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 Source: Market Profile Basics; by Jayanthi Gapa;akrishman http://www.earnforex.com/forex-e-books/forex-market/Market_Profile_Basics.pdf

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

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

Market Profile Rules Volume is key Volume dries up Volume stays strong 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

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

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

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