How To Use Market Profile [START NOW] | Trading Tutorials

what's up traders matt from the trade brigade here to cover everything you need to know to get started using the market profile we'll talk about what the profile is two really good reasons why you should be using it as well as a ton of different nuances that you can watch intraday that'll help you make better trading decisions i really do believe that this is the best tool for understanding market structure as well as inventory so if that all sounds good let's jump through a couple of quick slides and then check it out in real time

[Music] so what is the market profile and what is it not right so the market profile is not a trading strategy all by itself rather it's just a tool that's going to help us organize trading data now the really cool part about it is that it's going to offer us a third dimension that candlestick charts don't really give us so as we know a market profile chart traditionally looks like what we have here on the right hand side now this is made up of two separate components we have the tpo distribution which are these letters

here and then we have the volume distribution which is this more graph looking portion that's blue here on the right hand side and collectively they're called the market profile now don't worry about acronyms and fancy terms we're going to break everything down in really simple methods right so this tpo distribution as we called it simply stands for time price and opportunity the easiest way to think about this is right across the bottom axis the x-axis we still have time just like a candlestick chart and on the y-axis we still have price just like a candlestick

chart so each letter here is going to marry up to a time as well as a price and at that time and price we have the opportunity to either be neutral on the market go along the market or go short the market and that's as simple as it gets right a tpo distribution is simply showing us all the different places that a market traded during any given day so traditionally here on a profile chart we use 30 minute periods to denote different letters right so if we look at a regular trading hour session the bell

will ring at 9 30 a.m and from 9 30 until 10 a.m we're going to be printing the capital letter a okay so 30 minute periods here when we're looking at market profile if i go ahead and just put a rectangle around all of the a's all of those a's would have shown up on the chart from 9 30 to 10 o'clock now the next 30 minute period again not to insult anyone's intelligence would be from 10 of course to 10 30 right and from that time frame we're going to be printing the letter capital

b and if we just highlight all the capital b's we're looking at these three in the first column as well as these in the second column now don't worry if it doesn't quite make sense how they went from the first column to the second column but we're skipping and we see the letter d down here we'll cover that in the next slide but what i want you to take away from this is that each letter represents a 30 minute period we also were making a point to say capital letters right whenever we're looking at capital

letters in the market profile we're looking at regular trading hours sessions so from 9 30 until 4 30 in the futures market okay so stocks of course the cash close is at four but in the futures market we go to 4 30 and uh we're going to be printing capital letters for that time frame but from any time after the bell and traditionally we look at six o'clock until 9 30 the next morning we're going to start printing lowercase letters so if you ever see a profile here that has lowercase letters or if you run

out of lowercase letters sometimes they use symbols so you might see a squiggly tilde you might see an asterisk like this you might even start to see brackets and parentheses that's going to be an after hours or extended hours trading session which we oftentimes refer to as globex in the futures market so that should cover our tpos and now to cover the volume distribution it's very straightforward it's going to show us how much volume was transacted at any given price level remember that the y-axis just like a candlestick chart does still represent price and if

there's a lot of volume conducted at a certain price it's going to be evident inside of our volume distribution now there's a ton of things that we can learn from the volume distribution but we'll get into that later on what i want to do now is compare the two with a candlestick chart what we call so this would be candlestick right that's a 30 minute candlestick chart this would be what we call a split market profile and this of course would be known as just traditional market profile or you could call it a composite market

profile from this view you can easily see now how this a period is a 30 minute period and it correlates to about the same range as our first 30 minute candle i think the most evident one here is this candle the large red candle here on the candlestick chart is going to correlate to our d period this large range of letters here you can see how the two marry up and again just for some more proof here if we count one two three four candlesticks in and one two three four periods in they marry up

perfectly again something i want to point out here is that our volume is completely different and i think this is one of the keys of market profile if we look at the highs of this candle here then we're not entirely sure based on this vertical distribution here of volume or it's not really a distribution it's just a volume count we're not sure how much volume actually transacted at that level whereas in the market profile if we look at this a and marry it up across with our volume distribution we can clearly see that there wasn't

