Volume Profile, Market Profile, Order Flow shows why the myth of self-fulfilling prophecies has long been nothing more than an illusion. Instead, it presents in an understandable way highly effective technical tools that can help a day trader look behind the scenes and assess trading situations in the here and now. This book was written for day traders searching for new ways. However, it is also suitable for beginners with basic knowledge. Countless promises on the internet make it difficult for especially beginning, ambitious traders to find their way through a maze of courses. These often leave the impression that all you have to do to succeed is to follow a crossover of two lines, a few chart patterns, indicators and money management rules.
Introduction:
The main difference to other forms of analysis is that there is no guessing involved. Instead, the activities of major market participants are observed in the here and now. In this sense, we are by no means dealing with the false gods of Technical Analysis. The market profile related to the volume profile has been known for over 40 years. The market profile is based on the thesis that significant price shifts are only possible if large market participants with a higher investment horizon become active. It also determines the price level at which prices have spent both the longest and the shortest time in a given period.
Some of the principles of market profile analysis from that time have lost their validity as the markets have changed. However, the progressive development of chart software has led to a renaissance of two central principles of this form of analysis in particular. By integrating them into a chart, market profile analysis can give traders a quick overview of who is in control of the market. A further current aspect is that the largest liquidity zones can be identified more clearly and precisely. Given that today’s markets are characterized by a myriad of false outbreaks, this can offer significant advantages to a day trader.
Volume profile analysis follows a similar pattern, but focuses on the price level at which the largest turnover took place in a given period. It can thus provide important information about the price zones in which major market participants have built positions. However, there is no need for these to be identical to classic support and resistance zones. In my view, it makes sense to combine market and volume profiles because they complement each other with two essential pieces of information. You can also project them next to each other and thus have all the important information at a glance.
In a way, you can compare the volume profile to a search system that locates zones where institutional traders were active. In many cases they resume their activities where they started out. However, only order flow analysis can provide final confirmation of this. It can be used for fine-tuning and allows a chart to be “flipped open” to provide information on the activities of the market forces that set the direction. This cannot be provided by a normal chart.
Contents:
- The Advantages of Futures
- The Market Participants
- Market Profile – A Brief Overview
- What is a Volume Profile?
- Value Area
- Forms and Shapes of Profiles
- How to display the Profiles?
- Bounce Backs
- General Set ups
- Hardware, Software and Data Feed
- Order Flow Analysis
- The Preparation
- Liquidity and Volatility – An Important Pair
- Characteristics of Individual Trading Instruments
- More on Market Profile
- Filtering the Ledge
- Broadening Tops – a Warning Signal
- Complete Examples
- Questions that could be asked
- Fake Moves
- What is a Trend?
- Trade- and Risk Management
- Short Term Trading – A Trade Example