Welcome to the market profile education sequence: this is a new initiative by poly investment comm, where we will cover all the technical analysis aspects. A marketplace profile is the first topic we have chosen on the forum. We were get a lot of entreaties about dealing with this topic, since the literature on this topic is limited and, in a sense, a bit outdated. We thought of taking up this topic firstly.
The second reason is that market profile in itself is, is: is sell generated information? If you, the saying, disappears that are consistent with the price, wherever it runs, and merchants do it in accordance with the arrangements of trading breakouts or break downs or through indicators, etc, and while that method is also valid – and I myself used those marketplace profile – is something that will give you Information about what the market is doing right now, it also gives you gives you an idea of what world markets has been in the past, and when you mix the past and the present, you can get a get a look into the future.
The male, the main idea about business chart is that a market profile is not a trade system. It is, it is just a way to look at the market um, if you, if you want to take it extremely simply, you are able to framed it this course that, like we have a bar chart or a candlestick plot or point to figure chart, we have a Market profile chart, but in but but when you want to view the market in depth, that is where I feel market profile has an edge over all other charting mechanisms, mainly because if you have a bar chart or a candlestick chart, you never ne-never able to see Amount of trading that happens on a certain level or the implication of, let us say, Candlestick doji. What is the rationale behind the doji forming, and these are kind of intricacies that marketplace profile flaunts “youre going to”, and it is extremely crucial in trading. So let us begin: a scoff chart was developed by the Peter in in early 1980 s, peter and daltin. These are the two guys who are known as papas of sell sketch.
They have written some diaries on it. While the books are fine, they little limited in a sense that the book written particularly in the 80 s or 90 s – I won’t say it’s not applicable today, but due to algorithmic trading – and you know so many members able to join the trading industry through internet. Some of the concepts should not be taken rigidly. That is what I feel as we go deal into details. I will ever let you know which, though, which of those special thoughts we don’t have to. You know go by the rulebook, but regardless, as of now, what we know is that market profile is basically organizing data according to time and rate, in a statistical bell-shaped curve, a normal , normal bell-shaped curve. Now those who familiar with statistics would know what a regular bell-shaped curve is and before is progressing. Let me time depict it to you: okay, this is the statistical bell-shaped curve.
Now seventy percent of sell war happen with happens within this curve, whereas remainder of the percentage happens either outside or outside the high parcel or outside the low-pitched fraction, and it is, it is applicable to any land I represent, even though they are, if we go and attend a Classroom or or take take participation in some sample size. You know about calculating a summit, so weight, etc. You’ll see that majority of participants fall into the category, whereas only few will fall in this category and respite will fall now. So that is the main rationale behind marketplace profile.
It’s it’s! It’s you! You merely have to take it as a tool with your present system to see what is going on. What happens is, let’s say we’re trading a breakout organization and, and we get a breakout, how do we know whether whether the likelihood of breakout, supplanting or disappointing is high or low-spirited? Once you have an idea of what is going on in the market, then those aspects should become much easier. That is what I was saying. If, if you look at market profile at the core, it shows nothing but the auction process and the auction I mean when buyers enroll world markets, they .
The toll is higher, the prices go up. It goes up to the point where all the buyers have exhausted. On the fragments when there is no buyer left in then the seller comes in to grocery and he drives the prices down. Vice-Versa, “its what” an auctioneer handles in a way we are just discounting demand and supply not before going into much detail of market profile. We need to understand some some words, first expressions like TPO initial balance, who are the various participants in the market. What is the wander extension, the ethic neighborhood, concepts and and what is buying a selling tail?
Let’S begins with TP o TP o is called time cost opportunity now, when grocery sketch was originally written, Peter laid emphasis on setting every you know letter that etches on the specific characteristics plot is a matter of 30 minutes into while this is. This is a standard set in which most of the people use, and it’s fine, if you do that um, but you can experiment the longer the profile you crave, the higher the initial time frame can be. It can be 30 minutes, 60 instants or 120 times.
Anything that you want now this is a this – is a TPO time place opportunity chart I’ll time give you a segmented, fragmented position yep that is them see now what happens is I would. I would ask all of you to get FEM rise with this this chart, because most of the charts that I’ll you know put up on the forum or on videos will will look something like this so see what decideds I have applied have mounted. The time is 30 minutes. The business opens here and trades from 58, 42, 58 10 in the first 30 minutes, that is ay ay, ay, ay ay, and a now why all these A’s are being reproduced is because it is the first half an hour act of sell, and these are the Levels that the market visits so so, whatever degree world markets sees during the first half an hour, a gets engraved on that.
