Damon Pavlatos has in the last 42 years multi-

faceted industry experience that includes the

Anticipating Market Action using following: Since 1977 he has held Exchange
Market Profile & Damon PavlatosMemberships
America
has in the last
on the CME, CBOT and Mid
Exchange. He has traded
41 years multi-faceted industryFutures and
Volume Analytics Strategies
experience that includes the following: Since 1977 he has held Exchange
Options for over 41 years specializing in Index
Memberships on the CME, CBOT and Mid America Exchange. He has
Futures.
traded Futures and OptionsFrom 1981specializing
for 35 years to 2000,inDamon managed the
Index Futures.
CME
From 1981 to 2000, Index
Damon andthe
managed Floor
CMEoperations
Index and Floorfor Shearson
Work Shop 1 and Rand Financials.
operations for Shearson American Express, L.I.T. America, Gerald Inc.
American Express, L.I.T. America, Gerald Inc.
During his many years in the industry Damon has
and
supplied Technical Rand
Market Financials.
Analysis and TradeDuring
Executionhisformany
variousyears in
the industry
Index Funds, Institutions, Damon
and Exchange has supplied
Members. Damon has Technical
been
featured at Tradeshows, Futures Seminars and in various trading books.
Market Analysis and Trade Execution for various
In 2000 Damon became a Principal Partner and CEO of FuturePath
Index Trading
Trading ®. FuturePath Funds,LLC Institutions, and
(FPT) is an IIB Exchange
in the Futures
industry. FPT isMembers. Damon has been featured
a technology driven Futures brokerage firm thatat
currently owns an electronic software Trading Platform called
PhotonTrader.
Tradeshows, Futures Seminars and in various
trading books. In 2000 Damon became a
Principal Partner and CEO of FuturePath
Trading ®. FuturePath Trading LLC (FPT) is an
IIB in the Futures industry. FPT is a technology
driven Futures brokerage firm that currently
Contact Information: owns an electronic software Trading Platform
Damon Pavlatos called PhotonTrader.
Email: damon@fptrading.net
Phone 312-987-2060
Twitter: Damon Pavlatos@DamonPavlatos
 Risk Disclosure
Risk Disclosure

Futures’ trading contains substantial risk and is not for every

investor. Risk capital used to trade Futures is money that can be
lost without jeopardizing ones financial security. PAST RESULTS
ARE NOT NECESSARITLY INIDCATIVE OF FUTURE RESULTS WHEN
PAST PERFORMANCE IS MENTIONED. The contents of this webinar
that Damon Pavlatos has provided, displayed or conveyed in this
presentation is not intended to guarantee success or positive
results using this material and information. Damon Pavlatos is not
responsible for the accuracy of this material in this presentation
and it is only the opinion and trading strategies used or acquired
by Damon Pavlatos. This is presentation is demonstrated using
historic data and PowerPoint slides. This may be considered a
solicitation for business. There are no claims or use of trade
history or P&L from past performances used in this webinar.
S&P 500 Pit at the CME – Cover of Futures Magazine in the 1990’s
1898 CBOT
 Successful traders . . .

• Are mentally flexible—they see multiple choices in any

context.

• Make choices based on their own analysis and research.

• Understand the risk associated with each choice they make.

• Continually reassess the risks inherent in each choice they've

made while the market is constantly bombarded with new
information.
 Successful Traders . . .

• Understand markets, their opponents, and

themselves.

• Are life-long students of the market and themselves.

• Are open-minded and perpetually inquisitive.

Peter Steidlmayer was the original creator of
Market Profile. This distribution curve was
developed to help provide traders from the
CBOT a data chart displaying price and time.

The purpose of the distribution curve is to

organize and display data.

The primary elements of the distribution

curve measure a constant against a variable
 1st
2nd 2nd
3rd 3rd

Distribution or Bell Curve

Traditional Bell Curve Market Profile Chart

Time

Value Area

P
r
i
c
e
TPO’s: Time-Price Opportunities

The Market Profile’s building blocks are

“TPO’s,” or “Time-Price Opportunities.”

Each 30-minute period of the trading

TPO’s: Time-Price Opportunities
session is designated by a letter;
whenever a certain price is traded
during a given 30 minute period, the
corresponding letter, or TPO, is
marked at that price.
30
30Minute
MinuteBar
BarChart
Chartwith
withTPO’s
TPO’s
 Market Profile Graphic

• Market Profile Graphic

 Developing Market Structure (Periods 1-2)

Initial Balance:

The range set in the

first two time periods
(first hour) for most
contracts
Developing Market Structure (Periods 1-5)
Developing Market Structure (Periods 1-7)
Developing Market Structure (Periods 1-9)
Completed Market Structure (Periods 1-13)
 Market Profile Range

Range:

The entire height

of the Profile – from
the TPO at the
highest price to
lowest price
 Market Profile Value Area

Value Area:

One standard
deviation (67%) of
the TPO volume
beginning at the
point of control
 Market Profile Point of Control

Point of Control:

Longest row of
TPO’s closest to
the center of
the range
 Market Profile Initial Balance

Initial Balance:

The range set in the first

two time periods (first
hour) for most contracts
 Market Profile Closing Range

Closing Range:

The last period of

the trading session
 Market Profile Selling Tail

Selling Tail:

Two or more single prints at the

upper extreme of the
Market Profile®
is a “selling tail”
Collapsed & Segmented Profiles
Collapsed & Segmented Profiles
Cumulative Volume Profiles
 Volume Profile

1) Identifies market interest at a given price.

