Trading with Market Profile

i prefer volume based.

if you are going to use time based, you can't really use a 24 hr session, because it skews the results (since very little volume can equal very much time overnight)

the reason MP was developed with time as a proxy for volume, was because real time volume data was not available.

that's key to keep in mind

 

I have in the past but i'm not currently using MP. Ensign calls theirs Price Histogram but as far as I know it's a "standard" MP.

 

fwiw, Market Profile is a trademark of CBOT. a chart program that does not pay a license fee cannot use the term "market profile".

thus, many vendors that offer a variation of market profile, don't call it that.

 

Maybe I'm using a different algorithm, I just can't figure out what's the problem with my volume base MP indicator. I'll ask around at technical analysis forum. Thank you for your help.
Good luck trading.

 

Hi there,

I use MP quite heavily and in everyday trading. I can probably get VA's as far back as you need them. I use CQG (the original MP chart provider for Pete Steidlemeyer) and can provide either TPO or volume VA's.

To try to answer some of your questions, using volume based vs. TPO based VA's is very dependent on the product you trade and the time of day the data comes from. I do not suggest using 24hr data for MP even on currencies. It is best to split the sessions and treat each one as its own profile.

I use TPO values for most US products. Even though Whistler is correct in that volume data is now available realtime, the majority still use TPO values as witnessed by the frequency with which the market will respect TPO values vs. volume values. I know this because I plot both to monitor their respective strength. I believe that over time, everything will be volume based and I don't want to be oblivious to the transition. It doesn't take much time to know both of them anyway.

I can also speak with you about the method you are using for computing VA. I am so familiar with MP that I can actually compute where VA will be given a trading scenario. I'm not trying to be immodest. I'm just letting you know that I'm speaking from experience.

As far as who has MP charts, true MP charts are provided by CQG, eSignal, Aspen Graphics and Investor R/T (probably the best and most cost effective software for MP at the retail level). Market Delta also provides MP, but that is the same as Investor R/T with the footprint turned on.

I hope that helps.

Cheers,
FT71 - TheRock71

 

"I do not suggest using 24hr data for MP even on currencies. It is best to split the sessions and treat each one as its own profile. "

i respectfully disagree, with the caveat that when u use 24 hr data you must use volume TPO's not time TPO's (irealize "time TPO is redundant but u know what i mean")

i experimented pretty extensively with my instrument of choice (YM) and found using a 24 hr session with volume profile gave me POC's that were better "respected" than either 24 hr based time TPO's or pit session time TPO's.

simply put, this is because the market DOES respect "globex" activity. if you doubt this, look at how the market reacts around the hi's and lows set during the globex session when tested later in the pit session.

while i respect the "godfather of MP", his methodology was necessarily suited to a market that did not provide realtime volume data etc.

i do agree that if you are using time based TPO's and are referencing the 24 hr session, that you are best served by splitting the sessions.

in many sessions, a 24 hr based volume profile and a pit session based time profile will have relatively similar value areas and POC's.

the question is when they differ markedly which are better respected? at least in my experience, it is the volume based POC's/value areas. this makes sense when you recognize that floor traders and markets in general are more respectful of volume at price vs. time @ price. look at auction market theory. it is about price acceptance and perception of value. value is established at prices that facilitate trade. prices that facilitate MORE trade (volume) show market acceptance. volume is more important than time.

of course that's just my opinion

 

Hi Whistler,

Thanks so much for sharing your findings. Although I probably don't trade or focus on the YM as much as you do, I want to thank you for letting me know what your experience has been. I will start plotting the 24 hr volume levels to watch and see. Even though I'm a member of the CBOT, I have not focused on the YM or any of the CBOT's products much in the last year or so (oddly enough). It may be time to have a second look.

Good luck and happy trading,
FT71/TheRock71

 

Sierra Chart's profile is also correct.

Ensign's didn't used to be in that Howard was using a symmetric distribution around the POC and the CBOT method is usually asymmetric.

 

You have to be careful because Histograms aren't always MP.

 

For POC, I just search through all the price and mark the one with highest volume.

To find VA,
I compare the volume of 1 tick above POC and 1 tick below POC, register the price with higher volume and add the higher volume to variable "Cumulated Volume". If the Cumulated Volume is greater than 70% of today's total volume, I stop; otherwise, I continue the the accumulation until the 70% has been reached.


Here's the pseudo code for VA calculation

Code:

let UFH = POC + TickSize;
let UFL = POC - TickSize;
let Cumulated Volume = 0;

while ( Cumulated Volume < 70% of total volume ) do the following Loop
{
    if ( volume of UFH  > volume of UFL )
        Cumulated Volume = Cumulated Volume + Volume of UFH;
        update UFH = UFH + Ticksize;
    else 
        Cumulated Volume = Cumulated Volume + Volume of UFL;
        update UFH = UFL - Ticksize;

} <-- the while loop will continue until accumulated volume reaches 70% of total volume 

Thank you for the advice