How to Read a Market Profile

Chart?
July 13, 2015 by Rajandran
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Who should start reading a Market Profile chart?

Market Profile is not a trading system but a market generated information and
a decision support system along with your existing trading systems. It
provides you knowledge about who is in control in the market (Long Term
Players, Short Term Players, Day Traders), directional conviction. Market
Profile gives an idea to a day trader about where to take a trade and which
tend to play for the day based on trend conviction.

Nifty Futures – Day Profile

Market Profile study is different from traditional technical analysis indicators.

You need to unlearn lots of your so-called traditional technical analysis
learnings before diving deeper into it. Like any other technical analysis
studies, Market Profile consumes lots of time in learning. It requires at-
least a live observation for 3 months and parallel reading is needed to
understand what other market players are trying to do and how the pro
traders and institutional players are driving the market. As a human trader, it
often happens that we tend to see what we want to see and react based on
limited information. Market Profile solves this perceptual blindness to some
extent.
Market Profile talks about how auction takes place in the market. Financial
Market is all about two-way auction process where buyers and sellers both
drive the price up and down. The byproduct of the two-way auction process is
market-generated information. By reading the market-generated information
one can learn who is in control in the market(Buyers or Sellers) and how
much confidence they are in driving the prices higher or lower. It also helps a
day trader to stay away from the retail style crowd play most of the time.

How to Read a Market Profile Chart

Market Profile was developed by legendary CBOT trader Pete Steidlmayer in

1984. It shows where the auction of the trading instrument, explains where
the crowd trades most of the time for the day, where trading volume is
accumulated most of the time, where trading volume is minimal or absent.

Market Profile is not a time-based chart rather it organized the trading data
and charts the relative frequency of trading at various price levels. By
organizing the trading data in terms of profiles (Alphabets) one can study the
market structure and market dynamics. Typically Day profile is meant for Day
traders where each and every day a free-flowing graphical format called
profiles are plotted as shown above.

Readings: How to Get Market Profile and

Footprint Profile Charts?
Basic Market Profile Terminologies

TPO – TPO or Time Price Opportunity is the basic building block of Market
Profile. Each and every letter in the chart represents a TPO. Which in turn
represents a point of time where the market touches a price. Each consecutive
letter denotes a 30min period of Market Activity. In our example, as shown
below the letter ‘A’ represents how the price traded for the first 30min. Letter
‘B’ represents the next 30min of activity. And Letter ‘C’ and ‘D’ represents
subsequent market activity details and so on.
TPO Size: Practically speaking we need to define the size of TPO to make sure
that your entire profile is visible. Generally one can try in Nifty Futures with
TPO Size of 3 which mean each and every letter represents a block of 3 points
in Nifty Futures. And TPO Size should depend upon the Trading Instrument.
For greater accuracy of Key reference levels, it is advisable to use TPO size as
less as possible but with higher TPO Size more historical data can be seen and
key reference levels out of range can be seen with higher TPO Size.

Generally TPO Size = Tick Size x Price Per Row

For example, if TPO Size = 80 and Tick Size is 0.05 then the TPO Size is 4
points. By default Ninjatrader uses tick size of 0.01 and can be changed
depends upon the Symbols tick size. Settings in Ninjatrader are shown below

Initial Balance (IB) : Initial Balance represents the first hour of trade.
Typically the high and low range of the letters ‘A’ & ‘B’. Longer the length of
the Initial Balance stronger the conviction of Long term and Short term
players.
Point of Control : Point of control is the price where most of the trade for the
day happens. In other words the price where more number of TPO’s in a row.
Todays ongoing POC levels are represented as DPOC (Developing POC) and
Yesterdays POC (YPOC) and Previous POC levels are plotted as dotted green
lines as shown above.

Value Area : Value Area is the fair price zone where the Other Timeframe
Players (Long Term players and Shorter Term Players) loves to trade in this
zone. 70% of the day’s trading happens here.

Value Area High (VAH) – The upper level of value area. (upper Red Bracket
Level). YVAH – Yesterday’s value area high is marked as Red Dotted Line.

