Category 1
Only trade in the direction of the trend (Trend is determined by a rising or falling Point Of Control/POC)
Trade setup #1a: In a down trending market, when the current session opens below the previous day’s Value Area/VA enter a short trade at the previous day’s lower VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points above the previous day’s upper VA.
Trade setup #1b: In an up trending market, when the current session opens above the previous day’s VA enter a long trade at the previous day’s upper VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points below the previous day’s lower VA
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Every off-floor trader would like to get a feel for how things really are on the exchange floor. Mastering Market Profile may help you get it.
Worried that you’ll never be able to compete with the floor traders? After all, they’re right there in the middle of the action. They’re privy to information that off-floor traders see late or maybe never. Once you start using Market Profile, however, you may find yourself with more information than the floor trader. No longer will floor traders, decked out in their colored jackets, frantically gesturing and scrambling to make themselves heard and seen by other traders, seem chaotic, intimidating, or bizarre. Instead, with the use of Market Profile, you will see the order in the markets.
J. Peter Steidlmayer developed Market Profile in the 1980s in conjunction with the Chicago Board of Trade. Traders who use it say that they get an in-depth understanding of the market, contributing to improved trading. Many factors can be monitored from Market Profile.
Market Profile is not an indicator in the typical sense. It does not provide buy/sell recommendations but acts more like a decision-support tool. It organizes the data so that you can understand who is in control of the market, what is perceived as fair value, and the direction of the price move. It is possible to extract enough information from Market Profile for you to position your trades more advantageously.
Market Profile is useful for the pit trader as well as the offfloor trader. The indicator can help the off-floor trader get a better sense of the market; prior to the introduction of Market Profile, only floor traders had access to this information. Although all references here refer to using futures contracts, Market Profile can be used just as effectively for other tradables. Software vendors such as Cqg and WindoTrader provide Market Profile displays for equities.
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