Market Profile/Meta-Profile for Day-Trading: A Brief Introduction
Your job as a trend trader is to locate the start of a directional move (trend) and to stay with it until you detect the congestion (non-directional balancing) that signals end of trend. If you are a congestion trader you want to sell tops of balances and buy balance bottoms.
Facts to keep in mind:
The CBOT Market Profile (tm CBOT)
A Market Profile is a graphic displaying price and volume on the vertical
axis, with cleared price activity on the horizontal broken down by trading
period. Market Profile is a subset of the Liquidity Data Bank (LDB) report.
LDB reports are released only by the Chicago Board of Trade (CBOT).
The horizontal activity is identified by letters for each time period (for
half-hour periods the letters are A = 08:00 to 08:30, B = 08:30 to 09:00 and
so on). These letters are called TPOs (Time-Price-Opportunity).
Value is defined as those prices included within the central 70 percent
of the cleared volume, beginning at the peak volume of the day. Market Profiles are
available only from exchanges that report volume at price (Liquidity Data Bank).
Currently, the CBOT is the only exchange that reports out the LDB.
Since Market Profiles come from cleared volume data they are not available in real time even
for the CBOT.
Go to Market Profile Data: Current/History
The CISCO Meta-Profile(tm CISCO)
A Meta-Profile replaces the volume of the Market Profile with tick data,
generating TPOs (That-Price-Occured or Ticked). These TPOs are used as a
surrogate for the volume of the CBOT Market Profile. Value is defined as those
prices included within the central 70 percent of the TPOs. Meta-Profiles are
generated in real time and are limited only to markets that produce tick
data. Meta-Profile methodology was created by CISCO in 1987, it was published
in 1987 and it has been in continuous use on the CISCO Bulletin Board and
website since then. In balanced markets values from Meta-Profiles and Market
Profiles agree quite well. In directional markets they diverge, a finding potentially
quite useful to traders and market analysts. It should be noted that many subscribers
to Market Profile services are actually receiving the Meta-Profile.
Go to CMaPS: Intra-day Meta_Profile.
Market Profile or Meta-Profile is the basic building block in Auction Market Analysis
Market Profile/Meta-Profile Value Area is the market's best estimate of value for a day
The shape of the profile distribution is the picture of demand
Rejected prices identify a lack of value
Market Profile/Meta-Profile is a day oriented information set
Market Profile/Meta-Profile gives detailed information on a market's
potential for continuation
1. Extremes show rejected prices. In an uptrending market, a sound rejection of the top price
is an argument against trend continution.
2. In an uptrending market, an upper range extension* that holds argues for continuation of trend
3. In an uptrending market, more TPO's below the POC* argues for upside continuation
4. Trading above the previous day value area* shows upside strength
* Items defined in the following discussion
Market Profile/Meta-Profile give same value in balanced markets
but may differ in directional markets
Initial balance is calculated by CMaPS. Pit trading has a defined start and IB is the first hour.
Now days it is harder to define the starting time for the electronic markets. With CMaPS you have a choice:
IB is the first two periods based on the start time you select.
Go to Market Profile and Meta-Profile Compared.
Market Structure: The Market Profile/Meta-Profile Display
Describing the Profile
In the Meta-Profile above, the (profile analysis) elements are:
The day trader now has three new, powerful tools for market analysis on
the internet.
History of the Meta-Profile (tm)
The Market Profile concept first appeared in the CBOT Market Profile
Manual (1985) and in
1986 in the book 'Markets and
Market Logic', by J. Peter Steidlmayer and Kevin Koy. Steidlmayer was a
successful floor member at the Chicago Board of Trade (CBOT); Koy was a trader
and a journalist. Their book created a completely new way
of reading markets. For the first time, the public trader could measure
value and the intentions of the participants (exchange members and the public).
These concepts provide the day-trader with an unparalleled depth
of market understanding.
