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.

Stockaddict

Market Profile Question

Recommended Posts

One area I find interesting on this forum is market profile. I had never heard of this method until I found this forum. It seems that market profile has been heavily discussed here among futures traders.

 

My question is: Can market profile be applied to markets other than the futures markets? Is this methodology designed only for commodities? I have never heard stock traders mentioning this.

Share this post


Link to post
Share on other sites

I think it's more in tuned with futures trading as it's not as news dependent as equities are. The auction theory lends itself more so the futures market where many companies are intertwined into one commodity rather than a single company where it's earnings and it's news really are what drives the price of the stock.

 

Just my 2 cents :)

Share this post


Link to post
Share on other sites

I had thought market profile was used by traders mostly for the futures market. HOWEVER, I just recently saw a stock trader plotting market profile charts for IBM and others. I was quite surpised to see this.

 

I am not sure how effective MP is with equities but I finally met one trader who uses it on stocks.

Share this post


Link to post
Share on other sites
I had thought market profile was used by traders mostly for the futures market. HOWEVER, I just recently saw a stock trader plotting market profile charts for IBM and others. I was quite surpised to see this.

 

I am not sure how effective MP is with equities but I finally met one trader who uses it on stocks.

 

Here's an excerpt review based on the book "Steidlmayer on Markets: Trading with Market Profile, 2nd Edition"

 

...Steidlmayer on Markets shows readers how to find these opportunities using the innovative techniques developed by the author during his many years of trading the market. This fully updated Second Edition covers innovations in both technology and technique-and broadens the scope of "market profile" to include stocks.

Share this post


Link to post
Share on other sites
how do you trade a 23 hours market with market profile?

 

i mean the YM,NQ

 

should the start session be 930am EST? ends at 415am EST?

 

That's the session most plot for MP. MP is about mapping TPO's to reveal market structure, after hours is quirky and thin volume in comparison so it's not as valuable IMO.

Share this post


Link to post
Share on other sites
use volume MP instead of TPOs, may give you better structure where the trading happened.

 

In my limited use MP and it's TPO's reveal structure S&R better than volume profiling. Also the question was about what session to profile and personally I weigh the action with the most participation more. This action is bound to = higher volume. :)

 

JMHO

Share this post


Link to post
Share on other sites

MP can be applied to anything including individual stocks for at its root is the standard bell curve and therefore it is about statistical analysis out of which is borne probability studies. Using this one can create trading rules for entry and exit. MP used in multiple baskets IE say 100 IBM +1 Currency Future Plus +1 Bond Future +1 Stock Indices is an additional way of incorporating MP whereby it becomes a diversified (debateable I know) basket but this style is really only applicable for institutional accounts

Share this post


Link to post
Share on other sites
In my limited use MP and it's TPO's reveal structure S&R better than volume profiling. Also the question was about what session to profile and personally I weigh the action with the most participation more. This action is bound to = higher volume. :)

 

JMHO

 

I'm pretty sure this is 'self fulfilling' (who cares if you can exploit it right?) If you look at Jperls fantastic 'trading with market statistics threads' he puts forward a very good case for volume.

Share this post


Link to post
Share on other sites
I'm pretty sure this is 'self fulfilling' (who cares if you can exploit it right?) If you look at Jperls fantastic 'trading with market statistics threads' he puts forward a very good case for volume.

 

Of course all that matters is that you can exploit something. I have tried both and like I said, in my experience TPO is more exploitable for me. Often the bellcurve looks similar as one might expect but shows me less noise on TPO'S. FWIW I still run the volume based POC along with MP to look for any discrepancy there.

 

Jperl has TREMENDOUS threads, and volume based structure works for him. There is no right or wrong answer in the markets. I was stating my opinion and what works best for me, nothing more. ;)

Share this post


Link to post
Share on other sites

I am a tradional kind of guy in that the original NYSE hours plus the 15 minutes IE: 9:30am-4:15pm ET for Stock Indices and 8:20am-3pm for Bonds etc not only work but there is a reason why they still work. The mutual funds and asset managers and fund managers etc still work traditional hours and in fact in many cases what the exchanges have not figured out is that many funds require the exchange to be open to be able ot transact business from a fiduciary point of view (there is a little matter that many people are in fact forbidden to transact business outside of the office due to compliance reason not least of which is a taped phone) and the exchanges are officially open the hours stated. There are other reasons in that the guys who make up the large proportion of volume have little interest in working more than the necessary hours per day and they in turn when they train people pass down the same old traditional ways and it is likely to be like this for at least another generation of fund managers.

You will note that I am borne out in this in the sheer volume that originates in markets at the "open" and the "close" where it is not unual in Mini S&P for example to have a 1 minute 100k+ volume bar at those times

Share this post


Link to post
Share on other sites

as to TPO vs Volume Profile. I use both. Ultimately it is all about the pattern so find whatever works for you and do not deviate and if you have seen it before trust it to work again

Share this post


Link to post
Share on other sites
Guest forsearch

Alex,

You've worked at a bank desk trading institutional spot Forex. How did you employ MP - if at all - whilst working in the City and in France?

