you do it over and over again, sabotaging yourself and committing the same mistakes over and over again? When trying to dissect this problem into pieces myself I came to the concept of “emotional consistency”. I realized that sometimes I would be placing my trades being in a collected and composed state (for instance, outside of regular trading hours). Other times I would be placing my

trades under a stressed state of mind. Other times I would be doing so impulsively, or in a rush. Other times I would be desperate, or hoping (e.g. to recover previous losses of the day) or revenge trading. Under these different and extreme emotional states, things get blurry, rational analysis is distorted and execution errors arise. Suddenly something became very clear to me. Despite the quality of my system, the outcome of my trading would never be consistent if my emotional state was not reasonably consistent along the way. I was working my issues at a technical level (e.g. “why was this trade invalid?”) and not at their root (“why was my emotional state not valid?” -which is what prompted me to take an invalid trade in first place-). This was eye opening for me. I stopped thinking so much about charts (of which I already knew enough) and started to pay more attention to my emotional state, continuously. Now, why your emotional state is not optimal and how to fix this, is a different chapter. More to come on this in future articles… But for now I want you to understand that the problem is not technical but emotional. For the time being, I want you to think if your emotional state is consistent when you place your trades. Write it down before or after each trade. Write how you felt. What were your emotions when placing the trade? Fear to miss the move? Craving to trade? Fear to lose in an open position? Greed? Revenge trading? Where you collected? Where you in a rush?. Bear in mind that the first step to fix these kind of issues is awareness. So this exercise is extremely useful. Pay more attention to your emotional states. Started my trading with Demand and supply ,,,adoption of MP/VP has improved a lot ,but watching obv ( which is volume study based of closing ) can that address smart money answer ?? and no is the answer ,but found answer in VSA no mans area

…july series nothing good as a combo of all made me to land in

.after rules are framed, now bit relaxed in Aug series

Thought to start a thread raised in my mind ,but cannot spare such a time as of now..if people are interested can do there work. Three big names in VSA ..Jesse Livermore, Richard Wyckoff ,Tom Williams Bottom line: combo of MP/VP with VSA along with OBV…striking will improve…as you are with big boys … MP... high point price ,OBV support of volume for this high point price ..with VSA ..area of entry of smart boys

can be noted ..

You got to fight for your survival here. The market (that is the crowd out there) is ruthless and wants every penny (or drop of blood) out of your veins. It checks for one small mistake or misstep to drag money out of your PnL. Yes it cannot take it directly. That is the reason it takes the money through you – no one else. That is why market is powerful. You won’t know that the market is taking money, but you will give your money with your bare empty hands. That is why it is a fight to survive in front of the market. The only way to survive is in three steps: 1) Give it in small drops, whenever it troubles you. 2) To keep a small amount on the table, so that you can bluff the market to look at the small amount and take only a minuscule out of that. 3) Tell the market that you need its help, and hear what it says – agree with it and go with it, rather than against it. Despite this there is no guarantee that you can survive, but you can certainly lengthen your stock market career if you follow the above steps. Else, you will see, that you will have to struggle to earn to give money to the market. It may lead first with your own bank account, then with debt and then – in extreme cases – with life too. Yes, it can be that bad. So, get used to survival before earning any drop from the market. Yours, Edgemonk

Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance. Jesse Livermore, Reminiscences of a Stock Operator During this long course of journey (10 years) enjoyed initial luck phase at start , later burnt fingers in FNO, ,but earning from same product ,making me happy from intraday only trader ( D and S with MP), now trading swing/positional with MP/VP... All in all completely moved to Mechanical ...( which i never thought i can achieve that),Role of TJ in this cannot be ignored ,ST da, Saint,Manoj borle,Raamakanth,vjay,subhadip ,varun ,Happy bro helped a lot with his AFL side of knowledge.. What i understood in this journey is 1) Your competition spends hundreds of hours perfecting strategies and you’re in for a rude awakening if you expect to throw a few darts and walk away with a profit. It’s even worse if you cut corners in the rest of your life because that bad habit is much tougher to break. 2) Profit rarely follows the majority. When you see a perfect trade setup, it’s likely that everyone else sees it as well, planting you in the crowd and setting you up for failure. he weakest part of any trading system is the trader that is suppose to follow it. If you do not put in the work to develop a trading plan that fits you, develop and keep discipline, manage your risk, and stick to the plan regardless of how you feel then no trading system will work for you.