a whole lot of volume there so that's one of the benefits of the market profile charts and of course when you smush all of these letters up it's what we call compress a profile you turn it into a composite profile which looks like this and this would be the equivalent of your daily candlestick chart so hopefully that was helpful let's now talk about why we use the market profile so the main reason that we actually use the market profile is to identify areas of value because if we can do that we can find opportunity as

price disconnects from value one thing i want to remind you again is that market profile is the tool to finding these things but your strategy is going to tell you what to do with that opportunity so the more time that's spent at a particular price level the more perceived value the whatever it is that you're trading has at that level and you can associate time with volume as well it doesn't always go hand in hand but more often than not the more time you spend in a particular area or in this case at a particular

price the more volume trades at that price so for example sake we'll do a concrete one in just a moment let's say that we have commodity x right down here trading at fair value okay what happens if price starts to explore positively and disconnects from value can you see how there would start to be an opportunity if price is over here but we know value is really back here or what happens in the opposite case right let's say value or price starts exploring to the negative side or again is there opportunity here knowing that price

is advertising this when we know value is really back here to put some concrete examples to it let's say you walk by the apple store every single day and every single day for the last three months you've essentially seen this iphone selling for a thousand dollars we can just say that a thousand dollars for this phone would be considered fair value now what if one day you know it's been a thousand dollars for the last three months nothing has changed but you walk by one day and all of a sudden the same iphone now has

a tag price on it for two thousand dollars you're gonna you're gonna you know double take and say what the heck people buying this at 2000 are either getting ripped off or maybe this iphone starting to appreciate in value maybe it's rare maybe a lot of people a lot more people want it there's more uh demand than supply and value has to shift higher so there's opportunity here right so let's say that you're you you don't really believe the iphone should be worth two thousand dollars right so you go to the factory you buy them

at a thousand and you start selling them for two thousand again this isn't division here uh ignore that line there but let's say you subtract your initial investment of a thousand per phone from the 2000 that you get and again not to insult anyone's intelligence but you just made a thousand dollars per phone now what would that be the equivalent to in when it comes to trading right essentially what we've just done is short the iphone at this price expecting value to come back down to the one thousand dollar as we perceive fair value mark

okay so that's one way you could take advantage of that opportunity and the same exists to the downside right what's what if one day you walk by the store and all of a sudden it's advertised for 500 are you gonna jump on it and say oh my god 500 i know this is worth a thousand i'm gonna buy every single one i can and even if i don't make it to a thousand let's say i only make it here and i can sell these phones now for 750 i just made 250 bucks a phone for

not really doing a lot just for identifying that there's an opportunity where price has disconnected from value so hopefully you can start to see the advantages of trying to find where value is and no one summed this up better than jim dalton okay he's regarded as the expert the go-to guy when it comes to market profile he said that price is an advertising mechanism it can move back and forth not associated with value and time is going to regulate all advertised opportunities so it's time at those given prices and then volume is going to measure

the success or failure of those advertised opportunities right it's very simple again remember if the iphone was a thousand dollars that's considered value and price starts advertising for 500 what are people going to do are they going to jump on it are they going to buy it well there's an opportunity there and we're going to measure the success of that opportunity by the volume conducted so if a million people jump in and say i want to be a buyer at 500 well then prices are going to have to go back up right that's supply and

demand and the volume is going to be the success here if let's say only two buyers stepped in instead of a million at 500 then that will be a failure of the 500 advertisement and will likely have to auction lower to try to find more buyers so jim dalton really summed it up again i'd really encourage you to check out his stuff if you want to learn you know way way more about the market profile instead of just the basics but let's move on and start talking about how we can identify where value is so

the easiest way to identify where value is is to think about market profile like a bell curve or a normal distribution in this case we know that a one standard deviation move should encompass about 70 percent of the given distributions results right so if we pair this up with a market profile distribution we can see and again you would look at this traditionally rotated right 90 degrees to the right however if we just look at it in the same vein of a normal curve you can see that in this case we have a normal curve

