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Auction Market Theory and Market Profile

  • #3,141
  • Aug 23, 2011 12:13pm Aug 23, 2011 12:13pm
When I think short covering I expect this (photo), if not I cant bring myself to call it a Short covering rally. If it would have continued lower it would be, but it didnt so its not! So what is it? and how do you trade it, is the point. Look into the past profiles , if it was a p but not short covering rally, it most often completed the incomplete neutral/ norm var. the next day. I know I said Id drop the subject, but this was one of those "AAAHHHH HHAAA" moments for me and imo gives me edge. No more said.....
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Markets are not efficient, rather they are effective - Jones
  • #3,142
  • Aug 23, 2011 12:22pm Aug 23, 2011 12:22pm
Quoting Evak

PS: in one of the JDs blog that i recall some time ago, he describe a liquidation break which is quiet similar to what happen to ES today. So i suppose he is making reference to shorter timeframe basis.
I think you made a good point! As with JD workbook example this Short covering process happens during the course of the "developing" profile. Not in response to the previous days/session's profile shape.
Markets are not efficient, rather they are effective - Jones
  • #3,143
  • Aug 23, 2011 2:37pm Aug 23, 2011 2:37pm
When I see a P profile that doesnt meet short covering criteria imo, I see the profile as incomplete neutral (if RE is 1.5x or less) if its 2x I refer to it as incomp. normal var. day.
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Markets are not efficient, rather they are effective - Jones
  • #3,144
  • Edited 6:41pm Aug 23, 2011 6:41pm | Edited 6:41pm
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
now we talking...this thread came back to life as a phoenix bird rebornes from his own ashes.
nice interpretation mzvega, i saved it. i kept struggled today to understand "LOOKING FOR THE ALL-IMPORTANT REFERENCE POINTS" chapter from second JD book...it seems i'm missing something.
anyway evak why you said after P form we need to be careful with longs when this should be after b form, no?
i'm very confused at the moment with what's happening on the market and that means i have a long road ahead...
i almost forget, pit session opening coincides with nyse opening?
  • #3,145
  • Aug 23, 2011 7:05pm Aug 23, 2011 7:05pm
Quoting mzvega
Who here will give me their definition of "Short Covering Rally"?
I don't know...Peter Steidlmayer doesnt mention it at all in any of his books and he is inovator of MP...
The Market pays you to be disciplined
  • #3,146
  • Aug 23, 2011 7:52pm Aug 23, 2011 7:52pm
Quoting mima
I don't know...Peter Steidlmayer doesnt mention it at all in any of his books and he is inovator of MP...

He doesnt call it short covering he calls it (the distribution) something different "running profile neutral'. But its not the name thats important, imo, its understanding & identifying the distribution of price.

as per
Steidlmayer on Markets:Trading with Market Profile Second Edition pp 64-65.

"A derivative of the neutral day is the running profile neutral day. As in the standard neutral day, one sees longer-term participants expand price activity above and below the initial balance. The most significant difference between the running profile neutral day and the standard neutral day is the magnitude of the range extension and proximity of the close to the day’s extreme. One will find that either the buyers or the sellers have more of an ax to grind, allowing for a settlement price near the day’s high or low. Quite often, this day can signify change in trend. Essentially a running profile neutral day is 2 days rolled into 1.
"
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Markets are not efficient, rather they are effective - Jones
  • #3,147
  • Edited 11:03pm Aug 23, 2011 10:46pm | Edited 11:03pm
Quoting s7c
...
anyway evak why you said after P form we need to be careful with longs when this should be after b form, no?
i'm very confused at the moment with what's happening on the market and that means i have a long road ahead...
i almost forget, pit session opening coincides with nyse opening?
Let say for the sake of explanation...

After a P-formation shortcovering, market will still try to explore by probing up or down. IN EU case the 1st P follows by b is very normal. Like mzvega puts it, market will try to trade till a complete balance. So the exploratory state as at that point when b was form suggest an inside day with which market may still explore further up.

2nd P formation short-covering was eventually trade into balance during NY session with a probe that test the UK low. Note that the distribution as Steidlmayer would calls it is still below previous value range. So market is not ready to go down yet. Unless we see an excess taking out recent high we may not see any meaningful down move. So the trick is where will it distribute after that...& were will it explore & eventually probe...

So a MP trader would look at this as a form of "short covering upon more shortcovering", as JD puts it. So the stance one have to take is with caution as any potential long adjustment could be met with resistance, as we have witness the last 2 days. (Criteria 3)


*As for NYSE open is the pit session. Electronic session of Forex opens at 1.5 hours b4 the pit as for now, taking into consideration of DST adjustment.
  • #3,148
  • Aug 24, 2011 8:33am Aug 24, 2011 8:33am
Kave, a quick question, when jd talk about snp500 over nite inventory is he referering to uk session? Because he only trade US open.

because snp500 is trading 23 hrs a day. My es-mini chart always no gap, but his chart always show a gap? And what is the pit session? Is it the NYSE open?
  • #3,149
  • Aug 24, 2011 9:07am Aug 24, 2011 9:07am
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Thank's evak, I'm more confused now then before :-)
I will look for answers in the books for more clarification
I use the NYSE open for us profile
  • #3,150
  • Aug 24, 2011 9:27am Aug 24, 2011 9:27am
Quoting alexm
Kave, a quick question, when jd talk about snp500 over nite inventory is he referering to uk session? Because he only trade US open.

because snp500 is trading 23 hrs a day. My es-mini chart always no gap, but his chart always show a gap? And what is the pit session? Is it the NYSE open?
He is using S&P large contract, that could be a reason the gaps may not appear, I am just guessing. Inventory is base right after NY pit session end till the pit opening. So is like Sydney begins(23:00 EST) till 15:29 EST.)

