Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

mister ed

MP Vs. Ensign's Price Histogram

Recommended Posts

There are differences between MP and the 'Price Histogram' used instead by Ensign - would it be worthwhile discussing the differences here with a view to ascertaining how significant these differences are?

 

From the Ensign website:

"The histogram on the left side of the chart is drawn during the day in five-minute increments. The length of each horizontal line in the histogram represents the amount of time that the market spent at that corresponding price. "

 

So, instead of letters to signify each 5-minutes/half-hour (or whatever time increment being used) we have a horizontal line summing the TPOs (the link above will take you to an example of an Ensign Price Histogram chart).

 

How does this effect the use of MP?

Does it change the calculations for POC, VAH, VAL? (I think the answer to all 3 is no).

How else does it cause differences to MP?

Is it a better display than MP?

 

I am not deeply knowledgeable of MP, so I ask these questions of those who are more knowledgeable than me. This is not an academic exercise either, to me Ensign is a strong competitor to other charting packages, the information and knowledge we gain here will be useful to those considering Ensign as their charting package.

Share this post


Link to post
Share on other sites

I suppose instead of printing TPO's with letters they are displaying either the volume or the

time(secs/minutes) price spent at a certain level.

There are options for Volume-based, and Candle-based. Typically the Time and Volume based profiles generate POC's that are almost exactly the same.

 

Ensign would have to pay royalties to CBOT if they implemented a TPO based MP, since market profile is copyrighted by CBOT.

Share this post


Link to post
Share on other sites

Yeah, I think Ensign is a poor man's program, not that it's a bad thing since it's an individual not a company that created this software. I totally dig that. So bare essentials with contributions from users like open source is an excellent source of enriching the software. Basically, this is to avoid paying out fees to the big bad bullies (exchanges).

Share this post


Link to post
Share on other sites
Yeah, I think Ensign is a poor man's program,

 

Well, you know torero, I am not sure I agree. It is why I started this thread ... let's get some feedback from MP users, and Ensign PH (Price Histogram) users on what the differences are.

 

Let me admit some biases:

I don't use Ensign.*

I don't use MP (I am familiar with the basics of it).*

 

So, there is probably no-one less qualified on the board than me to start this thread , but I would like to hear the various points of view. With my limited knowledge of MP I am starting with the point of view that the differences between MP and EPH are minor and insignificant - but I am more than happy to be shown otherwise.

 

--------------------

* I don't use Ensign but I think it is a fantastic program with fantastic support that was only just edged out by I R/T for me.

* I don't use MP but I can appreciate the thought and effort that goes into using it by its practitioners, and I can see how it could add a lot of value to its users trading.

Share this post


Link to post
Share on other sites

Let me start with two specific questions for MP/EPH users.

 

Is the POC price derived from a MP going to be the same as a POC derived from an EPH? (I think the answer is obviously yes).

 

Are the VAH and VAL prices derived from a MP going to be the same as the VAH and VAL prices derived from an EPH? (This one I think is not so obvious, but I cannot see that the VAH and VAL prices derived from the two processes will vary with any significance).

 

Actually three questions - am I asking the wrong questions here?

Share this post


Link to post
Share on other sites

EPH is derived from 5-min, it's fixed while MP is from 30-min. POC from both are the same, it's the most traded price, assuming EPH is calculated from price and not volume. As for VAH and VAL, I'm not entirely sure just yet since I'm still new with MP and still trying to understand how's calculated, but EPH take the 2 standard deviation on each end.

Share this post


Link to post
Share on other sites

There are at lest three ways to calculate Value Area and POC information. One is done using TPO or Touch at Price counts. The second is based on Volume at price counts. That is why you may see different MP numbers from different sources. Many, if not most, of the time the values are the same. But of course there can be differences. So even if you use TradeStation and have the option of what to use, you could get different values as somebody else.

 

The Enthios price histogram is awesome. It's the Ensign version.

 

As far as which is better, I think that might be as subjective as which platform is better. And we know how divisive that can be.

Share this post


Link to post
Share on other sites
Let me start with two specific questions for MP/EPH users.

 

Is the POC price derived from a MP going to be the same as a POC derived from an EPH? (I think the answer is obviously yes).