Market Profile/Meta-Profile Methodology: Sources
Early on, formal training on the profile was available from
Steidlmayer's Market Logic School and through a series of lectures by
James Dalton (principal author of 'Mind Over Markets, Dalton, Jones & Dalton,
Probus 1991'). The Steidlmayer/Koy book is out of print but the DJD book is still
available at Amazon.Com.
How the Trader Applies the Market Profile/Meta-Profile
In the Dalton, Jones, Dalton book (DJD), they make the strong point that
Market Profile (tm) trading relies on these factors:
1) Market Structure: The Profile Display
We repeat the Profile graphic from above:
2) Trading Logic: The Congestion Report
Dalton, Jones and Dalton poses two questions:
Which Way is the Market Trying to Go?
Answers to A. and B. require knowledge of the functions and behavior of
the various classes of trader on the floor (scalpers, commercials, members
trading off floor and members trading for the public).
3) Time: TPO's at price in the Profile; Counts in tick bars
More Profile Understanding: Transition to Congestion
With time and experience, a public trader will learn to discriminate between
real demand and, say, a short covering rally. Such a rally often follows
sustained selling. But it lacks new buyers and thus will be unlikely to
follow-through. The same is true for long liquidation breaks. Both types
of market are characterized by rapid movement immediately followed by
substantial congestion. The congestion picture is that of a 'p' for a short
covering rally (see example below) or a 'b' for long liquidation. A tip-off
for the start of congestion is five or more TPO's on a line. Here there are
nine TPO's at 12031.
CISCO Congestion Report
Yet More Market Understanding: Market Condition
Market condition is the framework that the day market trades within.
The condition can be balancing (bracketing), testing the balance for
breakout to trend, trending and testing for the trend end (and back to
balance). If you know the condition, you are in a better position to
make trading decisions.
Combination of Latest Day Profile (May 20) with Previous Overlay
As price rose above 12020 during the opening period, it broke out
of the bracket, signalling the potential start of a trend. That makes
the ensuing trading activity very interesting. Is it a real trend
start or just a false breakout? If it is a trend, we would want to stay
with it because of the potential for large gain. Alternatively, our
experience is that the T-bonds have been poor breakout traders over the
past several months. So we want to be doubly alert to a failed breakout.
Recap
Recall that Profile trading relies on three factors,
1) Market Structure, 2) Trading Logic, and 3) Time.
Disclaimer
This brief introduction is intended to familiarize the trader with CISCO's
three profile related intra-day market information tools. Some knowledge
of Profiles is assumed. The trader
who is unfamiliar with profile techniques is advised to investigate the
information sources contained in the paragraph above entitled 'Market
Profile/Meta-Profile Methodology'.
References
Mind Over Markets, Dalton, Jones, Dalton, Probus, 1991
For more information phone 1-800-800-7227 or 1-303-306-1521
Send e-mail to CISCO <dljones@cisco-futures.com>
CISCO address is: PO Box 441396, Aurora, CO 80044
Market Profiles and Meta-Profiles are graphics of developing market activity. They
plot price on the vertical axis and time on the horizontal. The two profiles look much the same
but they differ in important respects. At the end of a day in a balanced market they both
result in a visual picture of demand in balanced markets (bell curve). In the following we will
primarily use Meta-Profile displays since they cover all markets in a consistent manner. When a
Market Profile is used,
it will be so indicated. A (Meta) Profile for soybeans, July 98 contract, March 2, 1998 illustrates the form.
SN SOYBEANS (CBOT) JUL 98 2-MAR-98
Price TPO
6710 F | <== Upper Extreme price
6704 F | Upper Tail (single prints, 6710 - 6700)
6700 F |
6696 FG | Upper Range Extension (above Initial Balance, 6696)
6694 EFG | |
6690 DEFGH | | Initial Balance IB
6686 DEGH | | (IB is trading range of first two periods, (DE), 6694 to 6664)
6684 DEGHIJ | Value Area |
6682 DEGHIJ | 70% of Trade | <== Point of Control (POC, 6682)
6680 DEHIJK | (6694 - 6672) |
6676 DHIJK | |
6674 DHIJK | |
6672 DHK | |
6670 DHK |
6664 DK |
6654 K |
6650 K |
6646 K |
6644 K | Lower Tail (single prints, 6654 - 6620)
6630 K |
6624 K |
6620 K | <==Lower Extreme price
The Market Profile/Meta-Profile day is split into half-hour time periods,
A is 0800 to 0830, B is 0830 to 0900, etc. Soybeans open at 0930 (D).
