Monday, September 2, 2013

What I've learned

So far my journey to master the Market Profile has lead me to download a book on the subject and sit through a few free online videos on the subject.  As with anything understanding how and what the Market Profile is measuring is paramount.  You won't believe how many people use an array of technical indicators without having the slightly clue how and what they are measuring.  They simply follow the "rules" of trading the technical indicators such as go long when the squiggly line moves up through the 20 level or sell when it moves down through the 80 level.  If making profits using these simple approaches could be so easy won't we all be rolling in it.  Sigh!

To continue the Market Profile provides a statistical analysis of time and price, typically in 30 min intervals to create a graphical representation of a trading session.  The cool part about the Market Profile is that it will show you the amount of activity at each price level.  It will display the amount of volume traded at each price level as well as how often it traded at those price levels.  I won't get into the deeper discussions as to how to interpret this information because I would rather come up with own conclusions and ways of analyzing it versus regurgitating someones else's thoughts.   However, it appears to complement the theory of supply and demand and provides a closer picture of that battle on an intraday basis.  So the learning journey continues. 

As for the markets, the 30min PnF chart of the SPX highlights the areas of support and resistance.  You will notice that 1630.9 was support and once broken lead to a significant move lower.  The same can be said for the 1624 area only it was resistance and once it broke moved significantly higher.  Therefore, since support and resistance is both an art and science we can conclude that the area between 1624 to 1630 is currently the support area.  

The interesting part of the 30min SPX candlestick chart is the amount of volume transacted (left side bars) within the support area defined above (1624-1630).  The battle of supply and demand happens at these key inflection points and its clear that the professional money has been active at these levels.  Are they accumulating or distributing?  Sort of looks like a double (one could argue triple) bottom doesn't it? Lets watch and see. 

Thanks for reading. 

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