ER Analysis 1/26/07

[TinGull 10]

Why is it important to look longer term for short term trades? Yesterday, we hit the value area high for the past month’s worth of trading :

 

 

We had some serious issues getting through that point and then BAM, we went down for almost 12 points on the day. Today will be interesting as we’re only 6 points away from 780 which has been some serious support as well as the value area low, and then 10 points away from 775 which has been a support area for months now. Let’s look at what Market Profile is telling us, shall we?

 

TPO count the day before yesterday had sellers in control by an OK margin, and today we had selling. Obviously sellers were in control of the day, and our TPO count today was 222/70 showing sellers in major control. the value area is WIDE for today. Regarding the "Value Area Rule" from Mind Over Markets, the wider the value area, the less chance price has to run right through it. The numbers are as follows:

 

VAH = 793.8

 

POC = 787.2

 

VAL = 785.4.

 

A value area this wide makes for some interesting possibilities. First, it’s very likely we’ll open inside of value. It’s also likely that the market will remain somewhat rangebound as we digest yesterdays losses. So…some plays I would look to make are as follows:

 

I would look to be a seller at the top of value, and a possible buyer at the lows, all depending on how the rest of the market is acting. IF for some reason we sneak out of value to the downside, that is a big warning that we want to go lower back to 780 and possibly wanting to take out 775 in the near future. Very doubtful that’ll happen today, though, after such strong selling yesterday. I think one of the better plays will end up being a buyer at VAL or the POC if we open up above that. I think we’ll find the ER wanting to range while trending as it does.

 

If we do find ourselves bouncing off of VAL, remember we’re tending to have 9-11 point ranges AND the ER is forming it’s high or low of the day about 68% of the time in the first 30 minutes of trading. If you buy the low hold on to it, cause it could be very profitable.

[syswizard 10]

Applying Market Profile correctly has always somewhat dicey....with the biggest issue being the lookback period ... 1 year, 1 month, 1 week, 1 day...I guess it all depends on your trading time-frame.

[TinGull 10]

Applying Market Profile correctly has always somewhat dicey....with the biggest issue being the lookback period ... 1 year, 1 month, 1 week, 1 day...I guess it all depends on your trading time-frame.

 

Thanks,

 

I would love to know what you mean by Market Profile being "dicey"? I haven't found that to be the case at all.

 

Chris

[Soultrader 12]

I think its all about how one trader uses market profile and applies it to his trading. I have heard many debates on market profile.. some claim they do not work while others rely on it heavily. It really depends on how you design your trading setups off market profile. Not every trader can profit from a specific methodology. One needs to be good at it.

[syswizard 10]

Thanks,

 

I would love to know what you mean by Market Profile being "dicey"? I haven't found that to be the case at all.

 

Chris

 

What I mean is that is suffers the same problems as other technical indicators....LOOKBACK. Go back too far, and the data becomes irrelevant. Use too small of a LOOKBACK period, and there is not enough data to use it effectively. Also, since Market Profile is just a statistical price distribution based on past price history, other than for determining support / resistance levels, I have yet to see anyone use it effectively for frequent trading.

[TinGull 10]

Thanks for your input. There are quite a few of us here who use Market Profile successfully day after day. When you say "other than for determining support/resistance levels"...that's exactly what Market Profile is for.