In the profile above, the opening half hour ranged from 666 1/2 to 669.
The next period, E, covered 669 1/2 to 668; and so on for the rest of
the day.
Note that any occurrence of trading in a period creates a TPO at
that price. (A TPO is a Time Price Opportunity, or, for Meta-Profiles, That
Price Occurred). So the profile is a frequency distribution. The prices
668 1/2, 668 1/4 traded in six of the day's 8 half-hour periods. These
were the most frequently traded prices (most in demand). Least traded,
least in demand, were the prices at the highs and lows.
And the half-hour tick bars from the CBOT from which the Meta-Profile
is made:
FIRST HI LO LAST TIK TPO
9:30: 0 6690 6690 6664 6680 20 D
10: 0: 0 6690 6694 6680 6690 13 E
10:30: 0 6690 6710 6690 6694 7 F
11: 0: 0 6696 6696 6682 6682 10 G
11:30: 0 6682 6690 6670 6674 12 H
12: 0: 0 6674 6684 6674 6680 7 I
12:30: 0 6684 6684 6674 6674 11 J
13: 0: 0 6670 6680 6620 6630 18 K
For illustration, the Market Profile below can be contrasted with the
Meta-Profile we just studied.
Price Vol Brackets
LD 6710 116 F
LD 6704 116 F
LD 6700 292 EFG
LD 6696 10 EFG
LD 6694 492 DEFG VAU
LD 6692 2 DEFG
LD 6690 888 DEFGH
LD 6686 52 DEFGH
LD 6684 462 DEFGHIJ
LD 6682 22 DEFGHIJ
LD 6680 948 DEFHIJK
LD 6676 24 DEFHIJK
LD 6674 680 DEFHIJK
LD 6672 32 DHIJK
LD 6670 418 DHIJK VAL
LD 6664 78 DK
LD 6660 314 DK
LD 6654 76 K
LD 6652 2 K
LD 6650 210 K
LD 6646 14 K
LD 6644 72 K
LD 6642 4 K
LD 6640 56 K
LD 6634 12 K
LD 6630 68 K
LD 6624 94 K
LD 6620 90 K
LD 6614 26 K
LD 6610 18 K
We can note some differences. The final cleared data include some non-tick
information such as out-trades (errors), exchanges for physicals and whatever
else is included in the final cleared information. The value areas, however
are quite close even though value from the Meta-Profile came from the TPOs,
while value for Market Profile comes from volume. This was noted in the original
research and indeed validated the Meta-Profile methodology.
Price Range Letters Description
6710 F Upper Extreme Price
6710 - 6700 F Upper, Selling Tail, 2 or more single prints
(Public sellers control)
6696 FG Upper Range Extension, above Initial Balance
(Public buying pressure)
6694 to 6672 DE Initial Balance, first two periods
(Floor member control)
6682 DEGHIJ Point of Control (POC), maximum # of TPO's
none Lower Range Extension, below Initial Balance
(Public selling pressure)
6654 - 6620 K Lower, Buying Tail, 2 or more single prints
(Public buyers control or public sellers control
discussed below)
6620 K Lower Extreme Price
6694 - 6672 D thru K Value Area, central 70% of trading
Wider = better trade facilitation
Higher (from prev. day) buying
Lower (from prev. day) selling
TPO count above POC 23 TPOs (6710 - 6684)
TPO count below POC 31 TPOs (6680 - 6620)
The Next Day
Imagine you are trading on the 3rd of March. You know yesterday's Value Area
is 669:4 to 667:2. The market found value in this range. Prices at 671:0
to 670:0 (upper tail) were strongly rejected as were the prices 665:4 to
662:0. For today, price above 669:4 will alert you to an upside change in value.
