Crash course into MP

[Hlm 10]

It would be greatly appreciate if you would take the trouble to illustrate how MP concepts aided your trading on Friday.

Since this topic is about MP I will focus on that and not Internals and Price Action. Also, my charting system is currently processing data from the previous week so I will try to describe it without illustrations as best as possible.

 

Value Areas (by the day they are used (in case Bannor is reading this))

This is also off the M contract. LVA POC UVA (or VAL POC VAH) I tend to randomly use both.

3/11: 1276.25 1281.25 1290.75

3/12: 1289.50 1302.00 1308.00

3/13: 1318.25 1323.25 1328.75

3/14: 1298.75 1315.75 1324.25

 

Let me start by saying that to keep this short I will focus on what did happen versus giving a bunch of rules and different scenarios. So on open what do we have. We have an open above today's Value Area but still inside yesterdays. Take note that yesterday price was unable to find interest above the POC (1323.25). We also have a gap below us that is right above today's POC (1315.75). When opening outside the Value Area I always look for reasons why the market may want to return or test the Value Area (Gaps, *Internals*, Previous VA's, Distance, etc). On this particular day any interest below 1323.25 and I was looking for a gap fill. BTW, this may sound hindsight but anyone who has spent time in the chat room with me knows otherwise. Once inside the VA we look for the market to find resistance at the UVA and for Price Action and Internals to show no interest on moving back out. This lack of interest to the upside was confirmed when we bounced off the POC, returned to the UVA and previous POC, and held while internals continued to become more bearish. Depending on your entry strategy you would have been short somewhere between 1324.25 and 1317.00. At this point as long as PA and Internals stay bearish my initial target is 1298.75. This is what we call the 80% rule. When entering into a VA there is an 80% rule that it will trade to the other side. Of course we have the VA from 3/12 to watch for signs that we may want to get out. As you can see, price DID hesitate and rotate around the UVA of 3/12 (1308.00). Of course we have that emotional number of 1300.00 around there as well. After reaching 1298.75 you could have taken off some. Any trader watching the Internals hopefully would have held on to some at this point though. The next target would be between 1289.50 (3/12 LVA) and 1290.75 (3/11 UVA). I personally went completely flat on the bounce when the market was unable to find interest below 3/11's POC (1281.25).

 

Also, a few observations:

Where did price pull back to and continue to consolidate around for the rest of the morning? The LVA and 3/12 POC. When did price stop using this area? When it broke into 3/11's VA and found resistance on the other side. Where did the market return to when it found resistance at the 3/11 UVA? Straight down to 3/11's LVA. In the afternoon, where did price spike to? The LVA.

 

Again, this is very basic and there is MORE to MP than what I just described. The purpose was to show Bearbull some basic MP concepts that aided my trading on Firday. ALSO...I wrote this up VERY QUICKLY (I do have another things to do on my weekends ) and hopefully I didn't mess up any of the numbers or areas.

[AgeKay 10]

Hlm, please reread post #23 by me in this thread. If you don't adhere to it, it just does not make any sense to me to reply to anything what you say in the future.

 

The value area is not arbitrarily defined. The value area that most short-term traders use is created during one day of regular trading hours.

Please reread my posts. I said why the value area in MP is arbitrary defined. It's because the creaters of MP picked some number out of the air to define the value area.

 

Now that we have a definite starting and stopping point, we want to know statistically where price spent the majority of the day. This is where the standard deviation comes in. You do make a good point that StdDev works best when you have a nice single distribution day. However, MP takes that into account.

 

That was not a starting point you defined, but just meaningless blub. SD's percentage probabilities work ONLY when there is a normal distribution. It has no meaning with any other distribution! Price spent the majority of the day where there was the majority of volume. That's it.

 

 

There are different ways to trade single distribution versus double distribution days. Even without taking into account any of the more detailed MP rules (distributions, # of prints, etc), just looking at the daily TPO lines you can see that price reacts very well with the current and past value area lines.