and kind of in the middle here you can see that there's a darker blue section in our volume distribution now that's what's known as the value area and that's seventy percent or one standard deviation away from from the range on the day where the most volume 70 of the volume has traded on the day so that's really important to know and that's how we can start to calculate where value is also notice that there could be different places where this peak is right let's say that this peak is here we're going to call that a

normal day let's go ahead and say that the peak is on one end here that could either be a trend day it could be a p day or if we had the peak over here we could call that a trend day again or we could call that a b day a lowercase b day so all these things let's go ahead and dive into them a little bit more it's worth noting all of them because they're going to tell us a lot about the market so a normal day again is going to represent a normal curve

and you can see that here in the composite profile after the day has completed you can again remember that the dark blue area in the volume profile is our value area where 70 of the day's volume actually traded so that's worthwhile and worth noting when you see a normal day what you can conclude from it is that the market was in balance and often times when the market's in balance what will happen is in the earlier part of the session so a b and c will often times set the entire range for the day it'll

put in a high of day and it will put in a low of day and from there the market will balance out back to the middle what we call a reversion to the mean if you can identify these days taking place and again there are other tools that you should be using not just the market profile for identifying this one of them is the market internal so definitely check out this video up here if you want to learn more about that but back to this if you can identify this day what you want to do

is start fading the extremes and by fading we mean either buy the lows down here or sell the highs up here and what you're looking to do is retrace towards the mill of the profile something like this back and forth back and forth you sell the highs you buy the lows expecting prices to revert to the mean so these days again indicate balance the market is content with what it's doing the next type of day is a trend day and just because we have an uptrend day here on our hands doesn't mean that this can't

happen to the downside but for example sake we'll talk about the uptrend here as buyers responding to lower prices right maybe they're responding to lower prices or there there are just a lack of sellers and we get this upward trending market as no one is willing to sell at these low prices they want more more and more more we get a trending market again use other tools but if you can identify this these types of days early on in the session it's the best for getting along as early as you can and holding on for

as long as you can towards the close because more often than not you'll see the trend continue all the way up into the close a really good characteristic of these types of days is a really thin and drawn out profile what you'll notice in the composite version is instead of seeing you know a nice bell-shaped curve we actually get different sections of of places where there's protrusion right we see this at the highs in here as well as down here and we'll talk more about the nuance of that in just a moment but for now

take away from this that trend days are generally thin and long as opposed to short and stubby right we saw that in the neutral market you can see how stubby this is right in here as opposed to the trend day which is thin and drawn out again get long stay long or get short and stay short towards the end or until the end of the day the earlier the better then we have the p and b shape day we'll cover both of them because they do indicate different things instead of just trend one way or

another the p day is going to indicate short covering back to a prior area of value and what's really important to note about this and why it's different from a trend day is look at what happens here in a b as well as c period right you get very very emotional buying to the upside right and what does that typically indicate short covering right and why do we know that well also look at the volume down here it's not like there was a whole lot of back and forth trade here it was very emotional get

me out of this position i don't want to be short anymore just hit the market button get me out and that's what we can discern from a p day again if you can identify it early go ahead and get long in in either a or b but often times into this end of the session you don't really want to try to look for any more out of the move essentially if you look at what happened here from d until h really not a whole lot and as well as from i until n the market really

just went sideways and accepted these higher prices back towards what i would likely imagine was value now of course it makes sense that when you look at it in a composite light you just see the uppercase letter p again remember a characteristic of this profile is certainly the low and really thin volume in the post of the p now the same is true but opposite for our lowercase b day now in the lowercase b again you still get in the first couple of periods the really emotional response to the market and then after that you