So this is at EPO because this, let’s say this single a represents a price at a particular time. So each each letter portends a period premium opportunity. The dark-green bracket that you see is significance neighborhood. I will come to that notion later, but time get FEM where they’ll precisely get used to the chart. The wizard that you investigate on most of the charts is the cost where the market closes the greater than symbol that you see here. It is the price which is the point of mastery or the PUC again. I will include that last-minute. The off-color bracket that you see is initial equilibrium. Initial balance is, according to this chart that I have prepared for 60 hours of trading, so firstly 60 instants of trading would be letter A and symbol B so see it opens here then a will continue to now.
Then B opens on this o and B will continue to here. If you understand the initial symmetry, that is, a blue bracket cross the period a and B all right. So this is the initial counterbalance. Now again, this initial balance can either be 60 instants or you can keep it for three years or you can keep it only thirty minutes. It is up to you to experiment, but what I have exploited is 30 minutes tpo, 60 minutes initial symmetry. 70 percent of trading, where happens its significance place, and these are self-explanatory. Initial balance, like we talked about initial offset, is usually the first 60 minutes of trading.
There is no hard and fast rule that it cannot be thirty minutes or fifteen minutes or one day or two day, it’s up to you alone. Now what initial balance is to a trader? It gives an indication about the market trying to find the balance in the first 60 minutes. Let’S say of trading like what happens basically – and this is this – this concept is particularly applicable to those who are extremely short term speculators and if you take a longer term profile chart for those with respect to that time, time, then that initial equilibrium becomes important. It is a initial balance, principally user is a tool to know whether market, for that special sketch would be range-bound or would be a elongated long and thin trending sort chart. By profile, I convey a a single, you know profile. This is a single profile.
Let’s say this: this is a particular day’s action and it’s it’s called a profile. Okay, so let’s am telling the initial match is extremely white, so here the initial balance was about 24 moments, 1% and and once the market swept that it merely rallied, it typically does not happen like this. I has only just been steady picked. An sample indicate, let’s say the initial match was about 3% wide. Then most of the action would have happened within that initial counterbalance, and hence you would know that it won’t be a trending daytime or a trending profile. Okay, so it is usually used by the day speculators to Gorge whether the day is going to be a trending day and are trending profile depending on the timeframe. Trader is transactions.
Closing range as such is not important, but it does give you an insight into the summary of profile. Let’s say for if, if expenditure within the profile closes in the mid range, then you would know neither the Bulls were confident nor the Bears are confident, whereas if the toll closes towards the high of the profile, you would know that Bulls were more confident and vice-versa For the Bears, okay, we’ve considered see this blue bracket. That we’re talking about is the initial symmetry participates. Now I want to spend some time out here, because this is a concept that everyone needs to understand see when we talk about market any kind of market. The authorities have two kinds of participants in the market, one other long-term musicians. These are the players who have a long term view on the market. They chiefly enter.
An outlet business based on value value can be anything right from earnings to premium, to book, severals, to expected price to marketings fraction to anything that is, that is, that is not relevant. These. These are the guys who are called the other time frame traders or the other positional traders throughout the educational series. I have mentioned them as OTF. That is other time frame. Traders, the other other kind of trader, is called the neighborhood local is usually a daily time frame trader or a or a single profile broker. He is particularly there to provide liquidity now, if you need to prosper in the market, you need to understand what the OTF trader is doing and you need to back within. If you bet against the other time frame trader, you will end up with loss each time. So you need to know what the other time frame trader is doing, and distributed according to that, you need to place your gamblings all right, um. There is one more thing that I want to get. You know completely memorize it. Oh TF speculators are the ones who Pro who give sell attitude, whereas neighbourhoods “re the guy who” returned market liquidity all right. I am if you, if you want to understand the market more in depth, let’s say the structure of the market, I’m not talking in technical terms. Now there’s a book um. I think it’s named trading and exchanges by Larry.
