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Market Profile is a registered trademark of the Chicago Board of Trade 2003 - ALL RIGHTS RESERVED
The following information is offered as an abridged edition of the Market Profile Basic Users Guide available through the WINdoTRADEr website at: www.windotrader.com WindoTrader Corporation thanks the Chicago Board of Trade for its support in creating the Market Profile Basic Users Guide.
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Direction
Understanding the market's CURRENT directional bias and STRENGTH of that bias. Auctions up until buying is exhausted. Auctions down until selling is exhausted.
Direction
Initial Balance
Range established during the first two periods of trade. Above average Initial Balance range projects potential trading range session. Below average Initial Balance range projects potential trending session.
Initial Balance
Point of Control
Point of Control Longest line of letters (TPOs) or most common price. Highlights area of highest market activity during current trading session.
Point of Control
Range Extension
Price trading beyond initial balance high and / or low. No range extension usually means the short-term trader is in control of the market. Range extension usually means longer-term trader in control of the market.
Range Extension
Single Prints
Trading Range
A narrow range of prices that persists through time. Initial balance range usually greater than average. Confirmed balance edges create risk and opportunity. A trading range is defined by traders timeframe.
Trading Range
Trends
A market moving with clear, sustained direction. Divergence of price away from value. Trends are defined by the traders timeframe.
Trends
Trends (cont.)
A trending market moves directionally until it finds value or a fair price and trade is shut-off by an opposite response. Trends are usually telegraphed by a narrow Initial Balance or news. Trade location is usually secondary to trade execution. Monitoring Value Area changes is key to trading trends.
Value
Value is identified by price acceptance, i.e., a price zone where the market trades over time. Unfair or rejected price is where market spent minimal time trading, i.e., tails / single prints. Price x Time = Value !
Value Area
The value area is that area / zone where approximately 70% (1 standard deviation) of the sessions volume was recorded. The value area - where two-sided trade primarily occurred. A key measure of overall current market activity. Value area range is one key to trading range activity or trending activity.
Value Area
Volume
A primary measure of the overall quality of the current market activity. Reading volume through volume relationships, i.e., greater than, less than, or equal to previous volumes. Convergence versus divergence relationships between price and volume.
Volume (cont)
High volume areas tend to attract market activity. Low volume areas tend to reject market activity. Volume is best interpreted over time and in relation to average volume.
Low Volume
High Volume
Windotrader Corporation, again, thanks the Chicago Board of Trade for its support in creating both editions of the Market Profile Basic Users Guide.
To view the unabridged version and attend a narrated presentation of the Market Profile Basic Users Guide, please go to: www.windotrader.com