Soultrader

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Here is a sample chart of Dec. 28, 2007. The chart shows the past few session market profiles with explanation. The left hand side shows 4 day activity of markets auctioning below the current value area. This area of congestion is labeled Bracket 1. On Dec. 22, the markets gapped up higher and created higher value placement. This shift in market balance on the 5th day of trading is significant with A period leaving a single print tail. This level will be a key support level. Also in Bracket 1, we have an area of confluence shown by the overlapping value low pivot line. Any break below the single print tails will cause price to enter into a previous value/congestion area. This confluence of the value low pivot will be a key support line. Now shifting to the right hand side of the chart, 12/25 - 12/27 shows a 2 day overlapping value area. 12/28 was rejected in this value area to drop lower into the area created on 12/22. There was also fundamental reason behind this move due to the assassination of former Prime Minister Bhutto. Strategies with Market Profile & Other Technical Tools We can now build a strategy based on what the markets is showing us. Questions to ask: Are we ready to move into higher value area created on 12/25 - 12/27? Or are we likely to remain inside of value created on both 12/22 and 12/28? Or are we likely to move into lower value placement inside of Bracket 1? Answer: All of the above. (who knows?) So using the 3 questions above, where can we establish trade points? First, if we assume price to break higher into 12/25 - 12/27 value area we can look for a break above A period from 12/28. In other words, we need to determine if buying exists above the 13600 mark. Are internals strong? Is volume increasing? If yes, we can then look for a long setup above this area. VSA techniques on a pullback to this area can be applied. If we assume price to remain inside of value created on 12/22 and 12/28, we can look for short setups inside the resistance area of 13580 - 13600. Once again, you can wait for VSA setups at this level. A reference point one can use to gauge strength vs weakness could be the overlapping POC on 12/22 and 12/28. Thus a downward bias may allow a trader to look at the 13500 level for any VSA or other setups. Also again at the 13400 level (below the 12/22 single print tails) After idenftiying the levels you want to play at, one can then apply his own technical methodologies to execute his/her trades. This is how I prefer to combine market profile with other technical tools.

No problem. Thanks to the VSA inputs as well. Ill get into identifying trade location with market profile then going into VSA for entry decision making. yw, feel free to post any questions you have on mp. I dont follow it by the book but have my own way of interpreting it. His latest book was Markets in Profile which came out early this year I believe. I dont know of any other book to be released by Dalton yet.

Yes, I would recommend to read in that order. Mind over Markets is the easiest to understand of the three. Steildmayer will help you add further insights.

One of the most important element with market profile is the value area. It is important to ask questions like: Are we likely to trade above/below value today? If so, why? If not, why? Can we expect price to remain in the previous days value area or range? Which way is the market trying to auction? Is it doing a good job getting there? Is the price break above/below the initial balance valid? Are we likely to see longer term participants step in to sustain this breakout move? Why or why not? Are we seeing two sided market action? Are we likely to see price pushed back into the initial balance? Was the move above/below the initial balance a rejection pattern? Which way are the markets likely to test first? What does the opening price action tell me? The point here is that the markets need good activity to move away from the previous day value and to trade away from the initial balance. If there is nothing that hints out any range extension, you can expect price to return to value. This is the most important concept of market profile in my opinion. Understanding this simple concept will help find good trade locations built around this concept. For example on Dec. 27, 2007 former Prime Minister Benazir Bhutto of Pakistan was assassinated. The futures market reacted negatively on this news causing price to decline premarket. My first reaction was that the Asian markets may gap down and open lower because of political unstability and chaos in the Asian region. This may impact the US markets as well due to the tight correlation. Next, I asked are we likely to create value placement lower compared to the past two sessions? I had a fundamental reason for lower value placement. Now I needed technical evidence to place any short trades. Thus I am holding a bias first but with confirmation through price action and trade location through market profile. The Slip The slip is what I like to call when price breaks out of the initial balance just to be rejected. In other words, the initial reaction to push price out of the initial balance or value area was wrong. Now we are likely to rotate in the opposite direction. The slip is so common that this is one of the reasons I do not trade momentum IB breakout plays. To be a good market profile trader, I think one needs to have keen intuition on these slips. Are you seeing buying interest above the initial balance? Are you sensing diminishing demand and weakness? Fading these breakouts takes courage but is one of the most profitable setups one can take. If you short above value, you are simply responding to expensive prices relative to the previous day value. If you are buying below value, you are responding to cheap prices relative to the previous day value. This is responsive activity. Initiative activity on the other hand is buying above the previous day value area or selling below the previous day value area. The reason you would be buying above value is because you sense a shift in market balance and higher value placement. Vice versa for selling below value. The most important thing to remember is: Is the market you trade a responsive or initiative type market? To be continued...

