Who is Market Profile Charts for?
Market Profile (MP) is not a trading system but rather an information generated by the market and that can be assisted with your existing trading system. It gives you knowledge of who is in control of the market (long term trader, short term trader, and day trader), their beliefs. MP gives day traders an idea of the zone to trade real and daily direction based on trend belief.
Nifty Futures - Day Profile
Figure 1
MP research compared to traditional technical analysis indicators is quite different. You need to put aside your knowledge of traditional technical analysis before diving deeper into it. Like other types of technical analysis, understanding MP takes a lot of time. Requires at least 3 months of direct observation and parallax reading ability to understand what market participants are trying to do, and how professional and institutional traders are driving. market. As humans, we often tend to recognize what we want to see and then interact with limited information. The MP resolves this blindness to some extent.
MP talks about how the auction takes place in the market. The entire financial market is a two-way auction, where buyers and sellers both try to make prices go up and down. The byproduct of this two-way auction is generated market information. By reading the market information that arises, one can know who is in control of the market (Buyers or Sellers) and how confident they are in pushing prices higher or lower. It also helps day traders stay away from the style played by most retailers.
Read the MP graph
MP was developed in 1984 by legendary CBOT trader: Pete Steidlmayer. It is a trading tool that shows where an auction takes place, explains where crowds trade most of the day, where volume is accumulated, where volume is extremely small or not...
MP is not really a chart over time, but rather organizes trading data and redraws relative trading frequencies at different price levels. By organizing transaction data in the form of a pattern (by letters), one can study the structure and dynamics of the market. Usually, the daily pattern is for day traders, where each day has a free-flow chart format called the pattern drawn as shown in Figure 1 above.
Basic terms in MP
TPO - TPO or Time Price Opportunity: is the basic building block of Market Profile. Each letter in the chart represents a TPO. Each tpo represents the moment the market touches a price. Each row of consecutive letters denotes the range of market activity over a 30-minute period. In our example, as shown below, the word ‘A’ represents the transaction price range in the first 30 minutes. The word ‘B’ is the next 30 minutes. And the letters ‘C’ and ‘D’ represent the details of the market's performance range over the next 30 minutes and so on and so on.
Figure 2
The caption in the picture from high to low:
- Tail for sale
- Each character is a top
- ‘O’- opening price
- ‘#’ - closing price
- Point of control
- Goods where there are tpo appear many times when prices go back and forth throughout the day
- The small black rectangle in the main image is the POC position with 11 tpo (translator counts only 10)
- Value area
- The value area corresponds to where 68% -70% of the trades are, which is denoted here as the area in red brackets.
- Tail bought
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