HOW TO TRADE BASED ON VALUE RATHER THAN FALSE SIGNALS

All markets can be traded based on value or price.

Price
Price is a numeric reflection of any market at the time a trader looks at the price quote. Price can be up,
down or unchanged without telling us anything about the valuation of the market. If price of ES is at
1350.00 that’s all you know. Without being aware of THE correct valuation, you will never know if
1350.00 is undervalued, overvalued or fairly valued

Value
Value on the other hand reflects a price range where most participants are comfortable transacting
within. If you consider buying a house you will review the price the house is listed, will compare the
average price of similar transactions and conclude if the asking price is above or below average.
You have identified the price range you are comfortable transacting within and established a benchmark
to assess what price is overvalued or undervalued.

Value area size

The size of the value area is a function of market dynamics. The more dynamic a market is the wider the
value area will be. An expanding value area is a sign of a healthy market with a wide range of
participants both long term and short term trades transacting. A shrinking value area is sign market
participants are exiting the market and demand is diminishing. An expanding value area is a sign of an
upward trend continuation while a shrinking value area is either signaling a pause or the beginning of a
trend reversal.

Value area direction

UP: A rising value area on a day to day basis is sign of buyers being in control. In such a scenario, the
trader should establish key areas of support and buy into pull backs if the opportunity is presented.
Down: A declining value area on a day to day basis is sign of sellers being in control. In this scenario, the
trader should establish key areas of resistance and sell into pull backs if the opportunity is presented.
Sideways: If the direction of value areas are overlapping from day to day, market is in a state of balance
and both buyers and sellers are in agreement, a trader must wait for the price to reach either the high
value area of the established range to sell into it or low value area to buy into it.
If the value area is going up and the price for that day closes down, the trader should remain bullish until
value shifts direction in order to confirm the direction of price.

Conclusion
Price is a reflection of the last transaction conducted in the market.  Value area is the parameter you
monitor, not price. The location of price within value area (overbought or oversold) will help you decide
about buying or selling. If value shifts up from day to day, you buy pull backs. If value shifts down from
day to day, you sell rallies.  What level to react from will be covered later. 
How To Analyze A Profile Chart

The preferred method to analyze a profile chart is by reviewing the finished structure from the previous
day after the session is completed. The previous days profile is the main point of reference for the
following trading day.

These are the characteristics we review:

1. What is the direction of value area (Up/Down)?

2. Did we have a large range day within the last 3 sessions?
3. Has the value area expanded or contracted?
4. Did we extend the range?  Was the range extension a success or a failure?
5. Did we have rejections at the extremes of the profile (tails)?
6. Did price close above or below 50% of the day’s range?
7. What kind of shape do we have (D,b, P, B)?
8. Do we have areas of minus developments?
9. Do we have any naked POCs close by?
10. What is the location of the open and what type of open did we have (open drive, open test
drive, open auction?)
After performing a detailed analysis of all these items we will be able to establish a bullish, bearish or
neutral bias for the next day.

Facts about Trading In Electronic Auction Markets

 Understand the function of the Auction Market. In an efficient Auction Market, price will go up
to the point to shut down buying and down to the point to shut down selling. In doing so, a
completed statistical bell curve unit is established containing an unfair high an unfair low and
price rotation between the 2 extremes. Until we do not see these 3 events taking place, the
auctioning unit is uncomplet.
 Have access to the appropriate charting software and data. Many brokers supply free data
versus paid services such as DTNIQ. You must be aware that most the data you are getting free
from your broker is not accurate resulting in populating your charts with inaccurate data,
causing inaccurate profile charts which could lead to wrong trading decisions. Ensure your
charting software provides you the traditional MP ability based on letters and not a volume
histogram slapped on a candle chart. The difference between the two is night and day.
 Correctly choose the market you decide to interact and trade. Each market has its own
unique characteristics and will vary in volatility level. Pick a market suitable to your risk
tolerance, character, account size and knowledge. Many traders think it’s a good idea to trade 5
or 6 instruments. There is nothing worse than that; the most you need is  2 markets and allocate
time to familiarize yourself with them and understand their functioning. Spreading yourself too
broadly will only waste your energy and eventually lose you money. Prior to expanding
to multiple markets, you must be sure you master the one you have initially decided to trade.
 Know the current reality about trading; Trading environment has greatly changed during the last
2 years. The level of market participants has significantly dropped, humans have been replaced
by machines and program trading dominates the markets. With this in mind, you must be aware
as a human you will be at a disadvantage compared to the computer programs. You must learn
 to adapt and identify when market is not behaving the way it should. Stay away during those
days. You also must be ruthless in cutting your losses in the event you are caught in the wrong
side of the machines.
 Before starting your electronic trading, ask yourself the following crucial questions:
o Is trading the right business for you? If yes, why?
o Do you have back-up capital to cover your expenses while going through your learning
experience?
o Can you afford to lose your trading capital without ending in the poor house?
o What kind of personality do you have?
 Are you balanced and calm person?
 Are you an impulsive and/or hot headed individual?
 Are you confident or hesitant?
 Do you consider a loss personal or as part of business?
 Are you healthy?
 Do you drink or use drugs?
 Do you sleep well at night before trading
 Do you exercise to release stress?        
           
