Homework Sheet Sample

Short Video on Delta Divergences and MP

http://www.screencast.com/t/RNhs2SgjjrA

When a 'joey', is not JUST a 'joey' - Why HOMEWORK is good!

1) Daily downtrend is undergoing retracement.
2) After 3-4 pushes, momentum slows and price coils at Fib retracement, which also happens to be monthly High Volume Node and can see pocket on daily chart.
3) 240m and below hit low-adx zone during this 'balancing'.
4) If you want to read into MP shapes, Monthly 'P' profile indicates just short covering.

get ready....

5) 7/13/08 sneaky lunchtime move. 11:30am 5m chart breaks to downside after clearing some stops above.
6) 15m gets momo after 240m breakdown zone!
7) Is the 5/15 setup good for retest only?? NOT IN THIS CASE
8)...it's good for daily timeframe move with r/r around 100!!

any future value??...sure...watch to see if daily bear flag sets up some follow through ;)

Daily Range / First Hour Range

Initial Balance (IB) = First Hour Range

Chart1: ES Day Session


91% of days have a range >= 1.3 IB

82% of days have a range >= 1.5 IB

14% of days have a range >= 3.2 IB
etc.

Median daily range = 2.1 IB

Highest range in sample: 11.5 IB

Chart2: Crude Day Session

92% of days have a range >= 1.3 IB

82% of days have a range >= 1.5 IB

19% of days have a range >= 3.2 IB
etc.

Median daily range = 2.1 IB

Highest range in sample: 9.5 IB

Soybeans: recent Made First and Made Last times

The letters are the standard Market Profile characters for each 30-minute bar
i.e.
D = 9:30 – 10:00am CT
E = 10:00 – 10:30am CT
etc.

Crude Oil: recent Made First and Made Last times

The letters are the standard Market Profile characters for each 30-minute bar
i.e.
A = 9:00 - 9:30am ET
B = 9:30 – 10:00am ET
C = 10:00 – 10:30am ET
etc.

Market Profile View of Z-Day

Feel free to comment with any corrections. Newbie perspective here.

Cleon


Cleon - this is my take on yesterday's action:
(similar to yours, but from a slightly different perspective)



SRS

10-Year Notes: recent HoD and LoD times (7am - 3pm CT)

Chart 1: Frequency distribution of High of Day (HoD) and Low of Day (LoD) in each 30-min bar


Chart 2: Frequency distribution of HoD and LoD in each 30-min bar on High Made First days


Chart 3: Frequency distribution of HoD and LoD in each 30-min bar on Low Made First days


The letters are the standard Market Profile characters for each 30-minute bar
i.e.
y = 7:00 - 7:30am CT
z = 7:30 – 8:00am CT
A = 8:00 – 8:30am CT
B = 8:30 – 9:00am CT
etc.

Single Prints

Single Prints - Recent Examples in ES (PDF file)

ES - Time of daily highs and lows (updated)

These stats confirm what Linda teaches about Taylor: reversals typically occur in the morning and most days trade from low-to-high or from high-to-low.

As such, they are useful if your trading style is focused on capturing the main theme of the day (they are of less importance if you are a TTF scalper).

The statistics can give you the confidence to stay with a trade, or to get in to a trade midway through the day and play for an afternoon new HoD / LoD.

However, the stats are not the holy grail. They must be put into context, which for me means considering:

• Where are we in this auction (i.e. how many days have we traded high-to-low or low-to-high)
• The strength of the current auction
• Price action vs the Previous Day High (PDH) / PDL and the Open
• Price action vs significant support / resistance areas
• etc etc.

Chart 1: Frequency distribution of High of Day (HoD) and Low of Day (LoD) in each 30-min bar.


Chart 2: Frequency distribution of HoD and LoD in each 30-min bar on High Made First days.


Chart 3: Frequency distribution of HoD and LoD in each 30-min bar on Low Made First days.


Chart 4: Number of 30-min bars between HoD and LoD



The letters are the standard Market Profile characters for each 30-minute bar
i.e.
B = 8:30 - 9:00am CT – the first 30-min bar for ES
C = 9:00 – 9:30am CT
D = 9:30 – 10:00am CT
etc.

(n.b. The letters were the original half-hour time codes at the CBOT)

SRS

Taylor days – post game analysis

Doing some end of week analysis I was struck by the similarities between the Sell Short Day on Thursday (Dec 4th) and the Buy Day on Nov 21st.

Rather than being classic Taylor days (failed test followed by a swing in the other direction) the coils that formed on these days made them more difficult to read at the time, at least for me.  

(Though the market had clearly failed to get any momentum beyond the previous day's range, in both cases the Opening Price was holding and Value was being built in the direction of prior two days.)

The attached charts show the similarities between these two days and the subtle clues that showed the auction had indeed changed direction (before the breakouts).

Chart1: Sell Short Day (December 4th)


Chart2: Buy Day (November 21st)


n.b.
LMF = Low Made First
HMF = High Made First
OP = Opening Price
VA = Value Area
PDL = Previous Day Low
PDH = Previous Day High

SRS

ES Initial Balance Stats

The Initial Balance (IB) is the price range established in the first hour of trading. Peter Steidlmayer (creator of Market Profile) believed that the first hour was when the locals would attempt to find a price area where two-sided trade could take place.


