[AgeKay]

This thread is about this thread on EliteTrader. TradeMaven Group is obviously trying to market their software/chat room/brokerage there (in which in am not interested in the least), but I am only interested in discussing the ideas outlines in that thread, specifically how past volume distributions might show you potential support/resistance points and when you should enter or stay out of the trade. I know there are a lot of experienced traders on this forum and that's why I am asking for your opinion. Do you think that the statements (their "rules") made in that thread are valid? Do you personally use them or some derivation of them in your trading?

Their basic "rules" are these:

Rule #1: In commercial or hedge markets, low volume numbers are support and resistance – they stop activity – and should be traded as such.
[...]
Rule #2: High Volume areas represent value and are attractors. They serve as support and resistance the first time touched only. If not immediately rejected, you can expect to trade around the high volume numbers for one to two hours. Here’s why: It’s where new moves start. New moves come out of the middle. The way the market confirms this is through the retest – it’ll retest a breakout. If it holds, more people will come in and trade.
[...]
Rule #3: Don’t fade Moves out of the Middle (MoMs). New moves start when the market has come into balance, off the Balance Point, Point of Control, or Mode.

I can see why rule #1 might be true, because there isn't going to be much volume past a prior high/low since this is where price turned around and did not trade much. But I don't know about rule #2 & #3. I guess you can only verify it by having looked at this data for some time.

I am grateful for any shared insights!

[MightyMouse]

They are interesting rules. But, the rules do not seem to have any practical application before the fact. In other words, I do not think you can create real time trading rules around them that will give you a favorable risk /reward. If the rules don’t do that, then what is the point?

Anyone can look at a yesterday’s market profile and say you should have done this or that.

[AgeKay]

Actually the volume distribution shown on the right is based on volume of past last year, so I do not understand why you think this could not be applied in real-time since this information is available bevor the trading session has even started. Could you please elaborate? I might be missing something...

[dandxg]

I think rule 1 makes no sense at all. From what I seen and read with PV it's the opposite. How is low vol. going to stop a thing? I have seen there thread. It's look fancy with their prop. bar and stuff, that's about it.

[steve46]

High volume often signifies "acceptance" of a price or range of prices by market participants. By acceptance we mean that the majority of market participants find value there.

Low volume signifies rejection of a price or range of prices. By rejection we mean that participants believe that price or range of prices does not represent fair value.

The concept of "time at price" is an important part of the concept of value. In Market Profile terms, if a lot of time is spent at or around a particular price, that means that participants accept that price (or prices) as representing fair value. Conversely if very little time is spent at a price, it signifies rejection of that price (or prices).

I think the best advice I can give is to suggest that readers buy James Dalton's book "Mind Over Markets" and check out the complete concept. A lot of good professionals use this approach.

Best of luck

Steve

[AgeKay]

First of all, thanks for chiming in Steve. Your kind of response is what I was hoping for.

Originally Posted by steve46 »

The concept of "time at price" is an important part of the concept of value. In Market Profile terms, if a lot of time is spent at or around a particular price, that means that participants accept that price (or prices) as representing fair value. Conversely if very little time is spent at a price, it signifies rejection of that price (or prices).

I think the best advice I can give is to suggest that readers buy James Dalton's book "Mind Over Markets" and check out the complete concept. A lot of good professionals use this approach.

Regarding the quoted piece, I've read all the MP boooks, but I could not confirm the validity of the concept of "time at price". For example in European markets like the Dow Jones Euro Stoxx (FESX) you will see that during lunch hour and especially in the last 2 hours price might not move that much and thus stay for a long time at certain prices, but that's not because the participants accept that price, it's because most participants have gone to lunch or home. You can see this because there is usually a lot less volume, the sum of the volume from 17:30 to 18:00 is most days as much as during 18:00 and 22:00 o'clock, that's 30 min vs. 4 hours.

[MightyMouse]

Originally Posted by AgeKay »

Actually the volume distribution shown on the right is based on volume of past last year, so I do not understand why you think this could not be applied in real-time since this information is available bevor the trading session has even started. Could you please elaborate? I might be missing something...

Sure it's available. No question, but, then, given the information, how you develop real time trading rules that offer a favorable risk/reward using the 3-2-1 approach? If you can't figure out a way to trade it so that your gains are larger than your losses, what is the point?

Bottom line, why should you pay these people for this info?

Also, I think that there are no net distinctions between commercial or hedge markets and non commercial or hedge markets. MP works with every market. I trade many different markets using MP. Each market has a different "personality", but MP is equally applicable. You can certainly prefer to trade one market over the other and defend your decision with religious fervor, but that doesn't make one better than the other for everyone else.

[AgeKay]

Mighty, thank you for your response.

Originally Posted by MightyMouse »

Bottom line, why should you pay these people for this info?

I don't think you should either. I said in my initial post that I am not interested in their software/chat room/brokerage. I just read that thread and found their ideas interesting and that's why I wanted to hear feedback from other traders on it.