 Each of these items will have a huge impact in your trading. Remember the good old saying: “Trading is
90% you, 10% of the market. If you do not possess the right characteristics, either you must work very
hard to correct yourself or you have a great chance of failing.
Electronic trading and risk of over trading
The creation of electronic trading and direct client order entry has been the best thing for brokers and
worst thing to the customers. There is nothing more dangerous than providing an out of control
individual the power to click a button from the privacy of his/her home or office and generate a trade.
You are accountable to no one and since you do not see real money changing hands you can easily
accept to lose few hundreds in minutes without shame; All by a click of the mouse. With electronic
trading access, the trader can place 20 in and out orders during any given day. Each time a trade is
initiated, the broker makes money and the customer is exposed to market risk. Over time the customer
will most likely lose capital from irresponsible overtrading and the broker will end up winning. Why? All
because the customer was able to place an order without being accountable for it. Imagine if you had to
call the broker for each trade. Would you feel comfortable to call the person to buy/sell 20 times during
a day? most likely not. You would look like an out of control person and ashamed of yourself. Or if you
were forced to throw $5 from your wallet into the trash each time you click the mouse to trade, would
you be ok to throw a $100 of physical money into the trash? I bet the answer is NO. Be aware of the
devastating dangers overtrading can cause. If you are victim of over trading, STOP and correct yourself.
Lastly, when in a trade try to hide your order entry platform so you don’t tunnel vision towards the
fluctuation of your profit and loss. In other words, never trade the money but always trade the chart. Let
the chart be the main component of your decision making not P/L.
How to Identify key reference price levels

When price is inside the previous day’s range:

Key levels are prices at which the trader is allowed to initiate trades from. When identifying key
reference price levels within the previous day’s range, you will work with following levels:
. Previous session high
. Previous session upper value
. Previous session POC
.  Previous session 50% range
. Previous session lower value
. Previous session low

When price is outside the previous day session’s range the trader has no real reference point to
rely on. However, based on my experience, I have noticed the following formula will provide you
with extremely solid and accurate support resistance levels past the previous day’s range. In
order to project those levels you first need:
o Find out the exact range of the previous session.
o Calculate 25% of the total range and add the amount to the previous day’s high and
day’s low
o Do the same thing with 50% and 100%

 You should now have 3 price levels of resistance above the previous day’s high and 3 price
levels of support below the previous day’s low. With these levels projected on you chart right
from the open of the developing day, you will know exactly where price will encounter
support/resistance when it exits the previous day’s range.
If I had to select one price level among the 3, I would pick the 50% projection. The 50% is a great
level of support/ resistance to stop up/down move.
Another important key reference price level is a naked POC resting near the developing day.
When you see one, chances are great the naked POC will attract price towards itself like a
magnet.
How To Identify Auction Market Balances / Imbalances

Markets are always either in a state of balance or imbalance.

Market Balance
State of balance is reached when buyers and sellers are in agreement and busy transacting
around a mean price. In this case you are dealing with a rotational structure with a nice D shape
and a well-established point of control. During balance the range of the profile will most likely
shrink as well as the value area. POC should be well developed containing multiple rows of TPOs.
Keep in mind balance can take place after an aggressive drive up (p shape) or an aggressive drive
down (b shape). The principle of balance development will remain the same.
Once balance is identifiable the trader’s job becomes to fade the extremes of the rotation until
price breaks out of the rotation.

Market Imbalance
Markets are always in a state of balance until either a shortage of supply, excess of demand or
an unexpected outside event tips them out of balance. When the imbalance phase starts you
will see fast price range expansion with little sideways developments. The profile will be thin and
long. Developing value area range will expand and the POC will be underdeveloped containing a
small amount of TPOs. How severe the imbalance will be is dependent of the underlying reason
behind the imbalance. For example if the market was influenced by an unexpected rate cut or a
natural catastrophe… the imbalance move can be quiet severe and it may take some time
before price would challenge the minus development areas created by the imbalance. On the
other hand if the imbalance was created by a minor event such as a good job number… most
likely the imbalance range will be less aggressive and the minus development areas will be
challenged within the next few sessions.

How To Use Order Flow To Time Entries

In order to understand this part you need access to order flow charting.  Personally I use a
volume break down indicator tracking ask traded VS bid traded volume (accumulate/days
volume/ delta bars) plotted on a 30 Ticks chart. This specific setting allows me to watch all the
real time buying and selling coming into the market. IF I see sell orders pushing price down then
I know the sellers are in control and supply is overwhelming and market is facilitating to the
downside. On the other hand If I see a bunch of sell orders hitting the market and price refusing
to go down, I then know a big buyer is accumulating all sell orders and as soon as supply is
absorbed, a big up move would come. The same principle applies to the opposite scenario.
In brief the order flow will allow you to see if the buying/selling is tuned with price fluctuation or
fake if in divergence with price.
Identify Responsive and Initiative Behaviors

o Responsive behavior is when traders fade support resistance levels.

o Initiative behavior is when traders go with break outs.
o Is there a way to tell any given day if traders will be initiative or responsive? Absolutely
not!
 You can only tell after the fact. However during heavy rotational days and some
other developing events which I will cover later you can guess with high level of
success if majority of traders will respond or initiate from key
support/resistance levels.
 When you think a specific level should reverse a directional move, wait for
evidence of rejection and only place a responsive trade against that level. When
trading responsively always wait for rejection evidence. You should also look for
volume spikes at resistance levels. If you see a big volume push and price being
rejected below the price creating the volume surge, you then have a strong
visual confirmation a big seller just capped that price.
 When trading initiatively it is best to wait for price to break out of rotation and
then trade the first retest of the break out level. If the break is successful price
should not return back inside the rotation.