 

What does it mean if price reacts with an value area line? How does that look like. Be specific, please! What does reacting "very well" mean? 90%, 80%, 70%, 60% of time? What adverse or favorable move can I expect if it does "react"?

 

With your current remarks I would have to guess that you haven't studied Market Profile "well enough".

 

Well, I have studied it enough to understand it's shortcomings, which you seem to ignore. On that note, do you use MP because you have researched price and volume and MP coincidentally confirmed all of your obersevations or because you take everything the creators of MP said about it as gospel? Same thing with SD: I can't imagine anyone using SD was originally looking for a good way to accurately determine the expected deviation from price and has personally derived the formula based on a valid reason and then somehow noticed that it's known as SD. Instead people hear about it in a book, magazine, internet article, forum or from another trader using it and try it out to see if it "really works" without even thinking if it has any meaning.

 

P.S.: There seems to be a lot of interest in this thread right now. I saw 4 other currently avice users viewing this thread while writing this post.

[mister ed 10]

I really appreciated hlm's post (#27) - and like he said, he has plenty of other things to be doing on the weekend. Re precision definitions - if you hover your mouse over " value area " you will see a brief definition, more detailed definitions can be found on the TL site (I believe Soultrader has a sticky thread devoted to definitions etc. re MP - edit: there are two, this one, and this one). Mind Over Markets (the book) is also good for this.

 

Re "definite starting and stopping point", hlm is referring to the open and close times of RTH (see his post as to why).

 

Interesting questions you raise AK -

Edited March 15, 2008 by mister ed

[Sparrow 10]

That was not a starting point you defined, but just meaningless blub. SD's percentage probabilities work ONLY when there is a normal distribution. It has no meaning with any other distribution! Price spent the majority of the day where there was the majority of volume. That's it.

 

It distribution doesn't have to be normal for starndard deviations to apply, you're right that markets have fat tails, but not all the time:

 

Chebyshev's inequality proves that in any data set, nearly all of the values will be nearer to the mean value, where the meaning of "close to" is specified by the standard deviation. Chebyshev's inequality entails that for (nearly) all random distributions, not just normal ones, we have the following weaker bounds:

 

At least 50% of the values are within √2 standard deviations from the mean.

At least 75% of the values are within 2 standard deviations from the mean.

At least 89% of the values are within 3 standard deviations from the mean.

At least 94% of the values are within 4 standard deviations from the mean.

At least 96% of the values are within 5 standard deviations from the mean.

At least 97% of the values are within 6 standard deviations from the mean.

At least 98% of the values are within 7 standard deviations from the mean.

 

And in general:

 

At least (1 − 1/k2) × 100% of the values are within k standard deviations from the mean.

[Hlm 10]

Hlm, please reread post #23 by me in this thread. If you don't adhere to it, it just does not make any sense to me to reply to anything what you say in the future.

If you had bothered to look at the time stamp you would have noticed that only three minutes had passed between our posts. It took me more than three minutes to post that response.

 

Please reread my posts. I said why the value area in MP is arbitrary defined. It's because the creaters of MP picked some number out of the air to define the value area.

They picked one standard deviation which is NOT "out of the air". It's a commonly used point on gaussian distributions. And yes, part of Market Profile is to know which value areas are normally distributed and which aren't.

 

That was not a starting point you defined, but just meaningless blub.

Blub blub blub bluba blub, blub blub. Blub?

 

SD's percentage probabilities work ONLY when there is a normal distribution. It has no meaning with any other distribution!

See above. Also, do you have a better way? Have you looked at TPO's on a chart lately? Have you looked at how non-normally distributed value areas still create good areas to watch? All standard deviation means is that on a normally distributed curve 68.2% will be contained. Does that mean if the day isn't 100% normally distributed those values don't have ANY worth? Their meaning may be less but to say that it has "no meaning" is in my opinion ignorant.

 

Price spent the majority of the day where there was the majority of volume. That's it.