Value Area Low (VAL) – The lower level of value area. (Lower Red Bracket
Level). YVAL – Yesterday’s value area high is marked as Blue Dotted Line.
Single Prints : When there is only one TPO in a Row. From the above picture
you can identify that Letter ‘D’ and ‘L’ are single prints.

Range : High-Low range for the day

Open Range : First 10 minutes of the market movement range. It is

represented as the Blue Vertical lines in the Initial Balance (IB)

Range Extension – An extension of price above or below the initial balance.

High Value Node (HVN) : An HVN is a price area of high TPO count or
volume. The market traded for a long time at this level. These often form
support or resistance levels when the price re-visits the area.

Low Value Node (LVN) : An LVN is a price area of low TPO count or volume.
The market did not trade for very long time at this level. These often form
support or resistance levels when the price re-visits the area.

In the next section we will discuss more about types of markets, market
participants and different profile patterns.

Market Profile : Balanced and

Imbalanced Markets
July 20, 2015 by Rajandran
In the last tutorial we discussed how to read a market profile charts and in
this section, we will cover different types of markets (Balanced Markets and
Imbalanced Markets) and provide a fair idea who is in control for the day.

Balanced Market: It defines a range bound market(sideways) or a bracketed

market [where price rotates within the bracketed range]. Balanced markets
show there is a lack of conviction among the other timeframe buyers and
sellers and typically results in a two-way auction process and the price
movements occur within the range.
The above image shows a typical balanced profile (Bell Curve Shaped) where
the price rotates within the price range [8609-8654] for the whole day.
Volume plays an important role in Market Profile. When Prices move outside a
balanced area, or trading range, without the presence of volume, it tends to
return to the area. Generally, the participation of the Longer Timeframe
trader(Buyers and Sellers) are minimal and they don’t have a strong influence
in the market direction. The whole day is either controlled mostly by shorter
timeframe traders or the locals (Day Trader). Such rotational days provides
very minimal opportunities for a day trader.

Balanced profile days are typically slow and boring. Most of the trend trading
strategies fail during these days and sometimes could yield consecutive losses
in a stretch when the markets are highly compressed for more than 3 days.
Identifying such days during the development of the profile are the key for a
day timeframe players to set ‘what to expect from today’s market’.

Balanced Market Occurs

1)Before any bigger economic events, news are expected (e.g RBI policy
announcement, FED meeting ..etc)
2)Consolidation in the market after the uptrend or downtrend.
3)Low Participation from the Other timeframe players or Institutional players
(Christmas & New Year holiday season)
4)Lack of liquidity(both buy side and sell side) in the market.

The result of this price rotational process is the discovery of prices that are
acceptable to both the buyers and the sellers.

Imbalanced Market : It represents a trending market (uptrend or

downtrend). Imbalanced market shows the conviction of other timeframe
players. The auction is said to be one sided or directional where there are
either more Buyers than Sellers or more Sellers than Buyers depending on the
direction of price.

Imbalance of buyers will drive the prices higher till the buyers exhausted and
the sellers take control of the market. And the Imbalance of Sellers drives the
market lower till the sellers get exhausted and the buyers take control of the
market.
The above picture shows the imbalanced profile. The days are typically
elongated and vertical. And the range extension is typically one-sided most
of the days. Range extension confirms the presence of other timeframe
players. Typically these days are fast and highly volatile and the risk reward
ratio for the day trader is much higher on trendy days.

Imbalanced Market Occurs When

1)Major economic event days (RBI rate decision day, Election Results Day,
GDP Announcements…etc)
2)Major catastrophic events.
3)Opening Gap Up or Gap Down days due to major positive or negative news
impact.
4)Strong Global Markets Sentiment.

In the next session we will be discussing about different types of profile

patterns and its significance.

