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(This is in response to a request by leobust)

I think it is important to understand Market Profile's origins in order to fit it into today's markets.

MP was first developed by Steidlmayer for use in the pits. It was a relatively quick and easy way to organize the auction process by hand. Imagine standing on floor of the exchange and trying to make sense out of the chaos around you. By plotting the rotation of the ongoing auction, Steidlmayer found a way to do that very thing.

At that time, traders were supposed to settle up and turn in their trading cards every 30 minutes. So, it is not surprising, he used 30 minutes as the period of each bracket. And, compared to any other manual charting method used at that time, writing down a single letter during each 1/2 hour period was in fact an excellent form of "shorthand". Also, since real time volume was unavailable, at that time, he only had price to work with.

Consequently, you must give him a tremendous amount of credit to him for coming up with framework that is used today. However, you can also appreciate, we have vastly superior resources available to us, today, to understand and decode the auction process.

Those followers of Market Profile, who have not adapted MP to today's markets and information availability are doing themselves a huge disservice. For example, it is only in the last few years that real time volume is available. Since, MP tries to organize the auction process, what better information could we use than volume, to show us where real activity is taking place. i.e.-In a sideways market, you can see price TPO's build out; but volume TPO's don't.

And, until you can plot the actual movement of price against the rotation, it is very difficult to find what I call a "tradeable event". A "p" or "b" might signify an important situation, but actual price action will always tell you the truth.

Thanks Beyond. Thats very informative.
As a new student of MP, i'm probably just scratching the surface of the true potential of MP on enhancing trading setups.
Could you please show us an example/chart of how to follow MP on a 30 min chart and how to roughly calculate POC as the market unfolds and define area of single print?
quote:
Originally posted by ak1

Could you please show us an example/chart of how to follow MP on a 30 min chart and how to roughly calculate POC as the market unfolds and define area of single print?



Trading against single prints, is sort of, the opposite of what I was trying to show.

However, if you realize, single prints actually represent fade trades against a previous bracket(or brackets) top or bottoms; they could be identified using the information I suggest. I think you will find, when a single print trade is successful there will be a volume POC above or below the single print that acts as a target.

As to how to follow MP on a 30 min chart, I'm not sure I understand what you're asking.
Hi Beyond. Based on your experience, could you please share your thoughts on this "tradable" scenario?

Today after the FOMC announcement ES closed above the VA of the daily MP chart which is coincidentally also above the weekly VA. Some MP practitioners say that you can establish shorts in the next day open because there is a good chance that the price will "rotate" and will likely visit the previous day high volume POC.

I have a bit of a doubt about this "rule" as today is not an ordinary or "normal" day. Your thoughts?

If this was an ordinary day, do you use other market indicators or stats that will support your judgement where the market will likely to go just before you enter the trade?
Please tell us and show us more when you have a chance...I'm especially interested in Volume at the moment...

Thanks

Bruce
quote:
Originally posted by beyondMP


Those followers of Market Profile, who have not adapted MP to today's markets and information availability are doing themselves a huge disservice. For example, it is only in the last few years that real time volume is available. Since, MP tries to organize the auction process, what better information could we use than volume, to show us where real activity is taking place. i.e.-In a sideways market, you can see price TPO's build out; but volume TPO's don't.

And, until you can plot the actual movement of price against the rotation, it is very difficult to find what I call a "tradeable event". A "p" or "b" might signify an important situation, but actual price action will always tell you the truth.



quote:
Originally posted by leobust

Hi Beyond. Based on your experience, could you please share your thoughts on this "tradable" scenario?

Today after the FOMC announcement ES closed above the VA of the daily MP chart which is coincidentally also above the weekly VA. Some MP practitioners say that you can establish shorts in the next day open because there is a good chance that the price will "rotate" and will likely visit the previous day high volume POC.

I have a bit of a doubt about this "rule" as today is not an ordinary or "normal" day. Your thoughts?

If this was an ordinary day, do you use other market indicators or stats that will support your judgement where the market will likely to go just before you enter the trade?




First, Mp is not a trading system. I know there are those that would like you believe it is, but, it isn't. It is a way to organize price movement to show the auction process. As such, it is a tool you can use to make better judgements about your trading possibilities. I, personally, know traders that have designed trading strategies based solely on MP(well thought out and practical methods) who haven't made any money using them. Even, the so called, MP gurus out there today are making more money from selling their MP "trading systems" than from their actual trading....As the wise man said, "All that glitters is not gold."

