The Evolution of Market Profile Theory

[BlowFish 10]

At the risk of repeating myself, if you look at things from a a data sampling and processing point of view then the 'indicator issue' is a moot point. It could be argued it is irrelevant anyway unless you are some sort of 'no indicator' zealot

[TEAMTRADER 10]

This was an interesting thread insomuchas the major orders of the traders in the wings is brought to light.

I know of a couple of pro traders who use this information and neither of them get it from the same source.

My point is if the info is different then strategy of trading will be different.

If I knew the full picture of major orders then my indicators would give me a 100% hit rate every time!

I hope everyone does well from this thread as it is a good one. Well done for posting.

TEAMTRADER

"Trade what you see and not what you hear or hope."

[UrmaBlume 10]

The infrastructure (people, software, leasing rates, hardware) that the price moving players use is so expensive that they would be taken out of business soon by their supervisory boards if they wouldn't be very profitable constantly.

 

What Urmablume is showing are the traces of this sophisticated infrastructure. For the volume spikes seen in the postings some specialized stuff is needed: Servers right next to the exchange, many clever software engineers and many man-years of programming, some good traders, big pockets.

 

 

Very well said and right on. As far as this forum goes, I thought I was all alone with an understanding and past exposure to this type of trading.

 

While I don't publish code I have provided certain insights into the construction of the code modules you describe.

 

For instance I describe our indication of intense commercial trade as -"When taken in combination, the acceleration and deceleration of buying and selling volumes, total volume and the velocity/rate of change in the balance of trade reveal a certain dynamic that we find present at many, if not most, intra-session extremes.

 

Some here have been able to come very close to reverse engineering this indicator and some have gotten the whole thing - the point is that several on this board now have an indicator that they find valuable that they engineered themselves from just a few clues. These guys are the thinkers and I like their chances.

 

On the other hand every one has to start somewhere and it is often hard to commincate the vast difference between someone trading 1-10 lots with Trade Station or Ninja Trader and some guy that builds auto execution models for thousand lots that operate on a data feed that costs more than a thousand dollars a day and that is just for the data - nothing to the infrastructure and the people to maintain the operation.

 

Your comments are most astute, thank you.

[Frank 10]

you allude to a good point

 

there is not going to be any edge in trying to beat the computer algorithms at their own game. if you think you can beat them by 'out-computing' them, you are in for a beating.

 

that said, the 'structure' Urma has presented is both excellent and well-known, create higher timeframe biases - blend them in a combination that utilizes possible synergies -- and then execute on the lower timeframe through good analysis of the real-time order activity.

 

trying to replicate the indicators presented here as your ONLY angle is surely not going to end well. that said, Urma has brought some very useful comments to traderslab to 'enhance' an existing methodology --- and I thank him for that, despite the 'look at me' tone of his posts.

 

stay humble my friends.... (channelling the Dos Equis commercial)

[UrmaBlume 10]

you allude to a good point -there is not going to be any edge in trying to beat the computer algorithms at their own game. if you think you can beat them by 'out-computing' them, you are in for a beating.[/TE]

 

Whether we trade the same or different time frames and or methods, aren't we all, to some degree, in competition for the same points/ticks?

 

As it is generally agreed that a very small percentage of traders make the biggest percentage of the money made in these markets - doesn't that make them the competition?

 

I believe that the Goldmans plus other more private entities have created an edge for themselves via the deployment of super fast, super smart systems. They make most of the money and I want some of it - they are my competition and I work everyday to find a better edge on them.

 

Do you think that they or anyone else with access even to the most basic of these systems is worried about some guy trading a ten lot via market profile, candlesticks or VSA - not. They have quants that have so been through and rejected all of that off-the-shelf buschwa and quietly go about taking the money from the total collection of those still clinging to hope, the Profile, Candlesticks, VSA and WVAP, etc.

