Market Profile -- who needs it?

Quote from dupaski76:

I was looking at the CISCO site and agree with the posters here that it is a mess. I don't know if the course is worth the money or not, however the absense of any feedback anywhere on the web dosen't bode well for it.

I'd like to do my own reading and play around with the tool in my trading lab, but I'm not sure that I even know where to begin. Any recomendations on where to start (what books or websites)?

Thanks
More...

MP is as simple or complicated as you choose to make it.

Try this exercise for 1 week:

Set aside all the books and web-pages and other stuff your reading about MP. At this point there is so much conflicting information being pushed out on the subject, it will just confuse you.

Set up 5 charts on your screen, $INDU, YM, ES, NQ, ER2

Use 5 minute bars, Regular Trading Hours, with no indicators = NONE = blank charts with bars.

Each evening, go to the daily notes page and get the MP numbers posted there, make sure they are for the trading session that just ended (at the top of the table it says Date For --> today's date, also you can confirm the OHLC is for the day that just ended).

Plot the MP numbers as horizontal lines on each price chart, make the lines red for VAH, Blue for POC, and Green for VAL.

The next day, sit and watch in real-time how price reacts with respect to the lines on the chart. Note the relationship between the markets and their lines. Note where price opens with respect to the lines, and where does price trade to.

In doing this, you will see directly and in real-time how the profile is used by market participants. Your goal starting out is to understand how the profile affects trader expectations and behavior as these price levels are encountered in real-time. If you can reach this level of understanding and acceptance of MP, then you will be ahead of at least half of the traders using MP today.

From this level of understanding, you should be able to write out a couple of basic trading strategies that you can test out, if you so choose.

Saying this another way, reading a book and then sitting and watching the profile histogram develop during the trading session will be of little if any value to you in a practical sense.

The next level of your education in MP, will need to incorporate practical things like identifying the day type early in the trading session, trading off the IB, and trading off developing value.

Hope this helps you, and best of luck in your research and future trading.
 
I have never used MP, though have observed some others using it. IMO it is of more value to daytraders, as if one is using longer holding periods and works with daily charts upwards, it is pretty easy to see where major support/resistance levels are. Price & Oscillators provide direction/patterns, so for swing/positional trading so called KISS is sufficient and MP is not necessary.
 
Quote from Mom0/pH0x:

indeed, those who should employ the ''KISS'' method are denoted in the acronym...those of us to whom that dosent apply are best to apply our intellectual resources...
More...

Perhaps those who employ the KISS method have already applied their intellectual resources and taken occam's razor to that hairy problem
 
Quote from Mom0/pH0x:

this post is a testament to the fact that ths discussion has digressed into rhetoric...anyhow, im fond of market profile, and i disagree with the assertion that it is only useful to daytraders, because you can change the settings of the tpo/volume display to whatever you like, IOW, if ur a position trader, each TPO can be 1-2 days, or 1-2 hrs, as opposed to 15-30 min or whatever you like, and likewise for volume, it's still just a statistical representation of the price/volume....nothing about it ''works'' or dosen't, it's just information...like any other indication, the question is, can you find a way to make use of THIS information, and for me the answer is yes...
More...

If you were to look at an intraday chart alongside a weekly one, then S/R would be seen much more clearly on the weekly one, hence my opinion that it is not essential for longer term traders. I don't know why some people are so defensive when somebody voices individual opinion on a method used. Don't forget that I could have also said, that it is odd that people relying on MP miss the basics in chart reading. You use it, I don't. It doesn't matter unless you are a vendor. Merry Xmas!
 
Quote from TrendPro:

MP is as simple or complicated as you choose to make it.

Try this exercise for 1 week:

Set aside all the books and web-pages and other stuff your reading about MP. At this point there is so much conflicting information being pushed out on the subject, it will just confuse you.

Set up 5 charts on your screen, $INDU, YM, ES, NQ, ER2

Use 5 minute bars, Regular Trading Hours, with no indicators = NONE = blank charts with bars.

Each evening, go to the daily notes page and get the MP numbers posted there, make sure they are for the trading session that just ended (at the top of the table it says Date For --> today's date, also you can confirm the OHLC is for the day that just ended).

Plot the MP numbers as horizontal lines on each price chart, make the lines red for VAH, Blue for POC, and Green for VAL.

The next day, sit and watch in real-time how price reacts with respect to the lines on the chart. Note the relationship between the markets and their lines. Note where price opens with respect to the lines, and where does price trade to.

In doing this, you will see directly and in real-time how the profile is used by market participants. Your goal starting out is to understand how the profile affects trader expectations and behavior as these price levels are encountered in real-time. If you can reach this level of understanding and acceptance of MP, then you will be ahead of at least half of the traders using MP today.

From this level of understanding, you should be able to write out a couple of basic trading strategies that you can test out, if you so choose.

Saying this another way, reading a book and then sitting and watching the profile histogram develop during the trading session will be of little if any value to you in a practical sense.

The next level of your education in MP, will need to incorporate practical things like identifying the day type early in the trading session, trading off the IB, and trading off developing value.

Hope this helps you, and best of luck in your research and future trading.
More...

Quote from bumblebuzzard:

I've studied MP quite a bit. Even went to Chicago for some seminars with Steidlmayer a number of years ago. Based on all that, I would recommend starting with the Dalton, Jones, and Dalton book "Mind Over Markets." I actually don't know of any other book on MP that's much good, though the stuff on the CBOT website is a help (or used to be -- I haven't looked lately).

I used to create profiles by hand from 30 minute bar charts. It was a very good way to develop a feel for the markets from the MP perspective. At any rate, it's a way to get started.