get more of a sideways market and again this can often times offer more chop than clean trades back and forth this is going to indicate long liquidation right so this is instead of shorts getting too short this is going to indicate longs getting two longs usually close to the highs right and again our target here is going to be some prior area of value and that's where we're going to find that two-sided trade and acceptance and we can go from there right so basically you have three different types of days each one is going to

tell you something different and it's really important that you carry this forward someone who i i also look up to very very highly is peter reznicek right from shadowtrader.net and he says that everyone should have an ongoing narrative of what the market's telling them and carry that information forward that way you don't get caught up in the shock and awe of the market you're prepared for all of these different scenarios and you have a feel for what's going on underneath the hood he likes to use the term and you know many traders like to use

this term really mgi right so market generated information and his tool of choice is the market profile among other things but he does you know really really speak highly of this market profile and i think you should learn from him as well as jim dalton so that being said let's jump into some nuances here and what we should be paying attention to intraday if you've made it to this point in the video hit the thumbs up button and subscribe to the channel and let's get through these last couple of slides we're going to focus on

nuances that don't necessarily have to do with shape now the first set will be anatomy pieces of the market profile and how we can use them we'll talk about structural deficiencies in the profile as well as some scenarios that have very particular rules that we can use to take advantage of again opportunity that the tool market profile is presenting us so let's jump in and talk about anatomy first you may often hear the term point of control okay so point of control is abbreviated poc and again don't be intimidated by acronyms here everything has a

rhyme and a reason point of control is going to be the place that we deem the fairest price to do business and there's two points of controls i'll tell you which one i prefer but the first one is the tpo point of control it's the widest point on the profile you can see if i remove that black maybe that it's a darker shade of blue here across this wide point where we have one two three four five six tpo's wide it's the widest place on the profile it's where the most time was spent during this

trading session the other point of control is the volume point of control and that's this dark blue line through our volume distribution right here now that's where the most volume was conducted on the given day so oftentimes they're going to sort of coincide back to back be very very similar and you know maybe off by one or two ticks in the futures and if you're trading a stock they shouldn't be off by more than a couple of cents here but this should act as a target when you have a normal day and you're fading from

the highs down towards the middle or up from the lows into the middle okay so point of control is used more often as a target as opposed to a place to initiate a new position value area we sort of touched on earlier but it's going to be this dark blue shaded area on the volume profile or this shaded blue area on the tpo chart now i oftentimes disregard the value area associated with the tpo chart but i figured i would let you know that it still is a thing here but i focus mostly on the

volume value area right so this is as we discussed earlier one standard deviation worth of the day's volume or about 70 percent of the day's volume has traded in this range we abbreviate the top as value area high or vah so we have up here we'll just label this as v a h and the value area low of course is down here towards the bottom we have v a l for value area low the point of control will always fall somewhere in the middle of your value area and what you want to remember about the

value area is think back to that example of the iphone right if we're trading way down here price is down here but we know value is up here there's a potential opportunity there some things that we should make note of also is that value area low will offer resistance when coming up from the bottom and it will offer support when coming down from the top same holds true for value area high when coming up from the bottom it's going to offer resistance and when coming down from the top it's going to offer some support now

it's not going to work every single time but more often than not you do get some reaction at the value area something else to keep in mind here is that when we get to the platform we'll talk about this but what is happening with multiple days worth of value is it overlapping so let's say that this is a value area our next day value area is here our next day value area is down here right that might throw you for a little bit of a loop so pay attention to what's happening with value the next

thing to watch is our half back so half back is just simply 50 of the day's range and just like the point of control this is oftentimes more of a target as opposed to a place to initiate a new position next up we have the opening range hopefully half pack was you know simple enough to understand there that's this blue line going through opening range is a little bit more complicated and it depends on who you ask about the opening range opening range is abbreviated as or or you may also hear it as ib for

initial balance now if you ask some people they'll say it's the first 30 minute period of the day in which case we know that's going to correlate to a period so this blue bar on the side of the profile would represent the opening range if you ask someone else they might say you know what i was traditionally brought up as opening range being the first hour of the day so we'll extend this to include b period and now this full bar would represent the opening range now i traditionally do not use this and i prefer

