Market Profile - just another indicator?

How good is Market Profile?

  • Absolute Magic.

    Votes: 0 0.0%
  • A Useful Technique.

    Votes: 4 66.7%
  • No better than other TA.

    Votes: 2 33.3%
  • Not useful.

    Votes: 0 0.0%
  • You have to be kidding - what a waste of time.

    Votes: 0 0.0%

  • Total voters
    6
  • Poll closed .

nine

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So is Market Profile:

- the holy grail or a sacred cow?

- insight into true market behaviour or inferior to price and resistance?

- the best available analysis or statistically fuzzy?

MP seems to have strong appeal to some traders at a particular phase of their development but I've seen little evidence that its as good as they hope. What do you think?
 
Unless you consider a method of charting to be a type of indicator, then the answer to the headline question has to be "No". MP is firstly a way to chart price movement just like bar charts or candles or Point & Figure.

As for the bit about "its as good as they hope", I think just about any system, indicator, or whatever falls into that category. It's the same old story. All of these methods are ways of filtering the markets and seeking to identify patterns - nothing more, nothing less.
 
The reason I suggest its an indicator is that it has that dominant characteristic of an indicator: it filters price and volume movements to produce a simpler view. A secondary characteristic is that they add assumptions about the meaning of the prices involved that are often hidden and situationally incorrect and not understood by the users of the indicators.

Candlestick and Bar charts do this less than most indicators but still lose information (you lose the ticking back and forth within the movement from open to high to low to close). They also don't add lag (unless you need them to complete before you can act). The classic assumption is that the close price is important along with the shape (pin-bars etc) - which is amusing in volume or tick charts (everyone gets different closes and shapes) or if your pin-bar is formed by a non-standard data feed from one spreadbetter.

Market Profile takes it further although you can sometimes see some of the intermediate price gyrations as the TPOs are laid down. It assumes importance in the intial balance (just an opening range for non-MP people). It assumes a distribution of prices that is normal (which we now know is incorrect) although the assumption is only loosely of importance to MP. It filters price movements and extremes into a fuzzy normal curve.

Finally, I understand that the TPO concept was partly created because volume was not readily available back then so TPOs were used as a substitute for volume distribution. This is a gross approximation in generating a Value Area (1 standard deviation) and a Point of Control. Correct me if this is wrong.
 
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By your definition, any representation of price is an indicator. That would include even the most basic, simple chart plots of price.

I would argue that an indicator creates an extra layer between the user and the market. Price (and volume) are essentially one level above the market, meaning that they are simply a representation of it, not the actual thing. An indicator will then do something to that first layer - average it, express it in terms of a range, etc. - which takes you further away from the market. That's why I wouldn't call MP in indicator, just as I wouldn't call any other charting method (meaning a plotting of price over time) an indicator.

What you seem to be bringing in to the discussion is a question of interpretation. All charts are subject to interpretation in one way or another. There are patterns are bar charts. There are loads of different things to look at on candle charts. Point & Figure has its own methods. I could go on. My point is that from that perspective, MP is no different than any other charting approach.

Addressing your more MP specific points regarding opening balance, distribution shapes, value area definitions, etc. You can argue one way or another the validity of different aspects of all that. But in doing so you are talking about interpretation just as if you were to talk about a head-and-shoulders pattern or cup and handle on a bar chart, or a dark cloud cover or shooting star on a candle chart.
 
Market Profile toolset for MultiCharts v6 and higher

Hello Market Profile traders,

if somebody is interested in a Market Profile toolset for daily, weekly, composite and classic MP, search here for more informations:
http://www.1st-tradingtools.com .

Toolset works ONLY in MultiCharts v6 or higher developed by TS Support http://www.tssupport.com/multicharts/ .

Regards,
swisstrader
 

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So is Market Profile:

- the holy grail or a sacred cow?

- insight into true market behaviour or inferior to price and resistance?

- the best available analysis or statistically fuzzy?

MP seems to have strong appeal to some traders at a particular phase of their development but I've seen little evidence that its as good as they hope. What do you think?

Maybe I have been trying to get results from the wrong angle but I spent quite a lot of time with it. The bell curve in the article is a perfect case. They are not like that in most of the cases I looked at. Unless the trader buys the software I would say that it is ok to draw one, perhaps two, instruments using the a-z system but more than that is time consuming.

The other point I would make is that, like point and figure, by the time you have drawn it, it has happened.

In a nutshell, you trade or you spend your time drawing bell curves or you buy the software.
 
Use yesterdays value area high and value area low as support and resistance.
 
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I've used mp, it's sh!t. It doesn't give anything, a person may as well trade off daily ranges....PA....SR..., that's about it.