Market Profile : Different Types of

Profile Days
July 23, 2015 by Rajandran
Welcome to Market Profile Series. In the last tutorial, we saw the different
types of markets (Balanced and Imbalanced). In this tutorial, we will be
discussing the different types of Market Profile Days. By analyzing the shape
of the profile, one can easily identify

 who is in control in the market.

 whether other timeframe players are present for the day.
 What the market is trying to do. Which direction the market is
attempting to move
 Which are the key levels the market is attempting to test or re-visit

If you are new to market profile it is recommended to start here How to read a
market profile charts

Non-Trend Day
Non Trend day is a balanced market profile which occurs before a major
economic event, news, earning result outcome to happen result in lack of
participants and a typical dull boring day. Range (high-low) for the day is very
compressed and the risk-rewarding nature for an intraday trader is very less.
Such days are characterized by low volume where long timeframe players
dominance is clearly missing and the day is purely controlled by Day
timeframe traders. Only scalping the market favors an intraday trader on
these non-trend days.
Non Trend Days are mostly inside day where the current day’s range is within
the previous day’s high-low range and the price rejection (at high or low)
happens near to the previous days high volume node. There is no range
extension on either sides which shows lack of other timeframe traders and the
price rotates within Initial Balance. Market shows very low volatility and the
Initial Balance is very small.
Normal Day
Normal day is a balanced market profile but with a wider Initial Balance. It
occurs generally 65% of the total profile, the most widely seen profile in any
markets. Trading centers around the point of control (fair place to conduct
any business). One-sided range extension is seen or at time price trades
around the wider initial balance with more trading activity balancing around
the point of control.
Price generally rotates near the center of the profile and the maximum
participation happens at the center of the profile with higher volumes at the
POC (point of control). Single prints(Buying tails and Selling tails) on both the
sides indicates lack of conviction among both the other time-frame buyers and
sellers. Profile shape looks like a perfect bell-curved shape.

No one in control of this market type and the risk-reward ratio is higher for a
day trader at the extremes. Wider the initial range, more risk-rewarding for
the day trader. However, the profile is low risk rewarding for new shorter-
term traders or long term players (who holds the position for more than a
day) as the market closing is very close to the center of the profile.

A Profile day with wider initial balance with no range extension is also
considered a normal day.

Normal Variation Day

Normal Variation Day is typically an imbalanced profile and the day is

dominated by large timeframe players (Buyers or Sellers). Long time-frame
players are waiting for the market to settle down where they consider the
price to be fair and then they take control who drives the market aggressively
post 11.00a.m or 12.00p.m with the range extension outside the initial range.
The range extension is more than 2 times the Initial Range And the Initial
Balance is typically smaller than the normal day but higher than the trend day.
The above picture shows a typical normal variation up day where the range
extension happens in the ‘G’ period and the length of range extension is 2x
Initial Balance.

Trend Day

Trend day is an imbalance profile where the day is controlled by the long
timeframe participants and the conviction is very strong among the long
timeframe players right from the beginning of the market. Other market
participants have no options other than aligning in the direction of a longer
timeframe. Many Short-term traders and intraday traders have the
characteristics of trading against a trend day.

A Perfect Trend Day one timeframes throughout the day continuously. Hardly
such trend days breaks the one-timeframing once.
Profile shape is vertical, elongated and very few price rotation and a clear sign
of one-sided trend right from the beginning. And the Value Area is typically
very large on a trend day. Risk-Reward Ratio is typically higher for a day
trader during Trend Days.

Double Distribution Day

Double Distribution is an imbalance profile and one form of trend day where
Initial Balance is small and the first price rotation (1st Balance Region)
happens at Initial Balance. Then, the larger timeframe traders take control and
drive the price in one direction. In the later session, another price rotation
happens at the other side of the edge(2nd Balance Region). Both the price
rotation regions should be separated by single prints. Risk-Reward Ratio is
typically higher for a day trader during Double Distribution Days.
Neutral Day Center

Neutral Day Center is a balanced profile where the initial range is smaller than
Normal day. Both the Larger timeframe buyers and Larger timeframe sellers
are Present. They don’t trade directly each other but the intraday trader will
act as a mediator between both the larger time-frame buyer and seller. Range
Extension happens on both the sides (i.e Initial Balance Breaks out on both the
sides). First half will be dull boring with low volume however the second half
will be mostly dominated with bigger volumes and price finally manages to
close around the center of the profile.
Neutral Day Extreme
Neutral day extremes are quite common on event days, days where both the
larger timeframe players fight. Initial balance breaks out on both the sides but
price managed to close at the one side of the days extreme.

