[qewcool]

Nice discussion going at least we put some new posts in the market profile section

I guess we are all saying almost the same thing but in different ways.

My point on the subject of Volume or TPO is that you have to go back to what POC and value area are supposed to mean or represent in Market Profile theory. And it is pretty much a core idea in MP.

Like I said, from what I understand, it means acceptance ie a price level where market participants are comfortable to trade at as a consensus of value.

And how does one recognize it on an MP chart ? MP is composed of price, time and volume. Acceptance shows up as rotation with time and volume being accumulated at the accepted value price level. so yes I completely agree that both volume and TPO is used to confirm an acceptance level.
And the more time you spend trading at a level, the more volume there is going to be at that level.

And here is I think the important point that explains the confusion : The rotation trades at the value area where the market is balanced are being done by the short term market participants whose notion of value is again short term.

When you see a spike in volume with no time spent (yet) compared to an earlier price area where there seems to be less volume but with a high tpo count. What you see is longer term market participants entering the market and displacing the balance area being established by the short term market participants. Their notion of value is different because it is longer term value.
It is why i say that the described picture is a symptom of imbalance.

So where is the new value area ? We dont know yet. You again need rotation (which over time adds volume) that shows that near-term market participants are willing to trade at a new level and has accepted it as a new consensus of value. If they dont accept it, they will again trade back at the old consensus of value. For the longer term market participants, it does not matter because their value consensus is different. And the volume associated with the trades that they made that day must also be taken into account with a longer term perspective ie that spike in volume may not be a spike at all if compared to volume on the longer term time-frame (composite MP chart) that they operate in. That is why I dont think that the day volume spike (if not accompanied by tpo count showing rotation) can be the POC until we see further development.

So the confusion comes from the fact that we are comparing longer term activity with short term activity. Macdougall said apples and oranges and I agree.

As for convoluted or cryptic answers, I am not under the illusion that interpreting market activity is a simple endeavour. But I do appreciate the ability to explain such complex subjects in a succinct and straightforward fashion such as MacDougall did. And I think that a lot of people agree that Dalton books are not the most straightforward texts that have been written although the ideas are certainly valid. But hell, we dont have that many books on MP so I would love it if Dalton (or anybody else) wrote another book on the subject.

[jimbo320]

Sorry if this is a bit off topic.

Am i right in assuming the followings.

The TPOC is the line of price, where 50% of tpos are above and 50% of tpos are below.

The VPOC is the line where the greatest volume traded.

Rgs,

[qewcool]

The TPO POC is the price at which the greatest amount of TPO has accumulated during the day ie the fattest part of the profile.

[clmacdougall]

Would it be too strange to consider that a volume based profile would be exactly whats wrong with trying to decipher and find trading rules for Market Profile?
It's a fact that the opening of a market and the end of that same day are times of incredibly high volume everyday. Already then, the volume profile becomes a strange endeavor, leaning more towards these high volume times then towards the truth.
Can we trust that the truth is found in looking for more information (ie volume) while discarding the past (ie rotation).
Because something seems simpler does not mean that it is. A rotation based profile evades the daily routine of the volume "U" formation. If you trusted in the volume profile, it would almost be akin to trusting the open or close of each day as the center of your bell curve, due simply to the height of volume at those times.
Thoughts anyone???

[BlowFish]

Trades are trades and they are reflected by volume. Would you rather know where the most trades took place or where price spent the most time? If the former use volume profile if the latter use TPO's. It is possible (but unlikely of course) for the POC to be at a level where a single trade for a single contract took place. The peak volume is by definition where the most trade took place so where the buyers and sellers where most in agreement. The PoC will exist where buyers and sellers are in agreement but it certainly wont necessarily be where the most buyers and sellers are in agreement.

Jperls excellent trading with market statistics threads have some discussions on this. They are compelling on various levels. In short volume profiles (and VWAP's with SD bands) are statistically relevant. TPO's are most certainly not.

if you want some arbitary 'lines' to trade against, sure, use POC, VAH, VAL, floor pivots, S1, R1, yesterdays mid point, whatever floats your boat . They are all decent heuristics but that is all.

[MightyMouse]

A good way to decide which is more important is to compare the reaction of price at the high TPO low volume overnight activity to the price reaction at the higher volume low tpo areas from yesterday or from earlier in the day session. Many times you will see that the high TPO low volume overnight areas trump the high volume low tpo areas in terms of reaction. I have concluded that the high TPO's are more relevant for my trading as far as the market profile is concerned.

I know a lot of people who only look at the market profile for the day session only. Why look at only a quarter of the picture? I took the Dalton course and know he refers to the overnight activity as "weak hands" which is truly silly since major trading firms all have overnight trading desks and most major independent traders treat the 24 hour markets like a 24 hour market and use the overnight to get in and out of positions.

Of course, you can certainly trade without using MP too.

[clmacdougall]

Thanks for the input guys. I appreciate it. I've got another weird observation to throw out there, please tell me what you think. Here goes!!!!!
"Volume is irrelevant!"
Here's the theory: Markets are 24 hr a day instruments. With this in mind all price movements are equal unless they overlap which makes them more valuable ( or at least more telling as places of value). The reason being that what happens around the world to influence price movement in the ES for example, is happening in various world stock markets and dollar relationships at potentially high volume but as most ES traders are asleep it is unfolding as low volume areas on the ES profile, fooling traders into thinking that certain price areas are not valuable due to low volume.
Notice that all night profiles are skewed towards the end of the night session as volume is picking up, making a volume based night profile completely and totally useless, and proving a rotation based profile as far more valuable.
The only incorrect assumption of Market Profile by Steidlemayer may have been his first, that TPO's are a proxy for volume, instead of possibly being more valuable and telling than volume.
Please let me know what you think.

[FuturesTrader71]

This is a lengthy thread and I haven't actual read through it, but I will agree completely with Omni's original comment. I use MP extensively (I used to compute POC moves in my head well before they happened...pretty geeky, but that is my approach). I must say, however, that I don't look at TPO's at all. I believe that, for my approach, it is a completely outdated look on the market. 30 min TPO's made sense when Steidlemeyer didn't have access to real time and accurate volume data (mostly floor trading at that time).

I look at volume profiles almost exclusively when it comes to assessing and using the auction as my main market-generated input. I tweet a lot on this subject and have held a couple of chats/webinars on it at various places.

I think the most important thing to take away from here is that MP or VP is NOT a system. It is simply a way of categorizing or organizing the market. It is what you do with that information that dictates which one suits your needs. Again, I find it easier to go with volume than TPO, but that is just a personal preference for the setups I trade.

Cheers,
FT71