to you know just look at the profile objectively without it but you know you could take a trade out of the opening range looking for a breakout or a trade down and out looking for the breakdown so those are my two cents on opening range just no i don't personally use it and then we have high and low volume nodes wrapping up our anatomy here pretty self-explanatory the highest volume node is of course the point of control after that you just look for areas that sort of stick out as mountain tops right so you can

walk it down putting a dash next to the really prominent high volume nodes and those are going to act as magnets okay that's going to draw price to it as opposed to repel price away from it now on the flip side of that coin we have low volume nodes and those are going to repel prices away towards the high volume node so we have low volume node in here there's a little valley in here i wouldn't really consider this one in here just simply because of how you know you know the magnitude sure it is

a bit of a dip but it is still relatively high volume i would say this is a low volume node this is a low volume node as well as in here we have low volume nodes so think of those as offering very little liquidity and price should move through it very quickly back towards an area of high volume let's now discuss some structural deficiencies the first structural deficiency that we'll talk about is the poor high and this is not to be confused with the weak high which we'll cover in just a moment basically what we're

looking at is an area in the profile where we have two tpos wide at the top instead of what we call meaningful excess if we look down here at the lows see how b period sticks out past the area of a b and gives us a small area where there's only one tpo wide in the distribution that's going to indicate the proper end to an auction and we're not seeing that here at the highs if we think about this logically and what this essentially means is any longs during today's session were unloading at the high

of day essentially causing a failed break of this high right there was no breakout to the high and that's typically not the way you want to see an auction end you want to see it end on a high right a euphoric move a sort of emotional move uh where you know you see an auction happening back and forth back and forth you're like wow i can't believe they're still going at these levels and boom then prices come back in after that emotional move this would be meaningful excess if we had a period print something like

this right if we had another a here and then another a up here and another a up here typically for meaningful excess we're looking for at least two tpos past this area where our overlap starts okay so two tpos defines uh meaningful excess anything underneath that would be considered a poor high or a poor low so the implications here are that we're uh we're looking for the first impulse to back off of this high because remember it is a weak level we have weak handed longs you look for the back off but going forward if

this area here was ever to be revisited in say the following day's session or even two or three days later we would expect that area to break because it lacks structural integrity now the same thing holds true for the power low but it's just the opposite right you can see we have good excess here at the highs these single prints stick out the top of the profile but down towards the bottom we just have f and g back to back here indicating that any shorts during the trading session were weak handed shorts they just basically

got it to low of day and then they covered right they got it to low of day and then they covered so again the first implication is that you move away from the poor low during this trading session and the second impulse would be later on at some point during the future if we were to revisit this low you should look for that to break and be violated because again it lacks structural integrity the next thing is the weak low and the weak high which again are not the same as the poor high and poor

low which we just discussed the weak low is a very visual level that only traders can see right it's not really something that a large buyer would really pay attention to a large hedge fund so on and so forth they don't care about this structural nuance so we call this a weak low instead of a poor low and in this example here do you notice anything peculiar about this area here this area here do you see anything weird about that notice how the low of this day here is almost the exact low of the overnight

session remember that the lower case letters here represent the overnight and the capital letters represent the regular trading hour session and then to take it one step further it's also the point of control from this prior day and here so we call this a weak level because only the very technical traders short-term traders are looking at this reference and probably buying it right so if we are to retest it we should expect it to break implications again it's a weak area of support very visual you may also hear this be referred to as a mechanical

low the same is true of course but opposite for the weak high again not a poor high but a weak high in this case do you see anything odd about this level here we have this high here this is the weak high do you see anything odd about where this is and where this is well it's certainly also aligning with the overnight value area low so to me this is a very visual reference point you're basically looking at prior day's low prior day's half back prior day's point of control priority is high value area high