Here is an example chart from 12/28/07 for further explanation. First chart shows a regular 30min market profile with A period starting at 9:30am EST. Second chart is the same chart but broken down into TPO segments. One of the safest ways to trade with market profile is to wait until the Initial Balance has developed. The first 2 periods offers the biggest clues to what type of market we are likely to develop. One of the things to watch for weakness on a price chart would be lower highs. With a market profile chart, the same concept can be seen when a time period is unable to break above the high of the previous 30minute session. Chart 2 illustrates this with the combination of market internals using the $TICK. Hence, in my opinion learning to use market internals as well as other technical tools is extremely powerful when trading with a market profile chart. This combination offers an edge. Chart 3 shows how "C period" high also met resistance from the past 2 session lows and 12/22 high. Any short trades from C period high down to 13550 would of offered great opportunities. Why not play the break of the initial balance? I personally do not play breakouts of the IB. I prefer to wait for a retracement back towards a high of a earlier TPO segment. For example, in the same day if one missed a trading opportunity to the short side a second setups occurs at E and F period. Price can not reverse until one-timing auction is cut off. So best to trade with the trend until this happens.

Market Profile Concepts Initial Balance - Initial balanace refers to the first 60minutes of trading. This time zone is possibly the most important time period as it offers clues to what sort of market one can expect. A and B period in the chart below shows the initial balance. This term willl continue to come up in the following posts so make sure to learn this key terminology. Value Area - A market profile chart plots price as a bell curve. This bell curve is then divided into the first, second, and third standard deviation. The first deviation of this bell curve includes the 68% of the total volume, the second deviation includes 29% of the total volume, and the third deviation includes approximately 3% of total volume. See chart below: The first standard deviation or roughly 68%-70% of the area where most market action took place is the value area. Point of Control or POC - Point of control is the price level in with the most TPO's. In other words, it is the level in which the markets spent the most time trading. TPO or Time Price Opportunity - TPO simply refers to each alphabet plotted. Each letter reprents a 30 min time period. One can count the number of TPO's above and below the POC to determine buying vs selling control for the day. Extremes and Tails - Tails and extremes occur as price is swiftly rejected leaving a vertical line of single print TPO's. Tails are key levels in which price may have a tendency to act as support and resistance. Range Extension - Any extension beyond the initial balance.

Yes, I currently use esignal for my charting as I pretty much rely on a naked chart now and dont need all the fancy TS stuff.