Importance of Volume and Volume Patterns

Developing Volume
Few years back, books were written about volume and a great deal of attention was dedicated
towards studying volume. Those days are long gone and volume has lost a great deal of its
importance. Here’s why:
o First, since the meltdown of 2008, the Madoff’s scandal, MF Capital scandal… volume
has significantly dropped in most traded markets and many traders left the business.
o Second, the control of the market has shifted from humans to machines.
If you combine the two, a drop in liquidity and a takeover by machines, you will see days when
program buy or sell will move price directionally with the thinnest volume possible. You can
jump and scream by saying how can price go up 10 points with little volume? it won’t matter.
This takes us to the next question: Is price more important or volume? Without hesitation price
is much more important than volume. Again as a trader if you lose 5 points with or without
volume the result is the same.
Past Volume
However there are times when past volume can be of great help unlike developing volume.
For instance when you deal with areas of minus developments or very little TPO developments
you can look into the volume histogram to see what prices had more volume activities compare
to others. Price levels containing higher volume will become support resistance.
Another important use of volume is to look at volume formation at the top/bottom of the
session and if you suddenly observe a big expansion of volume at the top/bottom and see price
trade below that volume spike level, you can then conclude with high level of confidence either
the top/bottom is in place for that day. This observation is also valid for the overnight structure.
Also, if price approaches past volume congestion areas, it will most like encounter significant
support resistance.
A structure containing heavy volume top/bottom will seldom break on first attempt. A
responsive trade upon break failure can become a very good trade location.

How To Correlate The Overnight and Day Profile

The overnight Profile is extremely important to day trading. In order to use the overnight profile
properly you need to separate the overnight profile from the day session profile. Your main
session setting will be on based on Globex. Next day, you will separate the sessions by selection
a special duration of 1020 minutes. This way at 9:30 am e.t you will start a brand new profile
based on 30 minutes brackets starting with letter A and finishing with letter N (Settings for ES
only!)
o That being clarified, how do you use the overnight session to be a better informed
trader? As a starter you immediately identify the main key levels within the overnight
profile:
      Overnight high
      Overnight POC
      Overnight 50% range
      Overnight low

These 4 levels are your key support resistance price points within the overnight structure. The
wider the overnight range the more relevant these levels will be and the tighter the range the
less relevant these levels will be.
Another critical question you will ask yourself while analyzing the overnight structure is how
much follow through you see if the overnight attempted to break above/below the previous
session high. If after the break of the previous session high/low you see the overnight session
went rotational based on its shape, you can then conclude: if the following day session retests
or try to break the overnight high/low, chances are traders will fade the break up/down and a
responsive opposite trade can be initiated from that retest.
If the shape of the overnight is a b, an early attempt to break the low should normally fail.
If the shape of the overnight is a P, an early attempt to break the high should normally fail.
Same principles apply if the combined overnight and the previous day’s session display a b or a p
shape profile.
How To Identify High Probability Trading Opportunities

When certain set ups are in place they can provide high trading opportunities; here are some of
my favorites:
         Gaps
  If you face 2 days of gaps up/down. Buy/sell the second days open as
well as the overnight high/low. Stop above the overnight high. Target
close of the gap before noon.
 If you have a 1st day gap up/down. Monitor the retracement of the gap
up/down within the first 10 minutes. If there is a refusal for price to go
fill the gap, then go with an opening range break up/down. Stop
above/below the low of the current day. Target, range extension
up/down.
 If you have a 1st day gap and you failed to participate early in the
session. Wait for a range extension and if the range extension takes
place at your 50% extension zone then get ready to fade the R-E. Stop
above the high/low of the day. Target the middle of Initial balance.
                        Open
 The open is by far the most important time of day trading. The nature of
the open will often tell you the story about the whole day. A decisive
and directional open will indicate the possibility of trend day or normal
variation day. An indecisive type of open will indicate the possibility of a
balanced rotational day. Also the open trades are the most profitable
trades compare to the rest of the day. These are my favorite open
trades:
o  Open drive break of the opening range: If the opening range is
broken up/down with an open drive. Take the break up/down
trade 3 ticks above/below the opening range, place a stop
above/below the high/low of the day and hold the trade till you
get a range extension.            
o Open test drive: If market rejects once side of the open by no
more than 6 ticks and reverses, take a trade when price crosses
back through the open, place a stop above/below the high/ low
of the day and target a range extension for exit point.
o C period range extension failure:  If you have been unable to
take any trade prior to the range extension, wait for C period. If
C period extend the range ONLY by 1 tick or 2 and rejects back
into the initial balance by more than 6 ticks take a long/short
and hold the trade for an opposite side range extension. Your
stop is above /below the high/low of the day. A C failed range
extension will often create an opposite side range extension.
o D period break of C In some occasion, C period will fail to extend
the range and it will be an inside period stoked within B period
range. Once you see that, there is a high probability trade to
take upon D period breaking either side of C. Which either side
D breaks C will then be the direction of a potential range
 extension. The trade set up is to take the break of C as soon as it
takes place by D. Stop goes above/below C. Target becomes the
range extension.
o H or I holding an extreme: As I stated H or I period are notorious
to seal one of the extreme of the day. If you see H putting the
extreme, there is a high probability trade to take upon I period
breaking the other side of H. Stop goes below H and target is to
hold the trade till M period.
o If I period puts in an extreme duplicate the same trade with I
but using J period.
Ledge Trade
A ledge is when the shape of the profile looks like a flat cliff with one side of the cliff being well
developed and the other side being very underdeveloped. Depending on which side the
development is taking place, a ledge will either be bullish of bearish. Once a ledge is identified
you want to buy/sell as far as possible from the ledge and your target becomes the ledge. In
order to balance the shape of the profile, the ledge should as some point be traded through.
Never hold a short position is you see a bullish ledge or long position if you see a bearish ledge.

