Why is 'market profile' only used for futures?

[narafa]

What you are referring to is Volume Profile and the segmentation of it through time. It is the offspring of the original market profiling technique developed by Peter Steidlmayer.

Market profiling developed by Pete Steidlmayer initially started with him simply marking the vertical range of price separated in 30 minute segments, creating the horizontal histogram formatting that is now synonymous with MP and VP visual. That's all, no volume. As he refined his method he added volume (but in the pit in the beginning it was not possible) and as we all know, his method of viewing market data was eventually packaged and marketed with volume data from the CBOT's LDB.

Over time he eventually left the 30 minute segmentation restrictiveness and desired to view the market more as the dynamic entity it is retaining the TPO (Time Price Opportunity) concept but dropping the time segmentation, leading to his latter work exhibited in the image below.

View attachment 239867

Till this day I have never found any software that can build profiles not based on a fixed time or volume segmentation.

This is the most accurate post in this thread.

Till this day I have never found any software that can build profiles not based on a fixed time or volume segmentation.

And I don't think there is one anyway. In order to build profiles (The standard bell shape activity throughout the trading session) without fixed time or volume segmentation would be like asking for a software which predicts future activity of the market as it knows when to smartly move horizontally in time based on no particular pattern except that it's trying to draw a perfect bell shape profile.

I thought of this a while back but didn't have enough time to experiment it. A smart software can (in theory) give out potential scenarios of how the day activity (profile) would look like (after a pre-defined period of time from the trading session start). It can go further in assigning probabilities for each scenario as well.

But still even if this exists (or developed), I would doubt the forecasting ability as the day can develop into any profile shape (Not restricted to the perfect bell-shape).

 

[SanMiguel]

And isn't that virtually the same as "number of contracts traded"? The more time price spends at one level, the more contracts get traded there.

And therefore remains the price point that the market participants most agree on

This is the most accurate post in this thread.

It's because he spent all afternoon on Google

 

[Scataphagos]

It's because he spent all afternoon on Google

That's 1.

 

[They]

It's because he spent all afternoon on Google

Its because I have wasted way to much time down the MP and VP rabbit hole.

 

[SanMiguel]

What you are referring to is Volume Profile and the segmentation of it through time. It is the offspring of the original market profiling technique developed by Peter Steidlmayer.

Market profiling developed by Pete Steidlmayer initially started with him simply marking the vertical range of price separated in 30 minute segments, creating the horizontal histogram formatting that is now synonymous with MP and VP visual. That's all, no volume. As he refined his method he added volume (but in the pit in the beginning it was not possible) and as we all know, his method of viewing market data was eventually packaged and marketed with volume data from the CBOT's LDB.

Over time he eventually left the 30 minute segmentation restrictiveness and desired to view the market more as the dynamic entity it is retaining the TPO (Time Price Opportunity) concept but dropping the time segmentation, leading to his latter work exhibited in the image below.

View attachment 239867

Till this day I have never found any software that can build profiles not based on a fixed time or volume segmentation.

Investor RT, Sierra chart?
What else would you build them on?
You mean you couldn't select anything other than 30mins?

 

[SanMiguel]

Its because I have wasted way to much time down the MP and VP rabbit hole.

True dat.
Although I see some use in it, the software and data fees always seemed to outweigh to the negative side

 

[volpri]

And therefore remains the price point that the market participants most agree on

It's because he spent all afternoon on Google

ROFLMAO

 

[SanMiguel]

ROFLMAO

POC
GFYR

 

[Jonathan Weissberg]

My colleague, John Thorpe, started on the floor of the CBOT, he had this to share:
Market Profile was created by a Grain Floor Trader to identify visually the same emotion he could hear in the Trading Pits on the computer screen. When the market was quiet, prices drifted, when the market participants were screaming, yelling and red-faced as they were bidding up or offering down the market, the price action was clearly driven by volume.

Forex doesn’t post volume,

In futures you can trade the short side with equal vigor.

In Equities you can not easily trade both sides of the market to initiate a position.


You need a two sided market with volume to use Market Profile.

Thank you for sharing this.

A few follow up questions to you or anyone else here:

Given this view of what market profile is for, what is it that is added visually that allows one to identify strong intent or directional volume (which is how I interpret "emotion"), as compared to a simply price chart or ladder?

If the purpose is simply to identify intent, why does it matter then whether something is more difficult to short? Intent exists regardless.

 

[Jonathan Weissberg]

It's some measure of the number of shares/contracts traded... with the implied "wisdom" that there is some value in knowing whether the number is high or low.

You're right that it's on whoever is making the claim to prove that there's value in observing volumes. There's no wisdom in volume itself, but there is information contained in volume relative to other volumes or your own trading approach that you can learn use.

I can think of a few values gained from being aware of volume:
(1) approximate knowledge of how much size you can put on & take off given your particular time-frame.
(2) awareness of when to observe the DOM (if daytrading), e.g., if the market is in a 'relatively low volume' period, it's much more difficult to identify any participant intent. You can verify this for yourself by simply observing 'dead' stocks vs. stocks with a catalyst and see what you notice on the ladder.
(3) It tells you about interest in the product and who is interested. E.g., in a product that's active and popular among retail traders, large size sweeping as market nears a level means there's 'technical-style' participants interested in the product vs. 'relatively lower size' and incremental moves towards the level (which may still signify a move beyond the 'level' but less of a chance a 'technical-style' break with stop outs).
(4) does provide an indication of someone who is potentially trapped, e.g., large one-sided volume hitting in at a given point and then we get back to that point. Potentially trapped. The key here is 'context.' Are you trading a heavily spread product or one where volume is dispersed across multiple venues? If so, then there's less information contained in this. Are you trading a product with 'relatively' low volumes generally and with no particular reason to expect large directional flow? Same applies.

All these could be verified by sitting in-front of a DOM and watching anything being actively traded around specific news event, large technical level breaks that attract new kinds of participants, or just heavily retail-traded products.