Our students asked us to do this article

Our students asked us to do this article

Our students asked us to do this article

Many people will say: it's easy to trade on the trend. But how do you recognize a trend? When is the best time to enter the market? The secret is revealed by the leading trader of the Forex Academy.

In our daily trading, we are used to bars and candles. For us, they are commonplace. The problem is that sometimes the information they give us is not enough to accurately determine the trend and find a good entry point. What else can help us?

Back in the days of trading in the pit in Chicago, the "market Profile" method was developed, which has long remained a favorite method of professionals. The method is based on the image of the price on the chart as a horizontal histogram.

There are two main directions in building a market profile: tick volume and traded volume. The tick volume shows us how much time the price spent at a particular level. The actual volume shows how many contracts were traded at specific prices. For the most part, these graphs will coincide, but there will be moments when the difference will appear.

Let's see how it looks on the chart.

In the screenshot on the left we have a tick volume, on the right we have a traded volume:

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Do not be afraid of these differences. Such contradictions are very rare. As a rule, these charts only complement each other.

What is the "market Profile" based on?
This method is based on the idea that market prices are subject to a normal distribution most of the time:

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If we turn to the theory of normal distribution, then deviations of one standard from the average cover about 70% of all possible results.

In the market profile, this range is the area of value, determining fair values for a particular instrument.

How do I use the "market Profile" in my trading?
There are two main ways to use the market profile:

Analysis of the dynamics of value areas;
Search for support/resistance levels using the "market Profile".
Dynamics of value areas
The dynamics of value areas help us determine the direction of the trend, as well as its absence. If the value areas move in the same direction, we state that a trend has formed in the market:

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If the value zones intersect each other in different directions, we state the presence of a flat in the market:

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Such situations, when the value zones intersect each other, tell us that there is no conviction in the market.

Therefore, the probability of a strong movement that will allow us to earn is low and it does not make sense to enter the market.

Search for support/resistance levels
The market profile helps us determine support/resistance levels. The main level that shows us the market profile is the control point, which is determined by the longest histogram:

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This is not the end of using the market profile.

There is also an analysis of the shape of the histogram, a combination of value zones, and a number of additional support and resistance levels that help determine the market profile.

Want to learn more about using the market profile? Then come to us for training! Sign up for a special course from the Forex Academy on VSA analysis!

What will the special course give You?
In just 6 sessions with a professional trader, you will learn the basics of volume trading and how to use support and resistance levels. You will learn how to cancel rebounds from support and resistance levels, and search for entry points after breaking through levels. You will also learn how to set Stop Losses correctly! Where else can you learn so much useful information?

Stop wasting time on non-working strategies, constantly find yourself in the red because of ignorance of the basics of trading. It's time to trade for real! And we will teach you this. Just click the button below and sign up for training!

 

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