Calculating Value Area

[marketminute101 10]

Hey Soultrader,

 

I was wondering if this could also apply to the FOREX market since there is no real volume indicator in the FOREX I don't know but I figured I'd ask anyways.

 

 

-Thanks!

[ghoti734 10]

FYI - Volume at Price is available for download at the CMEGroup site for all futures products. It's in the middle of the page:

 

Volume & Open Interest

 

I extracted the ES contract and plotted the Volume at Price for the area above where we are currently trading. This is the Excel chart for the date range noted. It's also premium adjusted for the December contract. The inset chart is the area the bar graph represents.

[CrudelyTrading 10]

I´ve been looking at this value area, very interesting.

 

I have a VA Indicator in NinjaTrader, it calculates the VA and the POC... It works fine, cause I can actually check the figures with Larry Levins email, this confirmed it was using the same data formulas etc...

 

 

Can anyone answer me this..... What surprises me is that the VA will be different on a 1min - 5min - 30m chart... The 30min matches with Larry and I know thats what he uses, but I don´t understand why it would be different on a 1 - 5 - 30min chart ?

 

Its not time frame based in that respect, it measures the 70% volume based over the trading period 9:30am - 16:15pm EST, so how does changing the chart time setting effect it ? There is a setting for "calculate on bar close" but even setting that to True or False on all the time-frames doesn´t matter... Far as I can see it shouldn´t matter at all what time frame it is on to do the calculation as the calculation is based on the 09:30am to 16:15 close anyway, isn´t it. Anyone know why its different 1min, to 5min to 30min charts ?

 

It is only slightly different, a few cents... 60min chart makes it wildly different though... If I use a tick chart which isn´t time based at all then the values are different again between different calue charts, doesn´t make any sense to my tiny neewb brain... lol :crap:

[TheNegotiator 13]

It is time based. With market profile, each price traded within a certain period gets allocated a TPO letter for that period once only no matter how much it trades during that period. The VA calculation is not simply 70% of the TPO (which btw in standard MP is just an approximation of volume).

 

 

This is a method used to calculate the value area.

 

Source: Mind over Markets

 

"First identify the price at which the greatest volume occurred. Then, sum the volumes occurring at the two prices directly above the high-volume price and compare it to the total volume of the two prices below the high-volume price. The dual price total with the highest volume becomes part of the value area. This process continues until 70% of the volume is reached."

 

The most important thing to realise in understanding the difference in value area when then timeframe is switched is that on a 1 min TF for example the price may span 20 ticks in a half hour period which would have a single TPO for each price, but price may have moved in one direction and stayed at the extreme of this move. So on the 1min, more TPO's would be generated at the extreme within the 30min period.

[CrudelyTrading 10]

Ok that makes sense in that respect yes... I can surely see the difference between why the 70% volume traded would be different over individual candles....... But, if you compared the volume traded over 30 x 1min candles, compared to 1 x 30m candle, would the 70% volume over the "collective 30 candles" be the same as the "singular 1 30m candle" ? (Assuming that the 30x1 and 1x30 started and ended at exactly the same time).

 

My point is that the Value Area is calculated between 09:30am and 16:15pm, where 70% is traded between those 6.75hours...The candle time period is irrelvent surely, the VA is defined by a static 6.75 hour period, not individual candles. Is that not right ?

 

Whether it is 1m or 30, or tick charts, or volume charts should not make a difference to where the 70% volume is traded over a 6.75 hour period, surely ?

 

Obviously I am still confused, sorry.

[TheNegotiator 13]

If people are using standard market profile and they are referring to volume, they are not being strictly accurate in their description. A market profile TPO or print, is generated by any amount of trading at a price in a single time period. It does not depend of volume, but is used as an apporximation to volume given the likelihood that the longer the amount of time spent at a price the more volume that probably traded there. It doesn't matter though if within the time period you are looking at, a price trades 1 contract or 10,000 contracts, it will still only get a single TPO for that time period. When the next period comes around, a price can receive an additional TPO but again only once within the same time period.

 

If for example you are trading a product and it trades in a 30 period from a price of 100 to 200 in the first 1 min, then remains between 180 and 200 for the remaining 29 mins of the period oscillating up and down, this is what you would see using different profiles.

 

30min profile:- A line of single TPO prints.

 

1min profile:- A single line of TPO prints up to 180 then many more prints between 180-200.

 

This reflects the fact that prices from 100-180 only traded in a single period but prices between 180-200 traded in multiple different 1 min periods. The 30min profile covered only one single period so prices couldn't accumulate additional TPO prints.

 

 

Did you take a look at the CBOT MP manual?

 

http://www.cmegroup.com/education/interactive/marketprofile/handbook.pdf

[CrudelyTrading 10]

Im not talking about Market Profile strictly.

 

Im talking about the calculation of the value area which is the prices where 70% of the volume is traded during the session (ES) 09:30am and 16:15pm, I can only see the title of the FORUM as being "Calculating Value Area"...

 

Did you see my actual questions ? Guess you don´t know the answer which is fine... No problem. Thanks anyway.

 

Anyone else know the answer to my question ?

[TheNegotiator 13]

Haha. Maybe listen? If you are looking at a market profile, there is a difference as volume is approximated by TPOs. If you are looking at a volume profile, there should be NO difference. If you are really looking at a volume profile, I would suggest going and looking at your indicator settings. In some I have seen, you need to manually set the VA type to Volume as it defaults to TPO. The indicator you have if it is from the forum may not have the option even to change the VA calculation method. Imo Ninja is not great for MP/volume profile.

 

Hope this helps.

Edited May 12, 2011 by TheNegotiator

[CrudelyTrading 10]

Haha. Maybe listen? If you are looking at a market profile, there is a difference as volume is approximated by TPOs. If you are looking at a volume profile, there should be NO difference. If you are really looking at a volume profile, I would suggest going and looking at your indicator settings. In some I have seen, you need to manually set the VA type to Volume as it defaults to TPO. The indicator you have if it is from the forum may not have the option even to change the VA calculation method. Imo Ninja is not great for MP/volume profile.

 

Hope this helps.

 

Ok, Thats exactly what I thought. I did find a setting in there earlier like you say, it can be changed from TPO to VOC (Volume on close?) - Even in the VOC mode though, there are still differences in the VA when you change from 1-5-30min charts. LOL.

 

Thanks for your help. Have a feeling that it´s a dodgy indicator. Going to try and contact the writer of it. Cheers.

[didi52 10]

Hi SoulTrader,

apologize for my naive question: where / on which site do you find the data needed for calculating the Value area?

As you see I'm a newcomer to this and would appreciate your help on this

Kind regards. didi52:

[TheNegotiator 13]

This might be a good link for you to look at:-

 

Market Profile Calculator