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MP and Volume Profile Questions


This is for me and any other folks who desire a better understanding and interpretation/reading of Market Profile and Volume Profile. Obviously, Bruce, Lorn and some others can probably address this best.

Many posts show the prior day's MP/VolProfile with the VAH/VAL and POC as a chart. Lorn regularly posts the "overnight" ES chart, typically coming into the RTH session.

I'll focus on just Volume Profile at this point. What are folks looking at for the VP ... the prior day's RTH session, with its VAH/VAL and POC? Or are folks incorporating the Overnight session (like Lorn posts) seperately ... or is it "better" to chart the prior day with the overnight, showing a "cumulative" picture coming into the current trading session?

Also, there are times when a post will describe the "meshing" of the past two day's VP activity ... and are folks just looking at HV and LV nodes? In addition, won't there be VAH/VAL and POC levels that are different from just the prior day?

Then there's the unfolding session where the VP (or MP) is being "built" in real time beginning with the RTH session. I think you've done a video on the current session unfolding, Bruce.

What is the arrangement of significance from the different mappings I've listed above (and others) that carries the most weight typically in analysis?

Been thru Dalton's stuff lightly and also Volume Profile analysis. But I'm looking for how one would decide to rank the HV and LV nodes, along with VAH and VAL along with POC. Charts will show variations based on what data is used. Fill me and others in if you will Bruce ... or Lorn ... or anyone who has been following the daily ES MP/VolProf analysis.

Hope this questioning makes sense. It'd be useful for me and hopefully others to better set up our software to track and watch what is being incorporated into the analysis for the posts.

MM
Great topic MM. I think/hope we can get some good ideas flowing on this topic.


I'll focus on just Volume Profile at this point. What are folks looking at for the VP ... the prior day's RTH session, with its VAH/VAL and POC? Or are folks incorporating the Overnight session (like Lorn posts) seperately ... or is it "better" to chart the prior day with the overnight, showing a "cumulative" picture coming into the current trading session?


I know this will sound simple and I mean no disrespect to anyone but its useful to think on the basics first.


Within the VP there are individual prices and groups of prices that show lots of volume. What does this mean exactly? It shows a price or price zone where both the buyer and the seller are willing to trade with one another.

Now what about a price or price zone that shows low volume? This is showing us an area where the buyer and seller didn't agree on trade.

Ok. That is just a concept, an idea. It doesn't help much with a trade setup. However, take some time to really contemplate the meaning of those two types of zones.

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To answer some of your specific questions MM. I like to look at the O/N vprofile separately from the RTH profile to get price zones for the RTH session. However, I combine the two profiles as well throughout the RTH session. I've always done that, whether it actually helps me is debatable. The important thing for the trader is to be consistent with whatever strategy being used.

I use the POC as a specific price level to watch. The actual VAH/VAL numbers are not important to me, however the whole value zone is important to me in terms of if current prices are moving away from that area or not, indicating to me whether buyers or sellers are in control, ie. moving up and away from value area equals buyers in control, moving down and away from value area equals sellers in control.

I also like to compare VP to MP as it gives a contrasting view to the shape of time and the shape of volume. If the time POC is on one side of the profile and the VPOC is on the other side this is important information.

As an example. Today 6-8 at 8:53 the current O/N POC sits at 1282.75 while the current VPOC sits at 1279. There was an extreme 1-min volume spike of 9k+ contracts between 1278.25-1276.75 which sits right on the O/N low so far. At this point I must read that as buying support until the current O/N low is broken.

Hope that makes sense.
Lorn,

when you refer to the value areas, are you referring to VAs produced by market profile or volume profile?

and how do you (if you do) interpret P shaped days versus b shaped days?
Lorn, you just posted a chart (time just after 11, this morning, 6-8-11.

On that MO chart, outline of 6/7 was P shaped. Prices went down at least overnight
Hey Paul,

I use the value area from MP rather then VP when using for reference. The time aspect just seems in my mind to be more significant when taking an area into account. Let me make it clear that I think an area is something different from a zone, where zones, in my book are price junctures of a point or less with a volume reference. Whereas the area is a large range where price spent time in.

That's just what makes sense to me.

