CISCO Futures
1-303-306-1521 1-800 800 7227 Fax 1-303-306-1572
http://www.cisco-futures.com
dljones@cisco-futures.com
Day Trading from the Meta-Profile©
Many people would like to day trade from a day's market patterns alone, i.e.,
pull up a screen of current trading activity and devise a strategy.
When applied to
value based trading, that can be accomplished only after the market has had
adequate time to form a cluster of trading that signals a market's agreement
on value. Markets that trade for a number of hours each day are obviously the
best candidates, since it typically takes a market some multiple of the
minimum equilibrium time (assumed to be 30 minutes) to get into balance.
The emini SP index opens at 08:30 and closes at 15:15, covering
nearly nine hours. The indexes in general often show a propensity to have
run late in the day. So indexes can show early day movement and then
reach equilibrium around midday. By midday, often a cluster of trading
shows up (or even the bell shape of a profile). This pattern can provide
the launching pad for the afternoon's activity.
The methodology here relies on pattern recognition of a cluster of trading,
which may well appear as a bell shaped profile.
The vast majority of work we do with the Meta-Profile ignores the classical
profile bell shape. Market Profile theory relies heavily on the
gaussian, normal distribution for trading a profile (range extension, tails,
excess, day types and that sort of thing). Meta-Profile depends
on the clustering of trading around a central point to find value, with
the focus on the run, pause nature of the market. Market condition
comes from the Overlay Demand Curve, a higher level of value (multi-day),
not used in this discussion (but it is illustrated in the Visual Graphic near
the bottom).
This example of day trading from a profile pattern is thus not in the general
Meta-Profile/Overlay analysis mold. Incidentally, the future we us in this
example, the S&P emini, has no Market Profile value area, since that comes
from cleared volume (available only from CBOT, not from CME). The value used
in this study comes
from the Meta-Profile, i.e. from tick data. For a discussion of the relative
merits of Market and Meta profiles, use the link below.
Market/Meta Profiles History 1985 - 2004
In the SP emini for July 22, 2005 below, B period runs from 08:30 to 09:00,
C is 09:00 to 09:30 and so forth. A buildup began to be apparent around a
price of 123125 by no later than F period and was quite clear by K period
(13:00 to 13:30).
Commodity: UUU - Mini S&P 500 (CME-IOM)
Trading Date: 20050722
Start Time: 08:30
Stop Time: 13:30
Profile Type: 30 minute
CISCO Meta-Profile
----------------------------------------------------
V Tick 30 minute
Price TPOs A Count Tick Bars
----------------------------------------------------
123450 B 1 B
123425 B 47 B
123400 B 95 B
123375 BC 113 BC
123350 BC 137 BC
123325 BC 179 BC
123300 BC 188 BC
123275 BC 116 BC
123250 BCEG | 103 BC E G <== Exper + VA U
123225 BCEGJK | 265 BC E G JK
123200 BCEGJK | 506 BC E G JK
123175 BCDEFGJK | 617 BCDEFG JK
123150 BCDEFGHIJK > 610 BCDEFGHIJK F
123125 *BCDEFGHIJK | 580 BCDEFGHIJK
123100 BCDEFGHIJK* | 497 BCDEFGHIJK L
123075 BCDEFGHIK | 389 BCDEFGHI K
123050 BDEFGHI | 331 B DEFGHI
123025 DEFHI | 289 DEF HI
123000 DEFHI | 206 DEF HI
122975 DHI 143 D HI
122950 DHI 160 D HI <== Exper + VA L
122925 DH 218 D H
122900 DH 157 D H
122875 D 59 D
122850 D 23 D
The trader can calculate the Meta-Profile value area from the standard
formula, the middle seventy percent of the TPO count.
There are 102 TPOs, with 71 TPOs in Value Area.
Picking the center peak TPOs as 123125, the count goes
10 + 10 + 10 + 9 + 8 + 7 + 6 + 6 + 6 = 72
123125 10 10
123150 10 20
123100 10 30
123075 9 39
123175 8 47
123050 7 54
123025 6 60
123000 6 66
123200 6 72
Experimental: Value Area = 123200 - 123000
Now you know: prices above 123200 are an alert for value moving up,
and prices below 123000 are an alert for value moving down. Since you
are dealing with an incomplete day, you might arbitrarily extend the
value area a couple of ticks in either direction:
Experimental: New (+) Value Area = 123250 - 122950.
These values would be applied with the beginning of L period, 13:30,
posted on the profile above as Exper +.