Always remember :self Trader has to reduce the time it takes to analyze,react and recover. The best traders do this effortlessly after much thought,experiment,and practice. Discipline, while necessary for success, is never sufficient. Discipline does not substitute for skill, talent, and insight. Strict, disciplined adherence to mediocre plans can only lock in mediocre results. If it were otherwise, there would be no losing automated trading systems. Trading is the hardest way to earn easy money plan to get that easy money should be robust ,but in this journey ,we travel from many mediocre plans/methods Main content of this jhand plans are (as per my opinion, people can disagree) 1. Divergence (Hidden or regular) of indicator, 2. Cross over of MA,EMA, 3.Experiments with indicators ,in such a way that we change value at the best or its another way of curve fitting Some contents which many still not using & being watched by some of the legendary traders 1. Triple divergence of indicator 2. 45 degree angle study of Ema/MA 3. Concentrating on High power areas of price through D&S /MP ,VWAP,TWAP 4. Order flow 5. Pure price action methods, need lot of skill very few will get to that expert level. Professional traders keep their eyes on the bigger picture and there are least bothered about outcome of a trade That bigger picture is the fact that if they execute their method flawlessly, over and over, over a long enough period of time / series of trades, they will come out profitable. They don't compare there trading result with some other ones. i'm comparing the results at last ,which is not good Things that should be avoided: Flipping through time frames and markets, hunting signals without doing your preparation Following your trades tick by tick Arguing with traders on social media Micro-managing trades and being glued to the screen

Every body knows that there are 3 styles of entry with respect to qty , there is general belief that addon ( 2nd in below picture) is the best one ,but for me intra/positional type 1 proved best and swing 2 ..never used 3 rd one as my system does not use any fixed levels for entry

Bernard Baruch Bernard Mannes Baruch lived from 1870 to 1965 and was known as “The Lone Wolf of Wall Street.” He was a stockbroker who made his fortune before the age of thirty years and went on to become an economic adviser to U.S. Presidents Woodrow Wilson and Franklin D. Roosevelt. Quotes :“Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars.” “I made my money by selling too soon.” “I never lost money by turning a profit.”

A speculator must concern himself with making money out of the market and not with insisting that the tape must agree with him. Never argue with it or ask it for reasons or explanations. Stock-market post-mortems don’t pay dividends. --Jesse Livermore Now i'm able to withstanding with qty bias in swing/positional passed out 20 lots in each style...intra is 10 all in...now what is the difference between 2007 and 2017,2007 beginners luck , now entry on bases of "EDGE" from qty to entry style..i can say i'm going to withstand any trend and get the result, which is "VITAMIN M" Time is the important factor and VA gaps shown its strength with D and S, got highest pts in BNF in intraday There is a random distribution between wins and losses for any given set of variables that define an edge. Trading is like tossing a coin we can have five wins in a row or five losses; we could win one lose one. Every moment in the market is unique. No matter how many times we have traded an edge the outcome can be different this time and no matter how perfectly matched this pattern is with the last one , this one is truly unique if for no other reason than in this market the participants are not the same as in the last one. After spending lots time in various forums , internet source, trading books , came to the conclusion ,which are three bullet points mentioned below,also removed recent additions which almost causing delayed entries ,and returned to my old school ,additions of new points are only to avoid some whipsaw losses ,but in words of Ed Seykota (first bullet point)..,from this OCT series ,i will not run after any new ideas in quest for out performance 1. To avoid whipsaw losses, stop trading 2. Risk can change shape or form but it never really goes away. 3. No Trading strategy can outperform at all times Multiple study of same thing is the cause of late entry !!! i'm a follower of VPA,VA, with MP with D and S....with in it self addressing volume side of BO and adding OBV has caused some late entry ,so scraping out this OBV "A complete Guide to volume price analysis - Anna coulling" is the excellent guide,its a bit complex in practical application ,i have done this long ago,but laziness and short cut in brain are main cause but for people who are feeling difficulty in VPA ,OBV is the best answer. From ,"A complete Guide to volume price analysis - Anna coulling"