That's a strangely worded comment. What if price trades around level A for the majority of the day? But then some big buyers push it up and a large amount of volume takes place (way more than level A). However, the rest of the day price falls back to level A. Price spent the majority of the day at level A but the majority of the volume was at level B. Of course this may not be what you meant. However, you have been harping on being "specific" but here you are not. In my opinion it's a good idea to know what the TPO MP AND VWAP are doing.

 

What does it mean if price reacts with an value area line? How does that look like. Be specific, please! What does reacting "very well" mean? 90%, 80%, 70%, 60% of time? What adverse or favorable move can I expect if it does "react"?

This comment right here puts some doubt in my mind that you are a successful trader. If this is not true, the by all means I apologize. However, any trader that has been around knows that there are many variables that go into figuring out numbers like this. For example: current price action, internals, clusters, other s/r areas, etc. If I could right here, right now, be able to tell you those %'s and exactly how price would react then wouldn't that be the holy grail? You are asking for "red light - green light" trading. And for now I am going to just leave it at that. Yes, you may come back and say this is all "blub" and that I am not giving any "specifics" because blub blub blub. But to be honest I don't really care. Because any other successful trader on this site (or any other site) will most likely stand by what I just said.

 

On that note, do you use MP because you have researched price and volume and MP coincidentally confirmed all of your obersevations or because you take everything the creators of MP said about it as gospel?

The former, expect maybe the "all" word. Have to have some mysteries in life . However, through research I have been working with and developing a more intraday and dynamic market profile like system that relies less on time to take into account some of your more 'legit' issues. But again, to say that the current theory of MP holds NO worth to a professional speculator is absurd in my opinion.

 

Same thing with SD: I can't imagine anyone using SD was originally looking for a good way to accurately determine the expected deviation from price and has personally derived the formula based on a valid reason and then somehow noticed that it's known as SD. Instead people hear about it in a book, magazine, internet article, forum or from another trader using it and try it out to see if it "really works" without even thinking if it has any meaning.

My many statistics and programming classes in college came before I ever started trading. Also, see the second portion of my last statement.

[darthtrader 10]

Honestly, I find little value in any discussion that is simply ripping apart an established trading tool without at least argueing as to why another technique is better. Anyone can take the position that markets are purely random and then argue against virtually any trading tool available. There is zero value in such a discussion though outside of academic nonsense.

We really should adopt a policy here against "niederhofferism" and "elitetraderism". I love Victor Niederhoffer's stuff but most his stuff is just ripping down techniques without giving a better tool to replace what was ripped down. While it makes for an interesting book/read, it makes for very pointless circular discussions on the web.

[jperl 11]

Standard Deviation is another thing that has no place in trading. Not even when used with VWAP. Standard Deviation describes the expected deviation of a normal distribution, but there is nothing in trading that follows a normal distribution, be it price changes or volume. It's another idea that somebody has just taken because it has a meaning in another domain, but is has no meaning in trading.

 

Perhaps this is the place for me to jump in here and clarify some concepts which are being used in some cases with confusion.

 

Standard Deviation (SD) is a well defined statistical concept for most distributions.

IT HAS NOTHING TO DO WITH WHETHER THE DISTRIBUTION IS NORMAL OR NOT. You can always define and therefore compute the standard deviation of a given set of price data. If you compute it with respect to the VWAP, then the SD so computed will be the smallest SD for the given set of data as I have pointed out in [thread=2101]"Trading with Market Statistics. IV".[/thread]

 

Where there is confusion is trying to relate the SD to some percentage of the days price data. It will be 68.2% of the data provided the price data follows a Normal distribution. On most days this is not the case. As Sparrow has pointed out in this thread, you then have to use Chebyshev's inequality to determine the percentages.

 

That being said, what can you do with this information. Well if you are a Market Profiler, you can always define the 70% data points and call this the value area and then develop a trading strategy around this just as long as you realize that on most days this 70% value is not a standard deviation.