 

The reason that these systems are not generally known or discussed is that 1) probably not 2 in 100 traders today have ever seen such a system in operation or even know anyone who has written or operated one and 2) anybody working on such a project that breathed a word would be gone and blacklisted.

 

The facts are that such systems exist, they can be bested by even small, well resourced traders and those small, well resourced traders that even come close don't stay small for very long. This defines opportunity for those short on money captial but long on what's most important to all of us, including the Goldmans, which is Intellectual Capital.

 

If a trader has a really good, Original, idea - hang in there and capital will find you. There is now, always has been and will likely ever be more capital than there are capital ideas. My guess is that I am not the only poster here contacted by one hedge fund or another looking to place money.

 

Part of the wonder of our magnificent game is that you don't have to be big, rich, licensed or a member of a club to succeed - you just have to be right.

 

 

cheers

[Frank 10]

I was not referring to YOU and the indicators --- I was referring to non-quants trying to emulate quants. You are saying things that I am not talking about --- and that I agree with most of your points. Its not new information to me or many others here.

 

It doesn't matter what your approach is -- it only matters that you are able to find situations where reward/risk is good.

 

If I am sitting at a poker table with the best players in the world -- but the ante is low and I have my little stack of money -- I can wait for good situations and just stick it in when the pot-odds say to do it. It doesn't matter that Phil Ivey is betting aggressively vs Daniel Negreanu and that they are both stronger players than I am --- because in the current pot, there may also be dead money from other players that do not have value. If my hand hand has innate value in that particular situation and there is enough money in the pot, sticking your chips in and playing that situation is profitable.

 

So, to some extent -- all I am trying to do with my personal research is try to ascertain the pot odds of even entering a position at all. I have my methods of quantifying this and I have a team of friends who are doing similar things.

 

I really don't care if you agree with me or don't agree. Just Remember:

 

~hubris may contain the seeds of your own demise

 

you play off like you know everything that exists in trading --- but hedge fund money flocks to 'what is working now' --- always has and always will -- and it eventually fuels its own demise. I know you don't disagree with this -- a small nimble shop of quants is a good place to be -- we agree on that.

[sep34 10]

Although, I like listening and being open to methods different then my own, Trading at its simplest form is about shifts in supply/demand.

 

Just dont be surprised, if a simple old school trader was able to consistantly catch these key shifts, without any fancy equipment.

[taotree 10]

Just dont be surprised, if a simple old school trader was able to consistantly catch these key shifts, without any fancy equipment.

 

Oh, but that old school trader has the fanciest equipment in the known universe:

 

the "little grey cells" (spoken in that delightful Hercule Poirot French accent)

[UrmaBlume 10]

I started this thread NOT to talk about the market profile, the status quo of the market profile or any particular trader's use of the Market Profile. I started this thread to talk about the "Evolution of Market Profile Theory."

 

To stay even close to the topic the discussion should be about EVOLUTION. It should be about the evolution of the theory and how to evolve graphic, statistical and other indicators that go beyond the same old, static discussion of TPO's, value areas, invisible time frames and WVAP.

 

My qualifications to start such a thread are 3 - 1) longer direct experience with the profile than most - I began under Peter Steidlmayer's direct tutelege in the early 80's 2) While it is measured in weeks and not years I have spent weeks eating, sleeping, working and trading under the same roof as Peter - much more than most here and 3) I have developed technologies that while based on the market profile, go beyond early market profile theory and certainly, when taken collectively, offer more precise information as to the current balance of trade and commercial participation than any currently available version of the profile by itself.

 

I praise the market profile and market profile theory as it is a big part of the foundation of everything I do. At the same time I have empathy for those that can't see that the value in market profile theory is not found in a 30 year old graphic indicator (I was stuck for a long time too). I applaud those that look to technical advancements spawned by the theory for value. While tired, old, and yet still somewhat useful as a training tool that old horse, the graphic itself, hardly qualifies as today's state of the art in data, concept and technically based trade decision support technologies.