Price below 667:2 is an alert for downside movement.
Below is the Meta- Profile for March 3. The open at 662:0 tells you the market has
broken out on the downside. The Meta-Profile of Mar 2 has given
you information upon which to base your trading, in this case the value area
dominated the other information that came from the extremes, the range extension and
the TPO count.
In the left column 'O' is open, 'C' is close.
META-PROFILE REPORT FOR 03 03 98
AND SEGMENTED AUCTION
COMMODITY -- SOYBEANS (CBOT) DAY JUL 98
Price TPO Segmented Auction
6626 G G
6624 DFG D F |G
O 6620 DEFGI D E F |G | |I | |
6616 DEFGHI |D |E |F |G |H |I | |
6614 DEFGHIJ |D |E |F |G |H |I |J |
6612 DEFGHIJ |D |E |F >G >H >I >J |
6610 DEFGHIJK >D >E >F |G |H |I |J >K
C 6604 DEFGIJK |D |E |F |G | |I |J |K
6602 DEFJK |D |E |F J K
6600 DEFJK |D |E |F J K
6594 DFK D F K
6590 D D
Meta-Profile for Reading the Market
Compared to yesterday, this is a very compressed market. It traded well
below yesterday value area (6694 - 6672) but the move occurred overnight
and offered the trader little opportunity to participate. Virtually the
whole day traded within the Initial Balance, i.e. under floor trader control.
Commercial traders behavior is an item of interest to most traders. The
Visual Graphic reports Commercial capping, which tends to seal off a move,
hence 'cap' the market. Following an upside cap, the market tumbles.
If heavy Commercial action occurs in the last half-hour of the day there
is no following period to check for a tumble. The possibility
exists that the Commercials may have been buying and not capping at all.
Visual Graphics
Example: Meta-Profile locates Commercial capping.
On January 30, the T-bonds showed heavy Commercial activity at the top.
The top price occurred twice, once in G period (11 - 11:30 AM) and also at
the close (13:30 - 14:00). The question: is the cap in G period or L?
The Profile can help find the answer.
Background on Commercial Capping
Meta-PROFILE REPORT FOR 01 30 03
AND SEGMENTED AUCTION
COMMODITY -- T-BOND (CBOT) DAY MAR 03
Price Brackets Segmented Auction
11124 GL G L
11123 GL G |L
11122 FGKL F G | | |K |L
11121 FGHKL F G H | | |K |L
11120 DFGHKL D F G H | | |K |L
11119 DFGHKL D F G H | | |K |L
11118 DEFGHJK D E F G |H | |J |K |
11117 DEFGHIJK D E F G |H >I >J >K >
11116 DEFHIJK D E F | |H |I |J |K |
11115 DEFHIJK D E F | |H |I |J |K |
11114 DEFHIJK D E |F | |H |I |J |K |
11113 DFHIJK D |F | |H |I |J |K |
11112 zDFHJK |z D |F | |H | |J |K |
11111 zDFJK |z D | |F | | | |J |K |
11110 zD |z |D | | | | | | | |
11109 yzCD |y |z |C |D | | | | | | | |
11108 yzCD >y |z |C |D | | | | | | | |
11107 yzCD |y |z |C |D | | | | | | | |
11106 yzBCD y >z | B >C >D > > > > | | | |
11105 zBCD |z | |B |C |D | | | | | | |
11104 zBCD |z | |B |C |D | | | | |
11103 zBCD |z | |B |C |D | | | |
11102 zBD |z | |B | |D | | | |
11101 zB |z | |B | | | | | |
11100 zAB |z >A >B | | | | | |
11031 zAB z |A |B | | | | | |
11030 zAB z |A |B | | | | |
11029 zAB z |A |B | | | |
11028 zA z |A | | | |
11027 zA z |A |
11026 zA z |A |
11025 zA z |A |
11024 z z |
An examination of the G period shows the high is followed by a pullback.