 

My preference of course has been to develop trading strategies based on the VWAP and it's SD's. The advantage of this is the SD is an exact measure of market volatility. It tells you how far you can expect the price action to move from any given price point. It does not tell you of course which way that will be. I have pointed out however that the SD points appear to be places where price action tends to stall or hold up and I have called these HUP points, places where the market tends to have some indecision as to whether to reverse or continue on in the same direction.

[januson 10]

After the first part of this thread I was planning to write out a detailed explanation with examples and illustrations, but this thread has taken a turn

 

Too bad for me I started this thread to learn something

[Soultrader 12]

Heres a ES chart from Friday. Semi-automated trade setups using price relationship to volume and MP resistance levels. The 1299 mark was VAL from Thursday. I get 3 signals indicating weakness at/near the VAL pivot.

 

First we are seeing price open above Thursdays high, rejected, and tank. Now the retracement tries to break back into Thursdays value area. Then seeing bars of weakness indicates price is not ready to go back above into Thursdays value area. So planning shorts around this level is a clear defined strategy using price action and market profile concepts.

 

[jjthetrader 10]

Heres a ES chart from Friday. Semi-automated trade setups using price relationship to volume and MP resistance levels. The 1299 mark was VAL from Thursday. I get 3 signals indicating weakness at/near the VAL pivot.

 

First we are seeing price open above Thursdays high, rejected, and tank. Now the retracement tries to break back into Thursdays value area. Then seeing bars of weakness indicates price is not ready to go back above into Thursdays value area. So planning shorts around this level is a clear defined strategy using price action and market profile concepts.

 

Sorry to be off topic here but James what's up with your 10:55 bars volume? That can't be correct can it? Mine does not match that at all.

[mister ed 10]

Too bad for me I started this thread to learn something

 

I want to second your thoughts here januson, I was learning a heap from this thread (for example, Sparrow brought up Chebyshev's Inequality, which cleared up some of my doubts about the use of 1 standard deviation as the value area). It is a real shame this thread has run out of steam. It is understandable, one poster who seems to have an axe to grind disrupted the thread so much that the valuable contributions just dried up.

 

I was reading a post on another forum a couple of days ago and had a laugh at it, this is what it said:

 

4 rules for a ** thread

 

1) Split hairs to show everyone that you know more than the other poster

 

2) Contradict others, for the sake of contradicting - be a 'master debater'

 

3) Boast that you make more than everyone else, when you're really losing money, and use the grin or shades smily

 

4) Make sure the thread goes nowhere

 

Like I said, I thought it was funny, but when it is happening to a thread you consider valuable its not funny any more!

 

I don't know if this thread can be brought back to life ... I hope it can.

 

Can I ask a couple of questions that maybe can kick-start the thread again.

 

Why is the first hour of trading considered so important (the initial balance)? Why is it the first hour? Has anyone come up with ideas for what characterisitics might define an 'initial balance' better?

 

Also, Hlm, you mentioned doing some work refining MP. Can you expand on what you are doing (only as much as you are comfortable with obviously, I don't want to pry into your private trading)?

 

I hope we can resuscitate this thread!

[jjthetrader 10]

Can I ask a couple of questions that maybe can kick-start the thread again.

 

Why is the first hour of trading considered so important (the initial balance)? Why is it the first hour? Has anyone come up with ideas for what characterisitics might define an 'initial balance' better?

 

 

I hope we can resuscitate this thread!

 

Hi Mister Ed, I'm no expert in MP and I'm not saying I'm right but here's how I look at initial balance. To me it's range and activity gives a good indication of sentiment. A wide range shows a lot of activity and a lot of 'steam' being used up within the first hour. So a future break out of this range is less likely since a lot of energy has already been used up. A narrow range shows a bit of consolidating and 'steam' being built up for a push later on out of that range.

 

Why the first hour? Well, I know some people that just use the first half hour. Those that can move the market are able to conduct their large size transactions within the volatility at this time of the day. What position they are taking around this time will most likely set the direction or action for the day. This is just how I view it.