 

How many of today's top 100 money making traders world-wide does anyone think use the market profile as their primary source of trade decision support information? Guess as you will - but from my experience the answer is not even one. They have all evolved - that is if they were ever stuck there in the first place, pluse some of these top guys are not even human they are bots.

 

Regardless of the method or indicator - longer term success usually requires more than just competence - it requires the ability to adapt to the changes that will surely come - in other words it requires evolution - evolution in technology, method and certainly in self.

 

cheers

[UrmaBlume 10]

If I am sitting at a poker table with the best players in the world -- but the ante is low and I have my little stack of money -- I can wait for good situations and just stick it in when the pot-odds say to do it. It doesn't matter that Phil Ivey is betting aggressively vs Daniel Negreanu and that they are both stronger players than I am --- because in the current pot, there may also be dead money from other players that do not have value. If my hand hand has innate value in that particular situation and there is enough money in the pot, sticking your chips in and playing that situation is profitable.

I know you don't disagree with this -- a small nimble shop of quants is a good place to be -- we agree on that.

 

While this is waaaay off topic, I can appreciate your poker analogy. You should, however, input a couple more basic poker concepts - the style of play you advocate is called "weak tight" and the players you mention eat weak tight players as appetizers. It should also be noted that in spite of your mention of pot-odds, the odds most operative in the games the guys you mentioned play are not pot odds, they are the implied odds. While you have mentioned one situation where it MIGHT be profitable for you to put in your chips against the best in the world you might note that the best in the world are masters at manipulating the situation and manipulating the implied odds that will ultimately be your undoing when playing against such as those.

 

Funny you should mention poker - we recruit our new traders almost exclusively from the poker community. Our best model so far is a young (20-30), male or female, from one of the Scandanavian countries that while successful in poker, never finished college. We quants build the trade decision support gear and young, bright people that are experienced in processing multiple online variables in online risk/reward situations execute the trades.

 

And yes, of course, I agree that "a small nimble shop of quants is a good place to be" unless the quants in that shop can't see or get beyond a 30 year old concept/technology that fails to take advantage of today's data, processing, concepts and intelligent and sometimes automated agents.

 

Again, thanks for your input. What I would rather see is how you have taken your study of Market Profile Theory BEYOND the traditional.

[Frank 10]

\ok urma, this is now getting somewhere that might get useful. I have already stated that I never have used the market profile as a trading method so I don't know why you would again link me to a dated tool that I have already said I don't believe is useful for more than a Theoretical start.

 

Regarding poker, one again you missed the point. 'weak tight' is for player that fold too much. Patiently waiting to push your stack to lock in an edge is called 'tight aggressive' and there are no implied odds in that situation. I have read 8-10 poker books so please don't try again to come at me from that angle. There are situations in poker where it is incorrect for either player to fold because of the existing money I'm the pot. In these situations, there is nothing a better player can do to manipulate me out o the hand - it's called 'planning the hand in advance' and 'planning for commitment'.

 

If it were just me vs Phil ivey, hey that is not good. But if it's a huge table with huge stacks pitted against each other, including Ivey. But with a bunch of dead money added to each pot, that is just fine

Edited August 15, 2009 by Frank

[Tams 20]

...Franckly, between you and me, who care if you spend weeks, eating, sleeping, studying or even working with Mr. ...

 

 

Such is the life on the World Wild Web...

you can talk

you can share

you can say anything and be anyone you want on an anonymous forum.

 

You can also pass...

 

;-)

 

 

 

I learn something from every post, if not something from the post, it would be something about myself because of the post.

[shreem 10]

Such is the life on the World Wild Web...

you can talk

you can share

you can say anything and be anyone you want on an anonymous forum.

 

You can also pass...

 

;-)

 

 

 

I learn something from every post, if not something from the post, it would be something about myself because of the post.

