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Auction Market Theory and Market Profile

  • #3,541
  • Oct 21, 2011 9:33am Oct 21, 2011 9:33am
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
I wanted to say i found RF very confusing and here's why, if overnight inventory from London is long and most likely Tokyo session dosn't influence too much we will have of course a positive RF but if market is not strong enough it will be necessary to come to balance so meaning it will need to go lower in us session...so am I missing something? I found usefull RF in small balanced areas
Regarding trading, We are in a bracket so acting accordingly it's the idea, I just sold at the top of the bracket, do you guys wait for confirmation to see if the tpo is confirmed as a tail by the next tpo? Logically you should because a tail is not a tail till is not confirmed but if we use this at the top of the bracket is a good risk/reward trade...as you guessed already I didn't wait, but in other situation I would...
  • #3,542
  • Edited 11:25am Oct 21, 2011 10:53am | Edited 11:25am
Quoting s7c
I wanted to say i found RF very confusing and here's why, if overnight inventory from London is long and most likely Tokyo session dosn't influence too much we will have of course a positive RF but if market is not strong enough it will be necessary to come to balance so meaning it will need to go lower in us session...so am I missing something? I found usefull RF in small balanced areas
Regarding trading, We are in a bracket so acting accordingly it's the idea, I just sold at the top of the bracket, do you guys wait for confirmation to see if the...
Im not sure I follow. If londons inventory is long, ok yes RF should be positive, sounds like its working fine. Were's the confusion?


".....but if market is not strong enough it will be necessary to come to balance so meaning it will need to go lower in us session...so am I missing something......?"

One if RF is positive its suggusting that there is strenghth, and posibly trending up. Until the rf starts getting weaker, I would still assume theres strenghth in the market. Also using RF in conjuction with "quality(quadrant) of close" data may give you further insight.
Markets are not efficient, rather they are effective - Jones
  • #3,543
  • Oct 21, 2011 12:28pm Oct 21, 2011 12:28pm
Quoting s7c
Regarding trading, We are in a bracket so acting accordingly it's the idea, I just sold at the top of the bracket, do you guys wait for confirmation to see if the tpo is confirmed as a tail by the next tpo? Logically you should because a tail is not a tail till is not confirmed but if we use this at the top of the bracket is a good risk/reward trade...as you guessed already I didn't wait, but in other situation I would...
Sounds reasonable, for the short term, I personally think there should be a much better place to short for the longterm OTF at some what higher prices. But its just an opinion. Im often wrong.
For me, Not so much confimation as CONTEXT. First question I ask myself in analysis is where am I in relation to the Higher tf profile.

My monthly bias is that we are not quite overvalued on the mn profile. I think there maybe a need to test vah area before the months end.

Weekly we are definatly above value and out of balance. either return to value or seek value higher. But weeks over. looking to close above value so far.

On the daily we have a single print area double dist. the small value area leads me to believe we may have acceptence of prices in that area. I would be looking to add to any longs at the single print area, or sell a breakdown of that area. being the time of day there maybe a shift in inventory at euro close. How prices behave during that time would give me more info on direction.
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Markets are not efficient, rather they are effective - Jones
  • #3,544
  • Oct 21, 2011 1:25pm Oct 21, 2011 1:25pm
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Quoting mzvega
Im not sure I follow. If londons inventory is long, ok yes RF should be positive, sounds like its working fine. Were's the confusion?


".....but if market is not strong enough it will be necessary to come to balance so meaning it will need to go lower in us session...so am I missing something......?"

One if RF is positive its suggusting that there is strenghth, and posibly trending up. Until the rf starts getting weaker, I would still assume theres strenghth in the market. Also using RF in conjuction with "quality(quadrant) of close"...
yes, but the confusion comes somehow at least for me, when i wake up in the morning and i see the inventory overnight is long first thing i think is the market will go lower/when i see RF+, first thing i think is the market will go higher. of course it's more complex then that as you said...
  • #3,545
  • Oct 21, 2011 1:58pm Oct 21, 2011 1:58pm
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Quote
My monthly bias is that we are not quite overvalued on the mn profile. I think there maybe a need to test vah area before the months end

i thought we need to compare with previous month and on my chart all this week we tested VAH from previous month but the coincidence makes to have overlapping value areas
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  • #3,546
  • Oct 21, 2011 2:00pm Oct 21, 2011 2:00pm
Overnight inventory being "long" is a concept, not a reality. The rotation factor measures the rotational capacity of 30 min bars. Price can close high, rotation factor can still be negative. Indicating that there were more downward rotations in the auction than up. When prices rally, it's not just straight bull candles. Sometimes, they are. This is when you get very high rotational factors. A rally with a negative rotational factor is indicative of the market trying to go up, but doing a poor job at it. Take today's NY session. There is a "P" formation to the structure with prices easing off the highs - indicative of short covering. This session also has a negative rotation factor because there were more downward rotations (lower lows and lower highs) within the structure than upward rotations (higher highs and lower highs).

