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Building a Trading Strategy with Market Profile - Robin Mesch
I've never used Market Profile to trade but I'm subscribed to the CME rss EconomicEvents ( Economic Events ) and the last post is about it. I just want to share with others that may be interested.
Tip
How to Organize and Interpret Market Profile Charts for Technical Market Analysis
In this workshop, technical analysis expert Robin Mesch explains how to use her Market Profile approach to building a trading strategy and a current outlook on key markets.
The presentation includes the following:
How to understand data representation with price bars
Why not all price points are considered equal
Market Profile as a database that accounts for price and time at price
Understanding Profiles as vertical bell curves of market performance
How markets move from high usage to low usage areas
Organizing data using Market Profile
Examples of trading strategies with corn and soybeans
Has some similar concepts as a "long term VWAP" in terms of the range trade setup (above and below the VWAP while the market is completing the bell curve).
Unfortunately, I don't know how applicable this is to retail/day traders.
From a risk/reward standpoint, you're tying up capital for large moves for an awfully long time (relatively speaking).
If you had a $10M Hedge Fund, this type of strategy, spread amongst a basket of instruments, would probably result in some handsome returns for the relative risk taken.
For a guy trading $25k, I don't know that placing an order in July and waiting until October is very viable.
Combine that with the fact that the ranges observed are pretty large (in terms of drawdown) and you'd need a sizeable account to weather any localized storms.
I guess, in the end, it's a self fulfilling prophecy, where day traders would become so large that their order sizes are no longer acceptible for intraday trading and they would have the necessary capital (and need to seek shelter from slippage) by chasing larger moves over longer time periods.
Also, I know that TS doesn't provide full volume data for anything daily or above, so you'd need to develop the program to compile and organize the data.
But very interesting nonethless. I like the concept of price acceptance and the ways that macro market sentiment moves price.
Essentially, people can only stand prices at highs for so long and businesses will begin to grow/up demand and expand business when prices are low.
FYI, the above mentioned Robin Mesch publishes a monthly Mesch Market Outlook based on her interpretation of current Market Profile technicals.
She apparently studied under Steidlemeyer and is well respected in this regard. The outlook is available on the CME website. February 2012 link here: Robin Mesch Market Outlook, February 2012.
I came accross Market Profile couple of months ago and initially tried to build trading system around it. But eventually ended up using it only for pre-market analysis. Webinars by L2ST ( Stock Market Trading Training Seminars | Learn2StockTrade.co.uk) helped me a lot when I tried to understand what is and what is not important in the market profile structure.