value area low if any low or high in this case we're talking about weak highs if a weak high is going to occur at a very visual and nuanced level more often times than not one of those anatomy pieces that we covered in the first sort of nuance section so a week high here again the implication is that if this is to be revisited in the subsequent session so let's say we're trading over here our profile looks like this in the morning and then all of a sudden in the afternoon we're getting another single print

up here and then boom we revisit this high you would expect that to break because we have very short-term traders short-sighted traders who are active at that area and their hands are typically weak okay so that is a weak high or mechanical high as well as the weak low and mechanical low which we just covered on the prior slide the next structural deficiency to talk about are single prints as well as double distributions and they kind of go hand in hand that's why they're here on the same slide you may notice about this that we

have a distribution here as well as a distribution here and they're separated of course by what we call single prints so right in here we have an area in the profile where there's only one tpo why so what do we do with this well there's a couple of rules to employ here we're generally going to treat this area of single parent prints exactly like a gap okay so look at the top of this single print area as support if we come in from the top look for that to offer some support if we trade into

it though look for it to trade through it because as we know there's low liquidity there just look at the volume profile here there's basically nothing we could call this a lvn which as we discussed in that first section would be a low volume node and the market does not like low volume nodes it likes to move towards high volume nodes so that should fill almost like we would expect a gap to fill you can also expect to see a little bit of support at the bottom end here so something like that or if you're

coming up from the bottom a little resistance here looking for the back off on the first touch or if it breaks the gap essentially or single prints to fill to the upside so hopefully that wasn't too confusing just treat any areas of single prints on the market profile as if they were a gap the other thing that we can point out here is the double distribution and what we're going to do with this is treat it like a separate day okay so treat this as one separate day and treat this as one separate day so

i would still argue that value area is probably something like this 70 of that volume there and then value area here is probably something like this notice how the volume taper is much more up here and it tapers off towards the lows i would make the argument that 70 percent is actually skewed higher in this lower distribution whereas in here you know maybe we could actually redraw it maybe that is about 70 or the value area of this upper distribution so again you're treating each one as a separate day these pictures here on the right

hand side are just offering a little bit more context it doesn't have to be exactly like what we've just shown here on this market profile you can see in this one we actually get three distributions right two and third distribution is down there again your value area up here would probably be something like that your middle value area would be right in here and your lower value area would probably be something along those lines and we're going to treat each one of these as separate days so one two and three down here the other thing

i want to point out is of course single prints don't have to be in the middle of the market profile you can see down below here we have single prints now what would this day be essentially like we discussed earlier right what what shape what what type of day would this be right we have a p shaped profile and that's oftentimes going to coincide with single prints in the post of the p or the post of the b in the case of you know that that long liquidation type day the next thing we can talk

about is more of a situation in the market profile and we call this a spike okay and the difference between a spike and single prince is that it must be created in either n or m period basically late in the day right we know that m period is the last half hour before the cash close and end period sometimes extends into that 4 30 session and basically what it tells us is there was a late day move but we're not entirely sure if the market is going to accept that move notice how it's happening on

extremely thin volume up here as opposed to down here where we have all of this acceptance right there's a lot of volume there's a lot of transactions happening down here we could say that this is value right it is value you can see the dark blue is right here so that's a fair price to do business but as this shoots higher into the end of the day we now have to start raising suspicions are these prices going to get accepted are they going to get rejected so some rules we can use here again these are

some of these scenario driven things is that if we open above the spike highs so anywhere up here we're going to see that as bullish right the overnight activity basically is going to accept these higher prices and we'll treat that as a bullish outcome if we open anywhere inside of that spike so anywhere in that area we've just drawn that's going to add acceptance so we'll just put an a for acceptance because we are accepting those higher prices it's not like we're rejecting them but it's also not like we're just off to the races and

continuing higher that's more of a neutral stance on a spike and of course opening below is going to be the most bearish outcome so anything under here you would basically expect a rotation to wear i hope what you're saying is the point of control of this area in here because we know that should act as a target and a magnet being a high volume the most high volume node on the market profile so that's how you treat a spike and trade around uh with those particular guidelines in place the next thing to talk about is