MP was developed as a short term trading tool. Later it was extended to longer time frames; but as far as I've ever been able to figure, it isn't really very useful beyond the day frame. Nor do the various efforts to improve it, as, for example, by adding volume and Cti considerations, really make much difference.

Steidlmayer himself has worked on improving the basic idea for years. His Capflow software embodies his recent thinking; though, again, for me there is little or no advantage.

I think the Market Profile is best viewed as a qualitative tool. With a lot of experience, it really does help develop an intuitive sense of what is going on in the day timeframe and how the day is likely to develop. It does not give signals or appeal much to a "what is the signal" approach. To see its power you have to immerse yourself in it on a real time basis.

Here are a some websites:

http://www.profiletrading.com/
http://www.steidlmayer.com/
http://www.windotrader.com/
More...

It happens not too often to read posts like these. Thank you guys.
I have used MP the same way for just one year as a kind of supplement (use bar charts and p&f too). And I think it is very heplful to plot your own MP chart down during the trading session. I read "Mind over Market" two times, not because I am a fan of this book, but because the concept was not so easy to grasp for me.

Follow the advices of TrendPro and bumblebuzzard and you can gain a lot of insight in MP and in your trading.
 
Quote from romik:

If you were to look at an intraday chart alongside a weekly one, then S/R would be seen much more clearly on the weekly one, hence my opinion that it is not essential for longer term traders. I don't know why some people are so defensive when somebody voices individual opinion on a method used. Don't forget that I could have also said, that it is odd that people relying on MP miss the basics in chart reading. You use it, I don't. It doesn't matter unless you are a vendor. Merry Xmas!
More...
I'm trying to follow the discussion but am not sure if I understand your first statement. As the previous poster said, the MP display can show activity for a daily or hourly timeframe per TPO. Hence, when you make a composite that makes up a weekly chart, then your value area would be much different than the S/R as represented on a bar/candle chart. I look at composites and use them along with other MP methods of viewing information.

The key to understanding MP is to realize that it is just a tool to help you see where the market participants saw value for that session. It also helps you better visualize where the longer-term participant (other timeframe participant) is entering the market. Given this information, you can then have more conviction in your trades and a clearer understand of the "story" the market is trying to carry out. This means that you can now take the candlestick formations, indicator crosses or whatever you want to use for your triggers and take the trade with more confidence or to filter out the signals that are contrary to your MP assessment. You can do this on any time frame and in any market because the principles of auction markets are acting there too. Heck... this applies to the price eggnog at your local supermarket. When people see that it is priced below accepted value, then they would come in and buy more of it. MP is just a way to figure out what the accepted value area might be.

Nobody really "needs" MP. I don't use any indicators, averages or whatever on any of my charts. I find it takes me away from reading what price and volume is telling me in real time. Hence, I don't "need" indicators, but someone else might rely on them for triggers, etc and they might "need" them. These are all just tools and it is just a question of what you are comfortable with and what information appeals to you. Period. It doesn't go any deeper than that really.

Best wishes on a prosperous new year for all of you.
 
Quote from FuturesTrader71:

..............Nobody really "needs" MP. I don't use any indicators, averages or whatever on any of my charts. I find it takes me away from reading what price and volume is telling me in real time. Hence, I don't "need" indicators, but someone else might rely on them for triggers, etc and they might "need" them. These are all just tools and it is just a question of what you are comfortable with and what information appeals to you. Period. It doesn't go any deeper than that really....
More...

As a proponent of Volume Spread Analysis, It is nice to see you only look at price and volume. You did not mention spread (range of bar), so I am not sure if you use VSA in your trading.

There are really two key elements to reading the market (a chart):

1. An understanding of what the Professional, or Smart, money is doing and when. This is what VSA attempts, very successfully I might add, to track.

2. An understand of support and resistance. Market Profile does this better than most other techniques. Support and Resistance lines (areas) in MP are actual rather than inferred. That is, MP assumes that certain levels will be support or resistance because those levels were support or resistance. Traders tend to remember these levels , either consciously or subconsciously, and hence they are important. Floor "pivots" are inferred support or resistance. They are based on a simple equation using H-L-C (typically). In other words , these levels are not based on where the market did find support or resistance. True, they do work very well at times as there is the self fulfilling element at play, but they start out as inferred and only after the market finds support/resistance at those levels do they become actual.

My point, MP allows the trader to have actual levels or price action/reaction, or support/resistance and this an essential element in analyzing the chart. Every trader needs to have some understanding of support and resistance. Market Profile is one of the best, if not the best, way of understanding support and resistance. By the transitive property, every trader needs Market Profile.
 
Please do not use market profile. It is the worst way to track support and resistance. Please do not study about auction market theory, it will not allow you to exploit the inefficiency of the "efficient" market. It will not help you to understand everything else better. All the terms and bathroom concepts will only overcomplicate the simple market. You cannot extract sensible trading methodology from the mess. It will not help you filter out trades as FT71 suggested since he doesn't know what he is talking about. Please stay the hell away. Thank you. :eek:
 
Quote from martys:

Please do not use market profile. It is the worst way to track support and resistance. Please do not study about auction market theory, it will not allow you to exploit the inefficiency of the "efficient" market. It will not help you to understand everything else better. All the terms and bathroom concepts will only overcomplicate the simple market. You cannot extract sensible trading methodology from the mess. It will not help you filter out trades as FT71 suggested since he doesn't know what he is talking about. Please stay the hell away. Thank you. :eek:
More...
Martys.... you crazy boy!!! :D
 
You must log in or register to reply here.
Back
Top