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dandxg

Market Profile Confusion

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I have studied MP and there are some things that I could never figure out. Maybe some nice people can answer them?

 

1. Why is price attracted to a balance area, a high volume area? I have never hand anyone explain that logically. Is it because it needs a re-test? Because price has traded there? To me it makes sense that if there is a high volume node is at the high price then it won't retest there because there was a lot of selling at that high.

 

2. What about the subjectivity with MP. You have splits, merges, profile, default 30 min, etc? On ET a guy just mentioned you could have seen on Cisco futures 20 day chart that there is resistance at this level and this level. 20 days charts never heard of such thing in MP? Most seem to advocate the 30 min profile? This is what lead me back to Wyckoff and VSA. I just couldn't figure out how to deal with what seemed so much subjectivity. Not that Wyckoff and/or VSA are perfect by any means.

 

3. When you are looking at MP and you see some high volume nodes and no volume profile in between them I have heard people rationalize that its going to move between there because there is nothing to stop it. Then price moves away from one of the two high volume nodes and moves back to it its because high volume nodes act as magnets? Huh?

 

I believe MP to be a solid method, I would and do appreciate some feedback to my questions.

 

Good trading to all. Happy Holidays.

 

Dan

Edited by dandxg

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yeah I can understand your wanting to dig deeper...

 

20 day prfoile represents one month, its fairly common to do a monthly profile.

just keep in mind Markets are not rational/ logical etc..

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yeah I can understand your wanting to dig deeper...

 

20 day prfoile represents one month, its fairly common to do a monthly profile.

just keep in mind Markets are not rational/ logical etc..

 

Kudos, I didn't think about the obvious 20 day in a trading month. Logical enough. Look forward to other constructive feedback.

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Try looking at the MP while thinking it is moving from balance to imbalance and back to balance.

Balance = congestion = less risk trading.

Imbalance = trending = higher risk trading

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hello

 

it has nothing to do with risk.

Whether you are in the range or in Trend, the risk exists.

Balance, the market has found a equilibrium point.

The Imbalance, the market has found a new reason to get out of range and find a new equilibrium point.

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Thanks, I was originally drawn to MP looking for a better S/R. I guess its like any other form of trading different viewpoints to the same picture.

 

I started to look at MP and volume at price to find better s/r, but it actually led me to look at price in terms of brackets, and now i just outline the ranges and these work out to be pretty accurate s/r levels. Drawing ranges sure helps you to see the important levels and ignore the noise, and as a beginner i would recommend it to anyone. By the way, this works in all timeframes.

 

P.s. I have a journal over at http://www.priceaction.net if anyone wants to see more of what i mean by price brackets.

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I was sent this information yesterday. Market Delta released two new papers . I think they will help you gain a better understanding .

 

[url=http://www.marketdelta.com/education]http://www.marketdelta.com/education[/url

 

Two New Education Documents

 

Both of these documents are new and are part of an educational pathway that we will continue to develop and let you know about. These two documents are foundational to getting the most out of MarketDelta and learning to apply the Footprint chart effectively.

 

 

1. Footprint Chart Anatomy

2. Learning to Read the Footprint

 

Make a great day,

The Team at MarketDelta

MarketDelta LLC

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To save the confusion it might be better to link directly to the Market Profile information. The stuff you linked is on market delta (generally) and footprint charts (specifically). Interesting topics but nothing to do with market profile.

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Hmm, I am not getting any of these replies? Soultrader? I always check the junk mail too.

 

I just started today with Alexander Trading's $5 trial for 2 weeks. It's only been a day, his partner Harris moderated and did a good job of explaining MP/ AMT theory concepts. A few years back when I made an effort to learn it, it just didn't stick. I get the merges but the splits just seemed so subjective.

 

On a side note I tried Market Delta and its info overload for me.

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The High volume (nodes/balance) are areas of fair price. These are areas where most trade took place. Risk is viewed as symmetric as the prices in the balance area/hv node are fair to both buyer and seller.

 

Now, if you are an institution, with a very large order to fill, where are you going to try and do it? Where there is liquidity of course so you will suffer less execution risk. Where do we know there is liquidity?

 

This is why high volume areas may sometimes act as magnets. Their 'pole' however can change. Sometimes these areas will repel price if value is seen to have changed, or attract if not.

 

The polarity can be determined by volume analysis at the extremes of the high volume area.

 

This is how I understand it, but I'm not an expert.

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I have studied MP and there are some things that I could never figure out. Maybe some nice people can answer them?

