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TPO and forex

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  #1 (permalink)
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Ive been reading through the DTS per market prep thread and Peter is a very smart chap. I really like his preparation method. My question is does anyone know if TPO analysis works in bucket shop... I mean forex? Does it require level 2 data at all?

Prep like Peter Davies/intraday analysis like feibel and Ill be unstoppable.

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  #3 (permalink)
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Hi Grantx,
it should work fine with Forex as well and of course there is no need of level2 data, if price traded at a level it will plot a new letter (doesn't matter if 1 contract is traded or 10k) in this 30min period. I don't trade Forex, but in my opinion Market-Profile should work fine with forex, because you will never get the correct volume so it should work better as volume-profile.

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Grantx View Post
Ive been reading through the DTS per market prep thread and Peter is a very smart chap. I really like his preparation method. My question is does anyone know if TPO analysis works in bucket shop... I mean forex? Does it require level 2 data at all?

Prep like Peter Davies/intraday analysis like feibel and Ill be unstoppable.

Some data providers provide volume data for cash currency pairs. Of course, as forex is not exchange-traded, one would need to aggregate transaction data from all (major) brokers to get a more accurate picture. In lieu of this, you can make an assumption that the transaction data for a given broker may be a sufficient proxy, though that assumption may not always hold. Also, you can use the 6E futures contract which is quite liquid. This is all for volume profiling.

You mention TPO analysis, which is not volume-based, and so of course it can be plotted for anything which has a price.

Level 2 data are quotes, not transactions, and thus have nothing to do with anything in this context; I would recommend you study some information on market mechanics to gain a better understanding of this.

Would just throw in that what makes you unstoppable may have a little to do with prep, a little to do with analysis, but it has a LOT to do with the gray matter between your ears. Granted, it's hard to focus on that if the other is not in place.

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The main thing to be aware of for TPO or traditional market profiling is that all half hour bars are equal. In that I mean the volume during the Asian session is light which is taken account of in volume profiling but with TPOs or half hour bars each bar has the same validity. This is especially relevant for the POC calculation and the Initial Balance.

One method of Market Profiling I have seen used by Forex traders is to build profiles only for the global session they intend to trade. Therefore a UK trader might have a Profile from 8am -4.30pm only (or start it at 7am to include the European open, the IB might then be one or two hours). This would give a POC and IB based on the data session you trade. Everything else would be considered as the overnight session. This would also give opening gaps showing whether sentiment had changed markedly from when the UK session closed.

Or if still wanting to see all the data then a day could be divided in to three profiles, one for the Asian session, Euro/UK session, and the US session.

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matthew28 View Post
The main thing to be aware of for TPO or traditional market profiling is that all half hour bars are equal. In that I mean the volume during the Asian session is light which is taken account of in volume profiling but with TPOs or half hour bars each bar has the same validity. This is especially relevant for the POC calculation and the Initial Balance.

One method of Market Profiling I have seen used by Forex traders is to build profiles only for the global session they intend to trade. Therefore a UK trader might have a Profile from 8am -4.30pm only (or start it at 7am to include the European open, the IB might then be one or two hours). This would give a POC and IB based on the data session you trade. Everything else would be considered as the overnight session. This would also give opening gaps showing whether sentiment had changed markedly from when the UK session closed.

Or if still wanting to see all the data then a day could be divided in to three profiles, one for the Asian session, Euro/UK session, and the US session.

I was wondering about this yesterday when configuring the tpo chart! Should I include the overnight Asian session with yesterdays US session?
What tpo profile to use:
07:00am to 06:59am (24 hours join everything)
07:00am - 22:00 (Join the US and European session but exclude the Asian)
07:00am - 13:30 and then 13:30-07:30 (European morning session and join the US and Asian)

The problem with Sierra is that it appears to only cater for the main session and overnight session meaning I can only load 2 profiles not 3. . Its early days and as usual with Sierra you have to go through your arse to get to your elbow so maybe Im just missing a checkbox somewhere.

