Market Profile - Traders Meetup | Traders helping...

24
Market Profile from Theory to Practice Gonzalo Peres April 17, 2019

Transcript of Market Profile - Traders Meetup | Traders helping...

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Market Profilefrom Theory to Practice

Gonzalo PeresApril 17, 2019

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Disclaimer: Neither TradersMeetup.net nor its organizers, hosts or presenters are licensed financial advisors, registered investment advisors, registered broker-dealer nor FINRA | SIPC | NFA-member firm. In accordance to the policies of TradersMeetup.net, this presentation does not provide investment or financial advice or make investment recommendations. TradersMeetup.net is not in the business of transacting trades, nor does TradersMeetup.net agree to direct your brokerage accounts or give trading advice tailored to your particular situation. The content of today’s presentation does not constitutes a solicitation, recommendation, promotion or endorsement of any particular security, other investment product, transaction or investment.

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

All rights reserved. This Material may not be reproduced or distributed, in whole or in part, any other reproduction in whatever form and by whatever media, is expressly prohibited without the prior written consent of TradersMeetup.

No Soliciting. No Recording. No Photography.

Disclaimer

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Today’s Agenda

● Theory and Definitions● Standard Deviations● Single and Multiple Distribution Areas● Balanced vs. Unbalanced Markets● Time Profile vs. Volume Profiles● Compound and Consolidated Profiles● Areas of Acceptance and Rejection● Value Areas ● Points of Overlap● Rules and Patterns● Skew and Kurtosis● Examples and References

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Market Profile is endorsed by the CME (Chicago Mercantile Exchange), and is based on the laws of statistics, and is the best way to frame the market activity.

Early complaints that Market Profile was too complicated, suitable only for large institutions and it took too long to understand and to master it. Today, rules and trading strategies have been developed within the trading community over the last 25 years, which simplifies its use, and eliminates noise to current trading methods.

Market Profile History

Peter Steidlmayer joined the CBOT (Chicago Board of Trade) in 1963, as an independent trader.

Peter served on the board of directors of the CBOT from 1981 to 1983. While a director, he created a revolutionary concept in data arrangement and trading information: Market Profile and Liquidity Data Bank.

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Market Profile is not a trading system, and it will not give the trader a buy, sell, entry, exit, overbought or oversold indicator. Market Profile is a approach, a methodology that provides traders the ability to identify the market's underlying dynamics and structure. Aiding traders to initiate, manage and exit trades accordingly.

Market Profile definition:

• A structure for organizing a developing market• A horizontal and vertical display of the dynamic

process of the market activity• A visual display of the market’s “fair value”• A graphic reflection of all market participant bias

Price vs. Time vs. Volume

Market Profile Principal

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Volume

Time

Price

Components

PRICE: Is simply the auction means of advertising opportunity. It is the most volatile variable and the fastest moving market element

TIME: Regulates each opportunity. It is the constant around which all the auction data is organized

VOLUME: Measures the success or failure of each auction high/low. Volume is also a variable, but it changes much more gradually than price, an it represents the interaction of players.

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Standard Deviation (Normal Distribution / Gaussian Distribution)

Standard Deviation measures the distribution of a set of data from its average. The more spread apart the data, the higher the deviation.

Standard deviation is also known as ‘Historical Volatility’ and is used by investors as a measure for the amount of expected volatility (Implied Volatility). In statistics and probability theory, the standard deviation shows how much variationor dispersion from the mean.

Carl Friedrich Gauss a19th century mathematician inventor of the Gaussian Distribution

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Market Phases

Accumulation(Oversold)

Distribution(Overbought)

Re-distribution

Re-accumulation

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Single Structure (Balanced Market)

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Return to the Mean

1 STD (68%)

2 STD (95%)

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Seve

ral A

reas

of D

istr

ibut

ion

Price Levels

Acceptance Area

Rejection Area

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Seve

ral A

reas

of D

istr

ibut

ion

Support and Resistance

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Volume Profile vs. Time Profile (Price x Volume) (Price x Time)

VPOC TPOC(Volume Point of Control) (Time Point of Control)

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Compound Profile(Volume Profile + Time Profile)

------------------------ Asia and Europe ---------------------- ------------- USA ------------

OTH (Overnight Trading Hours) RTH (Regular Trading Hours)

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POC Re-Test

---------------- Asia and Europe ---------------- -------------------- USA -------------------

POC Area(Point of Control)

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Scenario #1

When the market opens above/below the Value Area, and is able to hold outside, it is a strong bullish/bearish signal.

Scenario #2 (80% Rule)

When the market opens above/below the VA and it begins to trade for two consecutive 30 min bars inside VA, there is a strong tendency to fulfill the VA

Scenario #3

When the market opens inside the VA, it is showing signs of a balanced market

Value Area Rules

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VAH (Value Area High) & VAL (Value Area Low)

Resistance

Support

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Value Area Overlap(yesterday into today)

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VPOC Overlap(yesterday into today)

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Consolidated Profile(Weekly Profile)

Mon Tue Wed Thr FriTue Wed Thr Fri

● Weekly● Monthly

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B & P Patterns(Dovish Bias)

bbCombine...

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B & P Patterns(Hawkish Bias)

pCombine…

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References

NOTE: These are not investment recommendations sources,but rather source of reference for you to check

James Daltonwww.jdaltontrading.com

Charles Cochranwww.cnfuturestrading.com

ShadowTraderwww.shadowtrader.net

CME Groupwww.cmegroup.com

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Thank You!

Contact Info:

Gonzalo Peres

[email protected]