Yes he is using NYSE open or the pit session open.

If u want to approximate his pit session u can use the following setting as illustrated here using Broco. Set to combine TK/UK session as overnight & NY to pit open. I too use normal pit session to monitor ES. Due to the way the session indi is being hard coded & using Broco to view ES, I can't emulate exactly JD's settings.

Interesting chart of ES with overnight balance with narrow VA after a successful probe on previous sessions high as support, then shot up. (setting inserted)
http://img641.imageshack.us/img641/9...2aug242233.gif

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  • #3,151
  • Aug 24, 2011 9:29am Aug 24, 2011 9:29am
looking at monthly profile we are at top zone of current 5 months balance area..

it look like a flag to me
do you guys had any view that the price want to break 1.4500?
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...
  • #3,152
  • Aug 24, 2011 9:51am Aug 24, 2011 9:51am
Quoting bandung
looking at monthly profile we are at top zone of current 5 months balance area..

it look like a flag to me
do you guys had any view that the price want to break 1.4500?
It think so, if u were to combine Feb till todate. I think u have a balance profile...
  • #3,153
  • Aug 24, 2011 10:04am Aug 24, 2011 10:04am
Was waiting for this top failure off the UK high after US pit opens. Took a pot short at it & the price quickly took out my 1st target onto 4400. Move my stop above BE & see how it goes with my remaining exposure to 4350...initial risk was 17pips.

http://img851.imageshack.us/img851/4...3aug242259.gif

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  • #3,154
  • Aug 24, 2011 10:15am Aug 24, 2011 10:15am
Tks for ur input, appreciate it.
  • #3,155
  • Aug 24, 2011 10:52am Aug 24, 2011 10:52am
Hi Kave,
Can you tell me why you were waiting for it to fail?

Best,
Ox
Quoting Evak
Was waiting for this top failure off the UK high after US pit opens. Took a pot short at it & the price quickly took out my 1st target onto 4400. Move my stop above BE & see how it goes with my remaining exposure to 4350...initial risk was 17pips.

http://img851.imageshack.us/img851/4...3aug242259.gif

Uploaded with ImageShack.us
  • #3,156
  • Edited 11:13am Aug 24, 2011 10:55am | Edited 11:13am
Quoting Evak
Was waiting for this top failure off the UK high after US pit opens. Took a pot short at it & the price quickly took out my 1st target onto 4400. Move my stop above BE & see how it goes with my remaining exposure to 4350...initial risk was 17pips.

http://img851.imageshack.us/img851/4...3aug242259.gif

Uploaded with ImageShack.us
ah... nice pips K

what is your session time setting...? I notice the profile different than mine
...
  • #3,157
  • Aug 24, 2011 11:20am Aug 24, 2011 11:20am
Quoting bandung
looking at monthly profile we are at top zone of current 5 months balance area..

it look like a flag to me
do you guys had any view that the price want to break 1.4500?
Hey, long time no see! I always seem to miss your posts! I cant begin to tell you how much I appreciate your work on the mp indicators, again

I pretty much have the same bearish opinion I had a few posts back http://www.forexfactory.com/showthre...51#post4811351

Ive added an updated chart to that Qtly view. I see value has moved lower slightly lower, the current qpoc is slightly above last Qpoc point where most trade has taken place. But imo, its a majority of shorts, the rotation factor is -14 (more down bars than up). As in previous the best way to trade a summer time range bound market is to trade the extremes.
Ive been selling all rallies above value. I just dont see higher prices. but I am often wrong! Again, Great to see you!
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Markets are not efficient, rather they are effective - Jones
  • #3,158
  • Aug 24, 2011 12:01pm Aug 24, 2011 12:01pm
Quoting mzvega
Hey, long time no see! I always seem to miss your posts! I cant begin to tell you how much I appreciate your work on the mp indicators, again

I pretty much have the same bearish opinion I had a few posts back http://www.forexfactory.com/showthre...51#post4811351

Ive added an updated chart to that Qtly view. I see value has moved lower slightly lower, the current qpoc is slightly above last Qpoc point where most trade has taken place. But imo, its a majority of shorts, the rotation factor is -14 (more down...
Great to see you too Miss..
It always great to read your post, I cant thanks enough.
...
  • #3,159
  • Edited 1:15pm Aug 24, 2011 1:03pm | Edited 1:15pm
Quoting Oxford
Hi Kave,
Can you tell me why you were waiting for it to fail?

Best,
Ox
Daily profile:
Today daily profile base on UK open is still trading within with an inside-day range as it developing still b4 NY. So the strategy is still to hinge on the extremes of yesterdays range as to trade the yesterday balance back to control at the very least. Basically today sideways action is a continuation to balance further.

Session profile: (Even if u dont consider the daily)
UK inventory was Long & with a P-formation I expect another round of reversal like the pass few days,when NY comes in, to eventually distribute lower again as it forms into a b or balance within. again. Hence if UK short time frame trader did not auction any higher after a long inventory, odd that US may find it over-value if it try to explore into excess of UK high, auction speak.

Note that my previous chart show a combine TK/UK profile indicates to me of a potential inventory adjustment back to control & with the TPO count being top heavy (manual estimate) suggest sellers more then buyers.
  • #3,160
  • Aug 24, 2011 1:11pm Aug 24, 2011 1:11pm
Quoting bandung
ah... nice pips K

what is your session time setting...? I notice the profile different than mine

Combine the TK UK session as one...NY as seperate

My broker time is GMT +2, so this is the only way to circumvent it
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