This could have been commercial capping. But the market recovered an hour or so later
and showed strength in K period (13 - 13:30). So the pullback in H period
was probably just normal market action (rejection of a tail). At the start
of H period the pullback is apparent.
The two TPO tail in G period (11124 and 11123) indicates the market rejected
that high.
So the capping reported on the Visual Graphic must have
come in L period. Simple understanding of the Market Profile clarifies
that problem.
Now the trader knows the capping came at the end of the day
and can react accordingly (i.e. examine the overnight market if there is one
or wait until the next day open to see if it
was really capping (price moving down) or non-speculative buying by the
commercials late in the day).
Three Intra-Day Profile Applications
Meta-Profiles (CMaPS) track a market's development throughout the day.
Half-Hour Tick Bars pinpoint the location and intensity of the most recent activity.
The Congestion Report contains important exit-decision data; that point in
the day where a market's movement has stalled.
These three applications, taken together, are all a profile trader
needs to day-trade. In many cases they permit day-trading without the
normal expense of a live quote machine. All three are included in the CISCO
Day Trader Package.
The Meta-Profile arose because of the limitations of the Market Profile. It was
end of day only (from the LDB report) and covered only markets cleared by CBOT.
The Tick-TPO method of CISCO was real time and applied to all futures markets
that produced tick data. The Meta-Profile methodology was published 1) Determining
the TPO Value Area, D.L. Jones, Market Logic School, Al. Ltr. V1-#3, Apr 13, 1987 and
2) Estimating the Market Profile Value Area for Intraday Trading, D.L. Jones, S&C,
Sep 1987. The S&C article is available from Stocks & Commodities Magazine.
Sources
Currently the Chicago Mercantile Exchange offers Market
Profile training courses by Dan Gramza. Professor Thomas Drinka's
'Technical Analysis Primer' is available on the Internet at
http://faculty.wiu.edu/TP-Drinka/tutorial.htm. The Chicago
Board of Trade book store stocks the text 'CBOT Market Profile' (parts 1-6).
Steidlmayer's revised 'Steidlmayer on Markets', is available from Wiley.
CISCO offers a 5 month training course on value based trading in which
Market Profile/Mets-Profile plays a leading role.
HomeStudy Short Course Details
CISCO carries a number of studies and research reports on Market Profile
and value based data subjects, including a copy of our book, 'Value Based
Power Trading'. A good starting place is our homepage in the section
'Background Reading'. There you will find information on value based data,
trading methodology and Auction Market Theory, the theoretical justification
for Market Profile and value based market analysis. The profile alone is found at:
Market Profiles Background
Click for free Technical Analysis Primer: Chapter 6 by Tom Drinka
Click for info on
CME courses on Market Profile given by Dan Gramza (dmgramza@worldnet.att.net)
Click to buy the book Mind over Markets by Jim Dalton
1) Market Structure
2) Trading Logic
3) Time
Market Structure is found from the Profile graphic. Trading logic
develops from learning who is doing what in the market, i.e. by understanding
the market forces (the Congestion Report illustrates one such force). Time
validates price (price over time = value), and time regulates opportunity
(time is measured by TPO's in a profile or the ticks in the half-hour bars).
Logic creates the framework for trading, the strategy; time generates the
signal; and structure provides the confirmation.
SN SOYBEANS (CBOT) JUL 98 2-MAR-98
6710 F |
6704 F | Upper Tail
6700 F |
6696 FG | Upper Range Extension
6694 EFG | |
6690 DEFGH | |
6686 DEGH | |
6684 DEGHIJ | Value Area | Initial
6682 DEGHIJ | 70% of Trade | Balance
6680 DEHIJK | |
6676 DHIJK | |
6674 DHIJK | |
6672 DHK | |
6670 DHK |
6664 DK |
6654 K |
6650 K |
6646 K |
6644 K | Lower
6630 K | Tail
6624 K |
6620 K |
The Profile day is split into half-hour time periods,
A is 0800 to 0830, B is 0830 to 0900, etc. Soybeans open at 0930 (D).