 

Are the VAH and VAL prices derived from a MP going to be the same as the VAH and VAL prices derived from an EPH? (This one I think is not so obvious, but I cannot see that the VAH and VAL prices derived from the two processes will vary with any significance).

 

Actually three questions - am I asking the wrong questions here?

 

Perhaps this is the place for me to comment on this since I have written 11 threads on this topic entitled [thread=1962]"Trading with Market Statistics"[/thread].

You should be aware that market profile was developed more than 40 years ago at a time when plotting distribution functions had to be done by hand. You can understand that it was not possible to include every trade in the distribution function. Instead prices in 30 minute increments were used to generate the distribution. The net result is you end up with a distribution that essentially is a 30 minute average of the real distribution. Even Ensigns computation of the distribution is approximate, but it is much closer to the real distribution than anything else.

Using a distribution like Ensign's has many advantages, none the least of which the Peak Volume Price dynamic (which I call the PVP to distinguish it from Market Profile's POC) is easy to follow as it builds up at one price and then evolves into another price over time. In MP this tends to get washed out due to the averaging.

 

As far as value area is concerned, again for Market Profile, this was an historical choice of 70% of the data to conform to something like 1 standard deviation observed in a Normal Distribution. Unfortunately, the distribution is rarely Normal, so that defining a "value area" in this way is purely heuristic and has little if anything to do with the true standard deviation for the distribution. If anything, computing the value area with respect to the PVP yields values which are usually too large. A complete discussion of this can be found in the [thread=1962]"Trading with Market Statistics" [/thread] threads.

Share this post


Link to post
Share on other sites
A complete discussion of this can be found in the [thread=1962]"Trading with Market Statistics" [/thread] threads.

 

Thanks PP and Jerry - clarifies some things. Jerry, your threads (linked in quote above) are outstanding.

Share this post


Link to post
Share on other sites

I use MP extensively in my trading, and use the new version of EW for my MP levels. To make EW conform to regular MP, you simply put the PH on a 30min chart. The POC will be the same when the number of price buckets are odd, and vary from other software when the number of buckets are even. This depends on whether that particular software rounds the half a tick value up or down. The new EW supports two value area computation methods. One conforms to eSignal, the other CQG. I use the CQG method. It is selectable as a global option. The VA computation matches other software with the same caveat regarding rounding. You will not get a MP with letters like a standard profile, but you can toggle the 30min bars on/off to see which bracket the TPO belongs to.

 

In the past, the PH tool used screen coordinates for the price buckets. That was a major complaint, and why I used a different program for MP. That has changed in the new version to buckets matching tick size. The EPH is the only softare I use for my MP work. I would like to see a couple more features added, and I have submitted those.

 

Ensign is in the process of designing a new implementation for higher performance (I don't see any performance issues, btw) and adding new features. I am not affiliated with Ensign, so I have no idea when that is scheduled for release.

 

I use the PH tool on a 30min chart with TPO (time at price), and export the poc/vah/val values from that chart to other lower timeframes. EW supports constructing the histogram based on time or volume.

 

Volume Based Profiles

I know jperl has videos with a volume profile based on one minute bars. In my experience, EW does a reasonable job most of the time in this case, but I have seen occassional large differences between a volume histo based on one minute bars vs. actual ticks. I was running the two profiles on the same system with the same data feed. The comparison software was MarketDelta. The discrepancies occur when the profile takes on a double distribution shape. The occasional differences are large enough to place the volume POC on the other side of vwap. To be fair, even two different softwares using the same tick data can arrive at different POC (and value areas by extension) in this double distribution case. The reason is volume profile implementations usually incorporate some kind of threshold when comparing the buckets, and those thresholds vary from one vendor to another. So one software using a smaller threshold would dynamically shift its VPOC sooner as the second distribution began to overtake the first. From a trading perspective, this is a technicality, since a developing dbl dist provides a reasonble expectation of price behavior when transitioning from one to the other.

 

On a broader MP note, using MP for just VAH/VAL levels -while useful- is nowhere near the utility of understanding the auction process that a MP uniquely shows. Just my opinion.

Share this post


Link to post
Share on other sites
Perhaps this is the place for me to comment on this since I have written 11 threads on this topic entitled [thread=1962]"Trading with Market Statistics"[/thread].

