The Evolution of Market Profile Theory

[The Evolution of Market Profile Theory]

I don't necessarily have any insight into this subject, but I can share a tool that might be useful in the analysis. Our Zig Zag indicator has been enhanced with an option to label each leg with a variety of statistics including Volume (that traded during leg), Delta (of volume traded during leg), and Delta Per Price, among others. I think Delta Per Price might be especially helpful as it takes the delta of all volume that traded in each leg/trend, and divides it by the price change of each leg/move. So for instance, 100,000 contracts may have traded during an uptrend/leg that moved up 5 points or 20 ticks/prices (on ES)...with a delta of +10,000. So the delta per price would be +10,000/20 or 500.0. It essentially measure the average positive delta required to move the price up one tick.

 

Here is an example using a Zig Zag with minimum price change of $3 (each leg/move is at least a $3 move):

 

Images | ChartHub.com

 

 

It may also be interesting to further normalize these labels/stats to divide delta by (Prices * Volume).

 

Chad

Chad, in your post about your zigzag indicator who did you mean as 'we'. Is this an indicator you are selling or is available somewhere in the forums or what?

 

thanks

[Chart Patterns: Reliable?]

Chart patterns are reliable-- Mastering them is another subject....so too is Trading them profitably .

 

The problem that many have with patterns or their claim that chart patterns are not reliable is usually linked inexperience of understanding Price action or other variables like not enough time to master a pattern...to truely know it like the back of your hand and that takes time.

 

Part of the mastery is realizing that many variables influence any particular chart pattern that is trying to form. Because of this fact Programmatic back testing via a code usually will miss the value and the true reliability of chart patterns--In contrast a trader that has mastered his favorit chart patterns knows exactly when to trade them and when to let them go by. He has learned to be aware of the influencing variables and understands their impact on what he is trading , thus he can make appropriate adjustments on the fly.

Asking a Code to do the same thing is near impractical, unless you have a team of top notch programmers at your disposal and even then I dont think you would get the same results....some things just cant be communicated through code.

Bulkowski has been successfully trading patterns for years. I came across his article after another trader I respect made a similar comment as something he had observed in trading. Its not that they don't work, but their reliability is tailing off. the other trader also mentioned that he had found increasing cases of patterns apparently failing but of you monitored them they would resume later than expected.

 

Chart patterns are essentially representations of people's beliefs about the market, these beliefs can be manipulated by the smart money operators.

[Pure VSA]

There are no mentions of anything "hidden" in Wyckoff. Williams does, however, refer to, for example, "hidden buying" in Undeclared Secrets.

 

Since Master the Markets is essentially promotional literature for a software company and The Undeclared Secrets That Drive the Stock Market is Williams' original work, it might be better to rely on Undeclared Secrets so that everybody is on the same page.

 

I remember years ago that some people said that Undeclared secrets was just shilling for the software I think now however its very hard to get hold of Undeclared secrets, I lost my copy somewhere and its not in print now..

[Pure VSA]

I have just started investigating VSA and have started with this thread (per a suggestion I saw on another thread). I have started out by downloading VSA Summary I and the Master the Markets. I have printed out Eiger's first few charts and his comments and I find these extremely helpfull.

 

However, I get lost on some of the "buzz words" that are used by Eiger/VSA. I see references to "hidden test", "hidden upthrust", etc. I have searched thru the PDF files that I downloaded and can find no reference there.

 

Is there a document here (or anywhere) that defines the jargon that VSA uses?

 

I think hidden upthrust may be eiger's own jargon, or perhaps its from earlier wyckoff. I think i saw it defined here once and a search through the forums may help. Its not worth getting too hung up on such jargon nor to spend too much analysing every price bar. You are trying to gauge overall buying and selling pressure and look for setups in relation to that.

[Pure VSA]

Yes but if I can write my personal opinion,no offence,this thread in FF has poor quality compared with TL threads . People there always try invent some magic study and pure VSA posts are just from a few traders,maybe just from one nick: "malcolmb". He is trading forex and I his posts are very useful.

 

I agree the quality here is generally higher, although there are some useful posts in FF too. Some others than Malcolmb are quite good. Discussions get a little too indicator heavy, rather than pure VSA.

 

The best posts have found anywhere are here from eiger, I think if you read his posts, especially his detailed analyses coupled with MTM you will do well.

 

I can read the most obvious bars, but still struggle with background. Still, since focusing on this I have made some money instead of losing it.

 

Good Trading

[Pure VSA]

Eiger

 

pST!. I think I have paid a little of my dues to grapping VSA. Altough I havent read MTM, I have read Untold Secrets 4 times.

 

Forexfactory also has a large VSA thread.

 

MTM is the same as Untold Secrets, it's just a later version, and I think its more biased towards Tradeguider and somewhat restructured.

 

Yahoo has a group called wyckoff-smi which you MAY find useful, but there is a lot of noise and not sure how much real value. Some useful gems there I guess.

