Baz’s question made me realise that the section of Nature of Trends involving Market Profile will not mean much to anyone not familiar with the method. So, tonight I’ll outline some key ideas from the Steidlmayer Distribution i.e. the second stage Market Profile that involved distribution patterns of no fixed periods. The original Market Profile used fixed 30-minute periods.

The Steidlmayer Distribution begins with a directional move I call an Initial Price Movement (IPM). At some point, the directional move ceases, and a correction begins. This correction is called Development. Development tends to centre around a central price, called the Point of Control.

Figure 1 shows the three ideas on a Market Profile.

FIGURE 1 Market Profile

Figure 2 shows the same idea using daily data and Barros Swings.

FIGURE 2 Barros Swing

In Figure 2, to identify the start of an IPM, I locate a swing extreme and find the closest bar that has no overlapping ranges to its left. Using Barros Swings to identify development, we need to see ‘A’ and ‘B’ (See Nature of Trends: Labeling Congestion Markets).

It’s difficult to see the Point of Control without drawing the Profile. In Figure 3, the Point of Control is .9307 and we see that prices have crossed it 11 times. With this information, you can use the formula in Nature of Trends to determine if Development has completed.

FIGURE 3

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