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Trade School: market profile basics

Trade School: market profile basics. Nick Fosco September 11, 2010. Market Profile History. Developer: J. Peter Steidlmayer CBOT Traders for over 40 yrs Developed in the 1981 - 1983 Graphical organization of price and time Mostly used for intra-day trading.

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Trade School: market profile basics

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  1. Trade School: market profile basics Nick Fosco September 11, 2010

  2. Market Profile History • Developer: J. Peter Steidlmayer • CBOT Traders for over 40 yrs • Developed in the 1981 - 1983 • Graphical organization of price and time • Mostly used for intra-day trading Source: Market Profile Basics; by JayanthiGapa;akrishman http://www.earnforex.com/forex-e-books/forex-market/Market_Profile_Basics.pdf

  3. Market Profile Fundamentals • Is not an indicator • Does not provide buy/sell signals • Is a decision-support tool • Organizes data to allow for understanding of Market control • Provides understanding of fair value • Identifies direction of price move • Trade positioning • Market Profile data allows for advantageous trade positioning

  4. Market Profile Theory • Concept: Market’s daily organization determined by Time, Price and Volume. • Based on normal distribution curve • Value Area: Range of daily prices where 70% of trades take place (one standard deviation) • Market are normally skewed • It is rare to see market prices follow into a normal distribution curve

  5. Market Profile Rules • Volume is key • Look for volume action away from value area • Volume dries up • Sellers not happy with price change • Prices will most likely revert to value area • Volume stays strong • New price point is being accepted • Will most likely form new value area

  6. Generation The Market Profile • Time Price Opportunities (Tpos) • Represented by letters • Each letter is 30 minute period • Initial Balance • Price Range during first trading hour (Tpos A & B) • Price exploration period • Point of Control • Price with largest amount of Tpos

  7. Market Profile Types Normal Variation - Early trading activity (D) followed by range extension buying. • Trend Day • Prices constantly moving directionally • No interest in price reversal • Double Distribution Day • Original price value was found to be unfair

  8. Think or Swim • Active Trader • TOS has very similar profile that is located under the Active Trader tab • Let’s go to TOS platform for details

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