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And of course the next question is - what levels do you use and why? Use them all and your chart will look like a mess of horizontal lines everywhere. If you put enough lines on your chart, some will look like they nailed the HOD or LOD. Some will just get in your way.
And the follow up question: are static, fixed lines that are based on YESTERDAY'S price action good for determining TODAY'S price action? Food for thought. |
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Simply, Yes.
They are far better than mathematically derived numbers like "Floor Pivots". Key Numbers, aka floor pivots, derive their utility from two things: regression to the mean, and self fulfilling prophecy.
Market profile lines have as their basis the concept that because the market found support/resistance at this level today, all things being equal it should find the same there tomorrow. The market has memory. It knows when a price level is reached that found sellers/buyers the previous time the level was reached. If 510 on the emini, for example, brings in the bulls today as they see value, there is a good chance they will again see value at that level going forward.
I have been playing with this concept a bit after reading an article from Straightforex.com. Instead of using key numbers, they use what they call a "Market Map". The map consists of:
1. YH (Yesterday's High)
2. YL (Yesterday's Low)
3. DYH (Day before yesterday's High)
4. DYL (Day before Yesterday's Low)
5. PP (Pivot Point) (O+L+H)/3
The first 4 are already
HUPs (Hold Up Prices) and may continue to be. One thing the map tells us is if price is above the PP the trend may be up. If Price is above either or both YH or DYH and above the PP the trend is up. The reverse would be true for a down trend.
After reading a couple of threads on this forum, I have become predisposed to the Pivot Range concept that Pivot profiler talked about. So I add the Range to the map, plus a couple more
HUPs.:
1. YH
2. YL
3. DYH
4. DYL
5. PMH (Pre Market High= highest high made between 5pm close and 2am open NY time)
6. PML (Pre Market Low= lowest low made between 5pm close and 2am open NY time)
7. PP (H+L+(2*C))/4
8. PRH (Pivot Range High)
9. PRL (Pivot Range Low)