The first half of the day is dominated by traders with low volume transactions
followed by larger timeframe breaking the Initial balance on both the sides
with strong volume.

P Profile Shape
P Profile days are short covering days and the letter A or B forms the bottom
with single prints in the Initial Range and market opens at the bottom of the
profile. The price rotation happens at the top of the profile (i.e at the range
extension area).
b Profile Shape

b Profile days are long exit days and the letter A or B forms the top with single
prints in the Initial Range and market opens at the top of the profile. The price
rotation happens at the bottom of the profile (i.e at the range extension area).
Risk Reward ratio

 lower in Non-Trend Day, Normal Day.

 neutral in normal variation day and Neutral Day
 higher in Trend Days and Double Distribution Day

Initial Balance Range

 Non Trend Day – Narrow IB

 Normal Day – Wider IB
 Normal Variation Day – less than Normal Day IB
 Trend Day – Narrow IB
 Double Distribution Day – Narrow IB

In the next tutorial we will be discussing about the how to trade 80% rule , a
simple and effective strategy to trade value area

Market Profile – How to Play 80

Percentage Rule
July 27, 2015 by Rajandran
Welcome to Market Profile Series. In the last tutorial we seen different types
of Market Profile Days and in this tutorial we will be discussing about a simple
but very effective strategy based on value area which helps intraday traders to
bring a lot of trade conviction.

If you are new to market profile it is recommended to start here How to read a
market profile charts

Market Profile – 80% rule which was first mentioned in The Profile Reports
(Dalton Capital Management 1987 – 1991). It says if the market opens either
above or below the value area and test the value area high/low within 2
consecutive 30 minutes (i.e letter ‘A’ or ‘B’ touches value area) then there is a
80% chance that it will fill up the complete value area.
When the price open above value area and return back to the value area
within the first hour indicates the Buyer or Seller are not confident about the
direction and soon we can expect the auction to continue fill the complete
value area. In the above picture you can see that market opened below
previous days value area and reverses the direction soon to test the previous
days value area at the letter ‘B’ which activates the 80% rule.
Here is another example in the above picture price opens above previous
value area high and touches the value area at the letter ‘A’ however the next
30min price gone outside of the value area. Now to trade this rule one have to
wait for the price to revert back to value area again and should trade for next
2 consecutive 30min bars. Letter ‘E’ and Letter ‘F touches the value area high
and now one can expect the price to auction towards value area low.

80% rule is also applicable if the market open within the value area in the 2
consecutive 30min bars and moves out of the value area. One can trade this
80% rule if the price reverts back again to value area for two consecutive
30min bars.

However if price opens above/below previous days value area and haven’t
return back then it is a sign of one sided directional move

Watch Live Market Profile Charts

2 Bracket Rule

2 Bracket rule comes into play when the price open above/below value area
and the price touches the value area within first 30min and the second bar
trades within the value area then 80% play condition is satisfied and one can
look for the value area to get filled up. Conservative traders may wait for the
2nd 30min bar to close but if the markets are faster it will fill the complete
area within the available short duration.

In the next tutorial we will be discussing about the different opening types
and how it gives more conviction for a day trader on trend direction.

Market Profile Open Type and

Confidence
August 1, 2015 by Rajandran
Welcome to Market Profile Series. In the last tutorial, we have seen How to
Play 80 Percentage Rule and this tutorial we will be discussing the profile
open types and the other timeframe traders confidence. Reading the profile
right from the market day open gives more confidence to a day trader towards
trade conviction. The confidence level of the Other timeframe trader (Long
Term or Positional trader) can be analyzed through the market opening.

If you are new to market profile it is recommended to start here How to read a
market profile charts

Open Drive

When the price open above/below the value area and outside yesterdays
trading range and auctions(moves) one sided right from the beginning
towards the opening direction. It shows the high confidence level of other
timeframe traders(OTF) with strong directional commitment.
The above picture shows, price opens lower on Day 2 and below the
Yesterdays Value Area and Below Yesterdays low. Market Opens Imbalance
which indicates the presence of Other timeframe players and starts auctioning
lower and closed near to the day low. Clear Sign of other timeframe sellers in
control right from the market open.