How To Understand And Interpret The Daily Profile Structure

These are key elements we are looking at when studying a completed daily Profile:
o The extremes: Do we have a buying tail/ selling tail. If we do, we want to see if the tail is
only on one side or both sides. If it’s only on one extreme, then it’s fairly easy to see if
the buyer/seller was in control. If it’s on both sides we then want to see if the close took
place above / below the days 50% in order to identify the winner between buyer/seller.
o The Value Area: We want to know if the value area shifted higher or lower and if
confirms the direction of the market. We want to know the range of the value area. Has
it expended or contracted. Last we want to know if the close of the market was in
agreement with the direction of the value area.
o Areas of minus developments :  Minus developments are caused by a fast moving price
with no horizontal development. It constitutes of single or double prints within the body
of the profile (not the extremes). Unless the minus development activity was caused by
a significant outside events they are often retested and traded through. A trade can be
initiated when price enters the area of minus development with a target to erase the
whole area of minus development. If dealing with a very wide range day (wall)
containing wide areas of minus developments, it may take several consecutive sessions
to erase the areas (climbing the wall).
o The Shapes of the Profile: The various shapes the profile can project are also important
to observe.

o P shape: P shapes are either formed after a big directional push up going rotational, or a
rotational move breaking to the downside directionally. What is very important is to
monitor price inside the rotational part of the P, if there is a break of the rotation to the
upside (initiated from the POC) a long break up should be initiated with a stop below the
POC, target should be the range of the directional Leg up prior to the rotational phase
projected from the break out of the rotational part.

o b shape: Exact opposite of P shape. Same opposite principles apply.

 B Shape: This formation is called double distribution. Market starts with a rotation and
rejects the rotation either higher or lower and goes rotational around another mean
price. Trading applications are the same as with all rotation break up/down. Sometimes
the double distributions are more visible on the volume histogram. In such cases the
volume congestion areas become important support resistance levels.

D Shape: Rotation. Market is in state of balance and develops around the POC. Until the
rotation is broken the trade is fade the extremes of the rotation with the middle as
target one, the other side of the rotation as target2.

Ledge: A ledge formation becomes visible when half bottom/top of the profile develops
rotationally while the other half is missing. When you look at the structure you will see a
visible cliff formation and the cliff sideways development is all the same price. If a bullish
ledge is visible on the chart you want to buy pull back below the bullish ledge and target
the ledge to be crossed and the profile balance itself above the ledge. If a bearish ledge
is visible you then do exact opposite

How To Identify The 4 Critical Phases of Market Development

In any given time markets are either in a state of trending or in process of rotating. The flow
consistently shifts from one to the other. During this process you have 4 distinct phases:

o  Phase 1: Trend. Market is moving up or down directionally. Price facilitation is great.

The fast price move is attracting a large number of participants and great amount of
capital is either entering or exiting the market depending if the trend is up or down.
Market is making higher high higher low, Value area is shifting higher and price closes
near the high of the session. This condition will continue until we reach phase 2.
o Phase 2: After the trend has been going on for some times, suddenly price reaches a
level where it will encounter a swift rejection. The rejection will be fast and very
noticeable by its nature. For the first time if you bought at the wrong place you will see
punishment. ANY trend will continue until a rejection is visible. If a trend stops for
whatever reason and a rejection is not visible, then most likely you are dealing with a
simple pause and sooner than later the trend will continue in the path of the initial
direction. Do not mess around with trends until you see a rejection as a sign of end of
trend.
o Phase 3: After a rejection is visible, market takes a pause and starts to rotate. During the
rotational phase as a trader you want to monitor the following:
  Duration of the rotation: The more the rotation is developed the more likely
you will see a reversal of trend. The less the rotation is developed the more
likely price will continue in the direction of the initial trend once exiting phase3.
  Once a break out of phase 3 is about to happen make sure to see if the move
initiated itself from the middle of the rotation. If that’s the case, then the break
is likely to succeed. In such case you want to take a break up/down trade after
the break is confirmed and the breaking point retested.
  If the move was initiated from the opposite side of the rotation then most likely
a break out of phase 3 will fail. In such case you want to fade the break.
 o Phase 4: consists of either a continuation of the initial trend once exiting phase 3, or a
reversal of the initial trend when exiting phase 3. In case of a reversal you should expect
75%  of the initial leg prior to phase 3 development to be erased. In case of a
continuation you should expect a move equal to the range of phase 1 projected from a
break out of phase 3.

