Most of the trader’s base trade on the very similar systems and the result is that market makers can easily counter their positioning and catch their stop-loss orders, which then lead to poor trading results. In today’s market, it is not enough to learn systems, in this article, I will reveal how Market Profile improved my trading and tell you good tips that you can use in your trading.
What is Market Profile?
Market Profile is different from many other existing charting techniques. It is the result of an effort to meld the concept of value investing as expressed by Graham and Dodd, the bell curve from statistics, and the work of John Schultz’s minimum trend. Market Profile is technical information, but it is drawn from a different database than other forms of technical information. The Market Profile database is evolving real-time and reflects only what is happening on the trading floor. Market Profile tries to identify the underlying conditions of the current market movement. Not only does Market Profile communicate current price activity, but it also communicates whether a market activity is likely to continue or change. This is done by the way Market Profile captures the development of trading activity by fully utilizing the horizontal dimension. The power of market profile once is understood is enormous. Anyway, it takes a lot of practice and time spent on the chart by doing observation and trying to understand the present market profile structure.
Disinformation’s about Market Profile
– Market profile is not valid for decentralized markets
This is very untrue and by very nature market profile can be used in any liquid financial market and we are using it with good success in all markets: Forex, Stock, Commodities, and Futures.
– You can’t rely on market profile and you must combine with the regular chart.
Another big disinformation. You can absolutely trade only using a market profile since you got all pieces of information that bar chart has plus much more like where is the Value, Fairest price, Excess, TPO count, type of distribution and many more. Of course, with combining with the regular chart you can only improve your trading but the fact is that you got everything you need using the Market Profile type of chart.
You can’t build a system around the market profile
This misinformation is the one that I hear very often from traders. Since the market profile is simply a constantly developing graphic that records and organizes auction data so that you can understand who is in control of the market, what is perceived as fair value, and the direction of the price move. It is possible to extract enough information from Market Profile for you to position your trades more advantageously. You can create many systems around Market Profile. For example, one can only buy in the responsive market once the day closes below the value or sell when the day closes above the value. Another system can be to watch for excess to appear and the position on the market. The third example can be to wait for range extension to happen and only trade in direction of range extension. Anyway, the point is there are many ways that you can use Market Profile to increase your odds on the market.
What information’s you can read from the Market Profile chart?
The market profile provides an enormous amount of valuable information’s. On the image below (profiles on AUD/NZD), we marked some of the key reference points that you won’t be able to see on any other type of chart. The poor high the top showed us no aggression from the sellers, which is a sign that there is no completion of the auction on the way up. Even the week finished on its’ low but value and the point of control didn’t go with the price, they remained in the upper portion of the week, suggesting us that sellers went probably into the bear trap. The price tried to break the weekly low at 1.0288 but it failed, and the responsive buyers .reaction and AUD/NZD traded higher all the way to visit the FAT POC and to break poor high at 1.0375. Basically, we collect all pieces of the puzzle and then put that into one picture.
You can see another example similar situation. The GBP/USD finished the week lower but the value and the point of control remained in the middle, which is a sign of the potential opportunity. The price tried to trade below the weekly low but it failed and the responsive buyers entered the market. Price did return into the value and POC and it even extended more upside.
The candle provides you only open, low, high, close and the body. Comparing with Market Profile you can see lack of information. Anyway, in our opinion, the best way to use candle chart together with Market Profile is to watch for trendlines, channel, ls and patterns. Our core analysis is always done on Market Profile but we do check what the is situation on the candle-bar chart.
In today’s market, it is necessary to a be informative-smart trader rather than part of the herd. It is important to be an independent thinker rather than a mechanical follower. The Market Profile provides us enormous freedom and information’s and, on that way, leading us to trade by making observations and not trade by the mechanical references. The knowledge about Market Profile in the public is very low and in our opinion, the reason is that there are no good educators and professional traders who can educate you properly on this subject. That is one of the reasons why we at ProsperiumFX launched this website. We are educating traders on the real valuable information’s rather than giving them fake hope and dreams. Also, we noticed that traders will always go with the path of least resistance. Once they see that something takes time and practice, they will always prefer to buy fancy indicators or systems, which will lead them to terrible results. If you are serious in this business and you want to take your trading to the next level in order to become a successful trader and independent thinker, you can check our services. and join us.