Just What is a TPO?

[GCB 10]

I know it means "Time Price Opportunity," but that doesn't really mean a lot to me. Perhaps I am dense. Anyway, I'd like to know how one might determine "a TPO" from a price/volume chart.

[TinGull 10]

A TPO is simply a letter marking out where price has been in 30 minute increments. To determine how to derive it, you could just look at 30 minute bars and give each a letter, A, B, C...and then squish them all together so it forms a profile.

 

Hope I explained it ok...

[Soultrader 12]

GCB, TPO is basically just a term used in market profile that represents the letters plotted for the profile. Instead of saying alphabet, market profile refers to it as TPO. A TPO print in the first 30minute will show the "A" alphabet plotted in each price level it trades during the first 30min. The next half hour TPO would be a "B".

 

At the end of the day, you count how many TPO's or alphabet exist above or below the POC. If there are more TPO counts above the POC we have seller control while more TPO counts below the POC indicates buyer control.

 

For example, if you take a look at the YM 30min chart from todays session.. you will see how the A, B, C, D period could not lift above the previous period. 9:30-10:00 would be A, 10:00-10:30 would be B, 10:30-11:00 would be C, and 11:00-11:30 would be D period. B period could not lift above A period, C period could not lift above B period, and D period could not lift above C period. This indicates a market that is not willing to auction higher. Instead it was showing weakness as the profile developed.

 

So picture this:

 

A

A

AB

ABC

ABCD

ABCD

D

D

 

This is just a very simple profile picture of the first 4 half hour periods on of trading on YM. Notice the profile showing weakness?

[GCB 10]

I sort of get it. But value area is supposed to be the area where the most amount (70%) of trading took place, so it seems like you would need to know volume as well, and if you don't know the exact volume at each specific price, I don't see how you can figure this. I don't understand how this information can be derived from a 30 minute chart. I know ant's program does it, I just don't understand how, which is another way of saying I still don't know, from a technical programming standpoint, what a TPO is.

 

In contrast, I wrote a program which can derive value area and POC from a price and volume chart, and it does so accurately, but only if the chart is a one-tick chart, because only then do you know how to precisely assign each bit of volume with the price it actually traded at. Anything more than one tick and you don't actually know at what price the volume traded, so how can you accurately know where 70% of the volume actually traded?

 

Say, for example, you have a completely symmetrical downtrending 30-minute chart. It looks like a staircase going down, each stair the same size and having taken the same time to form. Imagine that, however, the afternoon session actually traded twice as much volume as the morning session. Where would the value area be, and how would you calculate it, given that you don't know exactly at what price all the volume traded?

 

The reason I was to know this is because I actually want to write my own MP indicator, because ant's is a little buggy for me. I asked ant this same question, but he didn't answer.

 

Anyway, there's something I'm still not getting about TPO. But thanks for the replies, guys.

[Soultrader 12]

GCB,

 

As the trading session progresses, the developing profile adjusts itself as well. The value area is derived by looking at the POC.The POC is the price level where the most activity has taken place. If the markets decide to sell off, the POC will adjust itself lower and lower. For example:

 

Profile from A - D period:

 

A

ABC

ABC

ABCD (longest line of TPO: current POC)

BCD

CD

D

 

Now as the day progresses and the markets sell-off.... Profile from A to H period:

 

A

ABC

ABC

ABCD

BCDEF

CDEFGH (notice how the POC moved lower)

DEFGH

GH

GH

H

 

Dalton refers to calculating the value area as this:

 

""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." - From Mind Over Markets -

 

Here is a thread simplying this calculation: http://www.traderslaboratory.com/forums/f6/calculating-value-area-345.html

 

Indicators such as the the 5 period moving average will take plot a line of the average close of the last 5 bars. Now what this does not do is take into account the volume (supply vs demand) and time per bar. Therefore Dalton would refer to it as "incomplete". Market profile is based on time, price, and volume. Time can be seen with the number of TPO's that take place at certain levels.

 

When alot of TPO's are clustered up in one area, you can see that price is finding value and spending alot of time within this area. Buyers and sellers are in agreement. When price shoots through a known support or resistance point on high volume, we see price spending little time at these levels. Hence we get single print TPO's. For volume, let's say the market is in a trading range. If there is less TPO counts at the upper range of this bracket, we are seeing buyers drying up.

 

Hope this clears it up.

[GCB 10]

""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." - From Mind Over Markets -

 

Yes, this is precisely what my program does. I got the methodology from the thread you cite, and it works. But again, I don't see how you can know "the price at which the greatest volume occured" with a thirty-minute chart, or for that matter, a one-minute chart. Only a one-tick chart will tell you precisely where the volume occured. With any other period chart you are taking averages, which leads to fuzzy results.

 

I asked ant about it and he said he doesn't use volume, he uses TPOs, which is why I asked the question "what's a TPO." I asked him and he never responded.

[dalby 10]

as i understand it, market profile originally used time essentially as a proxy for price, since volume at price data was not readily available realtime.

 

it is a pretty decent proxy.

 

but

 

in my experience volume at price (segmented over time) is more useful, especially when taking into account the 24 hr market action. market can stay in a narrow price range for hours in globex session with very little volume. clearly, that does not show the kind of price acceptance as when thousands of shares are crossing hands at the same level during the day.

 

i constantly compare my volume POC and time POC to try to discern the differences during different day types and which is more reliable.

 

now that we have realtime access to tick data, i think volume at price is much more useful. this goes along with my general understanding of pit action, wherein time is not what matters nearly as much as volume.

[TinGull 10]

GCB, you're right. You need to have TPO's calculated on a tick by tick basis, showing up on a 30min time frame. I have no idea about coding or its difficulties, but thats why I pay for a Market Profile charting package. I know it's going to correct, and I dont have to worry. If you're a good coder, then you've got about a million steps on me I haven't got the faintest clue on how to code stuff, so I dont know if it's easy or not.

 

You're right in that to get the value area, you need to know volume. To get the POC, you need only time.

[Soultrader 12]

GCB, take a look at this chart. It also has a volume profile. Is this what you were looking for?