 

1. Why is price attracted to a balance area, a high volume area?

2. What about the subjectivity with MP. You have splits, merges, profile, default 30 min, etc?

3. When you are looking at MP and you see some high volume nodes and no volume profile in between them I have heard people rationalize that its going to move between there because there is nothing to stop it. Then price moves away from one of the two high volume nodes and moves back to it its because high volume nodes act as magnets? Huh?

 

Dan:

1. High volume is what occurs at the nodes or POCs. It is where the majority of buyers and sellers are comfortable and perceive fair value within their respective timeframes. You will find that price is attracted to high volume areas to enable the maximum number of buyers and sellers to be satisfied because the POC represents one of several forms of Accumulation/Distribution

2. Yes there is a degree of subjectivity in MP when looking at distributions. Don Jones's concept actually originates from the CBOT Handbook of looking at distributions in terms of 5, 20 and 60 day distributions - (which in turn originated from Ricahrd Dennis and Bill Eckhardt of Turtle fame who used as just one of their entries a 20 day breakout - I should add that it was not as simple as just that though) - and as previously remarked this represents 1 week, 1 month and 2 month trading. The only issue I have with this is that it is static and markets are not static. They are dynamic and therefore frequently you will find that the distribution is shorter or longer than the aforementioned timeframes.

3. Price will tend to migrate between one set of high volume node to another. In its purest form it would represent a double distribution. Several reasons. One could be because in a rising market the shorts from the lower node are happy to regain their original sale for a breakeven cover. Another would be because people tend to remember time spent at a price. It imprints indelibly on the eye and creates a notion of value. The longer time is spent at a price the more it becomes accepted by the majority as value thereby creating a natural effect of on reversals to then revisit the high volume level - horizontal - rather than stopping initially somewhere within the speed area - vertical -

 

Dan to divert slightly from your questions

Value is in the eye of the beholder for different timeframes represent different behaviour patterns which also then leads one into the realm of anyone's need to transact. For example a day trader runs out of time and therefore no longer cares about exact entry or an institution looks at volume purely from the capability of being able to transact

 

The current S&P distribution started with the gap up on Feb 25th 2010 and possibly finished on Friday April 23rd for it reached perfectly into a MP measured move. This would be 40/41 days whereby any daily close below 1190/1191 would confirm the top.

Why?

Because 1191 is the top of Value for the current distribution

One can therefore infer that whilst above 1190/1191 and more especially closing above 1208.5 that the top is not in and a further push to 1231 or on a panic around 1241 instead

 

Dan you have opened an interesting discussion point that I am only really doing minor justice to for in reality a whole chapter could be written about the exact points you raise but I hope that in some small way I have answered a degree of your questions and am happy to continue the dialogue

Edited by alleyb

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Hi Ally,

 

Please can you elaborate on the MP Measured Move you mention, or refer me to where I can find out more? Is it similar to Dalton's idea of range estimation based upon where the market opens in relation to the previous profile value area, and the acceptance/rejection of the value?

 

Thanks,

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Hello Guys just found the thread...

 

The thing is, how to we know if price is leading value or value leading price? context is key, but ....

 

The only job we have to do is...Determine S/R levels and then determine direction for those S/R levels to hold...so the questions is how do we know if price will go back to value or POC, or not? is the same as saying, go with the trend or play the reversal...Isn`t

 

:crap::missy:

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By definition price always preceeds Value and Value catches up to price

The question you need to answer is whether the market action is at below or above VA and therefore what is the response whether that is horizontal or vertical. Timeframe is important within this and an application to understanding the 4 steps of market activity is useful to establish the answer

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This detail may give you a hand..

 

What is Market Profile?

 

Market Profile ® is defined as the study of price and volume over a period of time. Market Profile charts depict volume horizontally, as opposed to vertically, which is how most charts and platforms show volume. Market Profile illustrates price development, how price is moving, and the amount of volume trading at a particular price in real-time. It can also show a composite representation of price movement and development over a specific amount of time.

Why use Market Profile?

 

It is imperative for a trader to know and understand Market Profile. Recognizing how price is moving and developing in conjunction with volume will assist traders with placing high probability trades. A composite presentation of the Market Profile presents a detailed history of price movement and development. This gives traders additional information when attempting to identify long-term, intermediate-term, and short-term trends to trade with. Additionally, Market Profile's horizontal representation of volume is crucial in identifying major areas of support and resistance, which trades are taken against.

 

Best trade!

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