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27 Posts
Posted - 10/26/2010 16:46:42    
I thought I would start a thread to see if there was any interest in discussing the use of Market Profile analysis to trade markets. What I have in mind is a thread where traders, who have managed to find MP indicators, can show how they use them to analyze and trade markets (but not necessarily the exact specifics of entries). Perhaps pick a recent trade you made (or wish you had made) and show how you used MP to analyze the situation and how you traded it (I’m particularly interested in learning how to get on those Open Drives). Of course, feel free to make a comment or ask a question.

To kick things off, I will discuss trading the “p” and “b” patterns. In June, and maybe even earlier, these patterns have been occurring very frequently in the ES market. In the last 2 weeks almost every day has had one. P-shapes and b-shapes are characterized by an initial open drive or open-test-drive that is followed by a balance period that leads to a breakout, usually all in the same day. The following is a screen shot of a 30 min chart back to 6/26.

Although there are a number of ways to trade these patterns, the following chart of 6/26 which contains a 5 min plotted DVA shows how I approached it.

The arrows show (arguably) the best long entries while ellipses 2 thru 5 show (again arguably) the best exit points. The first ellipse shows the late afternoon low on 6/25 which had a p-shape and very treacherous breakout that never went anywhere. On 6/26 the market opened in the value area and stayed there throughout the IB which only had a range of 6.5 points. According to Dalton's MOM this indicated that there was good chance of a neutral day, meaning that we could expect range extension on both sides of the IB although not much. However, the fact that the 6/25 breakout never occurred indicated that there was still a possibility for one and more upside. The entry at the first arrow looked good because it was below the DVAL and though not shown there was also evidence that the downward move was approaching exhaustion which was indicated by extreme NYSE Tick levels. More importantly, the entry was at a test of the afternoon low on 6/25 where buyers had come in and pushed price up to that days high. The fact that the entry was in a area of single TPOs (shown by series of short white treadlines on the 6/25 chart)meant the the buyer or buyers were probably institutions and could be relied upon to protect their positions. The second arrow shows a more compelling entry, in my opinion, because it is where price begins to diverge from the NYSE ticks. That is, price is going lower but NYSE ticks are putting in a higher low. The third arrow is even more compelling because now price is putting a higher low, giving us a triple bottom. How long one stays in a trade like this depends how strongly you believe in the upside scenarios. In this particular case, the likelihood hood of a neutral day told us that we could reasonably expect price to rotate between the DVAL and DVAH, so our first target might be the DVAH (second or third ellipse). Secondly, with neutral days, we expect price, at some point, to put in range extension on both sides of the IB. Having already had downside extension, another target might be the IB high (fourth or fifth) ellipse. Finally, there were some good arguments for an even higher test. One being the break out from the “p” balance period. If there were such a break out we would expect to have a test of at least the prior day’s high. Given that we were in the second day of the balance period I thought the odds were pretty good for such a test. Secondly, there was also an argument for a test back into the early June range given that the market put in a higher low without testing the bottom of the May range and was now bumping up against the bottom of the early June range. However, all we got on 6/26 was a quick test of the prior day’s high (the neutral day prevailed--the breakout came the next day), but still not a bad trade -- 3 – 9 points depending a where you got in and how long you stayed in. On trades like this I normally set my stop 2 points away and want to be substantially out of the trade after a 5 point move in my direction.
22 Posts
Posted - 01/10/2011 22:34:36    
something about the bell curve, when its halfway there
28 Posts
Posted - 02/11/2011 23:26:51    
who makes mp_id_1?
24 Posts
Posted - 02/14/2011 20:15:39    
where can we get this indicator in a ELD ty
24 Posts
Posted - 02/14/2011 20:57:24    
Competetive trading software provides Market Profile as part of the software, I was wondering if Tradestation has any plans to make Market Profile as part of the software?
Jubal Harshaw
105 Posts
Posted - 03/28/2011 19:32:39    
There is a vid on You Tube that shows how to set up MP on Tradestation, however although it looks interesting I have no idea how to use it.
41 Posts
Posted - 04/22/2013 06:49:52    
Hi EdgePlayer,

I'm just looking at using profile charts and have been trying to overlay these over the top of bar charts, just as you have shown. Unfortunately I have failed rather miserably to show the daily profile with a 30 minute bar chart (or any suitable combination). Any pointers how you managed to achieve this?

Thanks Discussion
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