Think of this below situation ...which indicator will help you to read this to get a trade?? answer is non ,only VPA will help you , Lesson (self ):-When you are able to crack some thing ,then don't run after short cuts

Source :"A complete Guide to volume price analysis - Anna coulling"

"Never be a born bear or born bull.....as traders we are not permanant bulls nor permanant bears, this thought is dangerous....we just want to be on the right side of the market and if we are on the wrong side, get out fast....and be in tune with the market." Smart_trade "It is always a double effect on our ledgers that if in the bull market you short and lose money of say X amount, then it makes a difference of 2X to our ledgers because X is the amount we lost and another X is the opportunity cost of making X in a upmove which we lost...so the total effect is not X but it is minimum 2 X....think about it..." Todays discussion in forum !!! brought down 4 points which many traders are suffering with 1. Don't have a plan,trading system/method/setup etc 2. Having a plan ,but cannot back test it,as arguments are confusing 3. Proven plan is there with Back test ,but suffering at executional level 4. Searching new funda in case of draw down period of current proven plan Problem among "PRO" oh !!! i cannot use that for me experienced is the correct word, Just want to scraw the method to prevent whipsaw end result super late entry just have to remember !!!chaos in one time is just order in another time

http://www.traderji.com/community/threads/my-journey-in-technicalanalysis.100149/page-12

RF with vol divergence giving sell setup in bank nifty and nifty (both spot values),off course for positional ...which draws me below points 1) Size is the enemy of out performance, so maintaining as per MM

2) Brilliance doesn't always translate into better Trading results.so following the defined system 3) There is no signal known to man that can consistently get you out right before the market falls and get you back in right before it rises again so not hurrying into trade. RF and Vol divergence saying go short below 9952 for nifty and 24179 bank nifty both are spot value for tomorrow Nifty and Bank nifty NR 7 & also Boring candle (A candle whose real body is less than 50 % of its range just trading positional / intra...getting strain in maintaining position of both swing/positional so only positional/ intra from this series

ED seykota ( for self) “Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions “Be sensitive to subtle differences between ‘intuition’ and ‘into wishing’.” “I usually ignore advice from other traders, especially the ones who believe they are on to a “sure thing”. The old timers, who talk about “maybe there is a chance of so and so,” are often right and early.” People lot talk about crash (2008), valuation much stretched etc at present levels ... Brief history of 2008 crash :correction started 10 jan 2008, its looked as normal correction until 21 jan 2008 where nifty crashed 8.7 % ...only source of information is stock market is broker babu, pink papers,blue channel (at least for me), re entered at 5800 levels and faced the beating!

i'm not going talk about these valuation, or fresh bullish breakout to next higher level ,but in these period of 9 years,traders level of TA knowledge,trading psychology,money management has reached to great highs ,Thanks to TA books, TA softwares,online forum like Traderji etc No more people rely on blue channels,calls or pink papers,now many traders have good trading setups