Extending the Meta-Profile to the end of the day:
Commodity: UUU - Mini S&P 500 (CME-IOM)
Trading Date: 20050722
Start Time: 08:30
Stop Time: 15:15
Profile Type: 30 minute
CISCO Meta-Profile
-----------------------------------------------------
V Tick 30 minute
Price TPOs A Count Tick Bars
-----------------------------------------------------
123800 O 8 O
123775 O 33 O
123750 NO* 79 NO L
123725 NO 152 NO
123700 NO 226 NO
123675 LNO 240 L NO F
123650 LNO 249 L NO
123625 LMNO 238 LMNO
123600 LMN 171 LMN
123575 LMN 142 LMN
123550 LMN 221 LMN
123525 LMN 265 LMN
123500 LMN 157 LMN
123475 LM 99 LM
123450 BL 78 B L
123425 BL 85 B L
123400 BL | 148 B L
123375 BCL | 187 BC L
123350 BCL | 222 BC L
123325 BCL | 247 BC L
123300 BCL | 226 BC L
123275 BCL | 142 BC L
123250 BCEGL | 120 BC E G L
123225 BCEGJKL | 273 BC E G JKL
123200 BCEGJKL | 522 BC E G JKL <== VA U (K period)
123175 BCDEFGJKL | 645 BCDEFG JKL
123150 BCDEFGHIJKL > 625 BCDEFGHIJKL
123125 *BCDEFGHIJKL | 590 BCDEFGHIJKL
123100 BCDEFGHIJKL | 521 BCDEFGHIJKL
123075 BCDEFGHIKL | 436 BCDEFGHI KL
123050 BDEFGHIL | 372 B DEFGHI L
123025 DEFHIL | 298 DEF HI L <== VA L (K period)
123000 DEFHI | 206 DEF HI
122975 DHI | 143 D HI
122950 DHI | 160 D HI
122925 DH 218 D H
122900 DH 157 D H
122875 D 59 D
122850 D 23 D
Totals: 8983 Ticks in 39 prices.
+-------------------------------------+
| OHLC Bars (30 minute) |
+-------------------------------------+
Period TPO Time Ticks First High Low Last Hi Time Lo Time
------ --- --------- ----- ----- ---- --- ---- -------- --------
1 B 0830-0900 1265 123125 123450 123050 123325 08:50:16 08:30:44
2 C 0900-0930 928 123350 123375 123075 123125 09:00:27 09:14:05
3 D 0930-1000 1142 123150 123175 122850 122975 09:42:10 09:46:32
4 E 1000-1030 732 123000 123250 123000 123150 10:16:01 10:06:19
5 F 1030-1100 375 123125 123175 123000 123100 10:34:13 10:43:00
6 G 1100-1130 371 123075 123250 123050 123125 11:13:09 11:04:11
7 H 1130-1200 466 123100 123150 122900 122950 11:32:46 11:58:23
8 I 1200-1230 250 122975 123150 122950 123100 12:27:54 12:00:48
9 J 1230-1300 237 123125 123225 123100 123175 12:51:45 12:30:48
10 K 1300-1330 263 123150 123225 123075 123100 13:25:53 13:07:19
11 L 1330-1400 1243 123125 123675 123025 123575 13:58:36 13:33:08
12 M 1400-1430 449 123600 123625 123475 123625 14:29:56 14:25:59
13 N 1430-1500 709 123600 123750 123500 123650 14:42:28 14:33:03
14 O 1500-1530 553 123675 123800 123625 123750 15:06:07 15:02:00
-----
Total 8983
What happened: L period traded back and forth a bit and then took off
up. 123250 was passed early on and the market kept going until the close
at 123750, a move of 400. Strictly trading the intra-day Meta-profile pattern
put you in line for a large opportunity for gain as price broke above your
mid-day equilibrium level of 123200.
Most pattern trading relies on some pretty arcane rules and sets of patterns.
Meta-Profile patterns are exceedingly simple. Further, you
know exactly what a balance cluster or bell shaped pattern means; the bulk of
traders are finding value there. So if value changes, you are ready.
Meta-Profile 5 Day Overlay 10 Day Overlay
Resistance 123425 123850 123850
Support 122800 122500 121800
Experimental: New Value Area = 123250 - 122950.
Close: in balance
Market condition: in balance
Meta-Profile: in balance
Five Day Overlay: in Balance
Ten Day Overlay: in Balance
Twenty Day Overlay: no balance
What we know from the data:
Meta-Profile
Trading above 123425: breakout, alert for upward directional move
Trading below 122800: breakout, alert for downward directional move
Five Day Overlay
Trading above 123859: confirmation of upward directional move
Trading below 122500: confirmation of downward directional move
Ten Day Overlay
Trading above 123850: 2nd confirmation of upward directional move
Trading below 121800: 2nd confirmation of downward directional move
Comparing the experimental value area from today's trading only with the
value area found from yesterday (two different data days!), shows
Experimental: New Value Area = 123250 - 122950.
From Yesterday: Value Area 123425 - 122800.
The conclusion here is that the more current data of today gets one
to the alert level 175 earlier. This makes sense, since the market is
in balance at the start of the day and continues to work toward balance
from B through K periods.
Why does the market breakout in L period? If we knew and could predict it,
trading would lose a great amount of it's risk!