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Market Profile Initial Balance Setup


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Market Profile Initial Balance Setup

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  #1 (permalink)
Dazzc
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I was wondering if someone could clarify the correct times to be looking at IB in terms of the time frame.

I have been following a few videos on the futures trainer provider Axia Futures and they were suggesting for instance, On the eurex fdax that the IB would be 7am - 8am - this is premarket as the PIT opens 8am - 1630pm UK Time (9am - 1730 CET Time)

They were discussing setups from this time period 7am to 8am although there is literally hardly any volume during this time so I am wondering how signifance can be placed on this IB. Surely the IB Should be the first hour of the actual Cash Open on all exchanges?

I am wondering if I could open the Debate on the correct IB time and how generally people setup their market profile

Would the common approach be - RTH Cash Open - Seperate profile then an "evening" profile from Cash Close to Cash Open?

Thanks in advance.

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  #2 (permalink)
 matthew28 
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Dazzc View Post
I have been following a few videos on the futures trainer provider Axia Futures and they were suggesting for instance, On the eurex fdax that the IB would be 7am - 8am - this is premarket as the PIT opens 8am - 1630pm UK Time (9am - 1730 CET Time)

Sounds weird to me too. The initial balance is traditionally the first hour of the session. I think as always with ETH trading data available on computers, it is interesting to see what has happened in the hour prior to the open, especially in the case of US equity indexes where major news is often announced at 8:30am ET, an hour before the 9:30am ET open. But for example Jim Dalton, Market Profiler and ES trader, still has the IB set at the end of the first hour at 10:30am.

If trading the DAX my IB would be as you said, the first hour from the European open to the UK open as that makes sense. You would want to see whether the mood that took price up or down in the first hour is continued by the British markets, or whether it remains rotational once the British markets open, or whatever.
What happened in the first hour before either the European or UK markets have opened seems kind of irrelevant, other than of course knowing where price is in relation to the current high or low of the day when you start trading if it set during that period.

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  #3 (permalink)
 tr8er 
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Yes, I'm absolutely with you guys, for me the first hour of the cash-session is the IB (some traders use the first 30min).

The example you mentioned from Axia, has to do with the first trading hour years ago as the Eurex already opened 1 hour before the cash-session, as we all know, now the Eurex opens way earlier.

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 Devil Man 
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Dazzc View Post
I was wondering if someone could clarify the correct times to be looking at IB in terms of the time frame.

I have been following a few videos on the futures trainer provider Axia Futures and they were suggesting for instance, On the eurex fdax that the IB would be 7am - 8am - this is premarket as the PIT opens 8am - 1630pm UK Time (9am - 1730 CET Time)

They were discussing setups from this time period 7am to 8am although there is literally hardly any volume during this time so I am wondering how signifance can be placed on this IB. Surely the IB Should be the first hour of the actual Cash Open on all exchanges?

I am wondering if I could open the Debate on the correct IB time and how generally people setup their market profile

Would the common approach be - RTH Cash Open - Seperate profile then an "evening" profile from Cash Close to Cash Open?


Thanks in advance.

@Dazzc yes and yes. Not a good answer but the answer actually depends on you and the instrument you're trading. Hardcore profile guys definitely run splits...and the IB used to be 30 minutes in general back in the day of floor traders...but most I know use the first hour after the cash open for IB. To make things more confusing, in Mark Fisher's book 'the logical trader' he discusses different IB times for different instruments.....and if I remember in one of his videos he talked about adjusting the IB times depending on time of the year and volume of each instrument. Run some tests and find what works for you is what I would say.

cheers

Johnny

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  #5 (permalink)
Dazzc
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Thanks for your input guys.

Not sure i can post links here but check Check YT on Y3ndGrDcnPE if of interest. Its quite a recent video on a market setup a couple of weeks ago - so seems to still be the basis in terms of this traders strategy. Mentions break of IB just into the cash open? Agree its a personal preference but can't get my head around why he considered a pre cash market IB with no volume.


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  #6 (permalink)
Dazzc
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Wondering in general how you setup your multiple market profile charts.

Currently i am just using the cash times for my charts with only the last evening session profile displayed to get some idea of where price has moved premarket

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  #7 (permalink)
Dazzc
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matthew28 View Post
If trading the DAX my IB would be as you said, the first hour from the European open to the UK open as that makes sense. You would want to see whether the mood that took price up or down in the first hour is continued by the British markets, or whether it remains rotational once the British markets open, or whatever.
What happened in the first hour before either the European or UK markets have opened seems kind of irrelevant, other than of course knowing where price is in relation to the current high or low of the day when you start trading if it set during that period.

Never considered that. Thanks

Always thought in general UK markets opened 8am GMT and EU 9am CET i.e. same time. Seems to be the case based on volume evidence anyway. Unless I'm mistaken? Cheers


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 Devil Man 
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Dazzc View Post
Wondering in general how you setup your multiple market profile charts.

Currently i am just using the cash times for my charts with only the last evening session profile displayed to get some idea of where price has moved premarket

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A good starting point for your profiles would be Monthly/Weekly/Daily/4 hour

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Dazzc
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Devil Man View Post
A good starting point for your profiles would be Monthly/Weekly/Daily/4 hour

In terms of data do you just include the pit sessions or the entire ETH. Thanks

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 Devil Man 
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Dazzc View Post
In terms of data do you just include the pit sessions or the entire ETH. Thanks

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I just do ETH anymore...I don't really find the pit sessions relevant, but that is just me. Try both and see if you can catch an edge.