with positive expectancy so all of them will Ride the tide !!! irrespective of the direction !!! Bottomline :Learn to react, rather then asking the question why it happened! If you approach the market from a negative perspective, you will lose money. Negative does not mean you expect to lose, but you may have a lot of fear in your trading or have not fully accepted the risk. Reviewing your equity curve and keeping a trading journal will help you navigate times when you fall off the rails. Trading is simple ,but not easy Trading should be boring. Your trading edge should be separate from masses, where price and volume anomaly are part and not the regular volume A trader turns into professional trader once he stops looking for the “next great indicator.” You are trading other traders,not stocks or futures contracts. Do not impose your will on the market.once you done this be ready for the price Stop preaching others, until people ask, no body will accept you,because "nothing changes if nothing changes" (it is to be implemented ) Signs of Over trading or lack of confidence with trading system ,which i don't have ,but remembering points 1. Asking charts of other traders 2 Watching blue channels whole night for a open position 3. When markets turns other direction,rather then reacting to it,searching for news !!! 4, whole market is rigged and people are conspiring on me

What I understood over these years is every body trades his method ,it not only depends on success rate of trades ,but style of entry ,time frame he trades, terminology used in the method,most

importantly psychological needs of the person!!! never seen any body forced any one to abopt particular method !!! Many system are there in forum likeTDST, Pivot (swing ) ,TDST I never understood and pivot may be 80 % level,off course I ‘m not using it ..tried my level best to adopt but I could not do that ,there are many who follow both , just see vivek bhai’s TDST trades !!!Learn lot from STda, Saint,Raamkanth ( keep trade as simple as possible),pratap sir,vjay,manojborle, As vijkris bro once said Teaching is a Art, may be true, One thing is sure that no trader is a fool ,who do not want a high success rate system if he understands practicality of the system in real terms , it will apply to pure price action, price action with indicator, or PVA Some realities for (self) Successful Trading is more about behavior and temperament than IQ or education. 1. 2. 3. 4. 5. 6.

Don’t be surprised when we have bear markets or recessions. Everything is cyclical. You are not George Soros or Jesse Livermore The market doesn’t care how you feel about a stock or what price you paid for it. The market doesn’t owe you high returns just because you need them. Predicting the future is hard. Experience: This story applies for life as well as trading

7. 8. There was a guru, he had a disciple. The disciple had never seen a cow nor had he tasted the milk, he had read that the cow milk is very nutrient and was very curious to find a cow and taste its milk. He approached his guru and asked "Do you know anything about the cows?" "Yes." replies the Master. "Then would you please explain what a cow looks like?" the disciple prayed. The Guru explained: "A cow has four legs, It does not live in the forest. it's a domestic animal,you can find one in the villages, It gives white milk which is good for health." The Master gave him a lot more information on the features of a cow: the eyes, ears, legs, stomach, udder, horns. The Student went to a village and there he saw a statue of the cow, someone was painting an adjacent compound wall with chalk had left a bucket full of lime water near the statue of the cow. The student saw the cow and observed its features, he finally came to the conclusion that it must be the cow, he also saw a bucket with white liquid near by. 'This is definitely a cow, so this must be the milk' thought the disciple and drank some of it. He soon started screaming with pain, he had to be hospitalized. His Guru visited him in the hospital, "What happened?" the Guru asked. "Master you don't know anything about the cows or the milk, you are totally wrong." the disciple answered.

"Tell me what happened." The Guru sought an explanation. The student explained everything. "Did you milk the cow yourself?" asked the Guru. "No." "That's why you are in trouble. Until you rely on what others say you won't get to the truth which will liberate you." The Wise Guru replied. This is point i neglect "PROCESS AT HAND ",

