Trading Strategies With POC?

[carter]

I understand that the POC is a key reference point for Market Profile traders. What type of strategies do you guys use with the POC? Is the POC from the past sessions (beyond yesterday) as important as the previous days POC?

[ant]

Carter, as you stated, the POC is just another reference point that can serve as support/resistance similar to a moving average, previous day's high/low, etc. In and of itself, there is nothing magical about the POC so I would not focus on developing a trade strategy around the POC itself. Instead, I would focus on developing a trade strategy around market development and then using the POC, as well as other reference points, to position my trades. Do you see the difference? I would focus on trading market development (i.e., balance areas, trends, and the transition between both) and market context (e.g., is this a retracement within a longer-term uptrend, or trending behavior within a longer-term bracket, etc), and then using the key reference points that the Market Profile helps identify (e.g., POC, value area, single prints, range extension, etc.). By doing so, you would be trading based on robust, sound principles and not just a single price on a chart. Placing a trade solely because it has hit the POC feels like a "gimmicky" trade to me. You really want to understand what the market is doing so that you can position yourself with it. The market condition should dictate your trading strategy since trading ranges and trends are traded in dramatically different ways. I use a composite market profile to determine the market condition. After evaluating market condition, I turn my focus to market structure, which I do by looking at the daily profiles of the previous 2-3 days, in general. I would then try to identify a confluence of reference points, which tend to act as more signficant support/resistance levels than a single reference point. Trading mechanically at the POC, or any other single reference point, would not lead to profitable trading and your odds would be no better than 50/50, IMHO. In addition, I would also be careful of placing too much importance on any single price on a chart, such as the POC, UVA, or LVA, and focus more on price regions while monitoring market internals or an indicator of your choice. This is something that took me a while to start doing. As you can probably tell, my trading strategy has been heavily influenced by the book Mind over Markets.

[carter]

Thank you for sharing your thoughts ant. I'm still currently in the middle of Mind over Markets. In your MP indicator, is it possible to setup a composite profile? How would I go about doing this? I feel like your approach in understanding the overall market picture using MP gives more information than analyzing a daily chart.

[Reaver]

Nice info, Ant. You just answered one of my questions!