one time framing now this is oftentimes uh something i mention in the monthly charts when we review them on the weekly watch list but it applies and sort of came from the market profile and basically what we're looking at is the current session to not violate the prior session high or low by more than two ticks so in this case we're looking at one time framing higher so a lows are here b lows are here c d e f g h even i see how i does not violate h by any more than one tpo

it's not a big deal and we're still technically one time framing higher same thing with j here k and l notice how they're equal and they don't take out j by more than two uh tpos to the downside that's still one time framing higher so this entire day was spent one time framing higher and the implications of this are that we do not want to try to fight this trend again does this look like a trend day or does it look like a normal day hopefully what you're saying is it certainly looks like a trend

day and you never want to be bucking the trend and market profile can help you identify when this is happening right so if you see one time framing oftentimes your first impulse should not be to go in the other direction next up we have volume taper and this is kind of the last one we'll leave off with and this is uh more for the experienced trader someone who gets a really good feel for the instrument that they're trading but whenever you're coming into a low instead of thinking of lows you know when they end on

a bang there being a lot of volume you actually want to think the opposite there should be a taper in volume something that looks like this towards the lows notice how up here we have five digits worth of volume this one just so happens to be 13 270 contracts as we move lower from there you get into four digits right of course there's an outlier here that has five but generally as you go you're getting smaller and smaller numbers smaller and smaller until you get into the hundreds and then boom whenever you see two digits

at the lows at least in the es futures that's a pretty i don't want to say a safe bet because there's no such thing as a safe bet in the market but that's a good indication that you are coming into a low for that particular session so whenever you see volume taper again remember that as more and more uh emotion gets brought into the market you're gonna get less and less bitters and then maybe if you think about an auction uh you know that might happen with items right and you have someone smacking the smack

in the gavel on on the uh podium they're like okay how many how many people haven't been and then you get really thin up there at the top and oftentimes it's just two parties going back and forth trying to outbid each other at the highs the majority of the market has said you know what these prices are ridiculous we don't even want to be involved and that's why you get the low low number of volume ticks down here at the lows and you oftentimes see inflection points so always look for either double digit or single

digit volume prints to be an area of or a significant pivot point or a low in that current day's session so that's going to wrap it up for now in terms of looking at different nuances the other thing i want to conclude with is the last reason we talked about one reason to use the market profile but the last reason to use it is to figure out who is in the market okay this is really important to understand and i think it ties everything together there's really two types of traders in the market right we

have short-term traders people like you and i and we have long-term position traders things like pensions 401ks people who just need to put money to work so if we can understand who is in the market we can make better trading decisions so if we're a daytime day time frame trader we're going to make really nuanced trades you're going to see a lot of weak highs a lot of weak lows a lot of poor highs poor lows if the day time frame trader is involved in the market and remember that these people are weaker handed so

if those levels are are retested you should expect them to break because they're weak handed if you see those levels not being respected the market profile anatomy that we discussed then you can generally assume that the other time frame traders these people here controlling lots of money in pensions and 401ks those are the ones getting involved they don't care about the prior point of control they don't care about where value is they're just going to initiate a position and hold on they're stronger handed again don't care about nuance and oftentimes they care about direction and

size so you'll see a lot of volume come into the market when this particular participant becomes active and these are the days where you see trend days okay you're not going to fade the highs and you're not going to fade the lows you're going to go with the trend because you can't overpower someone with such a large position so hopefully that tied it all up why you should be using market profile you now know some nuances let's jump into the platform and see this in context we are now over in tradeofate's trading platform looking at

the es futures on a tpo chart you can see that clearly up here and we're looking at a split profile because the day is not yet completed this orange line down here does represent the current price and you can see we are trading inside of j period let's just quickly walk through our anatomy in this particular platform i will put a box around our value area or developing value of course that's the lighter shade of yellow anything outside of that is just you know the rest of our volume profile our point of control is the

