I have a question concerning value area on ES. How do you analyse it on the whole time spectrum. Do you slice the sessions into 2, globex and RTH? I am using the DvalueArea, from the ninja forum, the value area is calculated only on RTH hours but how do you relate to that value area if there has been a significant move during the globex session?
Or we just need to analyse RTH value area and ignore what happened during globex?
You can calculate the value area of anything. The value area is the core area of a range where most of the trading activity occured.
The value area, which is mostly referred to is the value area as calculated from the market profile. You can find the description in Appendix 1 of the the book "Mind over Markets" by James F. Dalton.
When the concept of market profile was developed, PCs were not readily available to allow for exact calculations. Therefore the value area was calculated from time price opportunites that were taken from 30 minute bars. The concept was only applied to the regular session. In particular, time price opportunities do not take into account volume, but only look at price action.
To show the value area in line with market profile, you would therefore need to apply the dValueArea indicator to a 30 min chart, set it to "TPO" and apply it to the RTH session only.
With the help of number crunching machines, the concept can easily improved.
-> if you increase the resolution from 30 min to 1 min or even 1 tick, you will improve the accuracy
-> you can replace the time price opportunities with volume-weighted time price opportunities (VWTPOs)
-> you can calculate the value area of the full session or any subsession
-> you can modify the 70% volume share used by Steidlmayr and Dalton
However, there are some things you should not do
-> calculate the value area of the full session based on TPOs, as this would distort the value area as the low volume price action of the night session is overweighted in the calculation
As always a good solution would be an approach that does not but too much load on your CPU, but which is accurate to the tick. I would see the best compromise here in
-> calculating the value area from 1-min VWTPOs
-> performing that calculation for the full session and the regular session
The resulting profiles for full and regular session will not be buch different, because in the end the volume of the regular session makes up for most of the volume of the full session.
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I use RTH but always check the highs and lows of Globex. Dalton says Globex high/low is a reference point.
I also look at the volume value area. Usually volume and price have same profile but when they differ significantly then its good to take note.