[joshdance]

When a profile (volume- or time-based profile, whatever you like) develops in a certain area, we sometimes say that the market has "accepted" that price. Because a lot of volume was traded at a price, or time was spent, it is said that this distribution of prices has gained acceptance from the market.

Unfortunately, this says nothing about the future direction of the market from this area of acceptance or balance. Just as increasing volume or time over an area will indicate acceptance, increased volume over that range also means more participation and interest, from traders both looking for continuation and reversal of the market. So, while we can say that the market has accepted the price, we know that out of balance comes imbalance and this increased activity at some point fuels the market to move in some direction.

Somewhere you're probably expecting a question; however, I really just would like some general thoughts you have about value and acceptance. Does an area of volume or time building really indicate acceptance, or can this be thought of simply as a resting point for the market before it either rejects this area by moving back where it came from, or by moving on to develop new value elsewhere?

I look forward to your thoughts; I feel that my mental model of how I view the profile is ready to be challenged and perhaps upgraded, and looking to your comments to spur me on to new growth here.

EDIT:
Perhaps this video I just made will make it clear what I'm looking for (or perhaps not lol) ... when price accepts a new area, this does not really mean that the market plans to move in that same direction.

http://screencast.com/t/JZwrHtUd4CIN

[BlueHorseshoe]

Originally Posted by joshdance »

So, while we can say that the market has accepted the price, we know that out of balance comes imbalance and this increased activity at some point fuels the market to move in some direction.

Somewhere you're probably expecting a question; however, I really just would like some general thoughts you have about value and acceptance.

I'm making this statement in the same tentative vein as your original post . . .

I would typically expect a market to move back towards a prior value area once it has left it. I would tend to associate the increased volume of trading as signaling agreement between both buyers and sellers that this price level represents fair value. When price moves away from this level, it will more often than not gravitate back towards it - the market exists to facilitate trade and match buyers and sellers afterall, and the fair value level is the price at which thej most trade was recently facilitated.

There are obviously two ways that this can occur:

1) Price moves away from the value area and then there is a substantial reversal, taking it back through it.

2) Price moves away from the value area to begin a new trend, and then pulls back to the value area before re-comencing the trending action.

The third possibility, of course, is that price breaks out of the value area and never looks back! This would usually only happen when significant new information enters the market. If clean breakouts such as this occurred with any regularity then I'm sure we'd all be trading them.

From what you say in your original post, I think this probably confirms your current way of thinking about value though, and will be of little help in developing it. I suppose the useful thing to know would be how widely a particular price level is considered fair value - an informed guess could then be made about whether price movement has exhausted interest at that level and is unlikely to gravitate back towards it . . .

[Jthoma]

Josh,

Take a look at this video, may help answer some questions. Look for the very first video, this was a webinar conducted on Jan 11th.
Video Library


Hope it helps.

[peter100]

i mean, an "value" area or area of price "acceptance" is nothing different then a temporary equilibrium in the order flow in my eyes...when the order flow balance shift, you can see price "rejection" all allong the price discovery way...anyway the basic problem remains, this is all historical and if you choose to go into the market at some point, your trade depends on other traders supporting your trade after you got in...

[rcoolkarni]

whats the platform you are using?

[squishy]

The following link really helped me think about how markets develop:

"Trading with Market Statistics"

http://www.traderslaboratory.com/for...ics-links.html

Understanding where VWAP is compared to the current Peak Volume Price (PVP) is a key component in defining whether the market is "in balance" or not (VWAP = PVP equates to an equilibrium point).

If VWAP is not equal to the current PVP, there are specific strategies to employ above or below the VWAP. Price advances often stop when VWAP moves to a newly established PVP.

Maintaining an awareness of the current relationship of VWAP to PVP has really helped with my understanding of how markets develop.

[BlueHorseshoe]

Originally Posted by squishy »

The following link really helped me think about how markets develop:

"Trading with Market Statistics"

Thanks for the link - a useful and interesting thread, by the looks of it!

[roztom]

Good Links for all who want a better understanding of VPOC Shift/VWAP interaction.. When these align with profile structure it can be a signifigent spot to position - subject to overall market structure..

Tom