[TheNegotiator]

Simple question really, do you think MP is really a tool for the 21st century fully electronic markets which we trade? Does it fully represent the auction or are important details missed out? What are the alternatives anyway?

[TheNegotiator]

My gut instinct is yes and no. The main alternative to MP as I understand it is the use of volume profiles. When market profile was first introduced (in the 80's?) the CBOT reported statistics every 30mins. So this is why the approximation was brought in of using a TPO to represent volume. Volume is now widely available both historically and realtime. It better represents imo, how the auction technically played out and so helps with price specific entries. So what about MP then? If it's just an approximation of what is now available as a Volume Profile, what is the point? Well, the interest it still holds for me is in the means of the approximation itself, whether by design or luck. Time. To me, time is becoming more interesting as a measure of market activity within the auction. One has time, the other has volume. Surely there is an effective way to combine these methods?

[steve46]

Originally Posted by TheNegotiator »

My gut instinct is yes and no. The main alternative to MP as I understand it is the use of volume profiles. When market profile was first introduced (in the 80's?) the CBOT reported statistics every 30mins. So this is why the approximation was brought in of using a TPO to represent volume. Volume is now widely available both historically and realtime. It better represents imo, how the auction technically played out and so helps with price specific entries. So what about MP then? If it's just an approximation of what is now available as a Volume Profile, what is the point? Well, the interest it still holds for me is in the means of the approximation itself, whether by design or luck. Time. To me, time is becoming more interesting as a measure of market activity within the auction. One has time, the other has volume. Surely there is an effective way to combine these methods?

Yes of course, there are several ways to combine the data. I use confluence of both time and volume based data in the form of supply demand nodes and Market Profile....Add time-based pivots and you have the best of both worlds...I realize that the question(s) are meant to elicit an easy to understand, immediately useful solution....and clearly this does not fit in that category, it fits your description, and it works consistently..

[clmacdougall]

I would suggest you read the thread "The Evolution of Market Profile" I found it really helpful. Personally I feel MP hides more information than it reveals, but that's just my opinion.

[electroniclocal]

There are not many tools that are so misunderstood as Market Profile. Pete Steidlmayer, its inventor, left us to work out how to use it for each of our own styles of trading.

Yes, actual volume is more acurate than TPOs but the two are pretty close.

The big advantage of TPOs is that the trader can more granularly manipulate the graphic in order to discover the various distributions. Once I've done that, I can clearly see the more hidden support and resistance areas that can be uncovered by that process. I'l have a video on my blog on Monday for anyone interested in seeing how the process of uncovering what "they" are doing is done on the MarketProfile.

Market Profile is not a timing tool, IMO. That's why I advocate using the Profile for context and a range bar chart for timing.

EL

[BlowFish]

There are a couple of problems with MP and there always have been. Having said that many traders obviously find it useful. Clearly the VAH,VAL & POC are watched and traded by enough traders to make them significant. As good an example of 'self fulfilling' that I can think of.

It is not so much that it is 'outdated', it was always a heuristic method(rule of thumb). Not only that but one of the premises that it was built on was false (markets are not normally distributed (Gaussian)). Who cares if it gives you a framework to trade within ? Nowadays it is possible to use tools that are based on actual mathematical / statistical principles. Personally I think these tools provide a better framework and I guess strictly speaking that makes MP outdated. Not only that I find them much more 'elegant' and i think they frame price better in many varying circumstances.

Vintage cars still go from A->B, arguably in some style . The Lexus practically drives itself.

[djohnsonhot]

Would you all consider a point here for discussion about Volume profile? It seems rather obvious to say that MP (or VP) cannot stand alone as an entry tool. The reason I am saying this is because I tracked a "professional" trade VP exclusively, using Keltner tools to enter and exit) and he is at less than 50% in his winners. What I am pointing to is that one must use a tool bag to trade: a) Let's say we know the key POC, VAH and VAL's. We market them on our charts with horizontal lines. b) We are away of the Pivot Points for the day. c) We know where the key levels are from the previous day's price action, and weekly mid-points, etc. Those are our key RES and SUPPORT price levels. Those are marked. d) We observe where the consolidations happened in the previous day sessions and where we might be in the stages of the market (Market Stage theory).

AND FINALLY: e) we have pure Price Action: candlestick formations, higher highs and lows and lower lows, etc - - depending on the OVERALL and DAILY trends.

Are we getting the picture. Well, traders or wannabe's. It has taken me years to determine the various chart techniques to watch for BUT I STILL FIND MYSELF on the WRONG side of many trades, and then either use proper Money Management skills or I do not and let a loser run which puts me in a hole early in the day - - my worst days - - which I then chase with more contracts or rather stupid entries...you name it.

The point: it is really difficult to remember to look for MOST of those chart indicators for entries and knowing when a trade is broken.

I have recently started a whole new approach: Ambush trades or what one would consider Half-Way Back trades on longer term and short term micro-moves and I will be back here to report whether it works. I am trying to simplify. I am really working at this. Weekends, nights, as this is my chosen profession and I am still under water after over a two-year period of great trades at times and lousy throw-it-all back to the professionals types of trades. It has been painful.

[joshdance]

Originally Posted by djohnsonhot »

a) Let's say we know the key POC, VAH and VAL's. We market them on our charts with horizontal lines. b) We are away of the Pivot Points for the day. c) We know where the key levels are from the previous day's price action, and weekly mid-points, etc. Those are our key RES and SUPPORT price levels. Those are marked. d) We observe where the consolidations happened in the previous day sessions and where we might be in the stages of the market (Market Stage theory).

The point: it is really difficult to remember to look for MOST of those chart indicators for entries and knowing when a trade is broken.

Sounds like too many things to watch. POC, VAH, VAL, Pivot, S1, R1, etc., key levels from yesterday or the week, mid-points (c'mon?), consolidations, .... too much info. You're going to have a minimum of 12-15 lines, probably all within a relatively small range. Perhaps that's why you say it's difficult to remember to look for most of these.

Originally Posted by djohnsonhot »

I have recently started a whole new approach: Ambush trades or what one would consider Half-Way Back trades on longer term and short term micro-moves and I will be back here to report whether it works.

Would love to hear about your progress with this, hopefully start a separate thread for this.