Markets trend 30% of the time, but these 30% moves result in the most profitable times for day and swing traders.
These are
the kind of moves generated by longer time frame players and generally
come out of balance zones. They also come 1 or 2 sessions after a
neutral day and hence we give neutral days a lot of importance at Vtrender.
The above profile shows a 2 day balance zone between 4730 and 4848 NF.
On Thursday morning, I had tweeted out this message-
4731/42 are lower ends of 3 day balance zone. After a neutral day possibility of new trend is higher
However
later that day, the market reversed above the 4731 mark and went
through the entire balance area the next day covering what we popularly
call the value area rule or the 80% rule.
But there was a reversal later on Friday below 4730 and the markets went into imbalance immediately.
This
is the truth of Market profile- Markets always go from balance to
imbalance as buyers and sellers jostle for their perception of value.
What happens now?
The
gap down open confirms a market still in Imbalance mode. The evidence
we want to see if is a D shaped profile showing buyers coming back into
the equation.
On Friday
as the market moved out of the balance zone it put in an uncorrected
swing of 180 points. Such uncorrected swings are generally the start or
the end of a new trend.
The biggest reaction on that one way down by the buyers was 4626 to 4660 or about 34 points.
So far
this morning we have seen a reaction off the lows of 4565 to 4598 or
about 33 points. Still not quite there for the buyers yet.
What I expect to see later is for buyers to step
up and take the market to twice reaction target of 66 points. This will
show me evidence that buyers are interested at current prices. Failure
to do so will keep the swing down.
Looking ahead to the week, a retouch of the balance zone and breakdown level of 4730 if and when it materialises will be another
opportunity to get short into the markets.Above that the high volume
node of 4848 will be a big resistance as we have seen all through the
week.
For
the day time frame players, we are watching 4624- the gap fill zone and
the high volumes at 4627 for reactions. Lower down our immediate
targets for the day are 4536 and 4523.
The Orderflow has kept us ahead of the trends.
Here is the updated record.
Posts
5 comments:
Dear Shai here r few points abt MP i want to clear, plz answer them whenever u r free..
1)For 80%rule , opening outside value area is requirement or applies also on going out and again coming in??
2)Which time frame value areas sud i look into for intraday trade...30 mins chart or...?
3)Where to place SL for 80% rule trade for intraday.
4)How to use VWAP for our trades.
Thanks Shai trying to learn from u.:)
Sorry one more thing..5)from which time we sud start using developing MP values of the same day rather than MP values of previous day??
Thanks
@ Bizagra,
Market profile is a system of trading to be utilized to interpret market behavior.The context is always value.
1) 80% rule is actually a value area rule working with a 80% success ratio. It works on all time frames and across day , swing modes.The day traders look at it in context of the day's action, but with a bit of experience you should be able to identify composite movements on market time.
2) the 30 mins TF eliminates a lot of noise and is useful to see the moves as well. Again it is a personal choice .
3) Once it gets into value, Sl will be below the value level entered by the mkt.
4) Vwap works best in trending markets to identify changes. It's utility is a lot lesser in rotational markets.
5) At vtrender we use volume profile to identify the current auction w.r.t where it developed value yesterday.For the current day we use only the DPOC which is the developing point of control
Thanks Shai for all the help.
Expecting a gap open at cash 4675 and a rally to 4910 (cash) in coming days.
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