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Market profile vs Volume profile


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Market profile vs Volume profile

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  #1 (permalink)
bavan666
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I thought Volume profile was supposed to be a more accurate version of market profile, but I've seen many traders use both of them in their trading, what's the advantage of using one over the other?

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  #2 (permalink)
 AllSeeker 
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Market profile in a simple layman words, is function of price and time. It simply marks areas where price has spent most time.


Volume profile in simple terms, has a much needed window into volume activity. It tells you price points where the most volume has appeared.

Neither is wrong or neither is necessarily better than other, in fact quite a few people use them both on same chart window, and quite a few platforms have option for both in a same chart window.


Its important to remember its not the tool, its the trader that is important.

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  #3 (permalink)
bavan666
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AllSeeker View Post
Market profile in a simple layman words, is function of price and time. It simply marks areas where price has spent most time.


Volume profile in simple terms, has a much needed window into volume activity. It tells you price points where the most volume has appeared.

Neither is wrong or neither is necessarily better than other, in fact quite a few people use them both on same chart window, and quite a few platforms have option for both in a same chart window.


Its important to remember its not the tool, its the trader that is important.

Correct me if I'm wrong, but if the price spends more time at a level, naturally the volume at those levels should also be higher(as more time spent means more trades took place there), right? So both the market and volume profiles should have the same shape, why do people use both of them together?

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 AllSeeker 
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bavan666 View Post
Correct me if I'm wrong, but if the price spends more time at a level, naturally the volume at those levels should also be higher(as more time spent means more trades took place there), right? So both the market and volume profiles should have the same shape, why do people use both of them together?

In theory? Yes, in practical? Its not always.

And hence, people moved on to tick data and more expensive tools like footprint.

All you need to do is apply both on the chart at the same time and see for yourself. You will also notice that there is difference in POC of MP and POC of VP. Sometime surprisingly big.

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  #5 (permalink)
bavan666
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AllSeeker View Post
In theory? Yes, in practical? Its not always.

And hence, people moved on to tick data and more expensive tools like footprint.

All you need to do is apply both on the chart at the same time and see for yourself. You will also notice that there is difference in POC of MP and POC of VP. Sometime surprisingly big.

Thanks, is there a good book or resource you recommend that talks about where and when to use MP over VP and vice versa?, I've read "volume profile by trader dale", but that doesn't go into detail about using market profiles

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 AllSeeker 
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bavan666 View Post
Thanks, is there a good book or resource you recommend that talks about where and when to use MP over VP and vice versa?, I've read "volume profile by trader dale", but that doesn't go into detail about using market profiles

Not really, there is lot of cluttered information on internet though.

You will have to do the digging yourself.

Good luck!

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 matthew28 
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bavan666 View Post
Correct me if I'm wrong, but if the price spends more time at a level, naturally the volume at those levels should also be higher(as more time spent means more trades took place there), right? So both the market and volume profiles should have the same shape, why do people use both of them together?

If trading the equity index futures the majority of the volume trades during stock market hours, 9:30am ET - 4:00pm ET. So for Market Profile I would only chart those regional hours.
Whereas if charting the whole ETH 23hrs session I would use volume profile and not Market profile. For me with volume profile I want to see where the most and least volume have traded for the whole of a session but not include the low volume hours with Market Profile because it doesn't taken account of volume so I don't want the relatively low volume Asian, European hours being considered with the same weight when it comes to formation of the Market Profile regarding single prints between distributions where one might be a low volume distribution and the other a high volume RTH distribution, or the Point of Control might be in the low volume session when in reality the main POC might be in the RTH session.
Also For Market Profile I would chart the main trading hours for the product being traded and ignore low volume periods so the next session you can easily see whether it is trading in or out of balance relative to the previous session.

For US equity index futures I like the RTH session Market Profile as said, but also have the RTH voulme profile next to it because it shows me some detail for what is happening in the first half hour/hour, especially if there is an opening drive the Market Profile just shows a long bar, but the volume profile shows where volume/price consolidated on the way up or down. So a little more detail.
My chart also has a current day ETH volume profile on the side so before the RTH open I can easily see where today's overnight range is in relation to yesterday and whether the overnight was a balanced volume distribution or stretched out and so on.

If I was charting the whole 23hrs trading session I would use either MP or volume profile as, like you say, they will probably be very similar in shape. As with everything though, one person will prefer one way, and somebody else another way.
For Market Profile Jim Dalton's website has lot's of information (and he has written a couple of books)
https://jimdaltontrading.com/public-webinars/

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  #8 (permalink)
 Mich62 
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bavan666 View Post
Correct me if I'm wrong, but if the price spends more time at a level, naturally the volume at those levels should also be higher(as more time spent means more trades took place there), right? So both the market and volume profiles should have the same shape, why do people use both of them together?

With Market Profile you will see where price stayed for the longest period of time, often dull low volume times like overnight, when using ETH. This doesn't necessary mean more volume is traded there and you will often see Market Profile (poc) looking different than the Volume Profile (vpoc).

Peter Steidlmayer developed Market Profile in the eighties, almost 40 years ago (imagine). He came up with a way to chart price action by using what he called TPOs for every half hour of trading. Through combining these TPOs a bell curve occurs. I believe he did this just because he had no other way to chart trading volume (back in the time). In his own words "What I worked out, without understanding it, was a way of charting trading volume" (page 25, Steidlmayer on Markets). Later on in the book he speaks further about the importance and use of volume.

However, nowadays we are able to chart volume at price (with HVNs & LVNs). It is therefor I 've made a choice to only use Volume Profile. The data is more cleaner so to speak. I think volume in addition to price is the most important in trading and I don't see any real advantage in using Market Profile on top of Volume Profile.

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  #9 (permalink)
 josh 
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bobbolton View Post
For all my trading experience, I came to the conclusion that the market profile is complete nonsense, which cannot be said about the volume profile, because sometimes a very large volume is traded in a short time period, and it strongly influences.

Volume profiles can contain irrelevant noise. "Interest" is easy to spoof with volume ... HFTs trading back and forth in a 2 tick range has no bearing on fair value or positioning, for example. Time can't be spoofed and thus a market profile chart often gives a less noisy view.

I tend to use VPs almost always, but auction theory has its roots in MPs and thus there is a lot of value there, IME, having traded this way for over a decade.

As @AllSeeker said, the tool itself is not really as important as how the trader uses the tool. I've seen a lot of VP users who really don't have a clue about what they're doing. They don't understand core principles, and so they dumb down their trading to blanket concepts without understanding context. For a trader like this, the tool used will not be of much use, whichever it may be.

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 trendisyourfriend 
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https://jimdaltontrading.com/tpo-vs-volume-profile/

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