In the profile above, the opening half hour ranged from 666 1/2 to 669.
The next period, E, covered 669 1/2 to 668; and so on for the rest of
the day.
Note that any occurrence of trading in a period creates a TPO at
that price. (A TPO is a Time Price Opportunity, or, for the Meta-Profile, That
Price Occurred.) So the profile is a frequency distribution. The prices
668 1/2, 668 1/4 traded in six of the day's 8 half-hour periods. These
were the most frequently traded prices (most in demand). Least traded,
least in demand, were the prices at the highs and lows.
Another way to evaluate demand uses ticks as a substitute for volume. In
the display below, the numbers in the columns are tick counts for the
TPO's of the profile above.
TRADING DATE: 02 MAR 98
CONTRACT: JUL 98 SOYBEANS (CBOT) (S N)
D E F G H I J K
6710 1
6704 2
6700 1
6694 2 2 3
6690 2 5 1 2 1
6684 2 1 1 1 1 1
6680 2 5 2 4 5 1
6674 4 4 2 5 2
6670 4 1 2
6664 6 1
6654 2
6650 2
6644 1
6630 3
6624 3
6620 1
Tick counts show that the downward drive in K period was fueled by
relatively heavy trading. It was apparently not merely liquidation
by floor members who were caught long late in the day.
Most importantly, tick information is available during the trading
day and a day trader can act on it. Additionally, one could use the
information to trade on in the late afternoon, Project A, market.
A. Which way is the market trying to go?
B. Is it doing a good job in its attempt to go that way?
Exchange members generally are satisfied with a balanced market, one
with no directional impetus. Floor members go home 'flat', so they
have little effect on the longer term direction of the market. The
public traders do buy or sell and hold, creating demand. So the public
seeks to unbalance the market.
To answer the question 'Which way is the market trying to go?' we must
look to the public trading. If the sellers control, the market is
trying to go down. If buyers control, it is trying to go up. What tools
are available prior to the market open? We know the previous day's
behavior. We know the overnight behavior. And we know the opening call.
So who is controlling, buyers or sellers or the floor? If either buyers or
sellers or floor members control exclusively, it is a one-timeframe market.
More often the market is a tug-of-war between the members who want balance
and the public who want a trend.
What has the market been doing? Who is in control? If both the floor
and the public are active and no net movement is occurring, it is a
'two-time-frame' market. The short time framers (members) and the long
time-framers, the public are at loggerheads. The developing Meta-Profile
is the public trader's pipeline to the floor. Understanding the message
from the pipeline is the public's key to trading decisions.
The Congestion Report, illustrated below, is an example of the market telling
us which way it is trying to go. In this case, it was trying to go up early
in the day and did so successfully. Then, around E period (10:20 to 10:50)
The up move stalled, congestion set in, and then there was no attempted
direction. The market started the day attempting to go up, a one-time-frame
market, controlled by public buyers. When it started to stall, control
became shared between the public and the floor. Later, the trend collapsed
and the floor members prevailed. However, there remained enough public
buying to keep price from rotating downward.
A. Time validates price (price over time = value)
B. Time regulates opportunity (short time-frame trader vs longer time-frame
trader).
Time spent at a price measures market acceptance. If the time is long, the
market is highly accepting. In the soybean Mar 2, Profile above, six
of the eight periods of the day traded at 6684, 6682 and 6680. These were
the most popular prices of the day. These prices were accepted almost all day.
They are in the middle of the value area. Price moved as high as 6710 in F
period, but returned to the middle. It is the clustering of price around value
that creates the bell shaped curve so characteristic of the Profile.