[Hlm 10]

Why is the first hour of trading considered so important (the initial balance)? Why is it the first hour? Has anyone come up with ideas for what characterisitics might define an 'initial balance' better?

I agree with what jjthetrader said. Simply put...this is when volume comes in (repositioning) to confirm or deny the previous perceived fair value. This is why many times when the market opens outside the Value Area (e.g EOD run or overnight move) it will try to (if close enough) reenter/test the Value Area on open. When we open inside a Value Area price will often test outside looking for interest. How the market reacts to these tests will usually create a trend or confirm a two sided consolidation period. On completion of repositioning volume tends to dry up. Depending on the outcome of these tests the activity usually lasts from 30 minutes to a couple of hours. I personally don't use any hard value. I let the market activity around these areas show me when it's complete.

 

Also, Hlm, you mentioned doing some work refining MP. Can you expand on what you are doing (only as much as you are comfortable with obviously, I don't want to pry into your private trading)?

Much of my research and development has been on TPO and Volume Market Profile started not at time related spots (e.g. Daily), but at swing highs and lows. I analyze not only the differences between TPO and Volume but how all of them converge to either cross or parallel each other.

[alleyb 10]

It might interest some to know that the first hour of trading was established a very long time ago before Pete even came up with the concept of IB by UK fund managers especially in the Gilt market which used to have the local hours of trading from 10-5.

 

They would await the usual elevenses sherry and biscuits with the Bank of England visitation that occurred every morning but at a different discount house and susbsequently Bank/Broker-Dealer. Many things would be discussed and from this the term nod and wink came about for the The Old Lady as The Bank was referred to would sometimes suggest that a particular hous position may need re-thinking.

The Fund managers therefore awaitied the first hour for this visit before making trading decisions.

There are other colourful stories about the Government Broker for example that when a Tap issue (New borrowing) was to be announced would walk into the Stock Exchange and if there was a slip of paper showing from his suit ticket pocket then there was going to be an announcement and the boys at the Gilt pitches would have time to adjust positions before the Goverment Broker arrived at the pitch where he would declare the details of the Tap

[alleyb 10]

The point about the the first hour of trading is amongst others:

To establish early direction from the flow of orders generated that then indicates the movement of value in relation to prior levels. The concept is that the longer term trader may try to influence (or maybe be influenced) by the the value area movement thereby generating trade. Volume therefore dictates the degree of force or power behind the movement.

The need to trade is a powerful argument for many as the only guys who need to trade are those off-side, those who are obliged to follow some form of benchmark, those who need to hedge up some other position whether because they are offside on that or wish to lock in some form of arbitrage. The IB therefore serves many purposes in forcing the maximum number of participants into the trade all with different time horizons and wishes, wants and of course needs to trade. Thereby the short term guy / day trader can try to nickel and dime some form of advantage from the long term guy / institution by correctly assessing the ebb and flow and the IB helps establish short term micro trend.

Pete Steidlmayer wrote (and I precis for brevity sake) that in the commodity markets it was necessary to operate early IE at the open due the small number of hours traded but in Stock Indices one would have to await as much the first 3.5-4 hours to establish the ture IB

[Northern boy 10]

This is because you have not studied mp well enough to be able to use what mp is providing. More than the strategies revolving around mp... you need to first grasp the mp concepts. As traders use candle patterns to trade... mp can be used in the exact way. Familiarize yourself with it and you can see what type of profile we are likely to develop. If you can see the type of day we are likely to have wouldnt this be a tremendous edge? You can easily build strategies around it.

 

 

ST, what particular book on MP teaches you to assume the type of day the MP will have? thanks.

[Rocky Mtn Trader 10]

Why is it so hard to talk about a topic...ie MP, and just talk about it. Look at the title of this thread, "crash course into MP".

