Though the Market Profile Chart was developed decades ago, still it is used widely mainly for intraday trading. The technique was introduced first by J. Peter Steidlmayer, a trader at CBOT (Chicago Board of Trade). As a part of the CBOT product, the market profile was introduced to the public in the year 1985. Many traders still find it difficult to understand. The article will cover the basic guidelines of the MP technique. At the end of the post, I will also present you with a Market Profile AFL for AmiBroer.
What is Market Profile
Market Profile is different from the traditional technical indicator. It requires a keen observation and a parallel reading to understand the real-time information regarding trade. The chart technique is consists of each day’s trading session. It determines who is the controller of the market, buyer or seller. It organizes a set of data which indicates where price traded throughout the day.
It looks like a perfect bell-shaped curve with some unique features. in order to understand the structure clearly, an image is given below:
The above image is a pictorial presentation of the Market profile. The vertical space refers to as price zone while the horizontal is time. The value area represents an equilibrium point between two main controllers of the market, buyers, and sellers. Each day the market develop a range for the day along with the value area. In order to understand the market profile, the volume is the key ingredient. The upper level of the value area is called Value Area High while the lower level is called Value Area Low.
TOP (Time Price Opportunities)
Market Profile is made up of TPO (Time Price Opportunities). Letters are assigned to each half an hour or 30 min period of every trading session. By using 70% of the days TPOs a value area is being calculated.
The picture shows buying and selling tail along with value area, the point of control and closing range. Closing Area is always near to closing point. As I have told you each letter represents 30 min, like, A: 8.00-8.29 B: 8.30-8.59 C: 9.00-9.29 and so on.
Therefore, the technique is a way to simplify the price action of the market. It also determines the are of fair price value. You can download the AmiBbroker AFL from this specific link. Please check below to know how the Amibroker AFL looks like.
The AFL will work on recent versions of AmiBroker. This technical indicator is best suited on intraday charts. Read more about MP before applying it to real accounts.