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the interpretation and application of price action concepts

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Trading Methods For Market Profile

(Category 1)        (Category 2)  right click to save as word doc


I believe document is from BobR, a prolific poster and successful trader. It was passed to me from a trading buddy who trades Market Profile as part of his main style. He has been away from trading for a long time personal reasons. He is a very successful trader. His success using Market Profile turned me on to it. My thanks to both for sharing.

 

Only trade in the direction of the trend (Trend is determined by a rising or falling Point Of Control)

terms used:

VAL = Value Area Low  VAH = Value Area High  LOD = Low of Day  POC = Point of Control

HOD = High of Day  DBY= Day before Yesterday  IB = Initial Balance

 

Trading Methods For Market Profile - (Category 1)

Trade setup #1a:  In a down trending market, when the current session opens below the VAL enter a short trade at the VAL and again at the POC. Place a protective stop for both trades 1.5 points above the VAH.  

Trade setup #1b: In an up trending market, when the current session opens above the VAH enter a long trade at the VAH and again at the POC. Place a protective stop for both trades 1.5 points below the VAL.

Trade setup #2a: In a down trending market, when the current session opens within the VA and at least 2 points below the VAH enter a short trade at the VAH. Place a stop 1.5 points above the DBY POC.

Trade setup #2b: In an up trending market, when the current session opens within the VA and at least 2 points above the VAL enter a long trade at the VAL placing a stop 1.5 points below the DBY POC.

Trade setup #3a: In a down trending market, when the current session opens above the UVA and below the DBY VAL enter a short trade at the DBY VAL and again at the DBY VAH. Place a stop for both trades 1.5 points above the DBY VAH. If stopped out on this setup and price remains above the stop level, change directional bias for all category 2 trade setups for the remainder of the day.

Trade setup #3b: In an up trending market, when the current session opens below VAL and above the DBY VAH enter a long trade at the DBY VAH and again at the DBY VAH. Place a stop for both trades 1.5 points below the DBY VAL. If stopped out on this setup and price remains below the stop level, change directional bias for all category 2 trade setups for the remainder of the day.

Trade setup #4a: In a down trending market, when the current session opens above the DBY VAL and below the DBY POC enter a short trade at the DBY POC and again at the DBY VAH placing a stop 1.5 points above the DBY HOD. If stopped out on this setup and price remains above the stop level, change directional bias for all category 2 trade setups for the remainder of the day.

Trade setup #4b: In an up trending market, when the current session opens below the DBY VAH and above the DBY POC enter a long trade at the DBY POC and again at the DBY VAL. Place a stop 1.5 points below the DBY= LOD. If stopped out on this setup and price remains below the stop level, change directional bias for all category 2 trade setups for the remainder of the day.

Profit targets for all trades should be in consideration of the risk of each respective trade and should be placed in consideration of the previous days POC, VAL or VAH   


Trading Methods For Market Profile - (Category 2)

terms used: DVAH = current session Value Area High    DVAL = current session Value Area Low      DPOC = current session POC

Category 2 trades are based off the current sessions DVAL, DVAH and DPOC with profit targets of approximately 2 points (they will generally setup after steps 1 and 2 have occurred in the market profile’s development)

When a Category 2 trade’s entrance level matches up with a VAH  It is referred to as a Category 2+ trade (category 2+ trades are generally good for 3 or more points)  

Step 1 ...being vertical movement of price. Step 1 will generally take place during the Initial Balance period of the day (the first 60 minutes)

 

Step 2 ...being the capping of step 1. Step 2 often occurs during the IB period as well  

 

Step 3 ...is when the market begins to move more in a horizontal direction than vertical direction and the bell curve begins to take shape  

 

Step 4 ...is when the bell curve is becoming fully developed and its DPOC tries to drift towards the center of the IB, if it is not already in the center (occasionally steps 3 or 4 do not fully develop and the market enters step 1 again, this is known as minus development)  

 Minus development is very helpful in showing the direction of the market.

   

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