Typically the low made in the first 30 min will not be breached during the
intraday session.

Open Test Drive

When the price open above/below the value area and outside yesterdays
trading range and test the key reference level(Value Area Level, POC level,
Prev day high/low) on the reverse direction and auction back towards the
market open direction. This type of market open type shows less confidence
less than Open Drive.
the above picture, price open high on Day 2 and above yesterday’s high value-
area and above yesterdays high. Market Open Imbalance but the traders
reverse the price towards yesterdays POC level followed by Other Timeframe
Buyers taking control and auctions higher on the upper side.

Open Rejection Reverse

Market Open Strongly higher/lower test a reference point

(Resistance/Support) price rejects from there and auctions in the reverse
direction.
In the above picture price opens higher and above value area but soon finds
resistance at higher levels followed by price reversal towards the downside.
Such kind of auction happens near the end of the bull market or end of the
major trend.

Open Auction In Range

When the volatility is very low and market opens within previous value area
and previous days high-low range indicates market is balancing and one can
expect price rotation at this zone. Complete lack of Other timeframe traders
and trading opportunity for a day trader is lower compared to other open
types. In classical technical analysis the day is represented as ‘ínside day’ and
price rotates around the day open. Other timeframe traders are not present
till end of the market.
The above provide shows the open is in-between value area and inside the
previous high-low range. Days are boring until the market close.

Open Auction Out of Range

Price opens above or below the previous day’s range and auctions back and
forth around that opening values. Such open lead to a conviction that the OTF
buyers or sellers have stepped in and will manage to drive prices in their
direction.
In the above example price gaps up and open higher but later the price rotates
near the open most of the times. Later Other timeframe buyer entered and
pushed the price higher. Open Auction generally shows low conviction on
market direction by OTF buyers or Sellers compared to other open types.

In the next tutorial, we will be discussing more on Spike Concepts and Spike
Rules.

Market Profile – Spike and Spike

Rules
August 10, 2015 by Rajandran
Welcome to Market Profile Series. In the last tutorial we seen Market Profile
Open Type and Confidence and this tutorial we will be discussing about What
is Spike & Spike Rules.

If you are new to market profile it is recommended to start here How to read a
market profile charts

Spike

In Market Profile terms spike is nothing but last minute rally or last minute
sell off typically in last 30-45min. In technical terms it is defined as late price
probe either on the upside(rally) or on the downside(sell off). By observing
Spike action in market and the next days follow through price action one can
determine whether the previous days spike action is false move to confuse the
traders or it is going to create a sustainable trend towards the spike direction.
[Nifty August Futures Daily Profile Chart showing Spikes]
Spike Rules

Last 30-Minute Rally

If previous day was a spike on the rally and today’s open is above yesterdays
spike high then possibly trend could continue in the upward direction.
Previous days base of the spike(bottom of spike) becomes the support.

If previous day was a spike on the rally and today’s open is below yesterdays
spike bottom then possibly trend could auction in the reverse direction.
If previous day was a spike on the rally and today’s open is between the spike
zone then probably price may be tried to follow two-way auction process and
may try to find a new acceptance zone.

Last 30-minute Sell-off

If previous day was a spike on sell-off and today’s open is below yesterdays
spike low then possibly trend could continue in the downward direction.
Previous days base of the spike(top of spike) becomes the support.

If previous day was a spike on sell-off and today’s open is above yesterdays
spike top then possibly trend could auction in the reverse direction and could
auction upwards.

If previous day was a spike on sell-off and today’s open is between the spike
zone then probably price may be tried to follow two-way auction process and
may try to find a new acceptance zone.

In the next tutorial, we will be discussing more in-depth about Failed Auction
zones.

Market Profile – Failed Auction

October 9, 2015 by Rajandran
Welcome to Market Profile Series. In the last tutorial we seen Market Profile
Spike and Spike rules and this tutorial we will be discussing about What is
Failed Auction and how to play it. Failed Auction is a Market Profile Pattern
brought to the world by Ray Barros of Trading Sucess. Failed Auction provides
trader a great oppurtunity to trade with dynamic mindset and constructing
his/her trading rules accordingly

What is a Failed Auction?

