Hello,
Could somebody, please, clarify for me the concept of TPO count
(i.e. buying/selling TPOs)?
In the CBOT's handbook (
http://www.cbot.com/cbot/docs/handbook.pdf)
on MP there in a paragraph on the subject (p. 35-36):
"We're counting TPOs because they represent market activity.
In this example, there are 70 above and 89 below (POC)
The imbalance we are looking for is on the side with the
least amount of activity because the longer term trader
is only a small percentage of total trade in the
value area"
What exactly is meant by the "imbalance being on either side"?
The dominating buying or selling participant? But in this
case, this would mean that, in the latter example, sellers
are the dominating force for there are fewer TPOs on their side.
Which is exactly opposite to the correct interpretation, isn't
it?
Later on, we read:
"To explain more fully, the
value area is primarily for traders
seeking a fair price ...."
OK, that is clear...
"...Therefore, the side with the most activity has to be
short-term activity. That's where the price in the
value area
will be fairest. In other words, no one is giving up an edge
there."
And here I'm lost completely... I just can't figure the concept
out. Does it mean there is no long-term activity in the area
of most activity (89 TPOs in the latter example)? But shouldn't
70/89 TPO count mean that it is the long-term buyer who's more
active in the
value area?
"Returning to this example, the side with the least amount of
activity is above the fairest price. Since the market moves up
to shut off buying, the longer term buyer was most active in this
value area."
Now, this finally makes sense to me (because of active long-term
buyers, the
POC moves up resulting in increased number of TPOs
below it and reduced TPO count above), but seems to contradict
what has been said previously.
Thanks in advance for your help.
Regards,
Noal