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Market Profile Exploring the Auction Theory

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  #21 (permalink)  
Old 18-12-2012, 06:05 PM
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@shiree sir – I admit the earlier post was sure & pure impatience or desperateness on my part to get to the next level as I was stuck up for quite a sometime after soaking the initial bit of MP! But I will wait for you!

@devdas – thanks a ton for the explanation! You should change your status from Bad-Man to Good-Man!!

Actually still few doubts:
  1. What I meant by trading stocks was trading stock futures. Still would you advocate following cash price to make decisions & trade stock futures?
  2. Since there is no substitute for Market Delta, let’s keep it aside! Btw, what difference will it make if I use a 1-minute data instead of tick by tick data for Volume Profile (as MP/VP has been told to use on a 30 min TF)? Since its a consolidated 30 min profile, how a tick data will make any difference?
  3. Since I don’t have Market Delta, I get these levels VA (70%), VAL, VAH, POC from my source (which uses Market Delta) for last 5 trading sessions which I mark them on RT charts! Since, the trade depends on those 5 opening strategies; I use those levels to take decision with the help of Volume Profile which is developing RT. If not the precise, is this a somewhat a correct way? Actually, this is the question which is based on my last 2 months of screen time involving this trade setup!!
  4. Can someone using Amibroker would still like to clarify that the by-default chart function – Volume at Multiple Price is Volume Profile? Also, if Kaka sir’s AFL is MP or VP?
By the way, others can also contribute to my original questions for different views if any and the present set of queries too. Thanks to them in advance!

And again hearty thanks to DEVDAS!!

Last edited by tradepunt; 18-12-2012 at 06:11 PM.
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  #22 (permalink)  
Old 18-12-2012, 06:33 PM
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Originally Posted by tradepunt View Post
@shiree sir – I admit the earlier post was sure & pure impatience or desperateness on my part to get to the next level as I was stuck up for quite a sometime after soaking the initial bit of MP! But I will wait for you!

@devdas – thanks a ton for the explanation! You should change your status from Bad-Man to Good-Man!!

Actually still few doubts:
  1. What I meant by trading stocks was trading stock futures. Still would you advocate following cash price to make decisions & trade stock futures?
  2. Since there is no substitute for Market Delta, let’s keep it aside! Btw, what difference will it make if I use a 1-minute data instead of tick by tick data for Volume Profile (as MP/VP has been told to use on a 30 min TF)? Since its a consolidated 30 min profile, how a tick data will make any difference?
  3. Since I don’t have Market Delta, I get these levels VA (70%), VAL, VAH, POC from my source (which uses Market Delta) for last 5 trading sessions which I mark them on RT charts! Since, the trade depends on those 5 opening strategies; I use those levels to take decision with the help of Volume Profile which is developing RT. If not the precise, is this a somewhat a correct way? Actually, this is the question which is based on my last 2 months of screen time involving this trade setup!!
  4. Can someone using Amibroker would still like to clarify that the by-default chart function – Volume at Multiple Price is Volume Profile? Also, if Kaka sir’s AFL is MP or VP?
By the way, others can also contribute to my original questions for different views if any and the present set of queries too. Thanks to them in advance!

And again hearty thanks to DEVDAS!!

Traderpunt your anxiety is justified and rather healthy for one who is eager to cajole knowledgeable ones to share there knowledge. In MP area everyone looks upto JJ ( monk of MP) , Devdas ,nice brain who makes it simple thereby gives the impression he loves and knows it . Because those who make the thing complicated , themselves dont know the subject.
Then there are freelancers like ALEX , RAIN enterprizing traders who are fearless in the realm of any technique.
I am as much a student as any. The only thing I can tell you that knowledge assimilation is far more easy when your body is properly exercised with aerobics.I enjoy reading better after having a stint with treadmill.
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Old 18-12-2012, 08:14 PM
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Please be patient, I will continue the thread and reply to query when I get some time, I don't want to make quick replies without giving the matter some thought.

Also, thanks to devdas for a well thought out post.
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Old 18-12-2012, 08:46 PM
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traderpunt, Amibroker volume at price isn't same as Kaka's MP lite, the calculation is different. Although it does look similar( thats because the shape of the distribution, but actually its different, MP's VA is based on +/- 1 sigma variation of the std distribution of tha gaussian curve.)
Once you use them both you would find the subtleties.
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Old 19-12-2012, 01:39 AM
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since i didn't understand how to back test the INITIAL BALANCE (IB) concept, i have manually observed (screen time) it for past 2 months or so! my observation says, time has come to change & challenge the IB concept as i found good results for IB=30 min & 40 min instead of 60 min for many liquid counters!! but how to generalize it for different underlying?