Failed Auction is often a successful trading pattern in market profile. It occurs

when the Initial Balance (first 60min high – low) is taken out and later within
30mins, price pullback happens followed by the price action towards the
other side of the Initial Balance as shown below. Failure to hold the Initial
Balance(IB) break zone for more than 30min is said to be failed auction. next
days initial price reaction is likely in the opposite direction of the failed
auction zone and later Failed auction Zone is expected to be revisited within 5
days (as per Ray Barros). Thus provides tremendous trading opportunity for
traders to play this pattern towards the failed auction zone.

Failed Auction Example from Nifty Futures October Contract

Above picture shows Nifty futures October Daily Profile Chart and you can
notice the formation of Failed Auction where Letter ‘J’ done the Initial Balance
(IB) breakout on the upper side followed by pullback within 30min back
inside the initial range and then price moved towards the other side of the
Initial Balance (IB). so the high of letter ‘J is considered as the fail auction
repair zone. And the very next day is RBI policy announcement Nifty Futures
Gapped down due to global sentiment there by creating a sentimental gap
followed by retesting/revisiting/repairing the failed auction zone.
Nifty Futures – Failed Auction Zone Created at 8249

Here is another example where a failed auction pattern is formed recently in

Nifty futures October contact at 8249. and you can notice the formation of
Failed Auction where Letter ‘C’ done the Initial Balance (IB) breakout on the
upper side followed by pullback within 30min back inside the initial range
and then price moved towards the other side of the Initial Balance (IB).
Similar failed auction pattern is also observed on Bank Nifty as well with
Failed auction zone @ 17799.

In the next tutorial we will be discussing about poor low and poor high profile
structure
Poor High and Poor Low Market
Profile Structure Explained
December 2, 2015 by Rajandran
Welcome to Market Profile Tutorial Series. In the last tutorial we seen Failed
Auction – Market Profile rules and this tutorial we will be discussing about
What is Poor High and Poor Low Market Profile Structure and how to play it.

Poor low and Poor High are market profile structure which generally
indicates a market that is too long or too short and the shorter timeframe
players in the market has low confidence about the current market direction
and takes control of the market to move it in the opposite direction. This
generally happens when the market is continuing its trend in one direction
and the momentum of the trend starts loosing at the peaks which makes the
shorter timeframe traders to think that market is too long or too short.

Generally market trends ends at the peak with an excess or a tail. But if the
exhaustion takes place due to lack of momentum at the high or lows with lack
of excess then such auction is referred as poor low or poor high. such price
zones are likely to be repaired/tested possibly the next day or within a week
or two.

How to Identify?

1)Poor High/Poor Low indicates a unfinished auction which in other words

requires a price revisit to those zones to complete the auction. It can be
identified at the high or low of the market profile zones with 2 or more TPO’s
wider. More the TPO’s are wider higher the odds that such price zone will be
revisited faster. Above picture shows that Nifty Futures Daily Profile charts
has two TPO’s at the highs i.e at 8003. Shortterm players are liquidating longs
and getting into shorts as they belive market is too long.

2)Context-wise two days having the same high or same low is also treated as
poor high/poor low and such zone requires repair. In classical technical
analysis we call such pattern as double bottom or double tops and such zones
are meant to be revisited which in classical technical analysis we call such
zones as support/resistance zones.

3)Context-wise we also call a profile as poor high/poor low even if the profile
is not wider a min of 2 TPO’s but only one TPO at the tails as shown below.
Context wise one can identify from the trend with the combination of current
profile whether the market is too long or too short.
How to Play Poor High/Poor Low?

One the poor high/poor low is formed on the profile charts the initial reaction
is mostly against the current prevailing trend direction followed by repairing
the poor high/poor low zone.

If you are able to spot poor high/poor low intraday then you can play intraday
around 2:30p.m towards the zone. If the zone is not repaired post 2:30pm
intraday then the information needs to be carry forwarded for next day.
Also if the poor high/poor low is forming on balancing or low volume days
then there is high probability of faster repair of such zones.

