Market Profile (Theory & application )

E

elmagd2000

Market profile (MP) is an effective tool to determine S/R levels including volume at each level. It is widely used in equities and futures market by floor traders for decision making.


Here are some references to get a deeper idea :

http://www.cbot.com/cbot/pub/page/0,3181,1168,00.html
http://www.cbot.com/cbot/pub/page/0,3181,1187,00.html
http://www.zapfutures.com/archives/daltarch.htm

plus examples:
http://www.cbot.com/cbot/pub/page/0,3181,1188,00.html

and an ebook:
http://www.cbot.com/cbot/pub/page/0,3181,1184,00.html

Anyone use MP in forex? Do you have ideas/concepts based on MP?

Hani :)
 

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from what i understand MP is based on volume. forex has no central exchange. all volume indicators in forex are based on ticks, not exactly a substitute for volume.

if my assumption is correct, i don't know how MP can work for forex.
 
MP is correlating price, time and volume. Although common volume is not available in forex but you have tick volume as an alternative plus MP can give you other analysis that can support and facilitate your decision. Pls. have a look at the attached Eur/Usd pic.

Hani :)
 

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Hani,

It is somewhat erroneous to consider tics as the same as "volume". Tics are the same as frequency, but not the depth of trading. 3 tics means three times a transaction, but we don't know whether the volume of those transactions are declining or increasing. Of course three transactions with declining volumes will be absolutely have a different meaning with the same three transactions with increasing volumes.

Most technical indicators were aimed for stock trading or commodity trading. So, most technical indicators, especially those which use volume of the traded item/pair/commodity, seemed to be forced to fit into forex, despite that there's no similarities whatsoever between tics and volume.

To me, tics merely useful to identify busy hours and lazy hours.

That's just a thought, though.

Good luck!
 
Quote from eternalfuture:

Hani,

It is somewhat erroneous to consider tics as the same as "volume". Tics are the same as frequency, but not the depth of trading. 3 tics means three times a transaction, but we don't know whether the volume of those transactions are declining or increasing. Of course three transactions with declining volumes will be absolutely have a different meaning with the same three transactions with increasing volumes.

Most technical indicators were aimed for stock trading or commodity trading. So, most technical indicators, especially those which use volume of the traded item/pair/commodity, seemed to be forced to fit into forex, despite that there's no similarities whatsoever between tics and volume.

To me, tics merely useful to identify busy hours and lazy hours.

That's just a thought, though.

Good luck!
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Hi Eternalfuture, I hope you you are doing well now and got back data feeding.

Regarding MP, I am totally agree with you about tick volume. But, let me ask: Is the whole MP volume? it is 33% of its analysis beside price and time. After some reasearch, I think that MP can be a valuable tool in forex. Regardless common volume, you can get # of TPO's at each level (which cosidered another type of volume of price movement at specific level ). These are my ideas and I am open to any amendments.
Regards, Hani :)
 
Quote from merlinjeffries:

best thing to do is look at the related futures contract and estimate the volume on the cash pair.
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Thanks Merlin, This is a great idea I was thinking about as well. Many know that currency futures are reflecting hedging of forex market. Plus you have the common volume.

Regards,Hani :)
 
If volume just makes up one-third of MP, then MP without volume will be merely at two-third complete. Personally, I don't think I can cope with that. Just like using DMI with one of its components missing.

Anyway, you can look at the futures contract. Any moves in the futures contracts "usually" followed by similar moves in the spot markets. Just count the premium, synchronize it with the spot data.

Cheers!
 
i trade fx, and use mkt profile...volume isnt neccesarily a part of mkt profile....mkt profile is a statistical price distribution study that volume CAN be used in conjunction with.....however, in its classical application, volume is not used, its just a statistical representation of time and price, but its amazing what u see on there that isnt so apparent on conventional charts.....
 
Quote from phenomena:

i trade fx, and use mkt profile...volume isnt neccesarily a part of mkt profile....mkt profile is a statistical price distribution study that volume CAN be used in conjunction with.....however, in its classical application, volume is not used, its just a statistical representation of time and price, but its amazing what u see on there that isnt so apparent on conventional charts.....
More...

Thanks phenomena, It would be useful to share our MP concepts on forex market.

Regards, Hani :)
 
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