This point I neglect, process is at hand

Indecision is worse then wrong decision,,retreat is perfect military strategy Returned to my old school of PVA, FT with 1 lot will be started from Nov series,once again ..it will continue upto March series 2018...i will return to full qty from April 2018 in swing segment Learn't the point of ultimate step towards emotional control ,which is nothing but stop explaining your self to stupid people,which may be around you in many forms !!! Years and decades are passing but success ratio is stock market at max @ 5% ,there is a reason why so few traders succeed. It is not for lack of study or effort or passion. It is not for lack of education or data/software/ platform subscription. It is not because only a select few have access to technical “secrets” (a.k.a. indicators). No. Few succeed at trading for the same reason that so few succeed at living an abundant life.The best traders think differently than others because they know that what is most important is “how they think about what they do and how they’re thinking when they do it. There is nothing called perfect trading,The best in business of trading learn' t how to deal with this imperfections,trading is nothing but taking smart risks, when odds are in your favor systematically over and over again with discipline,No Trader is right all the time.and No Trading strategy can outperform at all times. No matter what type of trading you’re doing (swing trading, intra day trading, long-term/Positional trading), you’ll need to come up with your own set of rules to keep your trading structured. The problem is most people don’t want to make up their own rules, because if they did they would have to

take responsibility for their results. And, as we all know, most people don’t want to take responsibility for their action. But, as we all know, the only way to be successful in trading is to take 100% responsibility and act in our own best interest. Ten Powerful Psychological Traits of the Rich Trader 1. They have the ability to admit they were wrong and get out of a trade. They know the place where price proves them wrong. 2. They have the ability to not only close a losing trade but reverse and go in the other direction with the right signal. 3. The rich trader is not trying to prove anything about themselves they are focused on making money. 4. They do not fall in love with an idea, currency, commodity, or stock they will make trades based on price action. 5. Rich traders know that the market action is their ultimate boss regardless of their opinions. 6. No matter how sure they are about a trade they still ALWAYS manage the risk. 7. Rich traders get more aggressive when winning and trade smaller or take a break during a losing streak. 8. A great trader is one that can admit to anyone that they were wrong. 9. Rich traders do not believe their own hype, they know they can not really predict the future they can only react to current reality and the probabilities. 10. Rich traders love what they do, win or lose. When you are trading with a mindset like that, it is hard to be beaten over the long term. Time is your friend. Intra first trade -100 and second +66 net -34 pts MTM...done for the day in intra !!! “Your losing trades do not diminish you as a person. You are not your losing trades. You are also not winning your trades either. They are simply by-products of the business that you’re in.” One of the toughest series for me in Positional side. The more you follow your rules, the more you’ll trust yourself and the better your results will be. Remember, only you are responsible for your trading results, good or bad. Having a set of rules will help you get more good than bad.To improve yourself, you must be honest with yourself. Blaming the market, the broker, the media, noise in trading forums, self praising (like i'm going to make a super system, or i got a world class method , i'm the special ,market follows me etc) is just going to delay your self-improvement. The less illusions we believe in, the clearer we can see what is really going on in the market and inside ourselves. The clearer things are the more we will learn and grow.

There is nothing wrong in optimizing any given trading system with important modifications and retesting those changes in the best solution is to find a middle way. Try to limit this to one or two times, otherwise the loop could be never ending. Also, don't forget to note down the changes in your trading plan, for my case optimization played spoil sport which eventually leaded into late entries , but the notes on my system before the step of optimization helped me to return back to previous best way ...i'm very much confident that i will step up to the level of professional trading once i finish the psychological drill.. It is the stage where people won't run after new points ,but will focus on increase of qty with profit,enjoying the entire process of trading without blocking there mind Check this start of swing trading

First trade of the series hit with huge SL way above my actual SL, earlier i used to stop trading under the swing,even risk management is in place it is very hard for to move on ,but after lot of time is spent i realized that ,losing trades are part of trading. The most successful traders in the world have losing trades each and every day. They do not get caught up in thinking that the losing trade is part of them. They realize it’s just part of trading, and the sooner they get rid of the losing trade, the faster they can look for the next opportunity to find a winning trade. This is easier said than done, but nevertheless, it’s still the reality of how to make money trading. MENTAL TOUGHNESS IS CORE FOR TRADING !!!