You should be aware that market profile was developed more than 40 years ago at a time when plotting distribution functions had to be done by hand. You can understand that it was not possible to include every trade in the distribution function. Instead prices in 30 minute increments were used to generate the distribution. The net result is you end up with a distribution that essentially is a 30 minute average of the real distribution. Even Ensigns computation of the distribution is approximate, but it is much closer to the real distribution than anything else.

Using a distribution like Ensign's has many advantages, none the least of which the Peak Volume Price dynamic (which I call the PVP to distinguish it from Market Profile's POC) is easy to follow as it builds up at one price and then evolves into another price over time. In MP this tends to get washed out due to the averaging.

 

As far as value area is concerned, again for Market Profile, this was an historical choice of 70% of the data to conform to something like 1 standard deviation observed in a Normal Distribution. Unfortunately, the distribution is rarely Normal, so that defining a "value area" in this way is purely heuristic and has little if anything to do with the true standard deviation for the distribution. If anything, computing the value area with respect to the PVP yields values which are usually too large. A complete discussion of this can be found in the [thread=1962]"Trading with Market Statistics" [/thread] threads.

 

I've never thought about the fact that back then, everything was done manually, it was a quick way to summarize the market. After understanding that fact the proliferation of the personal computer and super-computing power, it does seem more precise using Price Histogram than the traditional MP. POC is for me a very powerful and important event. The others VAH and VAL I'm still researching to find an edge using it. Thanks for the enlightment, jperl. I'm now using Ensign, a great tool indeed.

Share this post


Link to post
Share on other sites

I personally think there are certain things about MP (old or not) that are still very valid.

 

For example, I always look at the POC, yes it is based on TPOs but it is still valid IMO. I also look at the POCv (as IRT names it) which is basically the POC based on volume.

 

I will agree that many things with market profile are completely irrelevant (to me) in this day and age.

 

For example, I don't put a lot of weight on the value areas. In addition, I don't put much weight on the IB either. Even Steidlemeyer (according to his more recent writings) doesn't use it the old way anymore.

 

I personally prefer IRT because it is the most flexible MP software I have used. The developer has even put in specific requests on MP charting enhancements.

 

I find it interesting that EW has two computation methods, since I know IRT was the first to do that...no big deal though, competition makes things better for us. ;)

Share this post


Link to post
Share on other sites

For example, I don't put a lot of weight on the value areas. In addition, I don't put much weight on the IB either. Even Steidlemeyer (according to his more recent writings) doesn't use it the old way anymore.

 

hey Subq, can you point me to where you found Steidlemeyers newer stuff?

I would love to have a discussion on how we can use the developement in computing/data over the past 15 years to add to the original MP concepts.

I also don't put alot of weight in the value area. For me its just easier to eyeball it on a volume profile. It also messes up IMO when you have a nice double volume distribution, if your only looking at TPO based value you might easily miss the lovely breakout trades between the peaks of the volume distribution.

Really this discussion kind of boils down to time vs volume. Both though are market generated information and probly doesn't make much sense to discard one or the other.

My real problem with current MP software is we really need something that can backtest new ideas.

Share this post


Link to post
Share on other sites

 

Investor/RT has a TPO Indicator which allows you to backtest various MP-based strategies historically. The TPO Indicator will give you the historical developing VA & POC...on any periodicity (1-min, tickbars, etc). If you're testing 1-min data, you can see how the developing VAH (based on 30-min brackets) moved up and down within the 30-min period. TPO Indicator also now gives you access to IB & IB Multiples...along with developing TPO counts (both above/below POC, with or without singles), etc.

 

More info on TPO Indicator can be found at: http://www.linnsoft.com/tour/techind/tpo.htm

Share this post


Link to post
Share on other sites

darthtrader,

 

I am not even sure it is available in print, he covers it in the seminars though, and the concept is in their own software as well.

 

He is mostly looking at dynamic profiles and points of control, dynamic profile meaning they are not time limited, profiles will keep building and building if they rotational and will start new profiles once they break out of rotation...that coupled with market moves from point of control to point of control.

Share this post


Link to post
Share on other sites

 

profiles will keep building and building if they rotational

 

Hi subq;

 

I think there is a missing word in your sentence, and I cannot understand the information you want to convey.