 

 

Hello Tams and thanks for your reply. I especially agree with you on that last sentence. We can effectively learn anything from any posts even if what we learn have nothing to do with what the posters want us to understand. I did made the point that i am grateful that he start this thread as it has remind me how much i do like market profile theory as an intellectual framework to start deciphering the most crucial theory of trading which is the auction market theory.

Also, as a matter of fact if it is of any interest to you is that i am not a market profile purists as MP is just the start in my thinking about auction market theory. Market profile theory and its graphic representation is really helpful in beginning my journey into auction market theory. Then, Wyckoff teachings is even more important as it goes a lot deeper into the law of supply and demand. Finally, VSA setups are the tools that i use when developping a trading plan.

 

So, by using all those 3 things, i have come to develop my own trading plan and really cant see how market profile can be outdated as its basic laws are still applicable today as it was when it was first developped.

 

Anyway, a great week-end to you:)

 

Shreem:)

[Frank 10]

I am stuck in airport with flight delay so 1 more post.

 

Let's review what urma has truly brought to the table -- offering the 'structure' of an index of weighted biases brought down from a higher timeframe to a lower timeframe.

 

1. I read about this a long time ago though perhaps as recent as art Collins book of indexing biases that came out what. -- 3 years ago -- so that idea is maybe not as old as steidlmeyer but it's not exactly cutting edge new.

 

2. Some hint about the rate of change of order flow. Hmm, is that something new ? Uh, I will let the traders here decide for themselves on that one

 

3. An image of a quants monitor set-up and screenshots. Now this was probably the only Original contribution so far. Something many other traders have done.

 

The rest of the posts mostly make assumptions about what he THINKS others are doing and then decides to make judgments on others based on those I'll-informed assumptions.

 

Ok, so while James put this up for post of the month, I will nominate for narcissistic thread of the month.

 

Ok, plane may be boarding now. See ya'all around and this was fun rant by me.

Edited August 15, 2009 by Frank

[Kiwi 16]

I've been fairly critical in this thread so I should probably share something. I use elements of MP/AMT in my thinking about the market. I'm not sure if this will help anyone but when looking for a trade position my thinking goes like:

 

- what's the trend (higher highs and lows, moving through clusters, stopped at higher timeframe s&r)?

 

- where would people perceive value in a retracement (short time frame clusters can help here)?

 

- where would price trap some people who naively entered too early and thus catch some stops to improve liquidity?

 

- where would price trap earlier stops from the last thrust of the market?

 

- if I was the "big" guy and had been buying value to build up a position and I felt it shouldn't go further or others would pile on momentum against my position where should I defend my position?

 

Not much sophistication required; more an analysis of current and earlier swings and knowing the contracts that you trade. Also its thinking that can be applied in any time frame to evaluate risk, reward, and probability. FWIW.

[Tams 20]

I don't think he is here to boast or rant.

At one time, I did think he was here to sell something.

 

I am sure many people have noticed

he posted charts with interesting indicators.

 

Some people glanced at the charts and pass,

some people looked at the charts and ask "give it to me",

some people studied the charts and ask "how much does it cost".

 

This is the way I see it:

he wants to engage with someone who asks: what, when, where, why, who, how?

 

The "cryptic" charts are meant to stimulate your thinking,

to provoke your alternative views,

to challenge you to get out of your "box".

 

 

Everybody has something to offer;

Some people will see value, some not.

Some people will appreciate the challenge, some will pass...

 

 

 

as always, some prefer to chase own tail...

this is a wonderful world

[UrmaBlume 10]

Honestly, Urma, by wanting to ban Frank, you really going too far if you want my humble opinion. Shreem:)

 

shreem,

 

If you will take another look at the post, I never mentioned banning Frank or anybody else. That was a quote from the referenced post and it did not apply to Frank but to another, long gone, poster.

 

The post was in quotes and the name of the poster and the date of the post mentioned above the post.

 

I did not recommend banning anybody and never have.