MP was introduced in 1985 with a default setting of initial 1 hour (2*30 min candles) as the IB! since then there has been a sea change in financial market's trading (algo, HFT etc) - volatility has increased by manifolds! i am sure biggies using MP & high end systems must have done some kind of testing to get ahead of the markets - may be they must have changed the IB=60 min rule to IB=x min OR may be they are not using the TF based IB only they must be using customized tick charts i.e. IB=X no. of contract/shares traded

THE REASON BEHIND THIS QUERY IS - PRICE DOESN'T CARE WHEN THE (X) MIN CANDLE ENDS, IT JUST FINDS THE VALUE & MOVE UP & DOWN!

my simple query is how to get (method) the right IB=x min or X no. of contracts/shares traded for different underlying OR if that is too much, what is the new IB=x min or X no. of contracts/shares traded which is scoring over IB=60 min??

Last edited by tradepunt; 19-12-2012 at 02:02 AM.
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  #26 (permalink)  
Old 19-12-2012, 01:46 AM
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thks rain bhai!

though the by-default AFL Volume at Multiple Price doesnt have any feature to show 70% VA, VAL, VAH & Initial Balance, it does show the exact POC which is same as that of Kaka's AFL!

but i got the bigger picture that they are NOT the same!

Originally Posted by RAIN View Post
traderpunt, Amibroker volume at price isn't same as Kaka's MP lite, the calculation is different. Although it does look similar( thats because the shape of the distribution, but actually its different, MP's VA is based on +/- 1 sigma variation of the std distribution of tha gaussian curve.)
Once you use them both you would find the subtleties.

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  #27 (permalink)  
Old 19-12-2012, 05:54 AM
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1.The Time Price Opportunity method is used for the creation of Market Profile histograms. Volume is completely ignored, and instead, we count the number of times a given price occurs throughout the chart (i.e. A Time Price Opportunity).As you see its not the same as Volume Profile, although one can plot Volume profile differently and see VPOC which isn't same as the TPO POC.The volume point of control on a profile chart is the price level that had the greatest level of trading activity during a session. The price level that has the largest volume traded during a specified period or session. Note: The volume point of control is not always at the same price level as the POC for the session.Volume at Price is the total volume that is traded at a specific price level during a set period or session.

2.The initial balance is typically defined as the first two periods (letters) on the profile chart for a trading day. Typically, these two periods account for the first hour of trading activity.Noe here the deafult setting is 60 minutes, which one can change accordingly if need arises.So you can make each TPO as 15 minutes and you would get IB with a total of 30 minutes.
as you say -
Quote:
"THE REASON BEHIND THIS QUERY IS - PRICE DOESN'T CARE WHEN THE (X) MIN CANDLE ENDS, IT JUST FINDS THE VALUE & MOVE UP & DOWN!"

MP is not about candles , its about value and it has time factored into it along with price, and thats where it gets interesting, its real time market activity infront of you.Movement is not time dependent. A way to structure market activity by using time and price. The development of time and price opportunities is then distributed within a bell shape curved chart which can then be studied and this is what Market Profile is about.
There is another thing called opening range which is the immediate range that is created during the first 5 or 10 minutes of activity for the day. It is always contained within the range of the dayís initial balance.Its different from Initial Balance.
Actually MP isn't a system to backtest, atleast not for me.It needs experience and screen presence to adjust different settings in diff markets with different instruments.But for me who is not an advanced user of MP, the settings are always default for me.
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  #28 (permalink)  
Old 24-12-2012, 06:50 PM
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Default Consolidated MP/VP Queries!!