[Pure VSA]

Anatomy of afternoon session on YM

 

1. Up bar closing on the low range,on volume higher than previous 5 bars,is bearish and a strong short signal.

2. No demand up bar,with narrow spread, is bearish. Note all the following bars are down on low volume, a sign of strength.

3. Climatic action. A wide spread up bar closing on the low, on high volume is bearish and sign of weakness.

4. A down bar closing in the middle, on volume higher than previous 2 bars, is bullish. The next bar confirms the bullish reversal, by opening below previous close and closing above high

5. A down bar with narrow spead on volume lower than previous 2bars is a test in a rising market. A nice safe haven for entering longs.

6. A test, another safe spot for entering long or halving a profitable position.

7. An up bar on narrow spread, on volume lower than previous 2 bars, is highly bearish. A duck sitting on a fence i.e. an easy target.

8. A down bar on narrow spead, closing in the middle, on volume lower than previous 2 bars, that’s a sign of strength.

9. An up bar on narrow spread, on volume lower than previous 2 bars, is a sign of weakness. A sweet spot to short. Note the weakness in the background i.e. previous bars closing on the low or middle

10. Climatic buying action or stopping volume.

 

any comments welcome

 

Could you define what you mean by a 'down bar' and 'up bar'? I looked at 2 and it closed on its lows, which seems to me makes it a down bar. But I am guessing the terms down bar/up bar doesn't actually mean that?

 

Also, on point 4 you mention 'opening below previous close' but for my limited understanding of VSA the open is ignored (a VSA chart doesn't show the open, just HLC).

 

Thanks if you can clear up my confusion on this

[Pure VSA]

You are off to a good start. Four weeks isn't much time, so you can expect more work and effort ahead.

 

A few things you can do that might be helpful. First, understand the difference between Tests and No Demands. Tests disconfirm the presence of supply; No Demand disconfirms the presence of demand. You seem to have them confused. Tests do not show no demand; they indicate a lack of supply.

 

Try hard to see the bigger picture. The bar at 4 was less a 'break-out' than it was the presence of supply. This became evident at 7, and especially at 10 and the next bar when supply finally overcame demand and took the market down. Understanding the background will keep you from making poor trade selection as in 9. Staying too focused on the bars leaves you missing the forest for the trees and encourages trading random patterns. Strive to understand the background.

 

Eiger

 

Curious as to why you define Bar 4 as 'presence of supply'? It broke out of the congestion before it on higher volume and the close was in the support third of the bar. Did you see it as supply based on later bars ? Or if you saw that bar as it happened woul youn have thought the it showed presence of supply.

 

I can see why 7 would be supply.

 

But again I cannot see why 10 would be supply coming in, as it agian busted above the congestion to the left, albeit on no particular volume.

 

regards :crap:

[Support and Resistance]

S/R is my core trading strategy, and has been since I made the turn. I determine the S/R levels by using pviot prices. And sicne I promised a little meat with my next post, here you guys go.

 

Using your first tick attachment.

 

Wait for the first pivot high and pivot low to form. The order doesn't matter.

this forms the Open S/R box. (#1 and 2)

 

Wait for a new pivot price to form outside the OSR. Since it forms above the OSR I am looking to go long. I now wait for the pivot low to form. I want the market to trade completely outside the range of first bar that makes the pviot low. I now have my Zone.

 

In this order, I will go long on a break of of the second pivot low(the green dot), or a break of the most recent high on the retrace leg, or a break of the second pivot high. The initial stop is the OSR support level.

 

Can see the thumbnails, but the enlarged pictire shows blank, anything that can be done about that? I have looked at plenty of other thumbnails that worked and am using firefox

[Market Profile Key Terms]

Can we be clear please about what is meant?

 

"Boob"

 

A "Boob" to me is a mistake, a further derivativer of the word "Boob" is "BooBoo" most often used by an adult when talking to a child e.g. "you have made a booboo". if I say to someone "I've made a boob" It means "I've made a mistake"

 

boob = female breast in this context. Can be a man's breast usually on a fat man - hence term 'man boob'.

 

I know there are many female traders about, I wonder if they would use descriptions based on parts of the male anatom, I can imagine what they would use to represent an 'upthrust' :rofl:

[Sandbox]

There was a link to a site that had a free course by Hank Pruden on Wyckoff.Anyone have that info?

 

This is his web site although I couldn't see a free course there

 

http://www.hankpruden.com/index.html

[Zen and the Art of Poker]

That wasn't really my question... :\ Ofcourse I know that 14 losing trades in a row isn't "normal", which I why I stopped trading.

 

Depending on the kind of trading you do 14 losers in a row may well be quite possible in a profitable system. If you have say 30% winners and you make 4 points in each winer and 1 on each loser you will have a nicely profitable system (many trend following systems work much like this) but the losing runs could easily reach 14 or more and a drawdown of 50% or more is also quite possible.

 

If you have analysed your trading approach thoroughly in advance you would know this and be prepared for it mentally an duse money management to keep profitable and keep drawdowns acceptable to you.