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Is it really this simple?


Below, the contents of a MP strategy primer I happened upon somewhere. Its techniques seem intuitively sound -- conventional wisdom, perhaps? -- but I lack the sophistication and depth-of-knowledge in MP to be certain. Thoughts from those with some experience welcomed! Anyone?


(Category 1)
Trading Methods For Market Profile

Only trade in the direction of the trend (Trend is determined by a rising or falling Point Of Control/POC)


Trade setup #1a: In a down trending market, when the current session opens below the previous day’s Value Area/VA enter a short trade at the previous day’s lower VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points above the previous day’s upper VA.

Trade setup #1b: In an up trending market, when the current session opens above the previous day’s VA enter a long trade at the previous day’s upper VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points below the previous day’s lower VA

Trade setup #2a: In a down trending market, when the current session opens within the previous VA enter a short trade at the upper VA placing a stop 1.5 points above the Day Before Yesterday’s/DBY POC or High Volume Level/HVL (the open price must be at least 2 points below the previous days upper VA)

Trade setup #2b: In an up trending market, when the current session opens within the previous days VA enter a long trade at the lower VA placing a stop 1.5 points below the DBY’s POC/HVL (the open price must be at least 2 points above the previous days lower VA)

Trade setup #3a: In a down trending market, when the current session opens above the previous days upper VA and below the DBY’s lower VA enter a short trade at the DBY’s lower VA and again at the DBY’s HVL placing a stop for both trades 1.5 points above the DBY’s upper VA (if stopped out on this setup and price remains above the stop level, change directional bias for all category 2 trade setups for the remainder of the day)

Trade setup #3b: In an up trending market, when the current session opens below the previous days lower VA and above the DBY’s upper VA enter a long trade at the DBY’s upper VA and again at the DBY’s HVL placing a stop for both trades 1.5 points below the DBY’s lower VA (if stopped out on this setup and price remains below the stop level, change directional bias for all category 2 trade setups for the
remainder of the day)

Trade setup #4a: In a down trending market, when the current session opens above the DBY’s lower VA and below the DBY’s POC enter a short trade at the DBY’s POC and again at the DBY’s upper VA placing a stop 1.5 points abve the DBY’s High Of the Day/HOD (if stopped out on this setup and price remains above the stop level, change directional bias for all category 2 trade setups for the remainder of the day)
Trade setup #4b: In an up trending market, when the current session opens below the DBY’s upper VA and above the DBY’s POC enter a long trade at the DBY’s POC and again at the DBY’s lower VA placing a stop 1.5 points below the DBY’s Low Of the Day/LOD (if stopped out on this setup and price remains below the stop level, change directional bias for all category 2 trade setups for the remainder of the day)


Profit targets for all trades should be in consideration of the risk of each respective trade and should be placed in consideration of the previous days POC, VA or HVL




(Category 2)
Trading Methods For Market Profile

Category 2 trades are based off the current sessions VA, HVL and POC with profit targets of approximately 2 points (they will generally setup after steps 1 and 2 have occurred in the market profile’s development)

When a Category 2 trade’s entrance level matches up with a previous days HVL It is referred to as a Category 2+ trade (category 2+ trades are generally good for 3 or more points)

Step 1 being vertical movement of price and step 2 being the capping of step 1

Step 1 will generally takes place during the Initial Balance/IB period of the day (the first 60 minutes) Step 2 often occurs during the IB period as well

Step 3 is when the market begins to move more in a horizontal direction than vertical direction and the bell curve begins to take shape

Step 4 is when the bell curve is becoming fully developed and its POC tries to drift towards the center of the IB, if it is not already in the center (occasionally steps 3 or 4 do not fully develop and the market enters step 1 again, this is known as minus development)

Minus development is very helpful in showing the direction of the market

I shall repeat Pete's own words "Using Sound Market Logic RATHER than following formulae by rote OR automatically accepting the conclusions of others....You can't respond mechanically & expect to succeed on a regular basis" (My emphasis)...In other words whilst you might be able to bat the standad probabilities in the short run, the odds in favour of that happening in the long run are infinitesimal.....By developing a LOGICAL APPROACH it is possible to identify parameters that work 60 time out of 100 - sometimes 90 out of 100....The key is thinking about the CONDITIONS in which they succeeed....
Yes many people want preset formulae to establish a rule based trade. A bit like if the 5 minute, 15 minute and 60 minute are making higher lows and higher highs AND the price is not too far extended from the moving averages AND the MACD is hooking backup then Buy. Firstly this type of formulae takes no account of relative position in the market placec & is a lagging indicator. MP does have set rules some of which you have found but remember that as everyone uses the power of computers to scan for seasonal/probablility trades so therein lies the problem and the liquidity mirage that by necessity unfolds. PS (additionally and lastly) consider why when reports come and your machine freezes up. It has nothing to do with your memory per see but does have to do with your brokers band width...just as not all prices are equal (nor timeframes) so not all brokers are equal (consider all the so called auto traders turning off and then on their formulae - a bit like the electricity power surge experienced at TV peak viewing times when the adverts come on).
Flexibility and ability to adjust is the key and will become much more apparent as markets speed up further both in terms of numbers of trades and volumes and other influences and I fully anticipate that those who have the MP knowledge will succeed

My anthem Alleyb. Thank you! I believe every word of this. There are no shortcuts, except for the ultimate shortcut, which is an understanding of one's craft so profound that the matters of execution are an afterthought. I don't hear this from many (any?) of the trading gurus out there, but it is true of every other creative endeavor. Why should trading be different?
I have been trading for around 6months now, came in knowing to stick with the trend and it has been kind to me, well up until lately. Keep the comments and theories coming, very helpful for someone like myself with limited experience in futures. Thanks,
Trader Guy
Keep reading and studying everything related to the type of trading that you are doing. Remember that some of the stuff that you read will be 100% wrong - even in the respected texts.

What is valuable information for you may not be great information for another person. Each person is unique and the way that you absorb information and process it to enhance your profits in the market will reflect different results to the next person. (As in any industry or field of study.)

Bob Rotella in his book Golf is not a Game of Perfect talks about a famous golfer (I don't recall his name) going to a coach and listening to the coach's advice. He would sift through all the information that the coach would give him and usually find 1 out of 10 of the things that the coach said that he could relate to and found was of use in his game. So this is 10% of all the incoming information that he personally could use.

Finding and processing information about trading is the same. Read through the articles and just try and pick out 1 or 2 simple ideas out of each one that might help you on this journey.

Good luck and keep us posted on your progress.
I think trading the stock index futures is one of the most rewarding and toughest things. Few logic in intraday ES moves for example. It cannot be traded using typical candelstick, patterns, indicator methods. Only pretested strategies may be profitable on this symbols. Don't say it's impossible to trade it discretionnarily, just say there will a great part of chance.