First step in any traders trading career is following his tested system ..great sentence from book Mastering the Trade.. "Bigger losses are a lot worse than smaller profits,however ,a trader who takes small profits because of fear is not following a plan ,a trader who is not following a plan ,who is reacting only to internal emotions,is going to get beaten.not maybe not probably going to -John F carter"

Price in itself is just a unit ,and volume in itself is another unit, but once we start studying both combined,we can note the giant foot prints,which are more then sufficient to go ahead, volume price analysis ,does not mean that we should study volume first and then price, we are just confirming price action with volume,as price moves to higher levels ,volume analysis becomes tough,here time part with respect to price is relevant (Market profile) another is volume profile, for start we can go with OBV or PVT..but ultimate answers are with MP/VP ST da !!! methods are universal,adding VA will make them explosive Momentum study in a trend !!!

How to catch train in next station !!!

Vitrual High and lows

After so many years of Ah movement and ouch movement, i'm enjoying the process of trading in swing and positional, never had any issue with intraday Discipline, while necessary for success, is never sufficient. Discipline does not substitute for skill, talent, and insight. Strict, disciplined adherence to mediocre plans can only lock in mediocre results. If it were otherwise, there would be no losing automated trading systems. Successful traders I’ve known work as hard on themselves as on markets. They develop routines for keeping themselves in ideal states for making trading decisions, often by optimizing their lives outside of markets. Silence is best answers to some questions Brilliance/knowledge doesn't always translate into better Trading results. “Neglect to plan and you intend to bomb " You've got your work done in endless hours of searching your own framework. Long stretches of paper trading and back-testing your hand crafted framework, then comes the effective trading clinical execution and mentality for this given framework, this is where it took so many years to build this mentality to be applied effectively for swing/positional for me off course still in Psy drill with respect to swing ,until it is completed progress cannot be assessed from my side so stopping this thread as nothing new is there to add ...

Psy. Drill completed, so starting this thread once again, off course i will return to normal qty from April series with respective to swing trading!!! screwing a time tested method is always hazardous now no more dancing Many aspirants to stock market try to adopt to trend trading because of its robustness and longevity Before its adoption there are few points every trader should remember : 1.This is no ‘get rich quick’ scheme 2.If traded properly, you will have lots of small losses, a few small gains, and a few big winners 3.Often, a new trend will start seemingly for no obvious reason 4.You do not need to understand the fundamentals behind a stock, commodity or other instrument , however, you do need to have a method of determining whether price is trending or not 5.You never need try to pick a top or a bottom in a market. 6.In strongly trending phases, markets can persistently stay overbought or oversold for several months 7. Being able to effectively follow price trends means you need to have the ability to follow a simple set of rules about when to enter, and when to exit 8.Because you will suffer lots of small losing trades, you need to have rigorous risk control 9.Your stop methodology should be able to identify when a trend has finished 10.Trading with the trend is conceptually very easy to understand, but psychologically very difficult to master Back testing does not guarantee you about future viability of a given system, but when you back test a system and it doesn't make profit then you do not have a viable trading strategy.anyone who is trading an automatic or semi automatic system ,then back testing is absolutely vital. Properly constructed back testing will identify whether or not an idea has a persistent edge and under what conditions it will manifest. By properly controlling for different parameters, we can isolate those which add the most value to a particular proposition. We can test for robustness and measure the sensitivity of the edge to changing parameters. From that, we may be able to identify specific market conditions where the edge is significant and tradable or identify a subset of the total market trading targets in which this idea works best. The professional trader should take back testing results into consideration as a way to select a system to prototype with real money, in real markets with the human factors fully engaged to see what the real world results look like before committing to full production system risk.

Final trading styles with separate capital for each one no intra in NF I will post the result at the end of March series (point wise) for F.Y 2017-18

Today is Highest profit day in intra (in BNF) for FY 17-18..maintaining shorts in swing/positional, earlier I used to square off swing or positional in fear

, Once for all i have come out from this paranoia !!!

1.Trust your system. 2.You are not in rush. 3. Let the profit position run its course. Final points tally for 2017-18(net of costs) , NF future return is significantly lower when compared with BNF and nifty positional turned into negative also Trading is continues process and new year (F Y) will start from tomorrow,hope i maintain the increased size without any hesitation.

1. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits. 2. Never get out of the market just because you have lost patience or get into the market because you are anxious from waiting. 3. Avoid getting in and out of the market too often. These are three points which made me to survive last year and i'm going to follow it for rest of my trading !!!! Richard Donchian Guidelines are mostly valid till today ,even written in 1934 Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move.

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From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases.

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Limit losses and ride profits, irrespective of all other rules.

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Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing.

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Seldom take a position in the direction of an immediately preceding three-day move. Wait for a one-day reversal.

Two patterns which i should remember in trading !!!

Draw down is net result of series of losing trades, many will think that edge in trading will keep this away,this belief makes us to tweak and turn any given tested system ,end result is system hoping ,in my case Intra day resulted in series of losses, but swing and positional has turned the table.. now intra also started giving series of profit trades in this week,this is why risk management is so important. No matter what system you use, you will eventually have a losing streak. INTRA TRADE SHEET (BANK NIFTY)

John Hayden words: The price is where traders of different time frame perspectives and capitalization levels come together in an instant of time agreeing on a certain price. In order to understand where prices are going, it is important to understand which "time perspective" is the stronger force, and then go with that force.

"The FORCE is more your friend than the trend."

iam not using RSI which he tought,but finding the capitalization of time with D/S and MP... Thanks to him for showing that prospective Another pattern which eaten large profit ..parabolic rise same is with parabolic fall (rare case)..watching this carefully

Trading styles till now (covered every thing below in different threads nothing new) 1. Intra day trading with 3 mins (D/S with MP,Vwap,atp as core) BNF 2. Swing trading hourly (VP base),NF,BNF 3. Positional entries in NF and BNF (RF in daily time frame),NF,BNF New one for stock positional 4. Stock positional with simple 13,62 200 EMA along with volume study(VSA) added from April this year

Stock Positional..in simple terms i may not catch whole move but, its ok for my psychology ..

TREND FOLLOWING “Let’s break down the term trend following into its components. The first part is trend. Every trader needs a trend to make money. If you think about it, no matter what the technique, if there is not a trend after you buy, then you will not be able to sell at higher prices – following’is the next part of the term. We use this word because trend followers always wait for the trend to shift first, then follow it.” – Van Tharp [12:37 PM, 7/11/2018] Shiva MP Stock: Team ANY stock with OPEN = LOW cant able to cross IB will take a support @ 50% fibonacci retracement..... [12:38 PM, 7/11/2018] Shiva MP Stock: your can check This the accuracy of this is 98% [12:39 PM, 7/11/2018] Shiva MP Stock: FOR EXAMPLE SHIPLAMEDICARE. [12:41 PM, 7/11/2018] Shiva MP Stock: PNB HOUSING

STOCK OPEN = LOW INITIAL BALANCE CANT ABLE TO CROSS CAME BACK TO 50% RETRACEMENT.

Check with 1 hr chart.

[8:27 PM, 7/23/2018] Shiva MP Stock: Any thing opening gapup and brake's initial balance will always move up trend till the market ends... [8:27 PM, 7/23/2018] Shiva MP Stock: You try this u will become millionaire...

Market Profile simple strategy September 16, 2017

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tradeWinger

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Market Profile, Volume Profiles

A)

For

a

declining

(bearish)

trend

In case a new session opens within Value Area (an area of 70% sessions´ volume), then it is good to enter the short position on the VAH along with a stop loss order on the previous sessions´ POC. See the picture below.

B) For a growing (bull) trend A similar bull market situation allows you to open a long position on VAL. Similarly, the POC of the previous session is used as stop loss. Let´s take a look at the picture below.

This strategy is not difficult to understand. However, you should always consider the distance of previous sessions´ POC and possible risk to reward ratio. The situation is clearly viewed on tradeWinger visualizations Volume Profile and Market Profile Plus as you can see on the picture below: