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Dynamic Market profile
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Dynamic Market profile

  #31 (permalink)
 Vendor: www.auctionprofile.com 
Norfolk, VA, USA
 
Futures Experience: Intermediate
Platform: ensign, sterling
Favorite Futures: ES
 
Posts: 30 since Aug 2010
Thanks: 4 given, 42 received

I can't show charts but can illustrate my point with a simple, though contrived, example.

In the middle of the diagram below is a profile. Not only that, it is the archetypal, Platonic Form of profiles, so it should represent a perfectly balanced market with the Value Area being truly reflective of the consensus of fair value.

On the left and right are two split profiles, each of which could have produced the Platonic Profile. Do you think they are equivalent? On the right, the split profile is an uptrend: every subsequent bar has a higher high and higher low. The Value Area does not reflect consensus and should not be trusted as a basis for taking trades. The split profile on the left does reflect a balanced market.

The difference between the two is price rotatation. You wouldn't know the different implications of the profile unless you "unpacked" it.

I prefer to look at the price bars first, decide if the price action reflects a balanced market and plot a profile if it does, so I would have drawn a profile for the left-hand price action, but not the second.

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  #32 (permalink)
Elite Member
Quebec
 
Futures Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
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@erniebilko

Did this test using a few custom profiles at areas of balance but still showing the developing Monthly VWAP as a channel:

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  #33 (permalink)
Elite Member
Quebec
 
Futures Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker/Data: Stage 5 trading/AMP/CQG
Favorite Futures: ES, NQ, YM
 
trendisyourfriend's Avatar
 
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Some more markup tonight using a custom profile for each major area of balance along with zones drawn from swing hi/lo.

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  #34 (permalink)
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Christchurch, New Zealand
 
Futures Experience: Beginner
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Neo1's Avatar
 
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erniebilko View Post
I can't show charts but can illustrate my point with a simple, though contrived, example.

In the middle of the diagram below is a profile. Not only that, it is the archetypal, Platonic Form of profiles, so it should represent a perfectly balanced market with the Value Area being truly reflective of the consensus of fair value.

On the left and right are two split profiles, each of which could have produced the Platonic Profile. Do you think they are equivalent? On the right, the split profile is an uptrend: every subsequent bar has a higher high and higher low. The Value Area does not reflect consensus and should not be trusted as a basis for taking trades. The split profile on the left does reflect a balanced market.

The difference between the two is price rotatation. You wouldn't know the different implications of the profile unless you "unpacked" it.

I prefer to look at the price bars first, decide if the price action reflects a balanced market and plot a profile if it does, so I would have drawn a profile for the left-hand price action, but not the second.

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So do you use a Steidlmayer distribution then?

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  #35 (permalink)
 Vendor: www.auctionprofile.com 
Norfolk, VA, USA
 
Futures Experience: Intermediate
Platform: ensign, sterling
Favorite Futures: ES
 
Posts: 30 since Aug 2010
Thanks: 4 given, 42 received


Neo1 View Post
So do you use a Steidlmayer distribution then?

I think you're asking if I calculate the Value Area using the standard MP algorithm? If so, then the answer is No. I think the details of any indicator are less important than understanding what you intend it to show and how you will use it.

In my case, I know I want to trade within the extreme highs and lows of a balance and simply need a consistent method of delimiting the Value Area of fair prices from the unfair highs and lows. There are many ways of doing this and all are somewhat arbitrary - the market neither knows nor cares which prices you choose to define the limits of value, so these prices are only of interest to you.

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