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CL Market Profile Analysis
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CL Market Profile Analysis

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CL Market Profile Analysis

Since I use MP in my trading, and I like CL, I thought I would do a MP thread on CL. Some had suggested this to me as well and it will be a good exercise for me.

First, a brief disclaimer. I'm not a financial professional of any kind. The purpose of the post is for educational purposes. My views or opinions are my own and any trading decisions one makes are their own.

This is the first posting to this thread. If members find it useful or helpful I will do it as much as I can. The intent would be to do it nightly. If you have questions or feedback please let me know. I like Market profile and have studied it, but i may be full of you know what.

First chart is the 24 hour sessions of CL showing how we have been in a range.

Second chart shows a merged profile of several days with some annotation.

Enjoy.

David

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CL Market Profile Analysis-24-hour-cl-profile.jpg   CL Market Profile Analysis-cl-merge-21510.jpg  
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Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

 
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Here is the 3/4 MP .

The lower end of the immediate support held today 3/4. Today was an inside day from yesterday and a very well defined Bell curve meaning balance. There is selling tail today indicated on the chart as well as some range extension down. As I right this price is in the upper end of the value area.

To be honest, I don't know what to make of the activity. There are some bearish signs with the selling tail and the range extension. There are some bullish signs with support holding and being somewhat of a consolidation day.

In terms of the structure I think we can say the bias is still up, but to be honest, having a bias can screw up day trading as it did for me today. Not a horrible day with a loss of $130, but one has to take more than just the daily profile into consideration when day trading. The value area high from the overnight session acted as resistance and made for a nice short. Just need to see it. :-)

Meant to add that coming back inside the Merged profile could be bearish if it stays inside. Also, other nearby support is the value areas of today including the high, low and poc of it. as well as the other areas indicated. Nearby resistance is about 80.75-81.25. Specifically watch the selling tail tip and the base of it (where single prints are). Price will need to get beyond that zone to move higher.

David

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CL Market Profile Analysis-cl-mp-030410.jpg  

Last edited by David_R; March 4th, 2010 at 05:07 PM. Reason: Added last sentence
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Market profile for CL, 3/5/10:

Today I used the regular trading hours profile.

Broke out of the range/overlapping value areas.

Bias remains up with indicated support and resistance/targets indicated on the chart.

P.S.

I added a second chart with one potential use of the MP S/R levels. If I didn't have my head up you know where I would have executed these trades, but that is another story. The chart gives some ideas, but if you have any questions feel free to ask.

David

Attached Thumbnails
CL Market Profile Analysis-cl-030510-mp.jpg   CL Market Profile Analysis-possible-trade-usage.jpg  

Last edited by David_R; March 5th, 2010 at 10:02 PM. Reason: Added pic of possible trade usage of MP levels
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David ,

Thank you so much for this thread , this will be a great education thread

i have a few question (since i am a student of market profile)

1. when you look at MP do you look at the weekly/monthly profiles
2. how do you look at the open
from what i learn you can know what type of day it will be (Normal , trend etc...)

3. what type of money management do you use

if you see open test drive will you keep your stop at the previous VAL?


i know this is a lot to answer but i know you can do it

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benbrooke View Post
David ,

Thank you so much for this thread , this will be a great education thread

i have a few question (since i am a student of market profile)

1. when you look at MP do you look at the weekly/monthly profiles
2. how do you look at the open
from what i learn you can know what type of day it will be (Normal , trend etc...)

3. what type of money management do you use

if you see open test drive will you keep your stop at the previous VAL?


i know this is a lot to answer but i know you can do it

Ben,

Thanks, actually I'm a student as well. I will answer the questions best I can.

1. I don't really look at weekly or month profiles. I think that is more for the higher time frame trader. I will do merges as I did above of daily profiles. Those can be a weeks worth of data or more.

2. I look at the open in relation to the prior close as well as in relation to the value area of the prior couple of days. I have read that as well that you can determine the day type by the open, but I will need to go back and look at that again. I think from the day trading time frame we want to see where we open in regards to the close and value areas and trade support and resistance accordingly. Even if the Bias is up it may turn out to be a day where shorting is the best approach for the day. I hope this answeres your question.

3. My money management will depend on the circumstances and trade location. For example, if I am taking a trade off the futures.io (formerly BMT) bands mid line in he direction of the intra day trend, as you do, I will most likely employ a 15-20 tic stop with targets of 20 and 40 tics and if a third contract is used that is open and discretionary. I will trail my stop so that if we get a 35 tic move, I don' give back everything. I am not sure what the best approach is, but from what I've seen CL moves 20-40 tics in a swing fairly regularly.