How To Trade Different Types of Price Developments In The Market

At any given time the market is either rotating or trending.

o Trending Market: During trends most money are made and lost. If you fail to identify
the characteristics of a trending market and play the game of fighting the move,
bankruptcy will be the outcome. When a trend is identified a trader only trades in the
direction of the trend by buying pull backs in up trends and selling rallies in down
trends. Which level you will react from will depend on how close price is to that level. If
price is too close to let’s say upper value, then you should shift one level lower and try
to buy it from POC. If the POC is too close then shift to lower.  
o
Remember a trend will continue until a rejection is clearly visible.       
However keep in mind the trend is you friend at the early and middle
stage of the move. If you see 5 days consecutives of an up market, no
need to tell you to start monitor for signs of weakness rather than area
of support to buy. A trend at its final stage can be deadly for the late
buyers.

 Rotating Market: A rotational development is a pause prior to a directional up move or

down move. The rotational phase can be one session or multiple sessions. If it contains
multiple sessions, then you need to combine all the different sessions and determine a
combined area of overvalued to sell from and an area of combined undervalued to buy
from. In other word when a rotation is identified you always trade responsively from the
extremes until the rotation is decisively broken from one side or another for the start of
a new direction. The entry method is to either sell once price enters standard deviation
3 price range with a stop above the top of the rotation, target the middle of the rotation
and the opposite side of the rotation. Or you let price hit standard deviation 3 price
range and react when it crosses back into standard deviation 2. Use the same stop and
targets as entry method 1. Method 2 is the safest of both but gives you a worse fill on
your entry.
 How To Identify Whether Sellers or Buyers Are In Control
Your work to identify whether sellers or buyers are in control starts with studying the
Previous day’s profile.

                Look to see if:

  The market is making higher high, higher low (during and up trend) or
lower high lower low (during and uptrend
  Value area is shifting in the direction of the trend and if range of the
value area is expending as well.
  A range extension in the direction of the trend took place and if it was
successful by closing outside the initial balance.
  You have a strong buying/ selling tail confirming the presence of an
aggressive buyer/seller
  You see areas of minus development confirming a rush by traders to
conduct business
 Price closed above/below the previous days 50% range. In a strong up
move for example, you want to see the close be near the high of the
session and never below the days 50% range.
The Overnight profile
 In case of an up trending market, we do not want to see a deep
retracement of the previous day’s range by the overnight profile. Ideally
the range of the overnight should remain above the previous day’s
upper value.
  We also want to see congestion of TPOs or volume at the bottom of the
overnight profile to confirm support.
  The overnight POC should shift higher and the current days open
should be above the overnight POC.
The Current day profile
 First and foremost we pay a great deal of attention to the open. We will
observe the open for at least few minutes to evaluate if the open is
accepted or rejected. In case of an uptrend any price below the open
should be swiftly rejected.
  If after the first period A closes above the open then you have a
confirmation of buyer being in control and you can then anticipate a
range extension up with C period. Therefore you can buy into B period
stop below the low of A and target a C range extension up. The wider
the range of A period the more buyer/seller is in control.
 As the day develops to the upside, you also want to keep track of the
value area range. Make sure it’s expending and shifting higher as the
profile develops.
 Another element to monitor in order to access buyer/seller control is
the retracement of each period in relationship to each other. In a
healthy up move we do not want to see the first 3 periods (ABC) to
reverse each other or retrace by more than 60% of each other’s range.
 If you see a good drive within the first 3 periods, then you can anticipate
a pause and some rotation to take place. Under no circumstance the
 rotation past ABC should violate 50% of A period. If it does then the
power is shifting and a reversal is likely later during the day.
 If you are dealing with a directional move past C period, do not think
about fighting the move until F, H or I period holds the top or a bottom
with a rejection. The main periods notorious to hold tops or bottoms are
usually (A, C, F, H, I). A top/bottom put in place by any other period is
vulnerable to be violated.

How To Integrate Traditional Technical Analysis With Market Profile

Market Profile is unique and different from any other method. However at time if coupled with
traditional technical analysis a trader can gain an edge with trade entry timing. Your candle chart
time frame must be the same as your Market Profile time brackets.
Directional moves
 If you are in presence of a trending move, it could be very useful to draw a trend
line on your candle chart and remain in the trade until the trend line is broken.
For a trend line break, you need a confirmed closed out of the trend line. A
temporary breach of the trend line does not count as a brake.
  If you do not have a separated profile it’s always good to have a 30 minutes
candle chart and monitor the relationship of highs and lows, until they confirm
the health of the trend by making higher highs higher lows, stay in your trade
without rushing to exit.
 With a 30 minutes candle chart you can also keep a close eye on the range of
each 30 minutes candle. If after an extended directional move you start to see
substantial drop in range of each period, you can start to get ready for either a
pause or a reversal.
 Monitor for previous areas of supply/demand. Those areas are far easier to
locate on a candle chart than the profile chart. Once an extended move gets
closes or reaches previous levels of supply or demand get ready for potential
move termination and reversal of some kind.
Rotational moves
  Any rotational move will be visible on a candle chart as a flag, pennant or
triangles. You can help the timing of the trade out of the rotation by using a
candle close outside the rotation to confirmed break out of the flag, pennant or
triangle. A confirmed break out of either formation is when the candle closes
outside the defined boundaries of those formations.