As price, always has, a tendency to rotate-because that is how an auction operates, there is therefore a probability that the market will rotate to yesterday's POC. However, if you just took a short and waited for price to return to yesterday's POC you might need to have a very strong ability to withstand pain, as it might go against you by a wide margin and force you out. However, if waited to see how the process unfolded and then saw a reason that suggested price was on it way to yesterday's POC it might be more successful.

I will discuss the part about other stuff later as I am trying to give you answer before the market opens.....later!!
quote:
Originally posted by leobust

Hi Beyond. Based on your experience, could you please share your thoughts on this "tradable" scenario?

If this was an ordinary day, do you use other market indicators or stats that will support your judgement where the market will likely to go just before you enter the trade?



When I first read the second part of question, I thought it was actually a simple request. When I gave it some thought I realized it was actually quite complex. Let me elaborate. I need to answer the second part first.

"your judgement where the market will likely to go just before you enter the trade?"---There are 2 types of traders...Predictors and Followers.

Predictors try to predict (or guess) where the market will stop and where it will go. Their trading is filled with projections, previous levels and complex formations they take trades against. They get great satisfaction when they are right and think that they just missed something when they are wrong.

Followers watch the market and just try to follow the trend. They can use the same tools as the Predictors but they will always wait for the market to tell them when to enter and when to exit, instead of just taking a trade against some predetermined level. The Followers only get the satisfaction of making money when they are right and the realization that the market is always right when they lose.

I think it is important each of us figures out what type of trader they are....I am a Follower, which gets us back to the first part of your question. I watch for certain specific conditions relating to price and volume to occur before I enter a trade against a level.

I know this is a nebulous answer but I will discuss it later when I respond to BruceM as he brings up the subject of volume.

I am sure, there will be many differing opinions on what I have said here, but please keep all responses civil and respectful if you want this to continue.
beyondMP I look forward to your continued discussion on this subject. I look at all differing opinions. Sometimes you find an opinion that you can incorporate into your own trading plan. Sometimes its just a piece of an opinion that fits and other times there is no fit at all for various reasons. I for one welcome differing opinions!
quote:
Originally posted by VOwater

beyondMP I look forward to your continued discussion on this subject. I look at all differing opinions. Sometimes you find an opinion that you can incorporate into your own trading plan. Sometimes its just a piece of an opinion that fits and other times there is no fit at all for various reasons. I for one welcome differing opinions!



I, also, enjoy other's opinions. Some of my most important ideas have come from a spark ignited by some other trader's idea. I do not want to limit others from sharing and commenting. I, only, want to keep it a constructive, positive and respectful exchange. I hope my comments were not taken as an attempt to stifle other's comments; I apologize, if that's how I came across.
quote:
Originally posted by BruceM

Please tell us and show us more when you have a chance...I'm especially interested in Volume at the moment...

Thanks

Bruce



Volume is one of the factors of trading that most say is important but few have found a consistent and practical way to use.

When a trader says they use Volume, others nod their head in acknowledgment but do they really understand what is meant. There are many facets to Volume and unless a discussion is held to find out exactly what part of Volume someone is talkng about there is little information truly conveyed.

Traders use the term Volume to mean many different things. It can mean: total volume, the difference between volume of one period compared to that of another, total volume at a particular price level, total volume of a particular time period, the difference of volume on the bid as opposed to that on the ask, a particular fixed amount of volume the trader thinks is significant----and on and on and on.

So, it is important to know what aspect of Volume is referred to whenever the subject comes up. This is, also, important to such terms as Price Action that can mean different things to different traders.

This is the way I use Volume(unexplained version):
1. I first identify a price level that represents a high volume POC of a 30min. bracket
2. I then watch for a significant difference in the buying and selling volume of the period I'm using
3. I then take a trade in the direction of the difference making sure that there isn't another high volume POC to near that might limit my profit potential to an unacceptably low level
4. This is all done in relation to "The Fournier Effect" which helps explains the movement of price (this is an effect on price movement that can be thought of roughly as comparing to the Doppler effect on sound).

I am aware, that my explanation of the way I use Volume might raise more questions than it answers. For example, What is a significant difference?, What period are using?, What limits do you use for profit potential? The Fournier Effect, you got to be kidding??? But, as I consider this more of a general forum to promote thought and discussion I have done this on purpose.


I have added a screen shot of a trade from this morning. You can see the volume POC's formed. In the middle area the black arrow is pointing to the direction of the Fournier Effect and in the bottom pane the red arrow is pointing to the visual representation I use to identify a significant difference in buying and selling.

Click image for original size
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As to the first part of your questions, I observe the NPOC in relation to where price is currently. If going long, I look to see how and what kind of grouping is above, giving more importance to an area where there are 2 more NPOC's lurking;i.e.-bunched together.