A way of reading the market that recognizes either time spent or volume traded at a particular price level. A market profile can be either made up of “TPO’s” (time price opportunities), or volume. TPO’s measure how much time was spent at a particular price, while volume-based market profiles measure how much volume traded at a particular price. Generally, market profile is used in the trading of futures, especially the /ES. ShadowTrader utilizes volume based profiles. Value Areas and Point of Control, also known as the "fairest price to do business". It is the price level in the /ES where the greatest amount of volume in the prior RTH session traded. ShadowTrader measures the POC using volume but the traditional way is to mark off the widest point of the day's distribution where the most TPO's printed going across from left to right, indicating that that was the price where the most time was spent. It's important to pay attention to both the volume POC and the TPO POC. figures for /ESH7 and /NQH7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.
I could almost just repost the commentary from yesterday’s blog. Two tiny ranges and value areas in a row now. While we did take out the prior day’s Regular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. low yesterday, note that we didn’t make it to the Prominent Point of Control. This is a point of control level measured by time and not volume which is very wide relative to other areas of the distribution. It is a price level where every single (or almost every) TPO period traded. Prominent POCs are important as they have greater odds of being tested in subsequent sessions than less prominent POC levels. When measuring the POC by time and not volume, note that there can be a number of levels that are the same width. In the snapshot above, the green line of TPO's is where the most volume traded in the session. This is a good level to use as the prominent POC, keeping in mind that any of the wide areas can be turning points. If you look closely at the graphic, you can see the in the circled area, every TPO period (from B to O) is represent... of 12/19 as expected. Market is just in extreme balance. Volume has been the lightest we’ve ever seen it, frankly. Yesterday I noted on Twitter that S&P futures volume was at 400,000 contracts at 2pm EST. We can often do a million before lunch on a busier day. Market is simply in Holiday mode. The sleeping tiger was the best analogy I could find for the current market. As such, opportunities are currently small and expect that breakouts in either direction will be failures. You can play that by fading them or sitting on your hands.
The same inflection points I mentioned in yesterday’s blog post apply today.
Have a wonderful day,
**PS: Danno is hosting a Tape Reader thinkScript training session webinar in 30 minutes. Only those who have purchased the script are invited, however, we will be recording it and I’ll post the recording immediately, later this morning.**