Due to the highly successful VSA thread, I would like to also start a thread dedicated entirely for Market Profile that covers definitions, market structures, mp concepts, trade locations, pattern recognition, and more. Market profile is perhaps used by only a small percentage of traders with very little educational material available for free compared to other technical analysis methodologies. So let's get this thread started! Recommended Readings Mind Over Markets: Power Trading with Market Generated Information by James F. Dalton Steidlmayer on Markets: Trading with Market Profile by Peter J. Steidlmayer Markets in Profile: Profiting from the Auction Process by James F. Dalton Things To Keep In Mind The concepts and terminalogy covered in this thread may require you to have a basic understanding of market profile. There is a free pdf file available from the CBOT which you can download here that brushes this topic but I highly recommend to read the 3 books listed above. Important terms: Initial Balance (first 60min range) Value High or VAH Value Low or VAL POC, VPOC One-time auction Extremes/Rejection Day Types: Profile Pattern Recognition 1. Nontrend Day: A nontrend day occurs when there is no conviction by the longer term market participants. Day traders are the only ones providing liquidity with volume being light and range being small. Lack of confidece expressed by the longer term traders causes markets to be contained within the initial balance (first hour range) as an extension of price is less likely. Traders with a view longer then the day trader see no opportunity/advantage at these price levels. Below are a few examples of a nontrend day. 2. Trend Days (2 types): Trend Day A trend day occurs when there is a high level of cofidence expressed throughout the day. Larger time frame market participants must be active in order for any trend day to occur. The market is in full one-time control. One-time control refers to an auction process of continously higher lows/higher highs or lower lows/lower highs. Each 30minute price action will auction higher/lower than the previous 30minute price action. This should continue until the close. A strong trend day will usually leave the opening price near or at the high/low for the day. Below are a few examples of a trend day. Double Distribution Trend Day A double distribution trend day occurs when trading is light during the day followed by a sudden expansion of the initial balance by the longer term market participants later in the session. This one-time activity usually occurs into the afternoon session. This sudden change can be caused through fundamentals, news, economic reports, or just plain supply or demand. Below are a few examples of a double distribution trend day. 3. Neutral Day A neutral day occurs when longer term market participants express opposite views amongst each other. In other words, range extension may occur both above and below the initial balance with minimal price change for the day. Both sellers and buyers are present in a neutral day. Because the longer time frame participants do not agree on the same price they trade mainly with the locals or the middleman. In other words, sellers exist above value as they find price to be too expensive while buyers exist below value as they find price attractive. This profile resembles a complete market in balance as all short term and long term traders are involved. Below are a few examples of a neutral day. 4. Normal Day A normal day occurs when there is a small participation by the longer time frame traders expanding the initial balance by approximately half the range of the IB. So if the initial balance was 60 Dow pts, an extension would be 30pts above or below the initial balance. Normal days have a tendency for active action at the opening hours followed by dull two-sided trading for the remainder of the day. A normal day may also have a wide initial balance indicating a strong conviction by the longer term time frame traders at the open followed by no follow through. The result will lead to price action contained within the initial balance. Below are a few examples of a normal day. 5. Normal Variation Day A normal variation day occurs when the other time frame market participant steps into early in the day to upset the initial balance. The range extension is usually double the initial balance. So if the initial balance was 40 Dow points, the range extension would be roughly 80 pts above or below the IB. The extension causes value area to move higher/lower and is followed by two-sided price action for the rest of the day. Below are a few examples of a normal variation day. To Be Continued...

Hi Jwhite, I had to go through a similar incident myself. My folks are terrible investors without the slightest clue. I have had plenty of battles with them on the topic of money and career. My folks do not approve of my career as a trader but prefer the stability of a monthly paycheck. They do not understand that I consider a monthly paycheck to be the most risky compared to one who can generate his/her own money. Unfortunately my folks are as stubborn as I am and I have not dealt with this problem positively. In fact, I dont think they will ever understanding my view of life and money. So from my situation, the only advice I can give you is to keep on with what YOU do regardless of all that may pull you down. Family is #1 but from experience, even family can drag you under at times. Just know that you are different from your folks and live your life.... not theirs.

I also see it clockwise. But I can focus on her shadow and start seeing her spin counter clockwise as well. (takes a little more time)

No but from what Ive seen... it requires long hours. Our assistance had to retreive data from the Tokyo Stock Exchange everyday at 7:30pm so would be working till around 8:30-9:00pm. Also note the early hours starting from around 7:00am for traders. You do want to give off an impression that you are passionate about the markets though.

Well if you really want to dedicate the time to learn the markets... I am sure you can absorb alot of knowledge there. Just apply and give off a very motivated, hungry, and passionate image. Most finance guys I meet love hungry guys. I dont think mentioning I want to be your assistance is necessary. But mention your goal is to be a top trader and that you are willing to do anything to get there.