 

I know you guys are hard core market profile fans and I can respect that, I was once one too, but please try and read a little more carefully and not let your negative biases towards me get the better of you.

[UrmaBlume 10]

I don't think he is here to boast or rant.

At one time, I did think he was here to sell something.

 

I am sure many people have noticed

he posted charts with interesting indicators.

 

Some people glanced at the charts and pass,

some people looked at the charts and ask "give it to me",

some people studied the charts and ask "how much does it cost".

 

This is the way I see it:

he wants to engage with someone who asks: what, when, where, why, who, how?

 

The "cryptic" charts are meant to stimulate your thinking,

to provoke your alternative views,

to challenge you to get out of your "box".

 

Everybody has something to offer;

Some people will see value, some not.

Some people will appreciate the challenge, some will pass...

 

as always, some prefer to chase own tail...

this is a wonderful world

 

 

Tams,

 

Many thanks. Your post means a lot to me. No one has done more for this community than you. Your patience, measured approach and constant contributions at all levels is much appreciated.

 

Your words are my feelings. I have turned down every request to buy my technologies and tried my best to answer every question short of supplying the code/equations.

 

thanks again

 

cheers

[shreem 10]

shreem,

 

If you will take another look at the post, I never mentioned banning Frank or anybody else. That was a quote from the referenced post and it did not apply to Frank but to another, long gone, poster.

 

The post was in quotes and the name of the poster and the date of the post mentioned above the post.

 

I did not recommend banning anybody and never have.

 

I know you guys are hard core market profile fans and I can respect that, I was once one too, but please try and read a little more carefully and not let your negative biases towards me get the better of you.

 

Hello Urma. Thanks for the post. My apology if i red wrong about banning issue. I then retract my words and sorry for that. As for the rest, that is ok. After all, this is your own thread and how you see things, so i will refrain myself, from now on, to write in this thread as my intention is not to start a war with anybody but to try to understand more deeper what your intent here.

 

So, anyway, luck in all your endeavours and best of wishs and sorry again for that misconception about banning issue.

 

Shreem:)

[Frank 10]

Urma,

 

You described what I wrote as 'weak-tight' poker and mentioned implied odds - I was simply trying to show that what I mentioned was consistent with tight-aggressive, not weak tight because I believe this To be true.

 

As I have said repeatedly, I agree with all of your primary posts regarding using indexing approach to form a bias and executing on lower timeframe order flow etc,,,,

 

I am also a huge believer that poker skills and trading skills share many of the same core concepts.

 

I have started threads about various topics outside of market profile and have no agenda to push on market profile or anything else.

 

When I see someone posting the stuff you do I think, great - this guy seems on similar page and I would like to see what he thinks about X. So rather than continue down this road - let's just chang the direction -

 

Historically, old-school MP was based on the 30- min chart to link time and price. Derivatives of this concept were rotation factor and wilders ADX. This idea of Trend vs range is something perhaps to discuss in light of modern electronic trading -- and a more global market where overnight range has been increasing as a percentage of total range.

 

Frank

[Frank 10]

Another thought / avenue to pursue is that of modernizing the idea of a market whose price/time relationship is 'brief' - one that used to be measured in 'single prints'. The single-print 30 min stuff has never been of much use thy I have found, though the concept of a brief relationship of time and price is more true than ever. Modern electronic markets do move faster than ever.

[UrmaBlume 10]

Another thought / avenue to pursue is that of modernizing the idea of a market whose price/time relationship is 'brief' - one that used to be measured in 'single prints'. The single-print 30 min stuff has never been of much use thy I have found, though the concept of a brief relationship of time and price is more true than ever. Modern electronic markets do move faster than ever.

 

Time at price was Peter's way to approximate volume at price. That he clings to this notion today is, I bleive, his biggest failing.