Two questions from Mind Over Markets:

1) Which way was the market trying to go?
-Rotation Factor, positive or negative. If positive, the market is trying to go up. If negative, it's trying to go down.

2) How good of a job did the market do in it's attempt?
-Value: Higher/Overlapping-to-higher/Inside day/Outside day/Overlapping-to-lower/lower?
-Volume in relation to value:
Was volume higher, unchanged, or lower than the previous day
-Quadrant close:
At which point in the day's range did the market close?
(Expressed as a % figure, e.g. A close at the highest high of the day yields a 100% Quadrant close. A close at the lowest low would yield a 0% quadrant close. A close in the center of the range would be 50%, etc)

So, let's consider a day. The market auctions higher, resulting in higher volume than the previous day and higher value than the previous day. The day, however has a negative rotation factor and a 65% quadrant close. The market was TRYING to go down (negative rotation factor) and doing a bad job at it (higher volume, higher value, good quadrant close).

Now, there are all sorts of combinations of data the market will throw at you. Sometimes, you'll have positive rotation factors on down days and vice versa. Mind Over Markets does a pretty good job at laying out how to interpret the data though, from my experience, a lot of it comes with screen time and putting the pieces together.

You have to remember a couple of things. One, James Dalton was a student and co-author with JP Steidlemeyer. He didn't invent the profile graphic or AMT. He utilizes the same concepts and has tweaked them into a workable methodology. Inventories can be long one session and the market can reverse the next so, essentially, inventories being long or short is inherently meaningless. Now, when inventories are long and the market reverses, James Dalton will say "The market didn't care" - well, that's all well and good but it doesn't explain anything. Thus, I pay no serious attention to that concept. However, his concepts of reference points is extremely helpful.

Another thing that is that the Market Profile Graphic isn't an indicator. Some of our experienced folks in here understand this but folks new to the concepts or to trading in general are seeking a "holy grail" that MP does not provide. The MP lays out reference points and essentially "layer cakes" 30 min bars on a vertical axis. It isn't "magical" or predictive. It's just data. You cannot predict market movements with MP any better than you can with a candlestick chart. Steidlemeyer even mentions that one does not necessarily NEED the MP graphic to apply his concepts to the markets as, with experience , you can see the same data in a standard price chart.

There are concepts - from JP and JD and Donald Jones (not so often referenced here) - that can all be applied effectively to give you an overall perspective of the market and what it's trying to do. The Profile will not tell you when or where to buy. That is up to us as traders. It's also up to us to accept responsibility for our losses and not blame an indicator or chart. I personally stick with my MP charts along side basic candlestick charts (in all time frames) with a 100 period moving average to determine trends. The MP gives me an intricate picture as to what is going on, the candlesticks finish the job and provide icing for the cake.

I hope some found some insight here. Good trades!
  • #3,547
  • Oct 21, 2011 2:16pm Oct 21, 2011 2:16pm
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Quote
On the daily we have a single print area double dist. the small value area leads me to believe we may have acceptence of prices in that area. I would be looking to add to any longs at the single print area, or sell a breakdown of that area. being the time of day there maybe a shift in inventory at euro close. How prices behave during that time would give me more info on direction.

i don't have that single prints there just the tail from london, but i'm set to get a nr for every 4 pips so maybe that's why, but this mean it was a very small single print, it counts so much?
as i said i see the market is bracketing on the last 7, 8 days so i entered at the top but price took me out because i saw serious strength step in in nr 5 tpo and i decided to close
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  • #3,548
  • Oct 21, 2011 2:31pm Oct 21, 2011 2:31pm
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Quote
the small value area leads me to believe we may have acceptence of prices in that area

from what i learned to get from one time framing low/high to one time framing high/low we need to have a transition faze, or to get from trending down to trending up we need a bracket faze or to get from unbalance to balance...so implicit that means acceptance, no?
i put as an example what happened today in london session, it would not be the same as acceptance area you pointed?
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  • #3,549
  • Oct 21, 2011 2:33pm Oct 21, 2011 2:33pm
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Quoting Bilstein
Overnight inventory being "long" is a concept, not a reality. The rotation factor measures the rotational capacity of 30 min bars. Price can close high, rotation factor can still be negative. Indicating that there were more downward rotations in the auction than up. When prices rally, it's not just straight bull candles. Sometimes, they are. This is when you get very high rotational factors. A rally with a negative rotational factor is indicative of the market trying to go up, but doing a poor job at it. Take today's NY session. There is a "P"...
thank you for your explanation, i will really enjoy it a little later...i must go now
  • #3,550
  • Edited 2:58pm Oct 21, 2011 2:42pm | Edited 2:58pm
@s7c

Perhaps one suggestion...

