What is Market Profile? #

Market Profile is a charting technique, just like any other way of organising data. Traders encounter candlestick charts or bar charts when they first begin their journey with technical analysis. The problem with these charting techniques is often too much data to too little data.

The information they reveal about the markets is either less than necessary or more than necessary. Market Profile in my experience is a chart type which provides just the right amount of information.

Why Market Profile was invented by Peter Steidlmayer? #

Peter Steidlmayer wanted to understand how the floor traders behaved. How they processed the information? How they converted that information into trades? And finally, how their trading affected the markets or price of any individual instrument?

All this information could only be obtained by understanding traders activity, in other words, volume. But in those days exchanges did not provide real-time transaction data. He had to find a way around this problem.

That’s when he thought of plotting time as a proxy to volume and Market Profile charts, were born. It’s an interesting story, watch the video for more juicy details on this…

How Market Profile resembles the Bell Curve? #

When he plotted the market data in market profile format, Peter discovered something interesting. The profile shapes invariably resembled the bell curve, which we have learnt in high school statistics.

What he immediately understood that the majority of days trading occurred in a specific zone and prices moved about that zone throughout the day.

Once all the business in that zone was finished markets would move up or down in search of a new zone. Peter called these zones Value Areas.

How the prices move in stock market? #

Prices as Peter found out moved up and down in a specific sequence. He discovered that prices always followed this sequence…

Balance – Imbalance – Balance – Imbalance #

This sequence of activity showed that smart money picks and choose the times when they want to be active in the markets. They are not trading at all times in the markets.

What is the biggest mistake of a retail trader? #

The biggest mistake a retail trader makes is he thinks he has to trade all the time. Markets are not tradable all times and one must pick his spot carefully, otherwise, you will be at the mercy of these big smart money traders.

Why use 30 min time frame for Market Profile charts? #

The reason is most probably related to the way data was shared by the exchanges in those days. I have shared why 30 min time frames are preferred in the video. Watch the member-only video to understand it.

This video forms part of more than 100 videos shared in the Dean Trading Framework…

There is much more to this topic of trading and we cover it in great detail in the DTF Membership. So if you are curious and want to bring consistent profitability in your trading consider subscribing to our quarterly membership…

Enrol for a free masterclass on DTF Membership. You will learn all about the membership here, answers to common questions like…

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This Post Has 2 Comments

  1. Ravinder rohilla

    where is hindi audio. all I heard is english

    1. Dean

      The hindi course is right at the top of every relevant section…
      Soon I will be separating hindi and English courses for easy navigation…

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