If the time spent at a price is short, the market is rejecting that price.
Look at the same profile again. The top three prices, the upper tail,
occurred all within a single period. Price was bid up, sellers came in
and quickly sold. The tail is composed of prices that were rejected.
Now examine the lower tail of the soybean profile. Can we say the same
for it as for the upper tail? Not necessarily. K is the last period
of the day. Maybe the drive down is not over. First, look to the
close: if price came back to close above 6660 the down move would have
been negated and the prices rejected. The actual close was 6626, near the
low of the day. Later, after the close, price continued down. The tail
was not rejected. Rather it was a spike down, and that became apparent
during the work-out the next day.
TRM T-BOND (CBOT) DAY JUN 98 20-MAY-98 12:22 PM
12104 C
12103 CDG |
12102 zCDFGH |
12101 zCDEFGH |
12100 zCDEFGH* | 'p' at
12031 zABCDEFGH |
12030 zABCDE | 12:22 PM
12029 zABDE |
12028 yzAB | * is latest price
12027 yzAB |
12026 yz
12025 y
12024 y
12023 y
12022 y
12021 y
12020 y
12019 y
12018 y
12017 y
12016 y
As an illustration, take the congesting T-bond market of May 20 (above).
First look to the market condition of the previous day, May 19. That is
shown in the Overlay Demand Curve (tm) below. There, we have combined
five days of profiles to obtain the composite curve defined by the X's.
The market is in balance, with an upper limit of 12020 and lower limit
11930.
May 19, 1998 five day Overlay JUN 98 T-BOND (CBOT) DAY
TPO VOLUME OVERLAY AND PRICE ROTATION PROFILE
PRICE DYS L/F TPOS TPO VOL OVERLAY
12023 1 5 1 X
12022 1 5 1 X
12021 1 5 2 XX
12020 2 5 3 XXX <== Upper Bracket Limit
12019 3 59 5 XXXXX
12018 3 59 8 XXXXXXXX
12017 3 59 12 XXXXXXXXXXXX
12016 3 59 17 XXXXXXXXXXXXXXXXX
12015 3 59 24 XXXXXXXXXXXXXXXXXXXXXXXX
12014 3 59 22 XXXXXXXXXXXXXXXXXXXXXX
12013 4 59 22 XXXXXXXXXXXXXXXXXXXXXX
12012 4 59 17 XXXXXXXXXXXXXXXXX
12011 4 59 17 XXXXXXXXXXXXXXXXX
12010 4 59 11 XXXXXXXXXXX
12009 4 59 10 XXXXXXXXXX
12008 4 59 13 XXXXXXXXXXXXX
12007 3 5 14 XXXXXXXXXXXXXX
12006 3 5 18 XXXXXXXXXXXXXXXXXX
12005 3 5 20 XXXXXXXXXXXXXXXXXXXX
12004 4 5 24 XXXXXXXXXXXXXXXXXXXXXXXX
12003 4 5 29 XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
12002 4 5 27 XXXXXXXXXXXXXXXXXXXXXXXXXXX
12001 4 5 22 XXXXXXXXXXXXXXXXXXXXXX
12000 3 5 16 XXXXXXXXXXXXXXXX
11931 3 5 14 XXXXXXXXXXXXXX
11930 3 5 7 XXXXXXX <== Lower Bracket Limit
11929 1 5 1 X
11928 1 5 1 X
PRICE DYS L/F TPOS TPO VOL OVERLAY
12104 1 C
12103 3 CDG
12102 6 zCDFGH
12101 7 zCDEFGH
12100 7 zCDEFGH* * is latest price
12031 8 zABCDEFGH at 12:22 PM
12030 6 zABCDE
12029 5 zABDE
12028 4 yzAB
12027 4 yzAB
12026 2 yz
12025 1 y
12024 1 y
12023 1 5 1 Xy
12022 1 5 1 Xy
12021 1 5 2 XXy <== Breakout up
12020 2 5 3 XXXy 12021
12019 3 59 5 XXXXXy (during y period,
12018 3 59 8 XXXXXXXXy 0720 to 0750)
12017 3 59 12 XXXXXXXXXXXXy
12016 3 59 17 XXXXXXXXXXXXXXXXXy
12015 3 59 24 XXXXXXXXXXXXXXXXXXXXXXXX
12014 3 59 22 XXXXXXXXXXXXXXXXXXXXXX
12013 4 59 22 XXXXXXXXXXXXXXXXXXXXXX
12012 4 59 17 XXXXXXXXXXXXXXXXX
12011 4 59 17 XXXXXXXXXXXXXXXXX
12010 4 59 11 XXXXXXXXXXX
12009 4 59 10 XXXXXXXXXX
12008 4 59 13 XXXXXXXXXXXXX