How To Correlate Monthly, Weekly and Daily Profiles

The way you correlate the daily profile with larger time frame (weekly and monthly) is create a
daily profile developing with a monthly profile as a back ground. The monthly profile will have
the footprint of all the transaction booked during the month and will provide you with big time
frame support resistance levels. Monthly support resistance levels will be areas of high TPO
congestions, area of extremely low TPO activity. In another word you will be looking for defined
developed and finished units. As a result if your daily profile suddenly approaches the bigger
time frame support resistance levels you will be aware of them.
This is an approach of always trading the short time frame in regards to longer time frame
support resistance areas
How To Use Market Profile Techniques for Swing Trading

By definition, swing trading is a trade carried more than one day. How many days you will carry
a position is dependent of two factors. One your personal choice of time frame (3 ,5, 10 days…)
Two the behavior of price.
If you decide for example to swing trade on a 5 days basis, you will need to build a composite
profile for 6 days and have at least 3 profiles (of 6 days ) displayed. You will set it up to show
Value areas, POC… just like a regular daily profile. The trading method is to look at the direction
of the value areas of the past 2 profiles. Let’s say if the direction is up, you will let price reach
one of the main key levels (upper value, POC, Lower value…) to initiate your trade from and hold
the position until it would reach another critical level.
The other option you have is to trade the defined finished unit from the last composite profile as
I will show you.
If you decide to trade the price action instead of the composite profile, you need to use a candle
stick chart with a big time frame volume histogram in the background. I like 120 minutes bars
with a 10 days volume histogram. The trading method will be to use price action in relation to
key support resistance levels provided by the volume histogram (Value areas high low, POC,
defined unit boundaries).

How To Develop A Trading Plan Based on The Profile

A sound trading plan containing only 2 entries a day can be developed by following these steps:
 Thoroughly analyze the previous day’s session by extracting all the relevant
information (day high, upper value, POC, day’s 50%, lower value, Days low,
buying tail, selling tail, value area direction, value area range, profiles shape)
 Analyze the overnight session 15 minutes before the start of the day session and
identify (high, low, POC and the side containing the most TPO and volume)
  Once you have established your directional bias based on the information
gathered, monitor the location of the open. Based on the location of the open
select 2 key levels you want to trade from. Place your orders ahead of time as
well as you stop. If price hits your entry, place an exit order at a key level and
wait for execution.

The following set ups should be your guideline.

 TRADE SET UPS

UPTREND

ALL FOLLOWING SET UPS ARE ONLY VALID IF PRESENTED BEFORE 12PM E.T

GAP UP (Outside Range)

TRADE 1 UT (up trend)

IF THE OPEN IS 5 POINTS OR MORE FROM PREVIOUS SESSION HIGH: BUY 1 CONTRACT AT PREVIOUS SESSION
HIGH, 1 CONTRACT AT PREV SESSION UVA. STOP 2 POINTS BELOW PREVIOUS SESSION 50% RANGE. TARGET 1
TODAYS OPEN. TARGET 2 PREVIOUS SESSION 1.50X RANGE OR

OFFSET AT THE CLOSE.

 T2 @ CLOSE

T1

H
B1

UVA
B2

POC /50%

STP
LVA

TRADE 2 UT

IF THE OPEN IS LESS THAN 5 POINTS FROM PREVIOUS SESSION HIGH: BUY 1 CONTRACT AT PREVIOUS SESSION
UVA, 1 CONTRACT AT PREV SESSION 50% RANGE OR POC WHICH EVER COMES FIRST. STOP 2 POINTS BELOW
PREVIOUS SESSION LVA. TARGET1 THE DAYS OPEN, TARGET2, PREVIOUS SESSION 1.25X RANGE. IF TARGET2 IS
SAME OR CLOSE TO THE OPEN LOOK FOR 1.5 X PREV RANGE PLUSE ITS HIGH OR OFFSET INTO CLOSE
 T2

T1
H
1.50R +H

UVA
B1

POC /50%
B2

LVA
STP

TRADE 3 UT

IF THE OVERNIGHT RANGE IS GREATER THAN 8 POINTS AND THE OPEN IS WITHIN 2 POINTS OF THE OVERNIGHT
HIGH, SELL 1 CONTRACT AT THE OPEN, SELL 1 CONTRACT AT THE OVERNIGHT HIGH. STOP 2 POINTS ABOVE THE
OVERNIGHT HIGH. TARGET1 OVERNIGHT POC. TARGET2 PREVIOUS SESSION HIGH OR OVERNIGHT LOW.
 STP

