August 24, 2010

Market Profile Day Trading Entry Rules and Compensating Factors SchoolOfTrade.com

This is going to be an overview of how we use market profile.There are hundreds of ways to earn income as a trader, this is what I see as the best way to use this tool, known as Market Profile.

I think most traders are given the wrong information and they’re made to think that market profile is some secret weapon, when in reality this has been around for half century already. Check out the video below for a tutorial over Market Profile.

How do we trade it?
Define the value area bracket, next Download the indicator. If we stay inside the value area bracket from yesterday we can trade long or short with the same effectiveness. Look to buy the lows and sell the highs. Stay away from the middle (point of control, POC).
If we break out of the bracket we have a couple of different options, depending if the break is to the long or short side. If it breaks to the long side = buyers are in control and we are looking for a long entry. If it breaks to the short side = sellers are in control and we are looking for a short entry.
How do we make MONEY with this?
– Example: price trading below the VAL, so you use a 4-range chart and a breaker short pattern to sell those highs of the bracket below us
– Example: price is trading INSIDE the VA bracket, I can short the highs or buy the lows with a simple 2-step pattern

In conclusion

I will use the VA Bracket to show me where the market see value. If we trade inside the bracket, I’ll sell the highs and buy the lows. If we break out of the bracket I will buy above or sell below the bracket.

Why don’t we see this being used? Trying to keep things as simple as possible and this is a little more advanced.

MP Indicator, what times do you set it for? The open and close times from the exchange:

o E-mini = 930-415 EST
o Crude Oil = 900 – 230 EST

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