Share this post


Link to post
Share on other sites

As a Prop. Trader I used MP across 240 minutes for FX and 30 minutes for futures markets.

Still do although I suspect there is a case for finding a way to break the 30 minutes up into segment of 26 mintes. that is not 26 minutes continuous but 26 + 4 = 30 then another 26 + 4 etc.

Share this post


Link to post
Share on other sites
Guest forsearch

Still do although I suspect there is a case for finding a way to break the 30 minutes up into segment of 26 mintes. that is not 26 minutes continuous but 26 + 4 = 30 then another 26 + 4 etc.

 

This is curious, indeed. Might I enquire as to the rationale for doing so?

Share this post


Link to post
Share on other sites

observation over many years rather than devine science

You say it is curious. then you must not have read from Don Jones of Cisco-Futures that he believes the optimal profile timeframe to be 28+ minutes rather than 30

Share this post


Link to post
Share on other sites

Stock,

 

The MP works like a charm on individual stocks. As long as you have buying and selling activity, you'll have a MP. Whenever I look at a stock, the first thing I look at is it's MP.

 

You can use MP on the 24 hour markets, pit traded vehicles or any other actively traded security

Share this post


Link to post
Share on other sites

On trend days I have problem with MP due to waiting for the extreme or poc/vwap rather than the edge or live lvl, 1 std from vwap. I know they're statistically low % of days that actually trend in a month yet seem to occur much more frequently in these volatile times. Any input would be greatly appreciated on how to shift bias to edge from extreme or how someone determines a trend day early on in day.

Share this post


Link to post
Share on other sites
On trend days I have problem with MP due to waiting for the extreme or poc/vwap rather than the edge or live lvl, 1 std from vwap. I know they're statistically low % of days that actually trend in a month yet seem to occur much more frequently in these volatile times. Any input would be greatly appreciated on how to shift bias to edge from extreme or how someone determines a trend day early on in day.
It's an old post (five months) and VERY basic, but this might help some....LINK. For example today we opened up inside the VA used on Thursday (950.50 973.50 986.00) which was also a virgin. Upon no interest overnight OR right on open, we "trend" down to the next VA's (900.25 908.75 924.25 and 912.24 921.25 924.75. At which point we start our exploration inside.

Share this post


Link to post
Share on other sites

The establishment of identifying early the type of day actually comes from the Data Warehouse first.

EG: What follows (ie probability) on a Monday that is also a Bond Auction Day (or whatever the daily event is) that follows the previous Friday's NFP which was a Incomplete Neutral Day

IE: In simplistic terms it is a case of asking questions along the lines of where is the market in relation to today's open in relation to: previous Close/Highs/Lows/POC Short Medium Long Term/: What is the market doing IE Lower Highs Lower Lows with Constant Rotation (this is Key) and what is happening to Value both in terms of emerging or in terms of Short Medium and Long Term.

Understanding the Position (Long/Short and How Many... what used to be established from the CBOT LDB) of the Street is also useful and I have developed and shown how to do this without the official LDB in MP101 and MP102.

Understanding the position of the market in relation to the 4 steps of activity as well can help.

EG: All we did this am (Nov 10th) was revert to the recent mean which was also a POC from which the selling then started in earnest trapping many who were trying to trade from a fundamental/event risk point of view who had little understanding of those matters. After all who cares what the funnymentals really are for its not the funnymentals that count but the price reaction to them that matters. If the expected is not happening then the opposite must be true. From all this the pattern of the volume will then be self evident to confirm as to whether the market is a Trend Day or not displaying the patterns of 1st / 2nd / 3rd STD whereby it becomes necessary to foresake Trade Location to be on board the Vertical Move as opposed to requiring Trade Location in a Horizontal Move.

The day Nov 10th was marked as not a Trend Day at all but a Normal Variation Day with Trend Like Properties which then culminated with the late trade being some form of Incomplete Neutral Distribution. Please note that some of the phrases I am using are mine not Pete's/Dalton's/Jones's and represent the direction that so called Traditional MP is moving into as the markets evolve. At least it is the direction that I moved to some years ago.

PS: The Data Warehouse shows that Trend days in the Traditional sense occur 11.67% of the time but in terms of the evolving New MP or Adjusted MP actually occur 19.58% IE: 1/5th or One Day Per Week and there is no preference to which Week or which Month of the Year. The most likely day for a Trend Day is actually a Thursday

Share this post


Link to post
Share on other sites
The day Nov 10th was marked as not a Trend Day at all but a Normal Variation Day with Trend Like Properties which then culminated with the late trade being some form of Incomplete Neutral Distribution.
It all depends on the time frame and the concept of fractals within the market. One can "trend" back and forth around a POC during consolidation. Each of those legs can be as much of a trend as the breakout of that consolidation. If the market opens near the high and closes near the low with very little consolidation in the middle how can it not be called a "Trend Day"? Maybe I am missing something.

Share this post


Link to post
Share on other sites

What you write about "trend" back and forth Hlm is true just as with a 1st STD there are 2nd and 3rd STDs making up the 1st, 1st and 3rd making up the 2nd and 1st and 2nd making up the 3rd.

