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Old 08-12-2009, 05:40 AM   #9

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Re: The Evolution of Market Profile Theory

The market's sole purpose is to find that level where there is a disagreement on value and an agreement on price. The market does this very quickly thru a process called an auction. Market Profile "taps" into this auction market process like few other "indicators" do. I put indicators in quotes, because if we stick to a strict definition of indicators, PRICE IT SELF IS AN INDICATOR as it indicates a level or perceived value and the subsequent cost.

The profile is not about the "what should be", it is about the "what is".

Market Profile is not merely theory or an academic school of thought.

It is the visual representation of the essence of a market. A market where buyers and sellers make decisions about value, then make transactions, then make new decisions and new transactions. This process repeats as new information is gathered by the market participants. One of those new pieces of information is of course price itself.

Simple elegance. That is simply powerful.
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Old 08-12-2009, 12:59 PM   #10

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Re: The Evolution of Market Profile Theory

I think we need to define what an indicator is and what it's function is. First we start with a market of something to trade. We create a chart. The chart has lines,bars,candles,etc to show prices where tradethe trade auction is taking place. In order for us to understand more clearly direction etc.,we can add indicators like MA's,pivot points,oscillators and so forth. Market Profile is a charting style, like bars or candles, and is not considered an indicator.It is simply another graphic representation of the price being traded using the same data.

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Old 08-12-2009, 01:01 PM   #11

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Re: The Evolution of Market Profile Theory

Volumejedi... you are absolutely correct...thank you for your reply...
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Old 08-12-2009, 03:34 PM   #12

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Re: The Evolution of Market Profile Theory

Quote:
Originally Posted by VolumeJedi »
The market's sole purpose is to find that level where there is a disagreement on value and an agreement on price. The market does this very quickly thru a process called an auction.
Certainly there are many ways to look at the market.

To me this sounds a little idealistic.


Allow me to formulate another view not for theoretical reasons but because I learned that it can make trading efficient:

Why are there people that keep markets alive?
Because some people make profits through them. And markets will be kept alive only as long as some people (has to be always the same) make really big profits. (If it were only small profits they would start looking for other fields).

Therefore the main purpose is to give the few a chance to make big money.
On the other hand this implies that they have to take it from the masses.

So in this view it is not about finding agreements or disagreements more on finding areas of comfort (for the masses) which quickly turn into traps.

It is more like:
Where do the masses go?
How can we make them feel comfortable (in order to build bigger positions)?
After that, how can we shake them out / make them panic?
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Old 08-12-2009, 05:05 PM   #13

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Re: The Evolution of Market Profile Theory

Quote:
Originally Posted by uexkuell »
Certainly there are many ways to look at the market.

To me this sounds a little idealistic.


Allow me to formulate another view not for theoretical reasons but because I learned that it can make trading efficient:

Why are there people that keep markets alive?
Because some people make profits through them. And markets will be kept alive only as long as some people (has to be always the same) make really big profits. (If it were only small profits they would start looking for other fields).

Therefore the main purpose is to give the few a chance to make big money.
On the other hand this implies that they have to take it from the masses.


So in this view it is not about finding agreements or disagreements more on finding areas of comfort (for the masses) which quickly turn into traps.

It is more like:
Where do the masses go?
How can we make them feel comfortable (in order to build bigger positions)?
After that, how can we shake them out / make them panic?
That sounds a bit idealistic, or rather very simplistic. What about the big players that need to hedge? The airlines who want to hedge their fuel costs, the industrial companies that want to hedge for raw materials? They are not in it for purely speculation profits and to take money from the masses.

Why does this have to be the same players who has to make money? For the markets to keep functioning, there need to be buyers and sellers. What are you basing your statement on that one side always will be the same ones making money?
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Old 08-12-2009, 06:17 PM   #14

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Re: The Evolution of Market Profile Theory

Quote:
Originally Posted by Kiwi »

PS. For the person requesting Urma's stuff. For some reason he posts them at various points but then doesn't provide more than a hint as to how they are constructed. I think it makes him feel good. Oh, and they too are indicators ... they summarize price action (or price and volume action) to make it easier to make decisions.
I'm agree with You Kiwi. The post and the images posted by Urma don't tell Us nothing.....nothing to understand as they work, nothing to understand which phliosophy works behind them... volume....price or a mix of them....they are only images with dots and lines. I've worked on Volume profile very hardly in the last 2 years and on the relationship between volume and price. I've studied the relationship on the VWAP and the peak of volume, the differences between MarketProfile© and Volume Profile (little but very significant), the importance of Big players vs. small trader (SMart VS. Dumb) and I can clearly say that it's very important to understand these relationships using the today technology as tick data and Time& sale tape, bid vs. Ask or a proxy like Upticks vs. Dowticks. But a self celebratory post as the Urma one is unuseful and doesn't help anyone. It's like a joke against who read to bring them to a commercial purpose as selling them indicators and not a constructive manner to help the forum user as teaching them a knowhow built in a decade of studies. This is only my thought, but it's the second time on a different post that I read a post of Urma like this.
Then anyone could think what he/she wants about me or about my thought, but this is my way of thinking about Urma latest posts.
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Old 08-12-2009, 07:43 PM   #15

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Indicator

1. a person or thing that indicates.
2. a pointing or directing device, as a pointer on the dial of an instrument to show pressure, temperature, speed, volume, or the like.
3. an instrument that indicates the condition of a machine or the like.
4. an instrument for measuring and recording variations of pressure in the cylinder of an engine.
5. Chemistry.
a. a substance, as litmus, that indicates the presence or concentration of a certain constituent.
b. a substance often used in a titration to indicate the point at which the reaction is complete.
6. Ecology. a plant, animal, or species that indicates, by its presence in a given area, the existence of certain environmental conditions.


I too like VolumeJedi's view that price is also an indicator. In turning things on their heads we gain an opportunity for an insight.

On the same basis so is a TPO chart. Or a Volume Chart. Or a bar. Or this point or that of a Moving Average or a RSI.

What I don't like is the pretentious BS that we see on trading boards: my toy is better than your toy. And how often is it phrased as "my toy is pure and your toy is an indicator."

Get over it. TPO charts summarize price action over time in an attempt to indicate where value lies (or what you read from it).

They are indicators.

As are my bar charts and volume profiles.

For the record: my swing's are better indicators of the edge of value than your value areas (I define here, to make myself look better than you, that better equals allowing more precise entries with greater rr )
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Old 08-12-2009, 07:53 PM   #16

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Re: Indicator

Quote:
Originally Posted by Kiwi »
I too like VolumeJedi's view that price is also an indicator.
And Bid/Ask, and T&S, and market depth... they are all just indicators (and writing my own software, that's how I coded it) because they indicate information about something else: the market. "The map is not the territory": the market is not made up of the numbers streaming through the servers--the market is thousands of agents (human or otherwise) that are interacting with each other in a system. The numbers simply "indicate" some information about one or more of those agents at a given moment.


Quote:
For the record: my swing's are better indicators of the edge of value than your value areas (I define here, to make myself look better than you, that better equals allowing more precise entries with greater rr )
Let me use those for a while so I can see if you're right
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