What exactly is market profile and what it is not? #

Many people, when they first start trading, they learn about technical analysis and then naturally get attracted to systems buy signals sell signals, formulas and whatnot. All those things where you are promised something which is going to reduce your effort to get the results that you want. And the foremost result that traders want is to become consistently profitable.

Market Profile is a way of organising data… #

Market profile is definitely not a system or a signal, and it is just a way of organizing data. You can look at any bar chart, candlestick chart. There are so many types of charts available. The market profile also is just another way of displaying that data.

And if you’re using a candlestick chart, you might have heard about various formations, something like a Doji or, there are so many, thousands of names, funny names, candlestick charts have. So you must have heard about those. Every pattern tells you something about the market on a candlestick chart in a similar way market profile organizes data in such a way that it tells you a lot about the market.

Can you generate Buy-Sell signals using Market Profile? #

It cannot generate signals on its own. But what it will help you with immensely is improve your understanding of the market. And what do I mean by that is you will be able to understand why at a particular level buying is happening. Why if you saw a strong move late in the session, which is getting completely rejected on the next day. Or out of nowhere, a new trend starts and you just cannot get on the bus because it just keeps on moving on and on and on unidirectionally no pullbacks, nothing.

Can Market Profile help you make decisions in real-time markets? #

So, once you start understanding why the market is behaving the way it is. It will become easier for you to make better-informed decisions when you’re trading in the market. Now, markets I have seen are one of the most uncertain places. It’s really difficult to predict what the market is going to do today what it might do tomorrow? It’s really a difficult endeavour to try and predict the markets.

Can you manage Uncertainity using Market Profile? #

So once you start understanding why the market is doing what it is doing, what will happen is you will start accepting that uncertainty and you will start reading the market in the present. The real problem happens when you try to predict what this market going to do in future because nobody can do that. And when the market does something else, it starts bothering you because then your own personality is getting involved and you are now more concerned about being right than making money.

So just being right does not help anybody unless and until you are justifying your decisions with a trade, it basically does not help you at all. So what is required is being right, but also being able to put your understanding out in the market in the form of well placed low risk and high reward trades that will make you consistently profitable. So that is basically a market profile is.