I forgot on the last word, but last name, but just google, it trade in exchanges by Larry Harris or something I just forgotten. Just this google, the book trading in exchanges – it is, it is a wonderful book and it will clear a lot of doubts about about how the market serves all right. Yeah. One thing that I wanted to add about participates is a long-term trader, always participates world markets. When he feels it is below his hoped ethic and he ever exits the market when he feels it is above its desired value. Okay , now stray extension. This is something we are going to cover in much detail later, because it ways an essential part of market profile, but mostly a assortment propagation is when market the cost moves beyond the initial equilibrium.
Now, simply logically conclude the initial equilibrium was the blue bracket. I indicated you if, if why would a price move beyond the initial equilibrium, if the market is trading within the initial poise inhibit a that signifies only neighbourhoods are present in that in that profile, whereas if initial match is agitated and market, the goes up or get Down – and that conveys other time frame trader is present alright. Now why other time frame trader because other time frame trader is the speculator who causes direction to the market? All right do not forget this concept. Now you know when often the wander increase happens. There are two things that can happen, one.
Let’s say that you need, let’s say say: the initial offset gets breached on the upside and the expenditure moves up either the premium will continue going up or the vendor will come and push the rate down again. Okay. Now this kind of seller who reacts to prices being pushed on the upside is called accept, seller, okay and similarly there is a concept announced accept customer which we’ll cover last-minute, but but just for the interruptions sake just know what it is so see.
Our initial poise was this: world markets breached the initial symmetry and mobilized upwards. What this? What this says is that in this particular profile, the other time frame buyer was present and hence he he carried the market forward after the initial match was infringement. Now, if you ascertain ABCD now picture G H – and I even I profile t POS now, that aims once the initial counterbalance was agitated and world markets moved up. There was a seller who entered the market and pushed it down again, but eventually again the Bulls overtook. It and took it up so as of now exactly remember this.
That compas increase only is the case when the other time frame trader is present. It cannot happen when simply a neighbourhood is present all right value area. This, I would say, is: is the heart of market sketch, even if you, even if you don’t have a market profile graph, if you just know how the significance expanse is shaping up or where is the maximum activity taking place, you will be lightyears onward than most Of the sellers out there now Whale value area is usually defined as a lieu where 70 % of the day business is conducted instead of day business.
You can see the profile business because, because the market profile was an infrared concept, so most of the things I’ve mentioned according to intraday, you know time frame, but but let’s consider a chart, a complete day’s activity or, however, it may suit you so appreciate range. Mostly, it’s important because it gives you a signal of what the trend is now, let’s say, world prices opens at 2000, most of the activity happens at 2020 and next to the market opens at 2014. Now what does this say?
This was of the view that who participants participated at 2020 previous era and they are now seeing price at 2040 if the following day price exits at 2060 and 2080, the significance neighborhood shifting uphills. What this means is that both the OTF speculators, that is the OTF customers and OTF vendors, are accepting that the price is trending higher, so price range gives you a sort of indication that where tolls are going, if you remember we, we stroked upon the greatest symbol Which I call it was place of mastery.
Now site of ascendancy is always within the value area. Okay, it is it is it is that level where maximum undertaking happen, or it is the most admitted price in that profile. Okay, okay, this appreciate here now, cause us encounter see this was the initial poise. The sketch got disrupted the market rallied the light-green bracket is the value area. This is where maximum trading happened. This thing now within the green bracket, that is within the value area, the the item at which peak undertaking happened. That is the point at which peak TP o –‘s are there. That is the POC okay, you don’t you don’t need to calculate it manually or something you exactly need a software for it and it shown in, and that is much better okay, so this is. This is the fairest price now POC is important when we discuss about some programmes right now. Just just know the concept of it all right: okay, buying and selling posteriors are buying and selling posteriors like wander expansion gives people new ideas about how strong the profile is. It’S it typically forms in the form of a single single string. Tpo that is like this insure.
This is a single print knk. There is no other TP over here, so this is a single selling tail. Similarly, if you realise down, “youve had” single route of a a a a a and a this is this is called a buying tail. Alright , now you know a buying tush is is formed when the premium unexpectedly moves down, then the buyer realizes that it’s below price. Any any enrolls world markets and makes the toll high-pitched, so he does not give parcel of trading or gyrations around that level. That is where you get a single etch. If you is a lot of rotations at a single item there, the appraise arena, constitutes and and multiple TPS will happen all right. Similarly, a sell fanny is when a marketer opens the market and thinks the price has immediately rallied too much and he suddenly pulls it down. So that models a sort of selling tush okay , now in a in a fable in a selling narrative of buying fable. What is more important is the length.