Anyone done this before in Sierra?

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Ill try and simplify this question (I think) All times London.

What is the standard setting to represent a day on a TPO profile for EURUSD?

00:00 - 00:00. (Midnight to midnight)
08:00 - 22:00 (Brits and mericans together forget the Asians)
13:30 - 22:00 (Mericans only forget the rest)

Anyone using TPO?

Cheers.

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Hi Grantx,

yes I use market-profile for the 6E and I use the London/European cash session for my setting.

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Grantx View Post
Ill try and simplify this question (I think) All times London.

What is the standard setting to represent a day on a TPO profile for EURUSD?

00:00 - 00:00. (Midnight to midnight)
08:00 - 22:00 (Brits and mericans together forget the Asians)
13:30 - 22:00 (Mericans only forget the rest)

Anyone using TPO?

Cheers.

The first markets in Australia open around 5pm Eastern US time on Sunday after a 48-hour break. All markets close by EOD Friday in the US, also around 5pm. So, the most logical "day" is roughly 5pm to 5pm Eastern US, 24 hours. That makes 5 actual days. This is roughly in line with the GLOBEX day for most products. Any other time leads to more than 5 "days," and if you tally the hours, the forex market is open for 5 out of 7 days.

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Hi Grantx,

yes I use market-profile for the 6E and I use the London/European cash session for my setting.

Hi @tr8er so what are your times? 08:00 to 16:30....surely you dont ignore the rest of the us and Asian session? Or do you use that as the overnight? Im trying to figure out of this 'settlement' value and how much emphasis to put on it wrt the cash market. One thing Ive uncovered in this little curious quest of mine is to determine the overnight net long/short positions in relation to the settlement price (is this just the prior US session close?) and then having a plan for that.
A common thing is for the european session to correct the overnight inventory which, i think, is basically a smart arse way of saying that if the europeans determine the overnight was driven by weak hands, they will trade back into those positions for their own nefarious reasons or maybe simply to push back and find liquidity. Im rambling...sorry. How do you factor the US and Asian positions is the question?

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The first markets in Australia open around 5pm Eastern US time on Sunday after a 48-hour break. All markets close by EOD Friday in the US, also around 5pm. So, the most logical "day" is roughly 5pm to 5pm Eastern US, 24 hours. That makes 5 actual days. This is roughly in line with the GLOBEX day for most products. Any other time leads to more than 5 "days," and if you tally the hours, the forex market is open for 5 out of 7 days.

Great answer thanks @josh that helps. So when the US session closes at 5pm , whatever price it closes at is the settlement price aka rollover in the forex world? Settlement seems to be a factor in the futures market so I presume it has influence in other market as well.

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Grantx View Post
Hi @tr8er so what are your times? 08:00 to 16:30....surely you dont ignore the rest of the us and Asian session? Or do you use that as the overnight? Im trying to figure out of this 'settlement' value and how much emphasis to put on it wrt the cash market. One thing Ive uncovered in this little curious quest of mine is to determine the overnight net long/short positions in relation to the settlement price (is this just the prior US session close?) and then having a plan for that.
A common thing is for the european session to correct the overnight inventory which, i think, is basically a smart arse way of saying that if the europeans determine the overnight was driven by weak hands, they will trade back into those positions for their own nefarious reasons or maybe simply to push back and find liquidity. Im rambling...sorry. How do you factor the US and Asian positions is the question?

Yes I use the setting 8:00 to 16:30 London time and I don't change it, because for me, the European Session is the most important session for the Euro, so I see no need to use an extra setting for the us-session. For me the VA from the previous day is the most important I watch.

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@Grantx,

no, the settlement-price isn't the closing-price at 5pm ET, the settlement-price is calculated by the CME once a day and for currency-futures it is calculated at 2pm ET (end of day-session) and is based on a VWAP (and some other rules) of the last 1 1/2 minutes before 2pm ET.