H S2

S1

OVERNIGHT
SESSION POC
T1

H
T2

UVA

L
PREVIOUS
SESSION POC

LVA

GAP UP (Inside Range Outside Value) UT

TRADE (REQUIRES A WIDE RANGE PREVIOUS SESSION) UT

IF THE OPEN IS 5 POINTS OR MORE FROM PREVIOUS SESSION UVA: BUY 1 CONTRACT AT PREVIOUS SESSION UVA,
1 CONTRACT AT PREV SESSION 50% RANGE OR POC WHICH EVER COMES LAST. STOP 2 POINTS BELOW PREVIOUS
SESSION LVA. TARGET1 PREVIOUS SESSION 1.25X RANGE. TARGET 2 OFFSET AT THE CLOSE.

T1
1.25 R +H
H T2 @ close

UVA
B1

POC/50%
B2

LVA

STP

TRADE UT

IF THE OPEN IS LESS THAN 5 POINTS FROM PREVIOUS SESSION UVA: BUY 1 CONTRACT AT PREVIOUS SESSION 50%
RANGE OR POC WHICH EVER COMES FIRST, 1 CONTRACT AT PREV SESSION LVA. STOP 2 POINTS BELOW PREVIOUS
SESSION LOW. TARGET1 PREVIOUS SESSION HIGH. TARGET 2 PREVIOUS SESSION 1.25X RANGE OR OFFSET AT
CLOSE

T2
1.25 R +H

H
T1

UVA

POC/50%
B1

LVA
B2

L
STP

GAP UP (Inside Value)

TRADE UT
BUY 1 CONTRACT AT PREVIOUS SESSION LVA, 1 CONTRACT AT PREV SESSION LOW. STOP 2 POINTS BELOW THE
SESSION BEFORE YESTERDAYS 50% RANGE. TARGET 1 TODAYS OPEN, TARGET 2 PREVIOUS SESSION HIGH OR
OFFSET AT CLOSE.

H
T2

UVA

T1

PREVIOUS POC /50%

SESSION

LVA B1

B2
L

POC /50% STP

SESSION BEFORE
YESTERDAY

GAP DOWN (Inside Value Inside Range)

TRADE UT
SELL 1 CONTRACT AT THE OVERNIGHT POC, SELL 1 CONTRACT AT THE PREVIOUS SESSION HIGH. STOP 2 POINTS
ABOVE THE 25% OF THE PREVIOUS RANGE PLUS HIGH. TARGET 1 PREVIOUS SESSION LOW, TARGET 2 SESSION
BEFORE YESTERDAY UPPER VALUE.

OVERNIGHT
SESSION

STP
1.25 R +H

H
S2

UVA
POC
S1
PREVIOUS
SESSION
POC /50%

LVA

T1
L
UVA
T2

SESSION BEFORE YESTERDAY

GAP DOWN (Outside Value Inside Range)

TRADE UT
SELL 1 CONTRACT AT THE OVERNIGHT POC, SELL 1 CONTRACT AT PREVIOUS SESSION UPPER VALUE. STOP 2
POINTS ABOVE THE PREVIOUS SESSION HIGH. TARGET 1 PREVIOUS SESSION LOW. TARGET 2 SESSION BEFORE
YESTERDAY 50% RANGE OR POC WHICH EVER COMES FIRST

OVERNIGHT
SESSION

STP

UVA S2

PREVIOUS POC /50%

SESSION
POC
S1

LVA

T1
L
POC /50% T2

SESSION BEFORE YESTERDAY

GAP DOWN (Outside Value Outside Range)

TRADE UT
SELL 1 CONTRACT AT THE OVERNIGHT POC OR PREVIOUS SESSION LOWER VALUE WHICH EVER COMES FIRST, SELL
1 CONTRACT AT PREVIOUS SESSION 50% RANGE OR POC WHICH EVER COMES FIRST. STOP 2 POINTS ABOVE THE
PREVIOUS SESSION UPPER VALUE. TARGET 1 SESSION BEFORE YESTERDAY 50% RANGE OR POC WHICH EVER
COMES FIRST. TARGET 2 SESSION BEFORE YESTERDAY LOWER VALUE.

STP
UVA

POC /50%
PREVIOUS S2
SESSION

LVA

POC S1
L

OVERNIGHT
SESSION

T1
POC /50%

LVA T2

SESSION BEFORE YESTERDAY

DOWN TREND
GAP DOWN (Outside Range)

TRADE 1 DT (Down Trend)

IF THE OPEN IS 5 POINTS OR MORE FROM PREVIOUS SESSION LOW: SELL 1 CONTRACT AT PREVIOUS SESSION LOW,
1 CONTRACT AT PREV SESSION LVA. STOP 2 POINTS ABOVE PREVIOUS SESSION UVA. TARGET1 THE OPEN.TARGET 2
PREVIOUS SESSION 1.5 X RANGE MINUS ITS LOW OR OFFSET INTO CLOSE

UVA STP

PREVIOUS 50%
SESSION

LVA S2

S1
L

T1

1.5 R - L
T2

TRADE 2 DT
IF THE OPEN IS LESS THAN 5 POINTS FROM PREVIOUS SESSION LOW: SELL 1 CONTRACT AT PREVIOUS SESSION LVA,
1 CONTRACT AT PREV SESSION 50% RANGE OR POC WHICH EVER COMES FIRST. STOP AT PREVIOUS SESSION HIGH.
TARGET1 THE DAYS OPEN, TARGET2, PREVIOUS SESSION 1.25X RANGE.