Let’s “re saying you” simply have to TP o –‘s on the selling narrative, whereas in the buying tale you have five TP or 60 PS. So this means that the buyer OTF was more aggressive and the vendor or TF was less vigorous all going to hell. These thoughts that I am apply clarifying you only cannot take them randomly from here and there and start applying them. What I mean to say is tomorrow: don’t switch on the screen and see your 10 -digit TP or single posterior and buy that inventory. Simply thinking that the buying tail is there, so the other time frame buyer is present, so this level has to be defended. It’S absolutely no truth to the rumors. A market sketch is about the complete picture of the market. Nothing is based on stand alone. You know, organize of the market.
Everything has to be combined and put into a it’s like a baffle. The the more parts you fit together, the more clear or the picture will be all right, so so, whatever fundamentals BC basic things, we have discussed right now, it’s all about the building blocks of sell sketch. There are. There are a couple of things that I want to say before moving onto the next seminar, whatever your existing system is right now do not abandon that market profile use market profile as a confirmation to your existing signals. That course, what happens is once you get a get a signal on your organization. You can confirm through the profile what is happening so so give us take an example. Let us say you get a breakout. Alright.
On the on the following chart, I system signals are by entryway. What you need to see is how wide the initial balance for that chart is. If the initial equilibrium is not more wide, then you can link it with your breakout. Thinking that you are familiar with, if this breakout is going to be true, then that conveys the expenditure needs to really higher. When can world prices certainly higher, it can have a really high or when, in that special chart, the initial balance is restricted. That means you are giving the other timeframe, customer or marketer, is dependent upon where the breakout or outage breakout happens and chances to disturb the prices and take it higher. I will get it similarly, what the profile will give you an idea about it. Let’s “re saying you” get a you’re taking instead of 30 hour, instead of a single epoch profile, you are taking a blended profile of three days, let’s say all right and you see that you get a by single okay, but on a three daytime profile you’re, seeing that Your initial match is so wide and, and the cost is trading in the middle of the specific characteristics. What does it tell you instant? It tells you that the other time frame trader is not yet present.
It’s merely the regional who is trading, so what you can do with your organization is, you can adjust the length instead of betting, the whole hoped amount. You can just take one one-tenth of it and start off and see what happens whether the OT of speculator comes or not. If it is not come believes me, the cost won’t go anywhere. It will precisely all there’s no use generating Commission to your broker all right. Similarly, what you can see – let’s say, eventually, the premium goes disturbed. Then you can see where the assortment postponement is happening. If it’s happening on the upside, that means your system is correct and it gives you more confidence say trading is all about confidence. The greater confidence you get, the more stress-free you’ll be sorry, the less stress-free you will be and the less stress free will be not stress-free. I’M I stood over.
What I wanted to say is in trading mistakes happen because it makes stress if you, if you make less be emphasized that, will give you you know a clearer mind to take decisions and stress is lower in trading only when you’re high on confidence getting it yeah. Now, how do you integrate evaluate locality? If you be understood that your organization has given a you know break out, but but prior profiles are showing that value area is not trending, it is just overlapping with one another, then that symbolizes the market is not yet in a trending phase, and probably you are still In a scope, so again you can reduce your position. You can be less vigorous, save on boards, save on possible losses. Okay and same is the idea for buying tushes that once you find like, let’s “re saying you”, you have three sketches in front of you and you are entering on the third profile, but in the previous two charts, you’re, seeing that you have a huge selling tale whose Length is, you know, significant and the third profile on your bar chart. You are getting a buy signal on the third profile.
You can see that the previous two profiles have been. You know have a significant selling tail, so what it tells you tells you that marketers are present in the system, so what you can do is again reduce your width. Now. This information is not available on a bar chart or on a candlestick plot or arrow person show. So this is a you can say, a third dimension data that is being provided to you, and that is where market profile is helpful, all right in the next seminar. I think we’ll be considered by about profile kinds, that is, that is opening of the profile in which, which profile figure you need to bet on, and how you need to trade that now it gives you an huge advantage again if you use it as standalone basis. That’s fine, if you mix it with your plan, it are beneficial you more alright. So you see you guys. Underdone