 

"The briefest relationship of time and price" is the transaction/tick under this view all ticks or all amounts of time at price, however long or short, are treated equal and this is where the approach fails. Ticks or letters at price for a 1 lot do not have the same effect on future price as a tick/transaction of a 1,000 lot.

 

The weakness of using time at price is that all times at price, however long or however short, do not contain the same amount of trade.

The weakness of time at price is the same weakness as tick vs volume charts - ticks or times at price that are for a one lot are treated the same as as any other tick or time at price and they don't all contain the same amount of trade.

 

The passage of time does not motivate price - it is the occurrence of trade that motivates price. The bigger the imbalance in that trade the bigger the effect on future prices and methods that treat all units of trade the same regardless of the amount of trade inside them have no way to indicate the extent of the imbalance that is the ultimate motivator of future price.

 

Information = Equity if the information that spawned the trade is good then most likely trade equity will increase.

 

Fundamental information about the future movement of price comes from the amount and imbalance of trade. To have any chance to precisely measure this amount or imbalance you must first know the amount of the trade, impossible with time at price or tick based methods, and then you must break down that total amount to determine the imbalance within that total amount - again impossible if all you have is time at price or the number of transactions and not the amount of each transaction.

 

While most of Peter's early work is still valid, we are in an age of huge very fast databases, neural networks that have been genetically optimized and a host of other intelligent tools that are readily availble. His concepts still work but the use of the market profile graphic today is for the market Neanderthal.

 

Today's rennaissance market man has all of these tools and more to test, validate, disprove or more important for the trader - improve the efficacy of Peter's early teachings and of any other concept we chose to test, validate, disprove, optimize or enhance.

 

That the markets are faster and in many cases driven by computer trading is not scary it is a huge opportunity for after all someone programmed those computers and after knowing some of those programmers and program managers, I can assure that you that at least some of them are not as smart as some here.

 

Good Luck and Good Hunting

 

cheers

 

PS

I advertise no products and my indicators are not for sale or lease. If I have any ulterior motive for my posts it is that it helps me to spot talent. My head trader came from exchanges such as these. I am not recruiting, I am only stating - If you are good and if your work has merit and you have ethics - hang in there - money and opporutnity will find you.

Edited August 15, 2009 by UrmaBlume

[Frank 10]

excellent post. my first thought on this is not meant to be confrontational -- its posed as a question for your perspective on something I have thought a lot about lately:

 

If ' it is the occurrence of trade that motivates price' -- how do we make sense of these often large overnight globex moves that occur on relatively trivial amounts of volume?? Your opinion might help me come to understand this seemingly bizarre recurring theme of big overnight rangey move on low volume --- followed by sideways churning on relatively large pit session volume.

 

thx in advance,

 

Frank

[taotree 10]

If ' it is the occurrence of trade that motivates price' -- how do we make sense of these often large overnight globex moves that occur on relatively trivial amounts of volume?? Your opinion might help me come to understand this seemingly bizarre recurring theme of big overnight rangey move on low volume --- followed by sideways churning on relatively large pit session volume.

 

I know you were directing this at someone else, but your question seems applicable to something I read recently that I found thought provoking:

"That is to say, the change of price reflects the average change in traders’ beliefs, while volume reflects the extent of the differences in their beliefs."

 

Some things that come to mind:

1) Overnight there is less efficiency, less people to disagree, more difficult to find an equilibrium. Kind of like in statistics, it's the noise/confusion/inaccuracies that happens when you have insufficient data points.

 

2) Fewer people involved in the market (and potentially similar types of participants?) thus they tend to agree, so price moves according to how they all agree without much volume

 

3) Due to the lack of volume, people react more to what little there is.

 

4) Simply less liquidity, so anyone doing any ordering at all moves the market more.

 

Perhaps 'it is the occurrence of trade that motivates price' might be reworded to: the occurrence of trade provides insight into other agents' motivations.

 

It's interesting that "the market" (meaning bid/ask) could move all over the place without any transaction ever occurring.

