Market Profile FAQ
Find answers to some of our most commonly asked questions about the Market Profile.
The Market Profile:
- Helps you to access the relative importance of key support and resistance areas, potential risk management levels (stop placement), and potential profit levels (targets).
- Gives you an in-depth view of the market’s developing auction process that is essential to identifying trends or trading-range sessions.
- Displays both time-based and contract fairest-price levels and value areas derived from market-generated information in addition to support in trading value – not price.
Yes. The Market Profile identifies value. In fact, half of the traders who use the Market Profile use it for intermediate-term, swing, and intraday-trading futures, equities, indexes and other markets.
No, it will not. The Market Profile is not a trading system nor does it provide buy or sell signals. The Market Profile is a decision-support tool that provides a value-based context for tracking price movement and identifying high-probability trading opportunities.
While there are numerous concepts related to using the Market Profile in your trading, we believe some of the most important are:
- The dynamics of the market auction process
- The concepts of excess and balance
- The difference between price and value and the impact of time and contract volume on both
- Multiple timeframes
- The behavior of various market events represented by patterns, such as short-covering and long-liquidation
No. The Market Profile is used to read and interpret market activity.
Initially, new traders will invest more time studying and understanding the market while gaining experience through deliberate practice.
Experienced traders may find the unlearning of previous concepts and the learning of new ones can take as much time, if not more, to gain a solid understanding of how the Market Profile can facilitate interpretation of the market’s auction process.
A great way to get started is by reading the first 58 pages of Jim Dalton’s book, Mind over Markets, and then his book, Markets in Profile. After that, read the rest of Mind over Markets.
In addition, we highly recommend publications by Dan Gramza and J. Peter Steidlmayer.