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MENTORING - Market Profile - Basics 2 ((1) A Market Profile graphic has…
MENTORING - Market Profile - Basics 2
(1) A Market Profile graphic has two parts. (a) value area; (b) non-value area. The second part does not mean that it is not significant or important. It only means that value lies in the value area and value does not lie in the non-value area. It is in true sense taking about the area in the chart.
(2) The components of a value area are: (a) POC, or point of control; (b) VAH, or value area high; and (c) VAL, or value area low.
(3) The components of a non-value area are: (a) day high; (b) day low; (c) tails (buying tail and selling tail); (d) poor (or insecure) high and poor (or insecure) low.
(4) Types of trading activity:
There are two types of traders in the market. (a) Initiative traders; (2) Responsive traders.
(5) Initiative traders are also called active traders. They are aggressive traders. They like taking risks.
(6) Responsive traders are also called passive traders. They are non-aggressive and are risk-averse.
(7) Generally retailers are initiative traders and hence lose money. Even if they are responsive, they do not know
where
to be responsive. There also they lose.
(8) Real money (big boys) are always responsive traders and they know
where
to be responsive.
(9) Buyers above VAH are called initiative buyers
(10) Sellers above VAH are called responsive sellers
(11) Buyers below VAL are called responsive buyers
(12) Sellers below VAL are called initiative sellers
(13) A POC is the most traded business area on a Market profile graphic.
(14) A VAH is the level that is at +1SD from (above) the POC.
This is the area where active and passive traders change their view.
(15) A VAL is the level that is at -1SD from (below) the POC.
This is the area where active and passive traders change their view.
(16)
Day high, day low, open and close are the four most important prices for a trader to consider in intraday trading.
(17) Open and close can be anywhere on a Market Profile graphic. Hence we cannot judge their position in value and non-value areas. However, their position at key Market Profile levels should be noted.
For example, if the POC forms at the open, that means a large hand is controlling the market.
(19) Initial balance - The first one hour of trading is called the initial balance. It is called so because that is the hour when big boys are setting up the positions for the day.
(18) A day high or day low can be formed either due to fast market activity or a slow market activity from responsive traders. If it forms due to a fast responsive trader, it is a tail (buying tail or selling tail). If it forms due to a slow responsive trader, it s a insecure high/low.
(20) The high of the initial balance is called IBH, or initial balance high. Similarly, the low of the initial balance is called IBL, or initial balance low.