 

This thread is designed to talk about MP and what it might be able to do for your trading style. I am trying to learn more about MP and enjoy reading all the information I can. I have gained a tremendous amount of knowledge from this site...thank you.

 

No one has the answers. No ones method is right. Does it really matter what indicators someone uses or what method someone uses?...No. If you can make money,. ie feed your family trading, then good for you.

 

What that tells me is that you have a system, a method, a strategy, etc....that works for you, and you know how to use it to take a piece out of the market.

 

If someone starts a thread about a topic....support the topic and give your opinion on supporting the topic....OR shut the **** up and stay off this thread. No one wants to hear your negative comments.

 

Start a new thread AgeKay and tell us why you think MP is crap and a waste of time. But dont post your slander on this thread.

 

BTW AgeKay...what system do you trade with...you never told us?

 

Why dont you share your strategies and methods with all of us MP users?

[Northern boy 10]

nobody answered my question

[ammo 10]

north boy,heres all you need to know,the normal pattern makes a shape like a pennant or boob,the nipple on th boob is the value area,some days it will make 2 boobs and leave a cleavage area,if that doesn't turn into a trend day and starts to retrace it will go to the 1st nipple on the closest boob, it it gets above there, 80% of the time it will fill the cleavage,if its doing this at the end of the day it may go back and touch the 2nd nipple,those nipples and that cleavage are what you need to make primary in your study. If it makes a boob with a long bottom tail thats a p pattern ,thats usually bullish,the boob on the bottom with long tail above is bearish b pattern for the next day. On a normal day you go with the mrkt as it moves away from the nipple,as the market retraces as the S&P is now it stops at the next nipple ,fri stopped on the nipple from tue at the high and the nipple on wed is where it stopped around 11:30 on the intraday low before reversing ,fridays chart at that time had cleavage at 1354 and thats where it went from 46,that was a 2 boob day and the upper nip was at 57,it went there, the top of that day had a ledge at 59,they usually are not there in the final drawing of the day so it told you that as it moved above the top nipple u got long and you were gonna cover when it hit tuesdays nip at 63-64 the best way to learn this is by hand charting and don't bother taking a class, you will learn it the same way the originator,pete steidlmeir, did. Buy a graph paper notebook at office depot and chart it in points,you will soon see things very clearly

[ammo 10]

i have'nt found the 70% value area useful so i don't use it,know where the nips ,cleavage and trendlines are on normal daily graphs and the mrkt will respect one or the other 80% of the time, if you trade with stops, i know no one likes them but u have to when the dow has 300 point moves in a day,you will be protected when you are wrong,no one likes to admit it but to normally progress we have to be wrong, you've been doing it since birth so don't feel stupid when your wrong, just stupid when u don't use stops or trailing stops on your profits

[Northern boy 10]

Ammo,

 

Thanks for your sex-ed class, it got things across alot clearer. But I should of been more specific in my question. What you demonstrated was an opportunity to take advantage of price movement relative to VA and POC (or tit and nipple) as the day developes.

 

Currently I'm developping an intra-day trading strategy, and I'm working on the little tid-bit called cutting costs... or reducing trade frequency. I need to anticipate the next days volatility.

 

Does anyone have solid ideas on how MP can anticipate a Trend-day VS a Range-Bound Day? I already have some ideas outside of MP, but maybe you guys can help me in this area. Or if you have ideas of how to anticipate volatility outside MP maybe you can post it here or PM.

 

Thanks.

[OAC 10]

Does anyone have solid ideas on how MP can anticipate a Trend-day VS a Range-Bound Day? .

 

To anticipate a trend day is like anticipating a successful break out from a current VA. As far as I knowm MP has no predictive capability in that regard other than to say that a breakout is more probable if yesterday's VA or a composite VA from the past few days have a symmetrical-looking distribution or a "completed look".

[Hlm 10]

Does anyone have solid ideas on how MP can anticipate a Trend-day VS a Range-Bound Day? I already have some ideas outside of MP, but maybe you guys can help me in this area. Or if you have ideas of how to anticipate volatility outside MP maybe you can post it here or PM.