Don't forget that MP is a complementary tool so do keep tabs of what u see in a profile vs. what u see on your charts..

Here is an example of what i keep in my notes...just simple charts to ascertain where are the balance & unbalance area...just like chart formations etc...

& u are right, its been bracketing since it broke above 3690.

PS: Gap up on Monday?
http://img7.imageshack.us/img7/7573/...8oct220332.gif

Uploaded with ImageShack.us
  • #3,551
  • Oct 21, 2011 3:09pm Oct 21, 2011 3:09pm
Quoting Bilstein
Overnight inventory being "long" is a concept, not a reality. The rotation factor measures the rotational capacity of 30 min bars. Price can close high, rotation factor can still be negative. Indicating that there were more downward rotations in the auction than up. When prices rally, it's not just straight bull candles. Sometimes, they are. This is when you get very high rotational factors. A rally with a negative rotational factor is indicative of the market trying to go up, but doing a poor job at it. Take today's NY session. There is a "P"...

Very well put!!!!!
Markets are not efficient, rather they are effective - Jones
  • #3,552
  • Oct 21, 2011 3:17pm Oct 21, 2011 3:17pm
Quoting Bilstein
Overnight inventory being "long" is a concept, not a reality. The rotation factor measures the rotational capacity of 30 min bars. Price can close high, rotation factor can still be negative. Indicating that there were more downward rotations in the auction than up. When prices rally, it's not just straight bull candles. Sometimes, they are. This is when you get very high rotational factors. A rally with a negative rotational factor is indicative of the market trying to go up, but doing a poor job at it. Take today's NY session. There is a "P"...

Thanks ...
  • #3,553
  • Oct 21, 2011 3:18pm Oct 21, 2011 3:18pm
Quoting s7c
i don't have that single prints there just the tail from london, but i'm set to get a nr for every 4 pips so maybe that's why, but this mean it was a very small single print, it counts so much?
as i said i see the market is bracketing on the last 7, 8 days so i entered at the top but price took me out because i saw serious strength step in in nr 5 tpo and i decided to close
Here is what I meant by "single print area" Sorry, I didnt mean to confuse
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Markets are not efficient, rather they are effective - Jones
  • #3,554
  • Oct 21, 2011 7:06pm Oct 21, 2011 7:06pm
Hi, I am using Market Profile on Ninja Trader since a while and now saw this thread and trying to set up the market profile indicator like I have it on my Ninja Trader platform. But I can't get a simple daily market profile on MT4 like I have it on Ninja. I have made a screencast to show the problem I have. Please take a look......

http://screencast.com/t/uGwcYsowQo

Thanks.
Everyday 1K keeps the doctor away ;-)...
  • #3,555
  • Oct 21, 2011 11:05pm Oct 21, 2011 11:05pm
Quoting Bax80
Hi, I am using Market Profile on Ninja Trader since a while and now saw this thread and trying to set up the market profile indicator like I have it on my Ninja Trader platform. But I can't get a simple daily market profile on MT4 like I have it on Ninja. I have made a screencast to show the problem I have. Please take a look......

http://screencast.com/t/uGwcYsowQo

Thanks.
hi buddy.. this mp indicator not following mt4 chart time, it just using mt4 chart to put profile. slim profile will use space less than fat profile, profile with max tpo = 10 will only use 10 bars of chart plus some bars for other things like IB line, OHLC Bar and space between profile, no matter what chart timeframe you are using, it will only use as much bars as its required and not following bar's time. that why most of us here hide the bar/candle chart.
...
  • #3,556
  • Oct 22, 2011 7:42pm Oct 22, 2011 7:42pm
Hey bud,

I took some time and compared closely the last 20 days of MP on my Ninja platform with the MP on MT4.

On some days the profiles are pretty close within a range of 5-10 pips.

But that's normal since spot forex and euro futures have a little price difference.