If somebody on here can explain how MP can give any better odds than bog standard PA....then i'm all ears.

Please, don't tell me that i don't understand MP. F*ck me, it's only showing where most SR orders are going in, it's not genius material.

Even NRothschild could get the hang of it....and thats saying something.
 
This is my take:

I don't think it serves any purpose to discuss what makes an indicator and what doesn't. At the end of the day, we can split all of the information in the "market population" into two categories:

1) Information that arrives in the market from external sources (such as news, fundamentals etc)

2) Information that is generated by the market. At a granular level, the information generated by the market comes in a pretty raw format of time and sales.

Now, whether you are drawing an hourly bar chart, plotting a slow stochastic, building a market profile, a point and figure chart, or calculating the co-integration of two pharmacutical stocks, you are still analysing market generated information* for clues about the behaviour of assets in the market.

Some of the techniques used, such as calculating a 10 period RSI, IMO don't bear any relevance to the forces that are generating the information we are looking at. It's a bit like taking your long or short bias from the number of people sitting on the left of the bus vs. the right - sometimes you will end up trading the right way, other times you won't (it doesn't help when you get internet forums with 200,000 members all telling you that 10 period RSI is all you need, because you get psychological issues blurring your judgement). Other techniques however, do stand up to a bit of intelligent critique - cointegration, for example, is (or was) used by statistical arbitrage traders in the form of pair trades and similar strategies. In addition, I think you will find that people employing cointegration actually understand what the metrics they are using to support their decision making are - I doubt that all traders using RSI really understand what it is measuring, they will just describe it as an oscillator.

So, getting round to Market Profile specifically - does it stand up to an intelligent critique? Does the analysis Market Profile advocates bear any relevance to the forces that are generating the time and sales information that we are looking at? Well, if we break down MP to the most basic level, it is a technique that is used to help answer the question "where are the most deals being done?***" Is this a sensible question to be asking? Yes. Are the techniques that MP advocates appropriate for answering this question? Yes.

Q.E.D.

On a more practical level, I will add a couple of my experiences with MP; firstly, it tends to work better on some markets than others - markets that have a designated opening and closing time, and markets that have a high population of locals (usually because the locals are all using MP and so it becomes something of a self-fulfilling prophecy). Secondly, whether it is suited to the product you are trading or not, it has to suit your personal trading style if you are going to focus on using Market Profile as the driving factor behind your trading decisions.

* "Market Generated Information" is a term coined from the book Mind Over Markets, which describes the basics of Market Profile. Whether you use MP or not, I highly recommend it.

*** Although the original Market Profile was designed to work on 30m TPO's, I think you can count all "Volume @ Price" and similar techniques in the same bucket. Market Profile isn't the thing you pay $50 to the CBOT for, it's a way you look at the information you have. Moreover, Market Profile also references sources such as the CFTC report and the Liquidity Data Bank.

All IMO.
 
... or you were sh!it at MP...


Mate, it's like saying was i sh!t at 5/20 xovers on a 5min. MP is no better than any other indicator.

I guarantee that you could not give an MP trade that was not already written in PA.
 
I just realised this thread is nearly 3 yrs old!


What is MP? This is all you need to ask yourself.

You prove me wrong mate, i will honestly hold my hands up.

I'm not trying to suss you out, but what i am trying to say is that MP is just obvious re-worked material....PVT.
 
What is MP? This is all you need to ask yourself.

You prove me wrong mate, i will honestly hold my hands up.

I'm not trying to suss you out, but what i am trying to say is that MP is just obvious re-worked material....PVT.

I'm not saying anybody is wrong or anybody is right, at the end of the day all I can do is say what I think about MP from my experience of it.

"Tomatoes, Tomatoes" innit.
 
I'm not saying anybody is wrong or anybody is right, at the end of the day all I can do is say what I think about MP from my experience of it.

"Tomatoes, Tomatoes" innit.


If you can get it for free and you like it....

All that i would say is don't pay for it, you're being done mate, seriously.

Actually, i'm wrong there. If you are paying for it, make sure you are getting your monies worth.

Take into consideration comms, spread......and MP.
 
I've just finished reading the book, and am wondering whether or not there is any validity to the author's claims. Does anyone know if there are any academic studies that analyse Market Profile?
 
There are several Market Profile books. Which Market Profile author are you referring to and what claim did he make?
 
In February I got interested in MP for the second time and plotted the prices on Excel. Here is the chart.

As you can see, each day showed a trend on the previous day, but so does a bar chart.

The fair value is clearly visible but I can find that on a bar chart much easier by drawing a line where it cuts the most bars.

If there is something here that I am missing, please tell, because I gave it up.

My question as to why it had been devised remains unanswered except that you hasve to buy the software.
 

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