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tr8er View Post
@Grantx,

no, the settlement-price isn't the closing-price at 5pm ET, the settlement-price is calculated by the CME once a day and for currency-futures it is calculated at 2pm ET (end of day-session) and is based on a VWAP (and some other rules) of the last 1 1/2 minutes before 2pm ET.

OK so its exclusive to futures then and not applicable to the cash market?

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tr8er View Post
@ Grantx,

no, the settlement-price isn't the closing-price at 5pm ET, the settlement-price is calculated by the CME once a day and for currency-futures it is calculated at 2pm ET (end of day-session) and is based on a VWAP (and some other rules) of the last 1 1/2 minutes before 2pm ET.

Right, except it's 2PM CT, so 3PM ET.

Either way @Grantx, open a cash EURUSD and open volume on it. As already discussed, this won't be a meaningful aggregate, but it will show that every day at 17:00 ET, the volume is at the lowest. And, as discussed before, this is the time just after US closes, and before Australia opens. Markets open Sunday around 5pm ET, and they all close by 4pm or 5pm ET Friday. So, the most logical choice for a "day" in forex is 5pm to 5pm. If there's a better choice, I'd be interested to hear reasons behind it.

At any rate, don't overthink it, and if using TPOs, are you sure you want to give equal weight to the 5pm hour as the hour when the market is active? Would just use a EURUSD cash chart with a volume profile and be done with it.

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@josh, oops, yes of course it is 2pm CT = 3pm ET

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josh View Post
Would just use a EURUSD cash chart with a volume profile and be done with it.

Youre right. The volume by price is a basically the same profile. If dont use TPO to make trade decisions then there is no point paying for the extra functionality. I can still apply most of the market profile principles that I am interested in. Ill continue the evaluation (30 days free with sierra) to see if there are any advantages of one over the other that are applicable to me.
Thanks for the suggestion.

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Grantx View Post
Youre right. The volume by price is a basically the same profile. If dont use TPO to make trade decisions then there is no point paying for the extra functionality. I can still apply most of the market profile principles that I am interested in. Ill continue the evaluation (30 days free with sierra) to see if there are any advantages of one over the other that are applicable to me.
Thanks for the suggestion.

Market Profile was used back in the days of the CME when volume was not available in real time. Using it today as a replacement for volume profile is like using an analog clock for accurate time when a digital one (with sub-second accuracy) is available. It really doesn't make any sense at all.

I still keep open a TPO chart on one of my screens instead of a 30 minute chart (which it effectively is), but it's an addition to VP, which is my main tool.

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Market Profile was used back in the days of the CME when volume was not available in real time. Using it today as a replacement for volume profile is like using an analog clock for accurate time when a digital one (with sub-second accuracy) is available. It really doesn't make any sense at all.

I still keep open a TPO chart on one of my screens instead of a 30 minute chart (which it effectively is), but it's an addition to VP, which is my main tool.

I understand its irrelevance in futures but perhaps it is still applicable in the forex world. Volume on the cash market can be skewed but a TPO profile is the inescapable truth. Not defending it, just a thought.

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LOL, for me the Market-Profile works much better as the Volume-Profile.

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tr8er View Post
LOL, for me the Market-Profile works much better as the Volume-Profile.

Do you mind posting a screenshot of your setup? And explaining why it works better for you than volume?

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Grantx View Post
I understand its irrelevance in futures but perhaps it is still applicable in the forex world. Volume on the cash market can be skewed but a TPO profile is the inescapable truth. Not defending it, just a thought.

TPO vs Volume Profile by Jim Dalton
https://jimdaltontrading.com/tpo-vs-volume-profile/

I give more emphasis to the TPO profile because i believe that it provides a more accurate representation of the auction process by its inclusion of time in conjunction with volume. Additionally, it smooths some aberrations when there is high volume at the opening price, the closing price and other static references such as the prior pit session high and low or the overnight high and low.

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