Market Profile Thoughts
The following is a list of random market profile thoughts gathered from listening to various professionals, use them as you see fit...
- A double distribution day is weaker than a regular elongated profile with decent width at all areas
- Large intraday moves can often be nothing more than short covering or long liquidation. Once that gets out of the way, the previous trend resumes
- Excess is the moment of highest risk and also highest reward. All auctions end in excess. If no excess, then they are incomplete
- When a new swing low/high is made in the overnight session, it is usually not a very secure low/high. It will probably be tested in an RTH session and go lower/higher
- The “innovator” or “early adopter” might be an individual or even a slightly larger trader, but rarely an institution
- When initial moves pullback halfway, check to see if that 50% retracement holds or not
- Always mark off the prior day’s close so you have an “unchanged” line on your charts and note it as a reference point to see if the market is trading above or below it, especially when the market is trading near it
- Change takes place when the market stops one-timeframing. Sometimes, however, a larger move may take 1-2 days to get going
- The first area that a strong opposing force needs to take out is the POC. New buyers and sellers (the “other” timeframe, which is more sustainable) really only step in there
- Poor lows with no excess (buying tail) means market is overly short
- How long should one carry forward information of untested areas in their narrative? Until they’ve been revisited
- In order to do a short directional or “go with” trade, minimum area should be below prior day’s close. Look for longs above unchanged and shorts below unchanged
- Day timeframe traders are in control if you see them continually selling the highs or buying the lows
- Point of control rising or falling on a trending day is the OTF (other time frame) in action. That’s how they act. Pay attention, for the market is either under accumulation or distribution
- On a trending day, the market will usually stop one-timeframing at least once in order to balance inventory. Knowing this and anticipating it can keep you in the trade longer and also setup a late day entry for you
- Change takes place when the market stops one-timeframing. Sometimes, however, a larger move may take 1-2 days to get going.
- If you are trading futures full time and every day then there should be a number of breakout trades each week. These are often more difficult to trade then the responsive moves because the stop is often not as clear, but you should get in the habit of doing them when the “planets are lining up” because the are often the larger moves
- The most potent combination of a change of trend is excess followed by a gap. If the gap happens later after a couple of days once the new trend is underway, it’s a sign of acceleration
- If the gap is filled and value cannot at least be similar value to the prior day, odds of a later day move in the direction of the gap are likely
- Markets don’t go from trend to trend, they go from trend to balance, then back to trend
- Thinking in terms of structure is more powerful than thinking in terms of price. Structure is formed as a result of multiple data points coming together
- The first return to any significant reference carries high odds that responsive traders will become active
- Impulse trading is what kills most traders. Price is simply an advertising mechanism that stimulates our impulses to do something. Just trading based on a single feeling of greed/fear/price restricts us and can completely block us from the more powerful concepts such as excess, balance, value, and timeframes which are the real drivers of the market
- Days following excess are harder to read
- Initiating sellers don’t wait for a market to rise to a price. Responsive sellers do as they need the market to go up first before they’ll sell it. They tend to sell above value assuming that there will be a reversion trade
- A spike out of prior day’s range (above high or below low) and then a reentry back in has potential for rotation back to the prior day’s low or high.
- There is risk of seeing inventory corrections as something more