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Market Profile Exploring the Auction Theory

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Old 19-03-2009, 04:50 PM
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green Market Profile in Theory

Originally Posted by CreditViolet View Post
Alex, split the theory part into a new thread - Market profile in Theory

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Old 19-03-2009, 04:52 PM
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found this youtube vid quite useful for newbies like me in using market delta footprint http://www.youtube.com/watch?v=Pp1zv...eature=related
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Old 19-03-2009, 04:54 PM
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to do list for profilers before market opens ( taking it from Dalton )

To understand the market perfectly yesterday's Market Profile is very important, especially if you are a day trader, it gives a referral point..here is the list of to do list to prepare for next day market open, as said in first post there are no shortcuts to understand the principal -how market behaves -in contextualize way.

1>Review yesterday’s profile for clues as to what to expect today. Make
a note of possible trades, based on varying developments.
2> Review the overnight markets for any unusual price movement or
early indications for the day.
3> Compare the expected opening to the previous day. Is it within or outside
the previous day’s range? Value area? To the upside or downside?
4> Relative to the expected opening, identify three references points,
both above and below the expected opening. These could be the
previous day’s high and low, weekly high or low, the top and bottom
of the previous day’s value area, or the high or low of a recent trading
range. (There is no set answer—you should be guided by your past observations
of where price slowed or accelerated, as well as past areas
of heavy or light volume.)
5> Note what kind of opening is occurring, as well as what you’d want to
see in order to quickly judge the resulting directional confidence.
6> Note whether or not there is clear attempted direction, and whether
that activity is supported by volume.
7> Does the market appear to be within balance or out of balance?
8> Visualize the remainder of the day. Will it look elongated, squat, fairly
normal like a bell-shaped curve, and the like. Note any unusual shapes
or patterns that may suggest something unexpected is happening.
9> Estimate how much effort is being expended to move price directionally,
and note what that suggests about the inventory conditions of
your competitors—too long, too short, above water, below water, etc.
10> If there is a major news announcement scheduled, be aware that there
could be unexpected volatility. Let the market provide short-term interpretation
of resulting activity by observing developing structure.
Unless the day-timeframe structure is extremely strong and unlikely
to be reversed by such an announcement, we recommend that day
traders be flat in front of significant numbers.
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Old 19-03-2009, 04:55 PM
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mp terminology here http://www.trading-naked.com/MarketProfile.htm
market profile calculator to handwrite profile with poc,vah,val here http://www.mypivots.com/calculators/...alculator.aspx
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Old 19-03-2009, 05:11 PM
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Types of Open

* Drive - This is the strongest and most definite type of Open. Usually caused by other-frame buyers/sellers reaching strong conviction before the market opens. From the very start the market will auction aggressively in one direction and is unlikely to come back and test the opening range at any point. The initial large move happens in the first time period, i.e. the first half hour, but other large moves may happen later. Generally indicates a Type 3 Trend Day or a Type 2 Normal Variation Day. This Open type is uncommon.

* Test Drive - This Open starts in a similar way to the Drive Open, but stops and reverses. The market is taken lower to go higher or vice versa. The initial large move and reverse back past the Open happens in the first time period, i.e. the first half hour. This is caused by other-frame buyers/sellers wanting to test a previous support/resistance to ensure there is no remaining business there - when this has been confirmed by price rejection, it will roar off the other way. The extreme that has been tested has slightly less chance of holding than the extreme set at the start of a Drive Open, but is still strong. Generally indicates a Type 3 Trend Day or a Type 2 Normal Variation Day, obviously trending in the OPPOSITE direction to the Drive Day type. This Open type is uncommon.

* Rejection / Reverse - Like a test drive, but the initial large move and subsequent reversal take longer to develop (i.e. more than the first half hour). The initial extreme is only likely to hold during the day about half the time. The participants are less convinced than in Drive or Test Drive Opens, and the counter buyers/sellers effectively enter 'late' to force price to reverse. Indicates a two-sided trading day, i.e. low probability of a trend day, and that the initial extreme may be re-tested. Generally indicates a Type 1 Normal Day or a Type 2 Normal Variation Day.

* Auction - This Open falls into 2 subtypes, although both look like a market with no firm conviction in either direction. In the first subtype, if the market opens within the Value Area of the previous day, a non-convictional day is likely to develop, as market sentiment remains unchanged from the last session and other-frame buyers/sellers are not strongly present. Any extremes established early have a LOW probability of holding. Usually a Type 1 Normal Day, Type 4 Non Trend Day or Type 5 Neutral Day will develop. If on the other hand the Open is "out of balance" (i.e. outside the previous day's Value Area) then a "big Day" is likely. Although it may appear to be wandering randomly, the mere fact that the Open was OUTSIDE yesterday's Value Are suggests the activity of strongly convictional other-frame buyers/sellers. Usually a Type 4 Double Distribution Day will develop.
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Old 19-03-2009, 05:39 PM
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Thanks Alex for this innovation.

U r sticky now ,..!!

Enjoy.
Darsh
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Old 19-03-2009, 10:17 PM
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let me put some contribution for basic which may be someone dint know
those who know it pls ignore or refresh urself!!!

this material can be found on net on search simply but only if u want avoid search peep here

Key terms:

1. Initial balance - market activity in the first hour
2. Range extension - price action extending beyond the initial balance
3. Range - range from high to low
4. Single print buying tails - any single print TPO's at the lower extreme of the profile
5. Single print selling tails - any single print TPO's at the upper extreme of the profile
6. Point of control (POC) - price level of most volume. POC indicates an area of greatest market activity
7. TPO - stands for Time Price Opportunity. Letters are used to build the market profile structure. Each letter represents a half hour period. The letter is also known as the TPO.
8. Value area - price range in which approximately 70% of the market volume took place.
9. Value high - the upper pivot of the value area
10. Value low - the lower pivot of the value area


KF
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Old 19-03-2009, 10:21 PM
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second basics for market profile



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.



KF
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Old 20-03-2009, 12:09 AM
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Originally Posted by alex View Post
found this youtube vid quite useful for newbies like me in using market delta footprint http://www.youtube.com/watch?v=Pp1zv...eature=related

alex vid is no longer available
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Old 20-03-2009, 12:14 AM
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Originally Posted by faith View Post
alex vid is no longer available

no faith, its working, i rechecked
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