Validity of historic Value Areas?

[vicsch 10]

Hi Guys,

 

This is my first post and I'll try to keep it as brief as possible.

 

After a fairly lenghty absence, I've returned to trading the SPI 200 (Aust. Share Price Index). Over the past 6 months or so, I've been studying "Mind over Markets" and have been amazed to see how accurately the market reacts to the various pivot points of Market Profile - to such a degree in fact, that I don't think I could trade the index without it anymore.

 

My question is: If/when the market opens outside the previous day's Value Area (out of balance), how much importance can, or should be placed on previous Value Areas and at what time should one consider them to be no longer valid? I've seen the market react to previous pivots, but personally find it more difficult to "trust" them as possible targets, or entry points.

 

I calculate my Value Areas using an on-line TPO Chart and then manually update my charts on a daily basis. A bit archaic I know, but I find it works for me.

 

Any comments would be much appreciated.

[jperl 11]

Hi Guys,

 

My question is: If/when the market opens outside the previous day's Value Area (out of balance), how much importance can, or should be placed on previous Value Areas and at what time should one consider them to be no longer valid? I've seen the market react to previous pivots, but personally find it more difficult to "trust" them as possible targets, or entry points.

 

It depends on what you mean by "importance". Today's "value areas" aren't any more or less important than previous days,weeks,months,years value areas. (I put that in quotes, because my definition of value area is different from the standard market profile definition; but more on that at another time). A value area as a pivot point is only a price point where price action pauses before deciding which direction to move in. So if price action moves down say to yesterdays value area, it will simply pause there, before continuing down or possibly reversing. What happens after the pause depends on other factors. If you are in a trade, the value area touch would thus be a good point to take a partial exit. If you are not in a trade, then it's a good point to consider an entry.

JERRY

[Nick1984 10]

I don't look very far back for the previous value areas but i do pay attention to the POC for the last 1-2 weeks on a daily basis to see if there is any particular trend going on. Eg: If I see that for 3 days in a row the VAL and VAH have been moving steadily down especially if gapping down below previous days VAL, then i'd assume that the down trend would continue etc...

 

Btw: how are you finding the liquidity on the SPI 200? Last time I checked it was still doing pretty crappy in contracts traded per day around the 3-5k contracts mark.

[vicsch 10]

Thanks for that.

 

I suppose it does make perfect sense that previous value areas are as "important" as present ones, just as previous highs and lows, or Tops and Bottoms become support or resistance levels - sometimes months, or even years apart. I'll keep that in mind.

 

Regarding liquidity of the SPI 200 - It's been picking up of late and the average daily volume is anywhere between 15 and 20k - even higher at at times.