I understand the theory part of MP/VP and using it in my trading for past couple of months. What is still needed is the practical approach in innovating & fine tuning the approach if possible. I have literally licked every page of this forum on MP/VP & raised queries on my doubts (only few got solved). Hoping to clear rest of them, I have summarized & consolidated my doubts here below:
  1. What I meant by trading stocks was trading stock futures. So, should we follow cash or futures price for MP/VP to make decisions & trade stock futures?
  2. Actually, I am sure biggies using MP/VP & high end systems must have done some kind of testing to get ahead of the markets! May be they must have changed the IB (Initial Balance)=60 min rule to IB=x min OR may be they are not using the TF based IB only! They must be using customized tick charts i.e. IB=X no. of contract/shares traded. Thus my question - How to get (method) the right Initial Balance (IB) =x min or X no. of contracts (futures)/shares (cash) traded for different underlying?
  3. Since there is no substitute for Market Delta, letís keep it aside! Btw, what difference will it make if I use a 1-minute data instead of tick by tick data for Volume Profile (as MP/VP has been told to use on a 30 min TF)? Since itís a consolidated 30 min profile, how a tick data will make any difference?
  4. Since I donít have Market Delta, I get these levels VA (70%), VAL, VAH, POC from my source (which uses Market Delta) for last 5 trading sessions which I mark them on RT charts! Since, the trade depends on those 5 opening strategies; I use those levels to take decision with the help of Volume Profile which is developing RT. If not the precise, is this a somewhat a correct way? Actually, this is the question which is based on my last 2 months of screen time involving this trade setup!!
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  #29 (permalink)  
Old 24-12-2012, 09:39 PM
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Wait for some time ( max 2maro morning ), i will explain your queries further.
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Old 27-12-2012, 01:29 AM
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Originally Posted by tradepunt View Post
I understand the theory part of MP/VP and using it in my trading for past couple of months. What is still needed is the practical approach in innovating & fine tuning the approach if possible. I have literally licked every page of this forum on MP/VP & raised queries on my doubts (only few got solved). Hoping to clear rest of them, I have summarized & consolidated my doubts here below:
  1. What I meant by trading stocks was trading stock futures. So, should we follow cash or futures price for MP/VP to make decisions & trade stock futures?
  2. Actually, I am sure biggies using MP/VP & high end systems must have done some kind of testing to get ahead of the markets! May be they must have changed the IB (Initial Balance)=60 min rule to IB=x min OR may be they are not using the TF based IB only! They must be using customized tick charts i.e. IB=X no. of contract/shares traded. Thus my question - How to get (method) the right Initial Balance (IB) =x min or X no. of contracts (futures)/shares (cash) traded for different underlying?
  3. Since there is no substitute for Market Delta, letís keep it aside! Btw, what difference will it make if I use a 1-minute data instead of tick by tick data for Volume Profile (as MP/VP has been told to use on a 30 min TF)? Since itís a consolidated 30 min profile, how a tick data will make any difference?
  4. Since I donít have Market Delta, I get these levels VA (70%), VAL, VAH, POC from my source (which uses Market Delta) for last 5 trading sessions which I mark them on RT charts! Since, the trade depends on those 5 opening strategies; I use those levels to take decision with the help of Volume Profile which is developing RT. If not the precise, is this a somewhat a correct way? Actually, this is the question which is based on my last 2 months of screen time involving this trade setup!!

1) If you are trading Future then you must follow Future Price. Just like as we trade Nifty Future, but hardly track Nifty Index Price.

2) I feel you you are having misconception of "biggies" and perhaps their "actions" and "methodologies" adopted have too much bearings on market dynamics. You must be in market to trade your way not the other's way. Making complex assumption and adopting tweaks of standard practices may not be very effective and beneficial in your trading. But you can always do experiments in latter stage once you get good handle of standard trading ethics.
So i say, stick to standard IB of 60 min or 30 min. But it still depends on various factors, some i can think are following

a) Instrument type ( Cash/Future , Commodity or Currency ).
b) Instrument Volatility and Average Daily Range.
c) Session Total Duration.
d) Behavioral Trading Pattern of traders trading that Instrument.

3) If you are using TPO profile than it does not matter much, tick or minute data, as TPO is constructed on Time. So minute data can also plot same shape TPO profile as tick data.
If you are using Volume Profile than more the granularity of data more the accuracy, as it uses Volume on each Price( i.e. tick ).
Again i say, dont rush for "Tick" in illusion that it will give better information to execute. Rather you will be more better trader if you follow aggregate picture.
You can find hundreds of traders examples over the other forums and Internet , who start using smallest granularity chart , burnt their hands and finally get back on increasing the time frame.
Even i feel ( from current state of trading experience ) to drop my 3-min chart and follow only 15-min (...gradually shift to even daily) and reducing trades from 10 per week to 4 per week and then 4-5 per month.

4) You are already using aggregate picture trading - keep on refining.
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