Markets move in even the minutest Time Frame through a back and forth action where some part is Responsive and some part is Initiative creating the vertical and horizontal planes. The key to this is understanding the Dominant Trader Time Frame and therefore influence and therefore what and how your reaction should be.

Certainly your statement about Time Frame is valid and your description of a Trend day is true BUT and this is where I differ in stating that today was a Normal Variation Day with Trend Like Properties we did not close near the low but fully 1/3rd of the way back up. The Days Range was 46 points wide with the settlement 15.5 points off the low but if the close had been in the lower quadrant then I would have stated that the day was a full on Trend Day.

 

The original question raised was how to identify a Trend Day early on and at risk of repeating myself once the interrogation of the Data Warehouse has extracted the probabilty scenario then the proof is via the volume pattern together with the answers to the various questions of where is the market in relation to.......and yes what Time Frame....Short, Medium, Long Term.....Time Frame is about advantage, acceptance, fairness and NEED to trade.

Share this post


Link to post
Share on other sites

Thanks for the clarification...great information and I don't disagree :). However, when most day traders talk about trend versus consolidation days (at least the ones I know), they are really talking about which side of the market will be more favorable to their trades. Is there a bias for continuation and letting profits run or is the market consolidating and one should look for trades with smaller targets in both directions? Knowing when the probability is higher for a day with "Trend Like Properties" can be beneficial for an individual who wants to keep it simple with the information outside the intraday realm. From what I have experienced, for many day traders the difference between an actual trend day and one with trend like properties is just semantics.

Share this post


Link to post
Share on other sites
I'm pretty sure this is 'self fulfilling' (who cares if you can exploit it right?) If you look at Jperls fantastic 'trading with market statistics threads' he puts forward a very good case for volume.

 

Well first I should say that to me Mind Over Markets is the best trading book ever written, if you throw out or don't get into some kind of "religious" mindset about ideas. No one has ever done a better book on how markets breathe but that doesn't mean its exactly right, its moving into the realm of mythology at this point.

The fundamental problem with market profile is assuming a normal distribution of either time or volume between the high and low of period X is worse than wrong because if we can say anthing about the market at all its that between price X and price Y, a normal distribtion of anything has nothing to do with reality. To me the only thing with can objectively say about the market is between X and Y, the probability distribution given enough samples will exhibit fat tails, and that distribution is random enough to not be quantifiable in any real way, but its not exactly a stochastic process either. If you try to get too solid about it then the stochastic element will get you, if you try to get too stochastic then the solid element will get you.

To me this points to an objective view of trading in that trading is damn hard, you probly want to do something other than what anyone says to do on message boards/literature/anything you can get second hand, liquidity becomes issue number 1 and how to "surf" waves of liquidity.

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 May 2024. Market News – Stocks drop with bonds.Economic Indicators & Central Banks:   The NASDAQ was the star as the markets, of it rallied 0.59% to close at 17,019.88 for a fresh record high. And it is its first time over the 17,000 level. A 7% pop from Nvidia supported. Fed Kashkari said he wants to see “many more months” of positive inflation data before a rate cut. German GfK consumer confidence improves further. All signs are that consumption trends should improve with the rise in real-disposable income as falling inflation, rising wages and the prospect of rate cuts boost sentiment. US consumer confidence beat assumptions. Confidence has displayed only a slight updraft since mid-2022, after a prior deterioration from mid-2021 peaks. Asian & European Open: European & US stocks slipped earlier today against a backdrop of rising government bond yields. DAX fell 0.2% and FTSE lost 0.06%. Traders are pricing in that the ECB will lower its deposit rate when policymakers meet next week. Asia stock market dipped as Chinese tech and property companies declined. The Hang Seng Tech index shed 2.3%. Financial Markets Performance: The USDIndex is steady and Treasury yields also held firm ahead of key inflation data, which could offer more clarity on the Fed rate trajectory. The USDJPY fell to 156.88 nearing levels that prompted suspected interventions by Tokyo in late April and early May. Currently rebounded again above 157. Japanese officials might issue verbal warnings again, but without tangible action, the USDJPY could march towards late April levels The EURUSD dipped to 1.0830 but still marked its first monthly gain in 2024. Meanwhile, the GBPUSD was last at 1.2760. Gold steadied at $2350 per ounce as markets wait for key US PCE numbers at the end of the week. Bullion hit a record high early last week, only to post the sharpest weekly correction this year as the Fed reiterated the “high-for-longer” message. Oil broke the $80 barrier as Middle East tensions have picked up again. Markets are now looking ahead to the release of key US inflation data and the OPEC+ meeting on June 2. 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. Andria Pichidi 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.
    • GE Aerospace stock back up, top of range breakout watch above 171.02, https://stockconsultant.com/?GE
    • CRDF Cardiff Oncology stock possible trend change, at 3.35 triple support area, https://stockconsultant.com/?CRDF
    • COF Capital One stock at 138.59 triple+ support area, https://stockconsultant.com/?COF
    • PLTR Palantir Technologies stock hanging around the 21.03 triple support area, https://stockconsultant.com/?PLTR
×
×
  • Create New...

Important Information

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