What is market profile? Market profile is essentially the market auction theory which has been around since the conception of mankind and is the bed rock for trading any market! This theory is the premise for more successful trading in any and all situations, whether it is day trading, position trading, eminis, futures, forex, stocks and commodities. Learning how to proficiently utilize market profile as tactical tool in real time will take the ego and emotion out of your trading. It provides a footprint, a foundation, to trade wisely and strategically and moreover it is the correct way to approach trading.
The following is a list of some guidelines to prepare you to be a market profile trader, the better way to trade.
Time Price Opportunity (TPO) is an indicator which determines the time spent at each price level.
Value Area (VA) represents where 70% of all trades take place which is considered the Bell Curve.
The Initial Balance is defined in the first hour of trading which formulates the price range for the day.
The Point of Controls (POC) is the balance point and naked point of controls which is the most widely traded price.
High and Low Volume Nodes will act as support or resistance and become a magnet for where price is anticipated to go, and where most recent trading activity has occurred. Low volume nodes will be the tipping point in the market for it to either free fall or rally up.
Commercial Capping is when commercial traders put a price cap on the market after an extended up or down move which is also referred to as fading or buffering.
Single or double prints left inside the profile indicate the strong presence of long term buyers and sellers. This is considered a minus development area that becomes a valuable support resistance.
Supply and Demand Area is the basic root concept of economics where price is determined in a market based on the supply schedule and demand schedule and is the backbone to Market Profile.
Utilizing this information defined will determine what type of a day is occurring in the current markets, therefore being strategically equipped with a plan ready to trade! As the market is sideways 75% of the time, knowing how to trade the range is essential; ideally picking the highs and lows to the tick while using the stops cautiously and adequately. Profit targets and correct pivoting stops should be set according to the type of day it is the market, for example, when a trend day, trade only in the direction of the trend capturing the big winners never having to fight the trend. A very valid and most valuable phrase to remember is "when you think it won't go higher it will, and when you think it won't go lower it will!" You need to be doing what the institutions are doing, not what your ego is telling you. Using the correct data in market profile and having a plan is the only way to trade. For more information on trading with market profile feel free to contact a market profile software expert.
Institutional traders are not purely indicator traders and understand if the market is in "balance" or "imbalance". Understanding what the institutions are doing, on any given day, trading the markets or not, will make trading that much more comprehensive and more lucrative overall. Whereas, simply being an indicator trader will be a definite means to losing all your money, as indicators alone do not tell you where price is going. Tips and strategies to more proficient trading is available in a market profile trading room.
"What is the missing link to market profile trading?" "How can I become a proficient market profile trader?" These are great questions that will be answered as you continue to read our series of educational articles on market profile trading and how to trade wisely. Trading the market blindly will only leave you in a bind financially even if it seems easy to see and easy to learn. Anything worthwhile does not come easily! Most traders blow up trading divergence, because it is easy to see. Respect market profile levels and understand what to do at those levels or, again, be cautious because you will ruin your trading account. Respect them and understand them.
Always know the opening of the day and apply small stop high probability entries and be on board with what the institutions are doing to the tick.
Traders who are struggling to be consistent with trading in the non random markets need special guidance from a professional expert market profile trader who know the markets next move and more importantly why!
For more information on our methodology contact an expert at one of the daily forums at http://www.eminitradingschool.com/
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