Chart 1: IB proportion of the day's range frequency distribution

IB mean proportion of the day's range: 51%

IB median proportion of the day's range: 48%

IB median proportion when IB range is NR7: 37%

IB median proportion when IB range <= 60% of 10-day Avg: 35%

IB median proportion when IB range <= 80% of 10-day Avg: 40%

IB median proportion when IB range >= 150% of 10-day Avg: 64%

IB median proportion when IB range >= 200% of 10-day Avg: 80%

Chart 2: IB proportion of day's range vs. IB % of Avg


Chart 3: IB proportion of day's range vs. IB range

Range extension beyond both sides of the IB: 37%

Extension beyond both sides of IB when open outside VA: 28% ^#

Extension beyond both sides of IB when open inside VA: 39% ^#

VA = prior day Value Area

Data from ES day session from Nov 1st 2007 unless otherwise specified

#: This data is for ES day session from April 10 2008 - I will update these stats if they change markedly as the sample size increases.

SRS

Balance region

Chart 1: 10-Year Notes – 5 days of overlapping value


Chart2: 10-Year Notes – Composite Market Profile of the same 5 days

Watch for a breakout from balance. If price is accepted beyond the balance region the market will probably continue to auction in that direction for at least a few days. However, a false breakout (failed auction in MP parlance) can create short terms excess and lead to a strong move back through the balance area and out the other side.


Chart3: ES – 10 day Composite MP: The market is in the process of carving out a balance area between the October 6th gap and the October 10th low.

SRS

Value Area Rule - Market Condition

Hi Cleon,

Here are some general examples of the influence of market condition on the VA rule:

When the market is an a trading range – coming into balance – you often get 1 day up 1 day down sort of action. During such a noisy environment, in general the odds of the prior day VA getting filled would be higher than average. See Chart 1

When this happens the market is effectively carving out a higher timeframe value area, which will often be reflected by a 60 / 120min low ADX. See Chart 2 (same 4 days in Bund as Chart 1)

(This biref Steidlmayer article is worth reading.)

In a trending market, an open out of value in the direction of the trend (i.e. above the VA in an up trend) that then tests back into the VA, is generally less likely to fill. Gaps against the trend – for instance an open down below the prior VA after a high-to-low day in an up trend – are more likely to fill than average (this scenario would be analogous to a pinball buy). See chart 3

Dalton: “The direction of the current longer-term auction has an obvious influence on the momentum, or strength behind the value area penetrartion. When price auctions up into value during a buying trend, for example, the chances of continuation are much better than if the market were in a downward trend."

 

There are also some conceptual issues to be considered when assessing the value area of a particular day:

1. Value is created by rotations. Although a Value Area can always be calculated, those days which auction continuously in one direction are indicative of a market that is searching for a fair price. In other words those days that exhibit little price rotation (i.e. trend days) do not produce a true Value Area.

2. Dalton: “Narrow value is a sign of poor trade facilitation and lower volume. Because volume slows price, narrow value areas are more easily traversed than wider, high volume areas. Therefore, the Value Area Rule carries a higher probability when price enters a narrow value area.”

These are just some general points. Others may disagree with them and I do not in any way wish to present myself as some sort of expert. But, I believe these examples go some way towards explaining why, when assessed without taking into account market conditions or market logic, the VA rule is closer to a 50% tendency.

Tendencies such as the VA Rule, violation stats or the HoD/LoD times, can form the strategy, but effective tactics are still needed to enter (LBR set-ups) and manage (trail stops) each trade.

SRS

MP Value Area Rule (80% Rule)

As cleon pointed out in the prior post the Value Area Rule  is typically stated as:

If the market opens outside the prior day's Value Area and trades within that VA for two (consecutive *) half-hour periods, then the market has a good chance (frequently quoted at 80%) of filling that entire VA.

* Mind over Markets (p279) does not state the half-hour periods must be consecutive, just that the market show acceptance by printing inside the VA during two half-hour periods.

Day Session ES from 10th April 2008

Trading Days: 119

Open outside prior day Value Area: 76 (34 Above, 42 Below)

Two half-hour periods (double TPO) within prior day Value Area: 41

Completely filled prior day Value Area: 16 (39%)

Two consecutive half-hour periods within prior day Value Area: 40

Completely filled prior day Value Area: 16 (40%)

Completely filled prior day Value Area in single prints: 3

Obviously this is far from an extensive sample size and therefore the reliability of these stats is open to question.

However, the stats are consistent with Dalton's view in Mind Over Markets (p280):

“If a trader enters a Value-Area Rule trade without evaluating other market conditions, the probability that price will trade all the way through the value area is little better than a flip of a coin. 

"The power of the Value -Area Rule lies in your interpretation of surrounding market conditions. Through an understanding of the confluence of balance, value area width and market direction, you can identify the situations during which the Value-Area Rule offers a high degree of reliability.”

I will update theses stats in the future, if they change markedly.

 (It should be noted that the Value Area on any given day can vary across quote vendors i.e. CQG, eSignal, CISCO, Aspen, WindoTrader / Photon etc.)

SRS

Cash S&P Prior Value Area

Chart 1: Market Profile of the Cash S&P from January through October 2004. After rallying for most of 2003, the market entered a period of rotation and came into balance around 1125.


Chart 2: Weekly Cash S&P. The red box highlights the 2004 10-month balance. Will this prior Value Area provide some support?

SRS

MP for 8/19 - balance day anybody?

MP for ES from today for those who don't get mp charts

notice that every single period touches the POC

today also = NR7

maybe trendy wednesday / breakout mode leads to a nice move away from this area tomorrow

Market Profile – ES and NQ

Chart 1: ES MP shows signs of underlying higher time frame buying


Chart 2: NQ from the gap down on June 26 to date. The MP shows a well formed bell shape curve = balance. Just a different view of the 120-min coil that everyone has been watching.

SRS

Dalton Webinar (Text-Book Market Profile)

This is from a few months back (June S&P contract)-- but a template of a highly recurring z-day pattern.

20-Day POC coming into July 22nd