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
TPO Size: In fact, we need to determine the size of the TPO to ensure the entire profile is visible. You can try in Nifty Futures with a TPO size of 3 meaning that each letter has a value of 3 points in Nifty Futures. And depending on the trading instrument that determines the size of the TPO. For critical reference levels to be more precise, it is recommended to use as small a TPO as possible, but with a larger TPO size, more historical data can be seen and so that the levels of reference Projections are important outside of the visible range

Normally, TPO Size = Tick Size x Price Per Row (the number of ticks per line must be right)
For example, if the price per row = 80 and Tick Size is 0.05 then TPO Size equals 4 points. By default, Ninjatrader uses tick size 0.01 and can change depending on the tick size of trading objects. The settings in Ninjatrader are as shown in Figure 3 below:

Figure 3

Initial Balance (IB) _ initial price range: IB represents the first trading hour. Typically the high and low ranges correspond to the characters ‘A’ & ‘B’. The greater the length of the IB, the greater the confidence of the participants in the Long and Short term trades.

Figure 4

Point of Control: The price that most trading in a day goes through. In other words, it's the price with multiple TPOs per row. POC levels advancing for the day correspond to DPOC (Developing POC: POC is forming) and Yesterdays POC (YPOC) (POC yesterday), and previous POC levels are represented as dotted green lines. leaves as shown in figure 4.

Value Area: the area of value is an area of fair prices where market participants on different timeframes (long and short) love trading, 70% of intraday trading fall within this zone.

Value Area High (VAH): The high of the value area (the high of the area marked with red square brackets) YVAH - VAL of yesterday is denoted by the RED RICE LINE as shown in figure 4.

Value Area Low (VAL): The low of the value area (the low of the area marked with red brackets) YVAL - VAL of yesterday is denoted by the LAM GREEN RICE LINE as shown in figure 4.

Single Prints: When there is only 1 tpo in a row. In picture 2 you can realize that ‘D’ and ‘L’ are single print.

Range: The price range from high to low is recorded during the day.

Open Range: The price range of the market moving in the first 10 minutes. This is bounded by the blue line in Initial Balance (IB) in Figure 4

Range Extension: Price extension above or below the IB

High-Value Node (HVN): HVN is a price area with a high concentration of TPO. Most of the time the market is trading at this level. They often act as support or resistance levels when the price returns to the test.

Low-Value Node (LVN): LVN is the price area with a low density of TPO. The market often passes quickly through this level. They often act as support or resistance levels when the price returns to the test.