[Soultrader]

	Quote:	jperl
	A good general discussion of the Normal or Gaussian distribution can be found here: Normal distribution - Wikipedia, the free encyclopedia This is the type of statistical distribution that most TA users assume their TA rules for entry and exit will follow when they do back testing of their rule based trading plan. Unfortunately, most TA users never check this. If they did they would be shocked to discover that their TA rules don't fit a NORMAL or Gaussian distribution of results. The reason for this is quite obvious. The data themselves used to generate the rules, don't follow a Gaussian distribution, so nothing derived from it will either. The normal distribution is what also occurs on what MARKET PROFILERS call a NORMAL DAY. Market profile is a subset of the volume or price histogram. On a NORMAL DAY, the volume histogram looks like a NORMAL distribution function, hence the name NORMAL DAY. One of the important characteristics of a NORMAL DAY is the symmetry of the trading volume about the peak in the distribution (the point of control or POC). You can easily tell when a NORMAL DAY is occuring, or when a day is approaching a symmetric distribution (Gaussian or not), by computing the Volume Weighted Average Price (VWAP). When VWAP=POC we have a symmetric distribution of traded volume. VWAP>POC we have a skewed distribution of traded volume data toward higher prices. VWAP<POC we have a skewed distribution of traded volume data toward lower prices. Knowledge of the VWAP and its dynamic then has some important consequences for price action even when the distribution function cannot be analytically written down. I dont' have the room here to go into all of the consequences of the VWAP. At some point perhaps I will contribute and article about it. JERRY

Thank you Jerry. I have never used this reference point but sounds very interesting. I will definitely look deeper into this.