There is also a rare possibility of multiple poor low/poor high formation and
back to back poor low and poor high formation such auction signals high
probability of zone repair.

In the next tutorial we will be discussing more in-depth about Excess- End of
Auction Concepts.

Market Profile – Excess (End of

Auction)
February 22, 2016 by Rajandran
Welcome to Market Profile Series. In the last tutorial we seen Poor High and
Poor Low. In this tutorial we will be seeing couple of examples on Excess.
Excess generally indicates end of auction and the start of another. Generally
Excess is seen in the extremes of the profile with strong pullback as shown
below. Excess occurs across various timeframes (Hourly, Daily, Weekly
Charts)
Here is a simple example from Nifty FEB 2016 contract. You can clearly notice
that the letter G- Period dropped to fresh low followed by sharp pullback
(almost 90 points recovery from the lower extreme) followed by price moved
to the other side of the Intial Balance. Such sharp pullback with longer tail
extremes are often called as excess.

No Excess(lack of Excess)

No Excess is a situation where the shorter term bottom/top is made followed

by a lazy pullback(poor low or poor high). However no tails are noticed at the
profile extremes (lack of excess). Such zones have high probability of revisit in
the short run.

How to Differentiate between Excess and Failed Auction?

If you are familiar with Failed Auction then both the terms Excess and Failed
Auction sounds similar to you. How to differentiate both? Well Failed
Auction is nothing but weaker excess and the probability of revisiting those
zones are more likely within t+5 days. However from the practical experience
it may take more than t+5 also. Very Recently we observed Failed Auction
Pattern in Gail Jan Futures it literally taken t+8 days to clear the failed auction
high.

Failed Auction is coined by Mr Ray Barros and it is not part of classical Market
Profile study. To differentiate Failed Auction (Weak Excess) most of the time
occur during the intermediate trend reversal zones. However Strong Excess
only occur during the end of the trend and the occurrence is not very
common.

Excess on Nifty Spot Daily Charts

Excess on Petronet Weekly Charts

When the volatility in the market is high and if you are able to spot
excess/failed auction it is advisable to consider carry forwarding the
information near to EOD. Identifying Excess/Failed Auction and trying to play
the rules intraday could be trickly especially in a highly volatile environment.

In the next tutorial we will be discussing more in-depth about halfback

reference concepts

Market Profile – Halfback

Reference Explained
April 10, 2016 by Rajandran

AddT his Sharing Buttons

Welcome to Market Profile Series. In the last tutorial we seen Excess High and
Excess Low. In this tutorial we will be seeing couple of examples on Halfback
Reference. Halfback generally refers mid point of the previous days profile
(prev days (H+L)/2). Halfback is a Weaker intraday reference or shorter
timeframe reference where the weak day timeframe or shorter term
timeframe traders are entering at that point mechanically at that reference
level exactly or 1-tpo above/below halfback reference level.

Longer timeframe or positional traders have no idea about that reference

level. More likely Day timeframe traders or very short term traders are likely
to initiate trades at that zone and more likely their stops are very close to that
halfback reference.

If the price is testing the halfback reference zone during the initial auction
phase (first one hour) and bouncing back exactly from the halfback reference
or just 1-tick below or above the halfback reference level then more likely the
day timeframe players are initiating their traders at halfback and more likely
they are going to stopped out during the later part of the session.

In the above profile you can see that at ‘B’ period market came down to test
the halfback reference (mid point of prev days profile) and bounced back and
hence it is a weaker reference which has high odds of coming and test that
reference level intraday. Price came down back again at J&K Period just to
remove the weaker hands stoploss.
If the Price is testing the halfback reference zone post the initial auction phase
and bouncing exactly from the halfback reference level either a day timeframe
or shorter timeframe is likely to be in control. More likely they are weaker
players.

In the above profile you can see that at “D” period tested the halfback
reference just 1-tpo above halfback and reacted mechanically. Later price
tested the halfback reference level thrice exactly at the letters G,H,I which
indicates more and more shorter timeframe sellers are initiating positions
mechanically at the weaker reference level and which again indicates high
odds of revisiting to remove their stop loss.

In the next tutorial we will be discussing more in-depth about POC and Value
Area Concepts.