I am not big into reading so I can't really point you to a book that I know explains some concepts. I have always been the kind who after skimming over a book throws it into a corner to collect dust and then dives in head first to get dirty.

 

The following is a basic idea of how one can look at MP to get an idea of future market conditions. I will try to make it simple and to the point. To get more detailed it is best for the newbie to get dirty with that screen time.

 

Market opens inside VA:

One looks for a two-sided range bound day until we exit the VA and find interest. If we test one side with no interest we expect price to return to the POC if not completely to the other side of VA to test for interest.

 

Market opens outside VA:

One looks for a test of the VA without any interest. At this point we anticipate that price will continue in the direction away from the VA looking for the new VA (many times behing held up by previous Value Areas).

Confirmation:

One of the best ways to confirm the above is by using Market Internals (e.g. TRIN). If we punch outside the VA but the Market Internals are not confirming the move one should be very cautious. Many times this will result in a move back inside the VA at which time we would look for a possible 80% rule to the other side. The opposite is true as well. If we are wiggling around inside the VA and Market Internals are strengthening in one direction, we would look to trade the move outside the VA in that direction.

 

Volatility Outside VA:

One can usually estimate the volatility by looking at A) Market Internals and B) previous Value Areas. If we exit one VA just to enter another one with two-sided internals you can expect some consolidation. One should also take note of significant highs, lows, and consolidation areas (intraday MP areas) both in rths and overnight.

 

Again, this is VERY BASIC information. In my opinion the best way to learn MP is to throw up the volume by price (or the pretty letters if you feel so inclined) and tpo lines and just study-study-study the chart. This will also allow you to start getting the feel for how the different distributions affect the above.

[ammo 10]

you never know if its a trend day until the market closes,but if it gets to the next nip and the bounce doesnt bounce much and you have left several single traded prices, a wide cleavage,chances are it will drop to next nip,you should be prepared on those days with daily trendlines drawn that you can easily refer to so you know where to get in or out of a position since it picks nips or trendlines for major support and you wont know which til after the fact

[Northern boy 10]

I am not big into reading so I can't really point you to a book that I know explains some concepts. I have always been the kind who after skimming over a book throws it into a corner to collect dust and then dives in head first to get dirty.

 

The following is a basic idea of how one can look at MP to get an idea of future market conditions. I will try to make it simple and to the point. To get more detailed it is best for the newbie to get dirty with that screen time.

 

Market opens inside VA:

One looks for a two-sided range bound day until we exit the VA and find interest. If we test one side with no interest we expect price to return to the POC if not completely to the other side of VA to test for interest.

 

Market opens outside VA:

One looks for a test of the VA without any interest. At this point we anticipate that price will continue in the direction away from the VA looking for the new VA (many times behing held up by previous Value Areas).

Confirmation:

One of the best ways to confirm the above is by using Market Internals (e.g. TRIN). If we punch outside the VA but the Market Internals are not confirming the move one should be very cautious. Many times this will result in a move back inside the VA at which time we would look for a possible 80% rule to the other side. The opposite is true as well. If we are wiggling around inside the VA and Market Internals are strengthening in one direction, we would look to trade the move outside the VA in that direction.

 

Volatility Outside VA:

One can usually estimate the volatility by looking at A) Market Internals and B) previous Value Areas. If we exit one VA just to enter another one with two-sided internals you can expect some consolidation. One should also take note of significant highs, lows, and consolidation areas (intraday MP areas) both in rths and overnight.

 

Again, this is VERY BASIC information. In my opinion the best way to learn MP is to throw up the volume by price (or the pretty letters if you feel so inclined) and tpo lines and just study-study-study the chart. This will also allow you to start getting the feel for how the different distributions affect the above.

 

 

Thanks for the good post. that was fine i wasn't looking for too much detail in this. I will look into those ideas to adjust order brackets in my strategy, thanks alot hlm.