Explaining Market Profile....
I enjoy posting and I enjoy helping traders to become better traders. Trading is difficult and it gets more difficult all the time with AI, algorithms and high frequency strategies. You don't know it but your brain can still outperform them all when it comes to identifying potential trade set ups. It is still the most powerful computer out there by far. Yes it will be caught and passed within the next ten years when singularity becomes a reality but until then you have a chance.
There is a lot made about Market Profile. I use it myself more times than not to identify potential set ups. You can call them market maker areas, key supports or resistances, pivot points, Fibonacci or whatever you want. What all come down to is where the market gets made.
Now when making the market it is far from a perfect thing. You are often led to believe that certain areas hold more power than others. Not really. When the market gets made it gets made in an area. Not a line or a price. An area. Read that again just so it gets in there. In other words if you are looking at consistently being profitable using tight stops when you come to a volume area or key market maker area you will likely miss the majority of the move because you will be either stopped out for a small loss or you will make some quick cash but chances are your runner will never get off the ground. Price whips back and forth when the market is being made and it can be 30-50 ticks or more. Sometimes much more when the big fellows are battling it out. You think it is some conspiracy against you and your strategy but that is simply not the case. You are being whip sawed out of your position by buyers and sellers uniting in a particular area. That is why the US session is generally much more difficult to trade than the European session because there are more participants, higher volume being executed when the most liquid markets in the world open and of course the high frequency traders bashing each other.
Now I posted a chart below in CL today to show you how most traders waste their time chasing price action all over the place when all you had to do was to wait for one of either the bulls or the bears to win out. Eventually as you can see the bulls did. It took a few hours before that happened though. Most of the day to be exact. However look at the market maker area. It is approximately 50 ticks. This is the futures market. Today. I over traded myself today testing a strategy. However I likely would only have taken the trade at the 52.89 area. I would have been wrong once and right the second time. However if you are simply directionally trading well you would have been right to be on the bulls side today although there was not really any movement at all on a macro sense. There hasn't been for over a year almost. Yes there have been a few hick ups up or down but price has stayed between 48 - 53 most of the year. Say 50 for average. So what are you doing when you trade. Well it is quite simple, unless you are riding the long term trend up from 28 you are trading market noise. Nothing else. That means you are battling the banks all day for a few ticks. Not easy to do. They don't lose very much.
Why?
They are on the opposite side of the trade of you in most cases. Get it.
Now where you are able to make money is the fact they beat up on each other and this is what you are hoping to do. Ride the coat tails of whoever wins the daily battle or the macro battle. As you remember me writing before the commercial guys are always right so the over all trend in oil is still DOWN. Make no mistake about it.
There is a lot made about Market Profile. I use it myself more times than not to identify potential set ups. You can call them market maker areas, key supports or resistances, pivot points, Fibonacci or whatever you want. What all come down to is where the market gets made.
Now when making the market it is far from a perfect thing. You are often led to believe that certain areas hold more power than others. Not really. When the market gets made it gets made in an area. Not a line or a price. An area. Read that again just so it gets in there. In other words if you are looking at consistently being profitable using tight stops when you come to a volume area or key market maker area you will likely miss the majority of the move because you will be either stopped out for a small loss or you will make some quick cash but chances are your runner will never get off the ground. Price whips back and forth when the market is being made and it can be 30-50 ticks or more. Sometimes much more when the big fellows are battling it out. You think it is some conspiracy against you and your strategy but that is simply not the case. You are being whip sawed out of your position by buyers and sellers uniting in a particular area. That is why the US session is generally much more difficult to trade than the European session because there are more participants, higher volume being executed when the most liquid markets in the world open and of course the high frequency traders bashing each other.
Now I posted a chart below in CL today to show you how most traders waste their time chasing price action all over the place when all you had to do was to wait for one of either the bulls or the bears to win out. Eventually as you can see the bulls did. It took a few hours before that happened though. Most of the day to be exact. However look at the market maker area. It is approximately 50 ticks. This is the futures market. Today. I over traded myself today testing a strategy. However I likely would only have taken the trade at the 52.89 area. I would have been wrong once and right the second time. However if you are simply directionally trading well you would have been right to be on the bulls side today although there was not really any movement at all on a macro sense. There hasn't been for over a year almost. Yes there have been a few hick ups up or down but price has stayed between 48 - 53 most of the year. Say 50 for average. So what are you doing when you trade. Well it is quite simple, unless you are riding the long term trend up from 28 you are trading market noise. Nothing else. That means you are battling the banks all day for a few ticks. Not easy to do. They don't lose very much.
Why?
They are on the opposite side of the trade of you in most cases. Get it.
Now where you are able to make money is the fact they beat up on each other and this is what you are hoping to do. Ride the coat tails of whoever wins the daily battle or the macro battle. As you remember me writing before the commercial guys are always right so the over all trend in oil is still DOWN. Make no mistake about it.
No comments:
Post a Comment