Market Profile used in Trend Trading

M

MartinD

I made mention in another thread about a method and indicator I've been using to good effect in identifying trend changes.

I am also generally very interested in hearing from others about how they use market profile analysis, so if you have tricks for trading with market profile then please share them here too.

The method I have been employing makes use of an indicator that plots a channel around a user defined trend and also uses market profile to analyse volume at price only for the duration of the trend.

I wait for price to break out of the channel and then use the market profile value areas from the trend to look for entry or exit points - the two lines that are plotted represent the top and bottom of value area and price seems very prone to move from one end of value area to the other. A nice high probability setup.

a couple of chart examples attached. The indicator i got from http://www.1st-tradingtools.com.

Other traders using market profile, please share how you use this in your trading
 

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Here are another couple of charts from this mornings session 10th May 2004

The chart illustrated is a 233 tick chart of ES. I've identified a trend and drawn a regression line onto it. I then applied the Trend Market Profile tool onto the trend I had highlighted.

The indicator has drawn the market profile for volume at price from the duration of the trend idientified, and also applied an SD channel around the regression line.

The most important bit is the value area lines - the value area specifically of the trend, which you can see drawn onto the chart as projected lines of support and resistance. also worthy of note is the yellow line from the VAP histogram - this is the price level at which the peak volume occured for the whol trend.

You can see from chart 1 that the top of value area (the higher red line) had already acted as an area of first resistance, and then support when price broker through it.

When price came back down it broke through the support given by both the top of value area AND the lower edge of the SD channel. Price was also below the 50MA so at this point I SOLD the market on the basis of this setup.

As you can see from chart 2 this trade took no heat at all as price promptly and rapidly headed for the bottom of value area which was where I had placed my target limit order - a nice 2.50pts trade in 3 mins.

As you can see in chart #3 price was supported by the bottom of the trend value area for a while before trying to push lower and then coming back up for a brief period of trading at the peak VAP line... you can see in chart 3 how the edge of value area is having a strong influence on supporting/resisting trade around that area.

p.s - I will have to attach charts 2 & 3 in subsequent posts since they are too large to put all in one posting

Chart #1 below showing the initial setup and entry point
 

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And this is chart #3 showing what the market did next... you can see price finding support and then resistance at the bottom of value area before price makes a quick last effort to trade at the peak VAP level
 

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Quote from MartinD:

And this is chart #3 showing what the market did next... you can see price finding support and then resistance at the bottom of value area before price makes a quick last effort to trade at the peak VAP level
More...
Why do keep starting threads about market profile and posting charts without MP?I use MP exclusively but can'y comment on your posts because you don't attach MP charts.
 
Quote from BundMaster:

Why do keep starting threads about market profile and posting charts without MP?I use MP exclusively but can'y comment on your posts because you don't attach MP charts.
More...

The indicator I am using in the charts plots MP based on only the bars selected to compose part of the trend. Cant you see the volume at price histogram to the left showing the volume at the prices traded during the trend I was following?

I also have an indicator that plots MP in the traditional interval sense, but I havent found any setups that work out as neatly as using the value are of the last trend up or down...

I'd be interested in hearing how you use MP if you have any charts or setups you feel like sharing?
 
Quote from MartinD:

The indicator I am using in the charts plots MP based on only the bars selected to compose part of the trend. Cant you see the volume at price histogram to the left showing the volume at the prices traded during the trend I was following?

I also have an indicator that plots MP in the traditional interval sense, but I havent found any setups that work out as neatly as using the value are of the last trend up or down...

I'd be interested in hearing how you use MP if you have any charts or setups you feel like sharing?
More...
As I've said I use MP exclusively.Ther are certain formations I look for that tell me the market is out of whack.I also use it to determine support and resistence levels.
 
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