If I am trading at an extreme of a balance area I will modify the money management. When I say the extreme that would be another term for out of value. For example, if we are in an up trend and there is a good size pullback to a zone of support and I take a trade long there I will keep the same size stop, but look to take a more profit. The target could be a high volume area or the POC. The way I have read the material and the way I understand it, price will come back to the mean. That is basically the basis of auction market theory with the use of the profile. If price spends 70% of the time in the value area the probability is that it will come back to that area. It makes logic sense to me even. So, I will shoot for that zone in regards to targets. I will also look at the average daily range because if CL moves in a range on average of 2.00 why should we assume it will only move .80 today? So if in a trade and we have only moved .80 there is a high probability that we should move another 1.20 from a good entry point. I'm not looking for all of it, just some of it. I hope this makes sense. Again, I will trail my stop not to give too much back, but I don't mind giving it room. In this example I am more inclined to take 2 contracts off at a nice target and let the third go, but trail. I had a trade this week where I took of 2 a 75 tics and got stopped a 60 tics on the last one. Your volume pattern trade is usually good for a whole lot more than 20 tics. I think the volume pattern trade takes place at an extreme and that is why you see the volume patterns and why price is outside the bands. To me, the volume patterns mean accumulation or distribution by professionals. If that is true, they trade for a lot more than 20 tics.

what do yo mean by open test drive? Do you mean like a trend move from the open?

The way I see it is that I have no idea what the market will do. If I have profit in a trade that is greater than 20 30 tics, the last thing I want to do is turn it into a break even or a loser. So If price is 60 tics away from the VAL, no, I will move my stop and lock in some. Does this answer your question?

David

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David ,

thanks so much for the detailed explanation

according to the book i read ("mind over markets") there are 4 type of auction open

1. open drive
2. open test drive
3. open rejection - reverse
4. open auction



open drive cause by the "other time frame" and they already decide which way the market will go , you will not get a test to previous day value ares/ poc

open drive similar to open drive , but the market is not totally confidence about the level and will test yesterday value ares/ poc

and the other two i didnt get too yet :-)

this is from my notes

i highly recommend to you to read this book

i mention in one of my post today that the floor traders use this book as the "bible"

hope this helps

ben

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David ,

can you explain us a little bit about rotation factor and how you use it during the trading day

thanks

ben

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-- Albert Einstein
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benbrooke View Post
David ,

can you explain us a little bit about rotation factor and how you use it during the trading day

thanks

ben


Ben,

I can give you my understanding of rotation factor, but it is not something that I actively look at and use to trade. Maybe I should, but I'm not at that point.

I believe each day the rotation factor starts at zero and the TPO's (Time Price Opportunities), the lettered profile, are given a value of +1 or -1. Each TPO period such as A,B,C etc can be give a maximum of +2 or -2. After A period, or whatever is used for the first half hour period is complete, the count begins. Whenever the next TPO period makes a higher high the rotation factor (RF) gets a +1, if it makes a higher low as well it gets a +1. This continues throughout the day and is an evolving number. If the next TPO period makes a higher high it is +1 added on, but if is makes a lower low in relation to the last TPO period then the RF is give a -1. The rotation factor can go up and down as the TPO periods make higher highs, higher lows, lower lows and lower highes. HH and HL get +1's and LL and LH get -1's.

How do we use this? I'm not really sure to tell you the truth. I guess one way is to see what has been taking place throughout the day. If the RF is continually making a higher value, or in other words, the TPO's are making HH and HL and then all of a sudden in one of the periods a higher high is not made it may indicate that price is going to stop rising an go lower. I would think one would need other info to make this determination.

My main goal with MP is to find an area of Support or resistance at a location of unfair value that I can take a trade against. I believe the profit potential with trades at the extremes of value have a higher reward probability and all I want is one trade like that a day and be done.

David

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Thank you so much ,
i am reading the book right now and i wanted to make sure that i get it right

so from my understanding is :
if the high of the current bracket is higher then the previews bracket this count as +1
if the high of the current bracket is lower then the previews bracket this count as -1
if the high of the current bracket is higher then the previews bracket but have the similar low this count as 0

now you can combine this with the TPO count and you get who is in control

did i get that right? (if you have time call my cell)

ben

Keep on sowing your seed, for you never know which will grow -- perhaps it all will.

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