Welcome to your journey of becoming a professional trader.
Market profile is a recent buzz in India, but it is widely popular in other countries. Especially USA. What is MARKET PROFILE . Why suddenly the seriousness of MP is widely spreading ?., Well to answer the above question you should first try to understand what is MP.
Market profile is a charting system developed by Jim Dalton a famous trader of all time. His concept was based on Wyckoff principle of Auction Market Theory .
To know more about Auction Market Theory (AMT) watch my video in youtube.
Well in a layman terms, Market profile is a charting system or a profiling tool which help us identify important trade locations where the market has failed or the market has taken support.
What more than a support and resistance will help us to trade ? every tick price in the market is ticked up or ticked down due to support and resistance.
Market profile will address almost all the questions below.
- Who is in control of the market Sellers or Buyers ?
- Where are long term Buyers and Sellers ?
- Where are the institutional traders ?
- What are the potential trade path tomorrow, next week, next month, next year ?
- How long should I stay in the trade ?
- Where should I Buy and where should I Sell ?
- How to manage the risk ?
LAYOUT OF MARKET PROFILE
The above is a typical market profile chart of each day in a NIFTY. The chart does not have candles, instead it has letters to represent the trade happened @every 30 mins. For example letter A denotes the first 30 mins of trading followed by B to M.
Why this kind of charting is useful ?
If you observe the chart says, where the price traded for more time, in which price traded spent more time. We need the price which is acceptable by the market. once we know the following
- Most acceptable price in time.
- Most rejected price in time.
- Most traded price in volume.
- Less traded price in volume.
we can easily predict where are real buyers and sellers. TIME and VOLUME place a very important role in MP.
KEY TERMS USED:
1) OPENING : The letter O denotes the opening of the day
2) POC : The Green line denots the POC. The most traded price in time.
The region in between red and blue lines are Value area : Value area is a region where the price has traded for 70% of the time. This value area can be plotted for volume also.
3) VAH : The Red line is Value Area High, which denotes highest price in value area
4) VAL : The blue line is the Value area Low, which denotes lowest price in value area
5) The blue long vertical line, or the combination if blue and red line on the next day, is the Initial Balance (IB). It is devised that the market take one hours to balance. So the range covered by the character A and B will be the Initial Balance.
There are many other nuances, in the Market profile. I would suggest the readers of this post to watch my daily analysis on stock and make a note of each theory I am explaining. Once you get in hand with MP, within a matter of months your though process will get tuned to Market profile chart.
Believe me the way you think and trade after learning the Market profile will change drastically. Hope the above post help you to keep up with my analysis.
Any further doubts you can ping me in Discord(preferably) and Facebook.
DISCORD : https://discord.gg/mct6aXj
FACEBOOK : https://www.facebook.com/groups/159950008043049/