The Left Brain vs Right Brain Test Question: Which way do you see the dancer turning? Clockwise or counter clockwise? Note: dont try to analyze it too hard. Just note the direction you see on your first glimpse. If clockwise, then you use more of the right side of the brain. If counter clockwise, you are using more of your left brain. Left Brain Categories Linear Processing Linear processing is a method by the left hemisphere to process information. In this process, the left brain takes pieces of information, lines them up, and proceeds to arrange them into an order from which it may draw a conclusion. The information is processed from parts to a whole in a straight, forward, and logical progression. Your Linear Analysis You tend to have difficulty in processing data in a linear manner. When processing information you tend see the whole picture first and work your way backwards, filling in the pieces as you go. The information you process is not done in a straight, progressive manner, but may take different paths as you start with an assumption and take different paths to discover the threads that lead you to that assumption. Seeing the big picture at the beginning of the process is a necessity for you if you are to understand additional information. When given a task, instead of naturally following directions in a linear fashion, you tend to feel the need to know "why" you are doing something or else you may have difficulty with it. Sequential Processing Sequential processing is a method used by the left hemisphere for processing information. The information that is received is processed in order from first to last. Information is processed in a systematic, logical manner. Through sequential processing, you can interpret and produce symbolic information such as language, mathematics, abstraction, and reasoning. This process is used to store memory in a language format. Activities that require sequential processing include spelling, making a "to-do" list, and many aspects of organization. Your Sequential Analysis You tend process information you receive without any priority as to which is processed first, last, or any place in between. It is difficult for you to learn or perform tasks involving sequence. For example, spelling is a task that involves sequence and you may experience problems remembering exact spelling or any type of rote memorization, for that matter. Creating daily lists and plans are probably not activities you enjoy. If you are having problems with tasks involving sequence, there are methods you can use to improve your skills. One method involves using colors to learn sequence. You assign a color to each task. For example, you may want to make the first step green, the second step blue, and the last step red. This helps because the right side of the brain, your dominant side in this case, is sensitive to colors. The important thing to remember is that consistently using the same sequence will help you both improve and recognize that this strategy can be used in many different circumstances involving sequence. Symbolic Processing Symbolic processing is a method associated with the left hemisphere that is used for processing the information of pictures and symbols. The majority of functions associated with academics involve symbols such as letters, words, and mathematical notations. This process is what aids you to excel in tasks such as linguistics, mathematics, and memorizing vocabulary words and mathematical formulas. Your Symbolic Analysis You have difficulty processing the information of symbols, and would rather see the real object in order to understand. You probably hated algebra. For example, if solving a math problem, you need to "draw out" the problem to understand and solve it. You rely on the visualization of real objects instead of their symbols. Tasks such as memorizing vocabulary words or mathematical formulas are more difficult for you. Logical Processing Logical processing is a method that is used by the left hemisphere to take information piece by piece and put it all together to form a logical answer. When information is received through reading or listening, the left hemisphere will look for different bits of information that will allow it to produce a logical conclusion. This aspect of the left hemisphere is what aids you in solving math problems and science experiments. Your Logical Analysis Logical processing is not one of your strengths, so you may tend to rely on a "gut" feeling to help you make your decisions from the information you have received. For example, you will often choose an answer on a test because it "feels" right, and you may be correct. This is due to the fact of your tendency to look for the whole picture but not the details that create it. You can often start with the answer and work your way back to allow yourself to see the process and parts that create the whole. You may find math problems and science experiments difficult because of this. Verbal Processing Verbal processing is a method used by the left hemisphere to process our thoughts and ideas with words. For example, through verbal processing, a left-brained person giving directions may say, "From this point continue east for two miles and turn north onto Bellevue Road. Continue north on Bellevue Road for seven miles and turn west on Main Street". With verbal processing, exact, logical directions are given in a very sequential manner compared to a right-brained person who, in giving the same directions, would use more visual landmarks. Your Verbal Analysis You are not a verbal person. When you process your thoughts, you tend to use very few words, preferring instead to illustrate a problem or solution. You often find yourself in situations where it is hard for you to "find the right words." Upon reading or hearing new information, you must first create a "mental video" before you can process and understand the information of your thoughts. For example, when giving directions, you probably use many gestures with your hands such as pointing and leaning, and also refer to visual structures such as "a McDonalds" or "the big tree" instead of street names or exact mileage. Reality-based Processing Reality-based processing is used by the left hemisphere as a method for processing information with a basis on reality. This processing tool focuses on rules and regulations. An example of this would be how a left-brained person would completely understand the repercussions of turning in a late assignment or failing a test. A left-brained person also usually easily adjusts to changes in their environment. Your Reality-based Analysis The information you process may lack a basis on reality, but it does open the door to creativity. You do not show much focus for rules and regulations and do not adjust well to change in the environment. In fact, upon experiencing change in the environment, it spurs you to try to change it yourself instead of adjusting to it. Whenever you become emotionally