Problem on some other days I get a get a completely different profile on MT4 which shows a POC, VAH and VAL like 50 pips away from the one I have on Ninja!?!

The thing is I know that the MP I am getting on Ninja is 100 % correct and now I wonder why I get this huge difference on some days on spotforex?

Here I made a screen of the last 4 days so you can see what I mean. Just look yesterday the profile is pretty much different on spot then it was on futures. The POC is not even close of beeing the same!?! But the price range was very close, which means the time for the TPO calculation was also about the same.

Here from Ninja:

http://screencast.com/t/gkPdi5adv7v

Here are by the way the setting possibilities I have on Ninja. Maybe it's interesting for you programmers:

http://screencast.com/t/vZ8pOwrWpMl

Here the last four days on spot (it's a live ECN account):

http://screencast.com/t/8qKozxMlhW‏

Do you know why it is like that??
Everyday 1K keeps the doctor away ;-)...
  • #3,557
  • Oct 22, 2011 9:39pm Oct 22, 2011 9:39pm
Quoting Bax80
Hey bud,

I took some time and compared closely the last 20 days of MP on my Ninja platform with the MP on MT4.

On some days the profiles are pretty close within a range of 5-10 pips.

But that's normal since spot forex and euro futures have a little price difference.

Problem on some other days I get a get a completely different profile on MT4 which shows a POC, VAH and VAL like 50 pips away from the one I have on Ninja!?!

The thing is I know that the MP I am getting on Ninja is 100 % correct and now I wonder why I get this huge difference...
hey bud,

take a look at EURUSD M30 chart for 2011-10-20 ... where the poc is should be..?

it should be around the highlighted area... no where else.

I don't have ninja.. I cant do further investigation. I do believe your MP indicator is reliable. may it just setting/configuration thingy....
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...
  • #3,558
  • Oct 22, 2011 11:21pm Oct 22, 2011 11:21pm

Quoting bandung
hey bud,

take a look at EURUSD M30 chart for 2011-10-20 ... where the poc is should be..?

it should be around the highlighted area... no where else.

I don't have ninja.. I cant do further investigation. I do believe your MP indicator is reliable. may it just setting/configuration thingy....
Attached Image(s) (click to enlarge)
Click to Enlarge Name: pvjj83.gif Size: 25 KB
Click to Enlarge Name: pvjj84.gif Size: 22 KB
not euphoria follower
  • #3,559
  • Oct 23, 2011 12:28am Oct 23, 2011 12:28am
  •  s7c
  • | Joined Mar 2011 | Status: try and fail but don't fail to try | 289 Posts
Quoting Evak
@s7c

Perhaps one suggestion...

Don't forget that MP is a complementary tool so do keep tabs of what u see in a profile vs. what u see on your charts..

Here is an example of what i keep in my notes...just simple charts to ascertain where are the balance & unbalance area...just like chart formations etc...

& u are right, its been bracketing since it broke above 3690.

PS: Gap up on Monday?
http://img7.imageshack.us/img7/7573/...8oct220332.gif

Uploaded...
if we will have a gap, what would that mean?
the scenario if price continues in direction of the gap:-monthly the price could go to second distribution from last month , there if the price is accepted and if is going out of range would create unlimited moving potential or if it will be rejected creating a good opportunity for other time frame seller to step in, in form of a excess...but i guess because the price is above value area from last month it would mean initiative buying and weekly would make a higher value area and we should act accordingly getting the best from daily/sessions picture...
i like mzvega idea of use more the analogy with monthly/weekly profile but i'm not sure haw to do that, seems is not so easy as it sounds...

by the way, what are those 2 red intermittent lines?
  • #3,560
  • Oct 23, 2011 5:33am Oct 23, 2011 5:33am
Quoting bandung
hey bud,

take a look at EURUSD M30 chart for 2011-10-20 ... where the poc is should be..?

it should be around the highlighted area... no where else.

I don't have ninja.. I cant do further investigation. I do believe your MP indicator is reliable. may it just setting/configuration thingy....

Hey bud,

here is my 2011-10-20 from Ninja:

http://screencast.com/t/JEC7apAedj

You are right it seems like a setting/configuration thing. Is it possible to set your indy the same way as I can on Ninja? Like to set the profile start on asia open and to end the profile at NY close time??

Also does anybody know where to get this VWAP indicator for MT4??

VWAP:

http://screencast.com/t/PpTtdgo3LJ7

VWAP settings:

http://screencast.com/t/olJADjHi
Everyday 1K keeps the doctor away ;-)...
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