 

The large volume in the session is because there are lots of people that "disagree". That disagreement moves the market to a place of temporary and precarious equilibrium: the sideways market.

 

Sorry, slightly incoherent post, it's late, but this just sparked some thought.

[UrmaBlume 10]

excellent post. my first thought on this is not meant to be confrontational -- its posed as a question for your perspective on something I have thought a lot about lately:If ' it is the occurrence of trade that motivates price' -- how do we make sense of these often large overnight globex moves that occur on relatively trivial amounts of volume?? Your opinion might help me come to understand this seemingly bizarre recurring theme of big overnight rangey move on low volume --- followed by sideways churning on relatively large pit session volume. thx in advance, Frank

 

Thank you Frank. If you will have a bit of patience and bear with me through a bit of detail and a few graphics, I believe I can completely answer your questions and do it mostly with terms and concepts from Peter's earliest teachings.

 

The short answer is that it is not total volume that drives price but rather it is an imbalance in order flow that drives price. When there are no sellers it takes very little volume to move price up.

 

One basic concept that was foremost in Peter's mind in those days was that what he called "the other time frame traders" and what I call today's commercial traders were divided up into buyers and sellers and that most of the time commercial buyers did not trade with commercial sellers as between the 2 were the public and the locals on the floor, the speculators.

 

The idea was that when a supplier, a farmer, thought that prices for his crop were high engouh he would sell futures short against his production and when the user of of his crop thought that that prices were low the user would lock in his supply by going long the futures. One of the main reasons behind Southwest Airlines success is their successful long term hedging in fuel markets. It is assumed that both the producers and the users of the product were knowledgeable about the market and so they very seldom found prices that were attractive to both the producer and the end user.

 

The nite session trade is almost all commercial and so most of the time it is pretty one sided and often that one side dominates into the day session. The first graphic below is an overlay of the day and 24 session with the 24 hour session in red. Below the price chart is a graph of what we call cumulative commercial trade.

 

One can see at a glance that on the majority of days one extreme is formed in the nite session and forms what Peter used to call a (red) tail of rejection that often sets the tone for the rest of the day, the blue.

 

Here we should note one basic market profile concept/face that flies in the face of conventional wisdom - up on big volume is not as bullish as up on small volume. When there are no sellers it is easy for price to move up and move up on small volume. Trade is very imbalanced and that imbalance is what drives price - imblance, not total volume.

 

If you look at day bars of almost any liquid instrument you will notice that the highest volume days are the reversal days and that is because they are days when a strong force in one direction ran into opposing activity. It is a day when both the longer term/commercial sellers were active and so were the buyers, hence the high volume. Opposing activity slows price movement and increases volume

 

We teach that the nite session actvity is very important as it is mostly commercial trade and when it is one sided we can predict that it will spill over into the day session.

 

In the graphics below the day bars I will show a couple of examples from our Market Heads Up Display HUD that accurately prediced the day session several hours before it opened.

 

Here is the day chart - note how often the nite session leaves a tail and how often that tail sets the tone of the day session.

 

 

 

This first shot of the HUD shows nite session activity 4 hours before the open. Note the very low levels of both volume and more importantly the complete lack of long term/commercial trader commitment. This was taken before the open on the 10th of this month which turned out to be a day with about 40% of volume, 40% of range and 40% of volatility - a nothing day.

 

 

 

 

This second shot of the HUD shows the market condition near the close of the same day - again no volume and no commitment - no imbalance as was the day.

 

 

 

This last shot of the HUD is taken an hour and a half before day session trade began on the 11th - a very strong down day.

 

Note that there is more volume and more committment but that the committment percentages are much bigger than the volume percentages and all red - a huge imbalance to the downside which was reflected in the trade of both the nite and day sessions.

 

Its not the volume it is the imbalance and if you can accurately read imbalance in multiple time frames you can predict future price in multiple time frames.