involved in project you are more likely to learn and succeed. Right Brain Categories Holistic Processing Holistic processing is a method used by the right hemisphere to process information. The information is processed from whole to parts. A right-brained person, through holistic processing, is able to see the big picture first, but not the details that accompany it. A strongly holistic person may often find that prior to listening to a lecture given by an instructor, they must first read the chapter so that they better understand what the lecture is about. This function is also what provides to you your visual spatial skills. It also aids in tasks such as dancing and gymnastics. Through holistic processing, memory is stored in auditory, visual, and spatial modalities. Your Holistic Analysis You have difficulty seeing the whole picture, especially at the beginning of a project. You tend to process information you receive from its parts to its whole in a straight, progressive manner. When given a task, you tend to not bother asking "why," but instinctively are able to do it. Random Processing Random processing is a method used by the right hemisphere for processing information. The information that is received is processed without priority. A right-brained person will usually jump from one task to another due to the random processing by their dominant right hemisphere. Random processing is, of course, the opposite of sequential processing therefore making it difficult for right-brained individuals to choose to learn in sequence. In order to overcome this, a right-brained person may want to attempt to learn sequence by using colors since the right hemisphere is sensitive to color. For example, you may want to associate the first step with green, the second step with blue, and the last step with red. Consistently using the same sequence will allow you to see that this strategy can be applied to many tasks involving sequence. Your Random Analysis You tend to not process data randomly, preferring instead to follow a systematic, logical order from first to last. You have difficulty making "leaps of logic" which prevents you from making unique discoveries, or adapt to change during your thinking process. Concrete Processing Concrete processing is a method associated with the right hemisphere that is used for processing things that can be seen or touched. It processes much of the information you receive from real objects. For example, a right-brained person is not just satisfied that a mathematical formula may work, but will want to know why it works. A strongly concrete person often finds it easier to solve a mathematical problem by "drawing it out" because it allows them to visualize it. The more a concrete person can visualize something the easier it is for them to understand it. Your Concrete Analysis When you process information you have received, the real object is not important to you. You do not have to use the real object to make sense of what you have processed. For example, if solving a math problem you do not have to "draw out" the problem in order to find or understand the answer, and you do not have to visualize something to understand it. However, this also means you often neglect the physical information provided by a concrete example. In other words, you may miss the forest for the trees, trying to deduce something complex when the answer is plain to see. Intuitive Processing Intuitive processing is a method that is used by the right hemisphere to process information based on if it "feels" right or not. For example, a right-brained person may choose an answer on a test because they had a "gut" feeling and often they will be correct. Another example of this is how a right-brained person will know the correct answer to a math problem but will not understand the procedure of how they arrived at the correct answer. A right-brained person will usually have to start with the answer and work their way backwards in order to be able to see and understand the parts and process that create the whole. Your Intuitive Analysis When you process information using this method, you do not rely on "gut" feelings but take the information and put it together piece by piece to form your conclusions. You often look at all of the different bits of information before piecing together your solution. You probably excel in such tasks as solving math problems and performing science experiments, because the intuitive method is not needed. Nonverbal Processing Nonverbal processing is a method used by the right hemisphere to process our thoughts with illustrations. Reliance on this method is why it is occasionally difficult for right-brained people to "find the right words" in certain situations. A right-brained person cannot just read or hear information and process it, but first must make a mental video to better understand the information they have received. For example, through nonverbal processing, a person giving directions may say, "Continue going straight until you see a big, red-brick courthouse. At the courthouse turn right, and go down that street for a couple of miles until you se a gray stone church which will be on your right. Straight across from the church is the road to the left you need to take." With nonverbal processing, the directions that are given are extremely visual compared to the exact, sequential directions that would be given by a left-brained person. Your Nonverbal Analysis You have little ability in nonverbal processing. When you process your thoughts and ideas you mainly use words instead of illustrations. For example, if you were giving directions you may say, "Continue traveling west for 3 miles and turn north at the intersection." You would give exact, logical directions in a very sequential manner. Fantasy-oriented Processing Fantasy-oriented processing is used by the right hemisphere as a method for processing information with creativity. It focuses much less on rules and regulations than the processing method of a left-brained person. Due to the fantasy-oriented processing mechanism of a right-brained person, they do not adjust well to change. Instead of adapting to the change in the environment, a right-brained person attempts to change it back to the way they liked it. But fantasy-oriented processing also provides the advantage of creativity to right-brained individuals, and since emotion is integral of the right side of the brain, anything a fantasy-oriented person becomes involved in emotionally will aid their ability to learn. Your Fantasy-oriented Analysis You have a low ability to process information in a fantasy-oriented way. You have the tendency to focus on rules and regulations rather than on creative approaches. You generally do not have a problem adjusting to change in the environment. You may lack creativity, but you do not need to become emotionally involved in tasks in order to complete them. - Description taken from The Art Insitute of Vancouver -

