I received a number of e-mails and I noticed that the members of of one of my links expressed the same problem. But before I get into the blog, I’d like to ask a favour. Please direct questions on a blog to the blog. I’ll no longer answer private e-mails unless you have raised issues outside the post.
“Nice Blog on MP
I read the article & it seems the main idea he is saying is that one can have a fair predication of whether day will be two timeframe or onetimeframe based on
1. open type
2. open relative to yesterdays range/value area
Till here I understand but after that his use of IB , ATR & normal range is not clear”.
This was taken off one of the users to the Traderslaboratory: http://www.traderslaboratory.com/forums/f6/normal-range-in-the-market-profile-3536.html and is great summary of the e-mails.
I suspect that the authors of the e-mails have not read or perhaps not studied Daltons’ Mind Over Markets. If you want to be a student of the Profile, I believe you need to KNOW the contents of this book. Even the sections that have been superseded by the Steidlmayer Distribution (Modern Market Profile) are worth knowing for the insight they provide into the structure of the markets.
This is not the place for a full treatise of the Day Types. But I’ll use the Normal Day as an example of what is possible.
At the opening of any day, we need to define the likelihood of the day being rotational or 1-timeframe.
- The first tool I use to do this is the Steidlmayer Distribution. Is it in IPM (Initial Price Movement) mode i.e. directional mode? Is that likely to continue or change (I use statistics to determine this).
- The next tool is the relationship between today’s open and yesterday’s Value Area. For example, if the market opens within the previous day’s Value Area, then we are likely to see a rotational day.
- The third tool, the type of open. For example a Drive-Open (or as Dalton calls it Open-Drive, see Dalton page 63). A Drive-Open is usually a sign of a rotational day.
- The final tool is the relationship between the Initial Balance, Normal Range and Type of Day. You MUST know that in a Normal Day, the Initial Balance is 80% to 100% of the Normal Range. So, if the ES has an Average Range of 25 points and today, we have an Initial Balance of 24 points, the likelihood is we’ll have a Normal Day.
Tomorrow I’ll tell why I use three 30-minute periods instead of two.
Refer this blog post to a friend or colleague…