2) Helps confirm areas of support & resistance.

3) Offers you some transparency to who and

what kind of traders are participating

4) Will help spot and confirm breakouts

The Benefits of the Market Profile

The Market Profile—a real-time

evolving database—records,
organizes and displays
auction-generated information.

That information, once displayed,

becomes both a conduit for listening to
the market and a decision-support tool.
 Market Profile Graphic Benefits

• The Market Profile enables you to:

• View the structure of the market
• View the market ‘contextually’
• Compare one day’s structure to another
• View relationships between price and value
 Market Profile Graphic Benefits

• The Market Profile Graphic’s value area

represents the mean of the distribution.

• Using the value area as a reference point

along with volume, you can assess the odds
of price moving away from value, or regressing
to the mean. (Point if control)
Market Profile
 The Example below shows:
1) traditional Market Profile 2) Expanded into bars 3) Candle stick bar chart reflecting the same information
 The Market = Live Auction

The Market Place is purely an auction place to find fair value-

price for the product that is being traded.

The Market is controlled by 2 types of traders:

The long term trader = Hedge Funds and Institutional type

players looking at higher time frames to reach their profit
targets.

The short term trader = Day Traders, black box market makers…
any traders playing the shorter time frames.
• Once we understand the players in the market place we can
act on how to begin our trading day.

If we know who is in control we then decide if:

a) is it a sell rallies and buy dips Day

or
b) can we buy new highs (strength) and
sell new lows (weakness).
 The Short Term Trader

If a day is controlled by short term traders you can expect very little
follow through when breaking through support and resistance levels.
This is because of lack of commitment of volume and momentum that
the Short Term trader typically can not provide. Short Term traders
normally day trade using shorter term time frames and smaller capital.
 The Longer Term Trader

If a day is controlled by Long Term traders you can

Expect the market to move up or down significantly in
one direction accompanied with increased volume and or
momentum. Longer term traders are usually looking at a
longer time frame and have larger capital to invest. When
the longer term trader comes into the market it takes
longer to execute since their orders are usually larger and
time based.
 Example 2

For Example: Trend days are controlled by

longer term traders. On trend days capital is
gradually distributed in one direction by the
larger funds and institutions. You may see
price movement from one consolidation area
moved up higher or lower to another area to
re-balance and create a new perceived value in
price.
This is an example of 2 days. The day on left the market traded
and was controlled by the short-term traders. On the right side it
broke out and was controlled be the longer-term trader
When Short-Term Traders have control the market will trade back and
forth on both sides of the opening price. You can see the market
forming a consolidation area on low volume.
This is example is a day controlled by the longer time frame trader. It is a double
distribution day where the longer term traders moved prices from low to high.
Short term traders have control
 Starting your day using Market Profile

1) Make a note where the high and low volume levels are or the peaks and valleys.
( high and low volume areas attract and deflect price)

1) Look at where the point of control was in the past few days in reference to the
current market area before the opening

2) Determine how the night sessions traded leading into the opening. ( mark down
or highlight the night sessions highs and lows.

3) Identify what phase the market is in before the opening by looking at the night
session (balanced or in a long or short phase.)

4) Note all major spike highs/single prints. (These areas will be very important until
they are penetrated.)

5) Based on all of the above preparations and once the market opens you will be
able to see who is controlling the market ( the longer term or shorter term
traders)
The markets move from balance to out of balance and back to balance
This Ford daily stock chart shows short term traders had control for a bit and a market in
balance until the longer term traders move the market to a new value area to rebalance.
The market here is in search for a new area to find a fair value to trade around
Example from the previous slide how the market found a new area to rebalance
Single Tails=Spikes= a failed Auction occurred and price was rejected
 Failed retest in Gold
See next example in MP
Failed retest in Gold
example in MP
This example was around the 4th of July week
 Pockets
Pockets= areas where there is a significant trend reversal that is V shaped/spike
top or bottom. Pockets will act as major support or resistance.

a)There is a higher probability that a pocket will hold on a retest rather than
penetrate the V-shape bottom or top.

b) When a spike or V shape top or bottom is made…it rejected the high or low
for a good reason.
Gaps are referred to many times in the industry. A Gap higher opening from the
previous days high to the low of the current day low may cause a magnet for the
market to fill it. Gaps are not always filled the next day but it needs to be noted.
Here you can see where the market filled the gap perfectly the next day after the higher opening.
Example of a lower gap made as the market sold off
Feel free to contact
Email:
damon@fptrading.net.
Twitter: @DamonPavlatos
Phone 312-987-2060
Phone 312-987-2060