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MARKET PROFILE INTRODUCTION

Hello my friends!

I would like to introduce you a very efficient tool I have been sucessfully using for many
years. It is called Market Profile and it was developed by Peter Steidlmayer in the second half
of 20. century.

At first I would like to point out that Market Profile isn't indicator like EMA, RSI, MACD,
Bollinger Bands etc. It works quite differently. In it's core Market profile does one simple
thing - it shows volume at price.This means that it shows a histogram on vertical axis of the
chart that shows how much volume was traded at that particular price level.

This example shows 1 day Market Profile for USD/JPY (6.3.2017). You can see that most
volumes of the day were traded at price 113.83.
Point Of Control (POC)

Place where the most volumes of the given session (day in this case) were traded is called
Point Of Control (POC). POC is the most significant level of the session. It doesn't
necesarry need to be in the center of the histogram. Have a look at few examples of different
shapes of daily profiles. POC is highlited in each one of them:

As I wrote in my article - Price action - how to identify big players - big players move the
markets and they can be identified either by Price Action or by Market Profile. POC is a place
where the big players traded most volumes, possibly place where they were accumulating
their positions. Obviously they accumulated their positions in wider range but POC is place
where they accumulated most. It serves as a very strong reference point for them. Because it
is a strong reference point for them it should also be a strong reference point for us.

Market usually makes quite strong reactions to POC levels but in my trading I don't trade
POC just blindly. I combine information I get from Price Action with information from
Market Profile. This gives me the perfect market overview.

Apart from POC I also look for high volume areas. They work more or less the same way as
POC does. The logic is the same: big volumes = big players.

Timeframe:

So far I showed you only daily profiles (profile for 1 day). However, you can use all sorts of
different sessions for your Market Profile. For example you can use weekly, monthly, yearly
or cummulative volumes (volumes for custom period of time).

For example this is AUD/USD cummulative profile for 16.8.2017 - 7.3.2017. There are two
very significant volume areas. Both of them can be used as a support/resist zone. Have a look:
Forex vs. Futures

If you use Market Profile with Forex data, you need to know that it will never be as precise as
Futures data. The reason is simple. Forex is not centralized market. There are many brokers
with different data so basically they are unable to be 100 % precise concerning traded
volumes.

Futures markets however, are centralized so the volumes are 100% correct. My personal
experience is that for quick intraday trades it is better to use Futures data but it is not
necesarry. For swing trades it is perfectly okay to use Forex data.

Where do I get Market Profile?

You can download Market Profile at my Downloads page HERE. You will find instructions
how to run it in your Metatrader 4 in the .zip folder in "Market-profile-instructions.pdf"

I hope you will like Market Profile as much as I do


MARKET PROFILE – DIFFERENT
PROFILES AND THEIR APPLICATION
In the previous section Market Profile - introduction I briefly mentioned that there are some
different shapes of Market Profile histograms (profiles). I showed you some examples but I
didn't elaborate any further. In this article I would like to go a bit deeper and show you some
of the most common shapes Market Profile histogram can form. I will also show you what are
the most significant places to watch and trade in each different form. Lets get to it!

D-profile
The most common and well known is the D-profile. It's shape is similar to a letter "D". It is
formed when market is "balanced". Both buyers and sellers found temporary balance there
and they are in a rotation/cummulation. This means that one side of the market isn't more
aggressive than the other. It is used for cummulation of volumes by institutions and other big
players.

There are 3 significant places to be aware of. High and low of the profile and POC (Point of
control = place with the highest volumes).

 Places with the highest volumes around high/low of this profile are strong
support/resistance zones. Usually there can be seen some aggression around high and
low of this profile - aggressive sellers at high, aggressive buyers at low. I myself trade
situations like this - short trades at marked resistance areas and long trades at support
areas.
 POC is a good place for a profit target

Here is a typical D-profile:


P - profile
It's shape is simillar to a letter "P". It is formed when there are aggressive buyers and weak
sellers. If you look at price action chart you will most likely see bull candles (aggressive
buyers) and then rotation at the day's high (weak sellers).

P-profiles can be usually seen: 1. when the market is in uptrend or 2. at the end of
downtrend (this is not a hard rule though).

Most significant places of P-profile are POC and place with higher volume in the thin area of
the profile.

 POC - good support area if market goes up next day(s) and makes a pullback back
there. The price doesn't have to return to this area immediatelly (the next day). It can
take several days before the price comes back to this POC.
 Higher volumes in thin area of profile - in these places aggression of buyers was
most significant - they put heavy volumes in the market to move the price higher. If
the price returns there is high probability that these aggressive buyers will become
aggressive again and push the price higher again.
b-profile
=the exact opposite of P-profile.

It's shape is simillar to a letter "b". It is formed when there are aggressive sellers and weak
buyers. If you look at price action chart you will most likely see bear candles (aggressive
sellers) and then rotation at the day's low (weak buyers).

b-profiles can be usually seen: 1. when the market is in downtrend or 2. at the end of
uptrend (this is not a hard rule though).

Most significant places of b-profile are POC and place with higher volume in the thin area of
the profile.

 POC - good resistance area if market goes down next day(s) and makes a pullback
back there. The price doesn't have to return to this area immediatelly (the next day). It
can take several days before the price comes back to this POC.
 Higher volumes in thin area of profile - in these places aggression of sellers was
most significant - they put heavy volumes in the market to move the price lower. If the
price returns there is high probability that these aggressive sellers will become
aggressive again and push the price lower again.
Thin profile
Thin profiles appear when there is a strong uptrend or downtrend. These profiles are thin
because one side of the market is very aggressive and moves the price very quickly in one
direction. There is not much time for volume cummulation because the market is moving too
fast.