12007 3 5 14 XXXXXXXXXXXXXX
12006 3 5 18 XXXXXXXXXXXXXXXXXX
12005 3 5 20 XXXXXXXXXXXXXXXXXXXX
12004 4 5 24 XXXXXXXXXXXXXXXXXXXXXXXX
12003 4 5 29 XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
12002 4 5 27 XXXXXXXXXXXXXXXXXXXXXXXXXXX
12001 4 5 22 XXXXXXXXXXXXXXXXXXXXXX
12000 3 5 16 XXXXXXXXXXXXXXXX
11931 3 5 14 XXXXXXXXXXXXXX
11930 3 5 7 XXXXXXX
11929 1 5 1 X
11928 1 5 1 X
The form of the distribution is very clearly up trend--as evidenced by
the breakout and then the run up (single prints at 12024 & 12025). The
pause is also a normal part of a trend, although it has more substance,
more TPO's than normal. The large amount of trading in the pause could be
congestion. In this case, the CISCO algorithm for congestion shows it to
be 'p' type congestion, halting the up move.
Congestion is the key to the trend-end phase. If not congesting, the behavior
is a pause and the trend is probably intact; if congesting, the trend is
likely over. The CISCO Congestion Report, in this case, signals congestion,
and hence, end of the (brief) trend.
The Congestion Report of a 'p' congestion by 12:22 PM would have certainly
caused the day-trader to exit. Where the day-trader would have entered is
not shown. Normally, entry would have come via a profile or other strategy,
whatever the day-trader normally used. For instance, the exit from a long
could have triggered a new short (a stop and reverse order) because the
market is expected to fall away from the congestion.
The swing/trend trade is treated as a complete trade. Both the entry and
exit are identified; the entry as a breakout from a bracket and the exit
from the failure of the trend to continue.
Although the trend lasted less than a day, the trade is still profitable
(long at 12021, exit at 12100, for 11 ticks, $343, less slip and commission).
The market structure and its development intra-day is well covered
by the Meta-Profile function. Building the profile is a continuous
process.
Trading Logic results from experience and training in market understanding.
One must learn to interpret Profiles i.e., to divine who is doing
what and where it is being done. Who is dominating: floor or public,
buyers or sellers? The Congestion Report adds a significant piece of
information about stalled markets.
Combining the Overlay Demand Curve
with the latest profile provides an in-depth view of the evolving market.
This joins longer term market condition with current structure, oftentimes
a potent mixture. Lastly, tick counts act as a surrogate for volume
analysis of demand.
Time regulates the markets. It validates price, leading to value. An
overlooked element of time is it's necessity in market evolution. Price
alone is very volatile, moving up and down, sometimes very quickly. The
trader who realizes that time must pass before decisions can become clear
is a trader who will likely avoid the trap of excessive trading. It is
this feature of markets, time validation, that obviates the need for up-
to-the-second quotes.
CBOT Market Profile, parts 1 - 5, CBOT, 1991
Value Based Power Trading, Jones, Probus, 1993
Go to CISCO home page http://www.cisco-futures.com
Go to CMaPS Meta-Profile data CMaPS.