 

Please add the missing word.

 

Thanks.

Share this post


Link to post
Share on other sites
Hi subq;

 

I think there is a missing word in your sentence, and I cannot understand the information you want to convey.

 

Please add the missing word.

 

Thanks.

 

hahah yeah it was kind of late

 

profiles will continue to build as long as they are rotational, once they "break out" of rotation, then they form a new profile...that would be a "dynamic" profile

Share this post


Link to post
Share on other sites

The ensign software is fine. There are traders who use it successfully I am sure.

 

It captures the essence of MP which may be all some traders want. The real matter is what do you want? Is that enough information for you? Can you use that info to trade successfully?

 

If so, then that is all you'll need.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 29th March 2024. GBPUSD Analysis: The Pound Trades Higher But For How Long? The global Stocks Markets are closed due to Easter Friday (Good Friday). The NASDAQ continued to follow the sideways trend while other indices again rose. The SNP500 reaches an all-time high, but the NASDAQ remains under pressure from Tesla, Meta and Apple. The Euro continues to trade lower against all major currencies including the US Dollar, Euro and Japanese Yen. The British Pound is the best performing currency during this morning’s Asian session. However, investors are largely fixing their attention on this afternoon’s Core PCE Price Index. GBPUSD – The Pound Trades Higher but For How Long? The GBPUSD is slightly higher than the day’s open and is primary due to the Pound’s strong performance. At the moment, the British Pound is increasing in value against all major currencies. However, the US Dollar Index is also trading 0.10% higher and for this reason there is a slight conflict here. If investors wish to avoid this conflict, the EURUSD is a better option. This is because, the Euro depreciating against the whole currency market avoiding the “tug-of-war” scenario. The GBPUSD is trading slightly lower than the 2-month’s average price and is trading at 49.10 on the RSI. For this reason, the price of the exchange is at a “neutral” level and is signalling neither a buy nor a sell. The day’s price action and future signals are possibly likely to be triggered by this afternoon’s Core PCE Price Index. Analysts expect the Core PCE Price Index to read 0.3% which is slightly lower than the previous month but will result in the annual figure remaining at 2.85%. The PCE rate is different to the inflation rate and the Fed aims for a rate between 1.5% to 2.00%. Therefore, even if the annual rate remains at 2.85%, as analysts expect, it would be too high for the Fed. If the rate increases, even if only slightly, the US Dollar can again renew bullish momentum and the stock market can come under pressure. This includes the SNP500. Investors are focused on the publication of data on the UK’s gross domestic product (GDP) for the last quarter of 2023: the quarterly figures decreased by 0.3%, and 0.2% over the past 12-months. This confirms the state of a shallow recession and the need for stimulation. The data, combined with a cooling labor market and a steady decline in inflation, increase the likelihood that the Bank of England will soon begin interest rate cuts. In the latest meeting the Bank of England representatives did not see any members vote for a hike. USA500 – The SNP500 Rises to New Highs, But Cannot Hold Onto Gains! The price of the SNP500 rises to an all-time high, before correcting 0.33% and ending the day slightly lower than the open price. Nonetheless, the index performs better than the NASDAQ which came under pressure from Tesla, Meta and Apple which hold a higher weight compared to the SNP500. For the SNP500, these 3 stocks hold a weight of 9.25%, whereas the 3 stocks make up 14.63% of the NASDAQ. The SNP500 is also supported by ExxonMobil’s gains due to higher energy prices. The market will remain closed on Friday due to Easter. However, the market will reopen on Monday for the US and investors can expect high volatility. Investors will also need to take into consideration how the PCE Price Index and the changed value of the US Dollar is likely to affect the stock market next week. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HFM Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Michalis Efthymiou Market Analyst HFMarkets Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • MT4 is good and will be good until their parent company keep updating the software, later mt4 users will have to switch to mt5.
    • $SOUN SoundHound AI stock at 5.91 support area , see https://stockconsultant.com/?SOUN
    • $ELEV Elevation Oncology stock bull flag breakout watch , see https://stockconsultant.com/?ELEV
    • $AVDX AvidXchange stock narrow range breakout watch above 13.32 , see https://stockconsultant.com/?AVDX
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.