Most significant places in Thin profile are places where the price stopped moving for a while
and made some volumes. In these places aggressive market paricipants added fuel to the
moving market. If the price returns to these zones these aggressive participants will probably
become aggressive again and add some more fuel to the market to defend their positions. In
uptrend these are good support zones, in downtrend these zones are good resistances.

Thin profile in an uptrend:


Not all profiles you encounter will fit exactly in description of these four basic ones I showed
you. Most of time you won't be working with the "perfect shape" profiles. However, if you
use your imagination a bit there shouldn't be a profile you wouldn't be able to fit in any of
these 4 categories.

If you want to get good with trading with Market Profile I strongly encourage you to study
this article and then start watching and recognising these types of profiles in your real trading.
Try to fit every volume you see into one of the 4 categories and then try to figure out where
support/resistances are.

I am sure this will get your trading skills to a much higher level!
MARKET PROFILE –MY REAL TRADES
Theory time is now over and I think that some real trading examples would be another step
forward in your learnig. Now I would like to show you some real examples of how to use
Market Profile. All those examples are from trades I published at my website before and
traded them later myself along with my friends who follow my levels.

7.3.2017 EUR/USD short 1.0598

In the picture you can identify a "b" shaped profile that indicates aggressive sellers and
passive buyers. You can see that my level was placed little bit below the POC of the day.
POC in "b" shaped profile works as a strong resistance zone. You see that this time it worked
very nicely and that there was very precise and clear reaction to this level.

13.3. 2017 AUD/USD short 0.7592

In this case there was a "thin" profile indicating strong selling activity and a trend day. As I
wrote earlier, when there is a "thin" profile I look for volume clusters and I go into a
pullbacks in the trend direction from those volume clusters. The 0.7592 was the strongest
volume cluster of the day (and also POC of the day). It was very strong level that worked
really nicely. As you can see the reaction to this level was extremely precise.
14.3.2017 EUR/USD long 1.0608

This profile (the one on the left) could be seen by many as a "b" shaped profile. Although it
has a "b" shape I don't trade it as a "b" profile because it clearly doesn't signal strong sellers!
In fact this day was an uptrend day. There is one common rule to this. If the profile is to be a
valid "b" profile this day's price needs to close below 50 % of the daily range. If it doesn't it
isn't proper "b" profile. The same rule goes for "P" profile too (day needs to close above 50 %
of it's daily range to be proper "P" profile.

In this particular situation I traded this profile as a "thin"profile. You can see that this day was
indeed a uptrend day with strong and aggressive buyers present.
14.3.2017 AUD/USD long 0.7545

In this screenshot you can see a proper "P" profile indicating strong and aggressive buyers and
weak sellers. There is a strong support around 0.7540 in the volume cluster in the "thin" leg of
the profile. I took my trade little bit higher because I was afraid that the price won't go so low
as to the centre of this volume cluster. This time I was right and the price didn't quite reach
this place. Generally speaking though, this level should be a little lower at the highest volume
of this volume cluster.

*When I make my levels I don't only analyze the profile but also price action etc. For that
reason this level was not a bit lower.

20.3.2017 USD/CAD short 1.3367

This was a typical "b" profile day. If you look at the price action, you can see that there was
cummulation of volumes in at the low of the day. After that there was a strong upmove but
immediatelly after that there came strong sellers and pushed the price lower again - back into
the area of previous cummulation. This signals very strong and aggressive sellers. The most
aggression took place in the volume cluster (in the green circle).

When the price returned to this strong resist (the volume cluster zone), those strong and
aggressive sellers started to aggresivelly sell again, pushing the price lover once more. You
can see that the price turned at this level many times and was quite unable to go past it. Sellers
were really strong there.
20.3.2017 EUR/USD short 1.0769

In this picture you can see very nice and balanced "D" shaped profile of the day. In this case
there was a strong resistance zone at 1.0769 - exactly at the highest peak of the volume
cluster. I only took +10 pips profit from there but if I went for more, my profit Target would
be at Point of Control (POC) of the day. You can see that this is exactly where the price went
after hitting my short level. After hitting POC it went it's own way up. It was really a good
place for a profit target there.
21.3.2017 AUD/USD short 0.7705

Here you can see a perfect "P" profile. buyers were very aggressive from start of the asian
sesion pushing the price higher. After that there was some rejection of higher prices in the
euro session but it wasn't too strong and the day continued in a cummulation of volumes
above 50 % range of this day's range. This clearly indicated strong and aggressive buyers.

My long position was at the highest volume of a volume cluster created in the asian session.
in this place the buyers become aggressive and started their aggressive buying activity.I was
hoping that if the price came back to this level (0.7705) those strong buyers will become
aggressive again and that they will push the price again once more. I was right. You can see
that the next day the sellers absolutelly couldn't go past this strong support area. I ended this
position in +10 pips profit. However, it was possible to go for more. The ideal place for yur
profit would be at this day's (21.3.2017)POC.

This is the end of my free Market Profile course my friends. I hope I described you well the
basics of MP and the way I trade using it. Market Profile is an excellent tool and I strongly
suggest that you download it from my webpage and start watching the things I showed you
and implement those things into your own trading!

Thanks for reading and happy trading!

Dale