SPY Daily Composite

[heretodaygone...]

	Quote:	DbPhoenix
	I'm not a student of MP, but I understand that it considers the value area to include 70% of the trading activity. Since the center portion of the bell curve represents 68%, I assume that this is what they have in mind. Given that, the tails on either side would represent the same as the bell curve, 13% and 2% on one end and the same on the other. I learned the same support and resistance dogma as everybody else, and it made sense, as far as it went, so that's what I've worked with all these years. But auction market theory fleshed it out and deepened my understanding of just what is going on with regard to S/R. Someone wrote that if you combine the principles of Wyckoff with the principles of auction market theory, you have about as close to a grail as you're going to get. He may be right.

I don't know if I am asking this question correctly, but, if 68% is the center portion of the bell curve and the POC doesn't necessarily have to be at 68%, then how would (could) one calculate range extension(standard deviation)? Is it calculated from the bell curve median or the POC?

[DbPhoenix]

As I said, I'm not a student of MP. But there are three measures of central tendency, and if the "value area" is constructed about the number of trades that take place at a given price, I'm assuming that these measures will be so close that any differences won't matter.

As far as range extensions, I believe that they are simply movements beyond the range, but there may be more to it than that. When they occur, of course, the distribution will no longer be symmetrical. It will be skewed. When this occurs, the value area has likely shifted, as it did in the NQ on Friday. Whether it stays there or not remains to be seen on Monday.

There are plenty of MP devotees on this site. Shouldn't be hard to find more authoritative answers than mine.

[heretodaygone...]

	Quote:	DbPhoenix
	and if the "value area" is constructed about the number of trades that take place at a given price, I'm assuming that these measures will be so close that any differences won't matter.

actually a lot of times they are not which gives the trader asymetrical opportunities(thats a good thing)...thus the question I asked. It may be significant to let a trade run more if one knew where to calculate from...very interesting.

[DbPhoenix]

If they're not, then the distribution won't be symmetrical. Your question was based on a symmetrical distribution, a bell curve.

As to letting the trade run, if one receives no reversal signal at the extremes, then he lets it run. No reason to exit for no other reason than arriving at a number.

[heretodaygone...]

arghh,you've been doing this too long...go with the flow. Here's a mp chart to show what I mean.

[heretodaygone...]

so, as you can see friday shows a symetrical distribution which then an easily definable standard deviation(range extension ) can be calculated. BUT, Wednesday and Thursday had asymetrical distributions. So the question remains, how does one logically determine standard deviation(range extension ) ?

[DbPhoenix]

As I said, you'll have to ask an MP person. Sorry.

[heretodaygone...]

the question wasn't meant for you per say...gassah chart has me thinking. I thought you might have run across this before. thanks

[gassah]

The Market Analyst software isn't required for the standard deviation calculations. Barros states that the 12.5/87.5% fibonaccis make for a good approximation of 3rd STD, as does the 33/66% for value (1st STD).

nic

[gassah]

The previous post should have stated 33/67% (not 66%).

From the CBOT manual:

In order to understand how the distribution process relates to market activity, it's important to see the connection between the
Market Profile concept and volume. The volume of everything
typically falls one, two or three standard deviations from the mean. We're going to relate trading data to this organization. For our purposes, however, we're just going to relate the high volume first standard deviation and the low volume third standard deviation to
market activity.

The first standard deviation correlates to the value area. This is a high volume area. It shows price acceptance confirmed by use: a fair price area.

The third standard deviation correlates to a price excess. This is a low volume area. It shows price rejection: an unfair price area.

These low volume price areas are key reference points because they can contain the range. When the market reaches these potential parameters, it can only do one of two things: trade through or reverse direction.

nic