neon yellow line right here we know that's the fairest price to do business in the area where the most volume has transacted i would make the argument that as we spend more time down here the point of control may actually flip lower by the time the day actually closes it's something to keep an eye on it doesn't necessarily mean too much other than the fact that there is more price acceptance here at the lows as opposed to here sort of midway through the profile the other things that i want to point out is that we

do not really have any one time framing in effect at the moment but i will say that there was one time framing here right if we look at b c d and then up to e the market was indeed one time framing higher and f period here broke it to the downside that lighter white rectangle that i just sort of had the arrow on right through here is the tpo point of control but remember i oftentimes put more emphasis into the volume point of control there is good excess at the highs remember if we were

to just collapse this profile so we will go to remove splits and merges you'll see that there is good excess at the highs here in a period plenty of single prints sticking out the top but at the bottom at the lows there aren't so many single prints sticking out at the bottom so we would start to consider this a potential for a poor low inside of today's session now let's scroll back and start to look at some other nuances when we look at a little bit more than just one profile at a time i'm going

to scrunch this up just a hair here so we get a couple more profiles on the screen at a time and that looks about good to me so what i want to point out and the main thing remember is that we're using the market profile to really identify areas of value look at the value area here the overnight value here value here here i'm just going to highlight a bunch of these and i want you to sort of think as i'm doing this what is going on with value is it making progress in one direction

or another is it overlapping is it clean to the upside or downside and i mean in simply looking at the boxes i've drawn here it's not really clean it's really overlapping and what we can say about this is the market is in an overall state of balance when the value area is not making significant progress in one direction or another so we would call this balance as opposed to breakaway value now this would be a different story if value started to look something like this so here's our value here instead of this one being up

here maybe it's overlapping to down and then our maybe our next value area is down and then maybe this value area is down here that would be a sign of a more trending market but what we have on our hands in this particular case here the market is in a firm state of balance just kind of rotating back and forth with a lot of overlap inside of the value the other thing i want to point out is a couple of instances of poor low that i'm seeing and uh what do we have right here right

so poor low went right to the overnight point of control it's also a point of control from way back here close to this low as well so you might also refer to this as a mechanical or weak low and what do we know about that well the first impulse is to back away and we know that that was the impulse because we can see that n period n period where r u m period rather is kind of in here right so m period did make its way away from that poor low but as it's revisited

in the next trading session this one over here that level is broken right and we did trade underneath it now what about this poor low was that one broken well certainly look left or excuse me right get my directions messed up and we broke that to the downside so poor lows were repaired in both of these scenarios the other thing i want to point out is that we did say the market was in balance because value was sort of overlapping to unchanged right and what do we also know about a market in balance oftentimes you're

going to see normal days so what do we have here a very normal distribution it's not overly skewed i would even argue that this starts to feel more normal as opposed to something like this what would you say this day here feels like i would certainly argue that it feels like a trend day right it's a long and thin profile as opposed to a stout and a short profile so let's actually split it and look at it and you can certainly see that a certainly trends lower b trends lower we sort of find some sideways

acceptance and then trend lower into the end of the day so a trend a was on our hands there but what happened with value what happened with the point of control did the point of control really migrate all the way down towards the lows not really it was kind of smack in the middle here but it's just something to keep an eye on remember with market profile it's all about narrative and carry forward remember that is what peter told us and that's what we need to carry forward when we're looking at the market profile it's

really about keeping a story going in your head what's happening with the profile is it doing what it should do is it not doing what it should do where is value where does the opportunity lie and can we take advantage of that opportunity so i hope this video was helpful and at least getting you started with market profile again remember definitely check out jim dalton's work peter reznichek's work both of those guys are experts in the market profile and i you know aspire to be at some point in my own future here uh but if

you found the video useful let me know down below in the comments section or simply leave the video a thumbs up if you appreciated it again do the same things consider subscribing to the channel if you enjoyed the content and want to see more and all of that being said i wish you a green trading week