H
STP

UVA

PREVIOUS 50% S2
SESSION

LVA
S1

T1

1.25 R - L
T2

TRADE 3 DT
IF THE OVERNIGHT RANGE IS GREATER THAN 8 POINTS AND THE OPEN IS WITHIN 2 POINTS OF THE OVERNIGHT
LOW, BUY 1 CONTRACT AT THE OPEN, BUY 1 CONTRACT AT THE OVERNIGHT LOW. STOP 2 POINTS BELOW THE
OVERNIGHT LOW. TARGET1 OVERNIGHT POC. TARGET2 PREVIOUS SESSION CLOSE OR LVA WHICH EVER COMES
FIRST.

PREVIOUS
SESSION

LVA
T2

L
POC T1

OVERNIGHT
SESSION

B1

L
B2

STP

GAP DOWN (Outside Range Outside Value)

TRADE 1 (REQUIRES A WIDE RANGE OF PREVIOUS SESSION) DT

IF THE OPEN IS 5 POINTS OR MORE FROM PREVIOUS SESSION LVA: SELL 1 CONTRACT AT PREVIOUS SESSION LVA, 1
CONTRACT AT PREV SESSION 50% RANGE OR POC WHICH EVER COMES FIRST. STOP PREVIOUS SESSION UVA.
TARGET1 PREVIOUS SESSION 1.25X RANGE MINUS ITS LOW. TARGET 2 OFFSET AT THE CLOSE.

UVA STP

PREVIOUS 50% S2
SESSION

LVA
S1

T1
1.25 R - L

T2 @ CLOSE

TRADE 2 DT
IF THE OPEN IS LESS THAN 5 POINTS FROM PREVIOUS SESSION LVA: SELL 1 CONTRACT AT PREVIOUS SESSION 50%
RANGE OR POC WHICH EVER COMES FIRST, 1 CONTRACT AT PREV SESSION UVA. STOP 2 POINTS ABOVE PREVIOUS
SESSION HIGH. TARGET1 PREVIOUS SESSION LOW. TARGET 2 PREVIOUS SESSION 1.25X RANGE MINUS ITS LOW OR
OFFSET AT CLOSE.

STP
H

UVA S2

PREVIOUS POC /50% S1

SESSION

LVA

T1

1.25 R - L T2

GAP DOWN (Inside Value Inside Range)

TRADE DT

SELL 1 CONTRACT AT PREVIOUS SESSION UVA, 1 CONTRACT AT PREV SESSION HIGH. STOP 2 POINTS ABOVE THE
PRIOR SESSION HIGH. TARGET 1 PREVIOUS SESSION 50% RANGE, TARGET2 PREVIOUS SESSION LVA OR OFFSET AT
CLOSE.

STP

H
S2

UVA
S1

PREVIOUS
SESSION

50% T1

LVA
T2

GAP UP (Inside Range Outside Value)

TRADE DT

BUY 1 CONTRACT AT THE OVERNIGHT LOW, BUY 1 CONTRACT AT PREVIOUS DAY LOWER VALUE. STOP 2 POINTS
BELOW THE PREVIOUS SESSION LOW. TARGET 1 OVERNIGHT HIGH, TRGT 2 PREVIOUS SESSION HIGH. IF TARGET 1
IS NEAR TARGET 2 YOU CAN OFFSET INTO THE CLOSE OR AT PREVIOUS SESSION 1.25X RANGE PLUS ITS HIGH.

OVERNIGHT
SESSION
T2
1.25 R + H
H T1

UVA
POC
PREVIOUS
SESSION
POC /50%
B1
L
LVA
B2

L STP

GAP UP (Inside Value Inside Range)

TRADE DT

BUY 1 CONTRACT AT THE OVERNIGHT LOW, BUY 1 CONTRACT AT PREVIOUS SESION LOW. STOP 1 POINT BELOW
THE 25% OF THE PREVIOUS RANGE MINUS ITS LOW. TARGET1 PREVIOUS SESSION HIGH, TRGT 2 SESSION BEFORE
YESTERDAYS LOWER VALUE.

OVERNIGHT

SESSION
SESSION BEFORE YESTERDAY

LVA T2

H T1
H

PREVIOUS
SESSION

B1
L
B2
L

1.25 R - L STP

GAP UP (Outside Value Outside Range)

TRADE DT

BUY 1 CONTRACT AT THE OVERNIGHT LOW, BUY 1 CONTRACT AT PREVIOUS SESSION 50% RANGE. STOP 2 POINTS
BELOW THE PREVIOUS SESSION LVA. TARGET 1 OVERNIGHT POC. TARGET 2 OVERNIGHT HIGH.

H
T2
OVERNIGHT
SESSION

POC
T1

B1
L

PREVIOUS 50% B2
SESSION

LVA
STP