The P and b patterns aren't something I pay much attention to. I know those patterns are suppose to suggest either short covering (p) or long liquidation (b).

Take yesterdays p shape...the days range was below the average 5-day range and the close finished at the low end of the range. So maybe Dalton is correct when saying after a p shape we usually get a back fill to smooth out the profile, (which is what is happening currently today, lol!) but I don't make any trade decisions on this.
thanks, that makes a lot of sense.

I bought 2 of Dalton's books. My biggest problem is wading through all the adverse excursion.
Yea...I totally agree.

Originally posted by PAUL9


My biggest problem is wading through all the adverse excursion.
I think most of my comments will match Lorns. I also donot use the Value areas from volume. I find the 4PM est. close messes things up so I also like time better. For the current day session I will watch the developing time profile when I happen to have my MP charts open but I think it is sufficent to watch the clusters of the 30 minute bars and the volume profile....just looking for where the big volume is taking place and where has price spent the most time at. We always want to try and fiqure out if price will be pulled back to value ( Volume) or will price be the leader and volume be allowed to catch up to price.

For the Overnight I just use the big volume areas and the low volume areas as long as they match up with something else from some other day session data. It doesnot have to be the immediate session prior. I donot keep track of where the value area highs and lows are from the Overnight session. That is irrelevant to me.

If I had to rank anything then the ranges would be most important as they are the most obvious for people to key off of. The next concept to that would be the concept of volume as an attractor. This gets a bit confusing but we have high volume areas that get created by time and high volume that gets created by big traders entering and exiting the market. Price becomes attracted back to both types of volume and often you will see time catch up with volume spikes. Draging price over the same basic area.

Today is a great example as we had the biggest volume spike at a price of 1283.25 prior to the 2 pm reports. This volume happened on the 3rd one minute bar of the day session. Next what happens is that price is unable to break away from that price with conviction. So the market trades on both sides of that price multiple times. The POC based on TIME eventually gets created in the same general area.

Now as another example you can see in the Overnight that there was a volume spike down in the 76 - 78 area. Lorn mentioned this in the day trading threads also. Not only was this an old POC from a prior real time session but we also went down to test this same area in the day session after the reports hit. Again we see volume get tested and we came back to the 82.50 and the 83.25 area.

Lorn likes to combine the Overnight data with the current developing day. I don't do this but can't make a good argument for not doing that. It's all a matter of preference.

I've spent tons of time "meshing" data together and profiles and I donot think it provides any real edge to me. We had low volume during yesterday afternoons selloff and putting today and yesterday may make for a good visual ( I posted "boobs and cleavage in the day trading threads) but it is not really needed....it also didn't fill in yet...overtime you will see these things without merging data. I exhausted my merged profile threads and beat those to death. I failed and was unable to really make those useful. The only time they may provide some value is if you have multiple days that overlap greatly. Like inside days, but do I need to merge profiles to see the extreme highs or lows ? No. If I keep accurate notes then do I need them to see what prices come up on the radar again and again ? No. Most times there is a reason those prices are attracting attention and often it will be previous swing lows/ highs off the monthly or weekly time frames. Prices we should know anyway.

Hope I didn't mess u up and get too sidetracked. Most times we are trying to fiqure out which volume we will get attracted back to for targets. Today I had 87.50 as a volume spike from Tuesday afternoon and then the Overnight high stopped there. As of this writing price has been unable to test that volume so it went lower, jerked around the 82 - 83 area and went for the volume at the other end of the range. Easy to see in hindsight but not always easy to utilize.
GREAT STUFF BRUCE and LORN!!! Much appreciated so I can tinker with my software and track what "data grouping(s)" to follow and look to for analysis along with other things I may be tracking. Hope this is as helpful to others here as it is to me especially since it helps put everyone on the same page as to what's being looked at for analysis during the daily ES threads/topics.

Any additional comments/questions from others here would be welcome and appreciated.

Thanks again guys!

MM
Thought just crossed my mind. Perhaps this could be a "sticky" or something where mypivots folks old and new could easily link to and know how to organize their data ... or at least better understand and appreciate what is a significant component of method/strategy/analysis that's employed and referenced on the daily ES gig.

DT ... whadda ya think ... what are the possibilities?
I agree MM - I've made this sticky.
Thank you so much!