It seems like assistant work and data mining. Usually a team of traders will have a few assistants taking all sorts of information down on high/low performers, stock deslistings, insitutional block holdings, market sentiment, chart data of traders risk in excel, etc.... You will definitely learn alot about the markets they trade but you will probably go through shit work for 1-2 years.

Happy holidays all, lets make 2008 another great year!

Sorry guys, it took us a while to figure out the problem. Chat room is fixed now. Thanks

Yes, I am looking into this matter asap. Waiting to hear from my IT guy... Ill try to have it fixed asap.

Hi Paul, No problem. Of course anyone on a mission to become the best pattern based traders must understand the psychology behind why they work and become familiar with them before risking any money. Similar to candlesticks but on a more broader based form of pattern recognition imo.

After receiving this book from Suri Duddella himself (author), I must say I was highly impressed. Previously reading two volumes of Bulkowski's, Encyclopedia of Chart Patterns, I was quite stunned to learn various chart patterns I was never exposed to. Suri's book contains over 65 chart patterns, most of which was new to me. For a purely technical based trader relying on pattern recognition, this book is a gold mine. Packed with illustrated charts, Suri goes into depth on entries and exit points as well. From NR7 breakouts, Globex pivots, channels, M & W patterns, etc... Trade Chart Patterns Like The Pros explains things easily even for the novice trader. There are alot of technical analysis books out there on the market but this book was perhaps one of the easiest to understand. I recall reading Technical Analysis of Stock Trends by Edwards and Magee my first month entering the trading world and it was quite overwhelming. I personally am not a chart pattern based trader but many intraday traders I come across here in TL have done an amazing job trading intraday technical patterns. I highly recommend this book for both the seasoned and novice trader to expand your knowledge of technical price patterns. A few examples of patterns explained in the book: 1. Three Hills and a Mountain Pattern 2. Bearish and Bullish Bat Pattern 3. Fractal Pattern (interesting reversal pattern) 4. Various Channels (rectangle, donchian) 5. Symmetry Patterns 6. 3 Bar Patterns (MSL and MSH) I personally am not a pattern based trader but the book made me think about the lack of understanding I had for patterns. (I trade mainly off market profile. Different kind of patterns. ) I will also like to invite Suri to participate on our forums to share his expert knowledge on this topic as well.

It used to be available here for free but it has expired and no longer available. You will need to use a third party vendor for it.

Hi Sparrow, What software do I need to open this file?

Do you know anything about the Nikkei? It is a completely diffferent market if you are used to the US. Also those commision rates are pretty much standard right now, some brokers go as low as 80yen rt. (approx 75 cents) With the rates shown in the link, you should save the trouble and just open an account with IB. They offer similar rates. Most Japanese firms will be distratrous when trying to communicate in english.