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 matthew28 
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Dazzc View Post
In terms of data do you just include the pit sessions or the entire ETH. Thanks

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Quick answer. I only show the session I am interested in trading. For the US equity futures I would use profile 9:30am- 4:15pm. and the rest of the time I wouldn't see which would give me gap opens if price has moved during those Asian European morning sessions.

Same with Dax. I would follow the European stock market session times. If I also potentially traded up to the US session close I would extend the profile and end with the US close (that gets tricky in Spring and Autumn when the UK and US clocks time difference changes for a week or two with the summer time clock changes.

If trading currencies I would still only profile the session I was interested in. So for the Euro or Sterling, the European session time and ignore the Asian session for the profile. I would only trade the Asian session if trading a currency from the time zone, say the USDJPY (but as I live in the UK I would stick with the currencies most heavily traded by this country).

Just my thoughts. I think different people will have different answers but as long as you choose a reason that makes logical sense as to why you use a certain period's data, and aren't interested in another portion of the day (and aren't excluding a high volume/heavily traded part of the day for your market), you are good to go in my opinion.

ps This answer only applies for Market Profile where I wouldn't one profile bars showing from the low volume Asian session. If I was creating daily volume profiles, as opposed to market profiles, I would just use the full ETH volume profiles laid on to of a standard barchart.

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 bobwest 
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Hi @Dazzc, I'm really not the best one to respond to these questions, since I don't use either volume or market profile and don't use Initial Balance either.

But not really knowing what I'm talking about doesn't always stop me, so I have a few thoughts anyway. Take them with as much salt as you think they should have.

To start, you ask:

Dazzc View Post
I was wondering if someone could clarify the correct times to be looking at IB in terms of the time frame.

I will guarantee that you will get about as many answers as you get people who will try to answer this. There is probably more than one reason for this:

1. Often, in trading many different ideas work out fairly well. Different traders will inevitably apply them differently, and will get their own results, often different from the results of others. No one looks at a chart or a market situation the same way, nor trades it the same way.

2. The concept of Initial Balance, as the balance reached in "initial" trading, was formulated, along with Market Profile (as distinct from Volume Profile, which came along later) on the CME by J. Peter Steidlmayer in the 1960s, when the only futures trading was pit trading, and when prices were only available at half-hour increments. So Market Profile charts are often still plotted on a 30-minute timeframe, and the Initial Balance is still often based on a multiple of 30 minutes (one hour, as a rule.) It is not that there is a "right" way, just that it has traditionally been this way. Can it work? Of course. But others use other ways of doing it, and many use an "opening range" concept, which is similar in some ways to IB, and I have seen different opening ranges being successfully employed by different traders. Many others don't use either IB or OR, and do fine.

So to a degree, the one-hour Initial Balance (and a "balance" of the initial pit hour trading) is something of a holdover from an earlier time. It still may work fine, but it is not "right" or "wrong," and there is not necessarily a "correct" way to do it.

3. To expand on this, asking for the correct way to figure the IB is probably looking for something that isn't there. Instead, see what doing things one way, and then another, do for you and let you trade effectively.

So, for instance, you received an answer that says not to care about pit sessions:

Devil Man View Post
I just do ETH anymore...I don't really find the pit sessions relevant, but that is just me. Try both and see if you can catch an edge.

And another who says, yes, do use pit sessions:

matthew28 View Post
Quick answer. I only show the session I am interested in trading. For the US equity futures I would use profile 9:30am- 4:15pm. and the rest of the time I wouldn't see which would give me gap opens if price has moved during those Asian European morning sessions.
...
Just my thoughts. I think different people will have different answers but as long as you choose a reason that makes logical sense as to why you use a certain period's data, and aren't interested in another portion of the day (and aren't excluding a high volume/heavily traded part of the day for your market), you are good to go in my opinion.

They both also say to do what works for you, and I would say the same.

----------------------

One last thing:

Dazzc View Post
Always thought in general UK markets opened 8am GMT and EU 9am CET i.e. same time. Seems to be the case based on volume evidence anyway. Unless I'm mistaken? Cheers

You don't have to make assumptions. You can Google the particular exchanges for trading hours, or check here:
https://www.market-clock.com/
or here: https://market24hclock.com/
or here: https://www.tradinghours.com/

Bob.

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Dazzc
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matthew28 View Post
Quick answer. I only show the session I am interested in trading. For the US equity futures I would use profile 9:30am- 4:15pm. and the rest of the time I wouldn't see which would give me gap opens if price has moved during those Asian European morning sessions.

Same with Dax. I would follow the European stock market session times. If I also potentially traded up to the US session close I would extend the profile and end with the US close (that gets tricky in Spring and Autumn when the UK and US clocks time difference changes for a week or two with the summer time clock changes.

Cheers for the reply and apologies for the delay in response,

I understand with regards to choosing the time zone you are trading within but I am wondering what is the most accurate way to mark out points of interest i.e. TPOC, upper value areas etc... and what is the best way to achieve this accuracy with session time settings e.g. will the TPOC for a daily profile for a Euro stoxx 10 days ago be more accurate with a Pit euro session open -> Pit Euro close or a Pit euro session open to a pit US session close.

I think you touched open it in the later part of your reply and agree with what you said with regards to where the most volume is traded i.e. the Pit Euro Open to Pit US close this would make more sense in achieve a more accurate TPOC.

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Dazzc
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@bobwest

Cheers for the reply, I'll take your advice on board. Seems IB is more fluid as you stated. Thanks also for the links re market hours.

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