Market Profile

10 Things to know before trading with Market Profile

Market Profile is a great tool to understand the markets, market sentiments, helps traders to understand the dominant traders, weaker hand traders much better than most of the available technical tools for the technical traders. This tutorial explores some of the basic things a trader has to consider if one would like to start market profile-based trading as their trading career.

1) For the Starters and those who are very new to Market Profile. Market Profile is more of a graphical tool and one has to visually use the tool to understand the market context and later one has to interpret the visual information manually into trading context and trading context into trading strategies.

2) There are three things that are more important for a trader to become more professional

i) Managing the Trading Expectations
ii) Trade Management
iii) Risk Management

Market Profile helps one to understand the markets better and if the trading context is changing it also brings the flexibility to change the trader’s views as the markets itself changing its direction and so the trading context as well.

3) Market Profile is a decision support tool that can be used to take standalone trading decisions using market profile alone or can be combined with indicators to manage risk and manage trading expectations.

4) Market Profile helps traders to focus on meaningful trading insights and helps traders to focus on objectivity by adopting a trading process/ trading framework to stay away from the external noise + cognitive bias.

5) Learning Market Profile brings a unique ability to handle any kind of challenging market situation (Trending, Sideways, High Volatile, Low Volatile, Extremely volatile markets). Market Profile brings more systematic thinking and better trading habits to capture the edge consistently.

6) Market profile strategies cannot be completely automated. As the markets change, the visual rules change too on a daily basis. Every day is a new day for those who are using Market Profile. Some parts of Market Profile strategies can be automated however, the market profile nurtures the traders to make better trading decisions and help traders to focus on the recent information as well as the past information. Though the past information about the market activity is helpful, the recent information holds more weightage than the past information.

7) Market Profile provides more conceptual thinking. Market Profile explains the “what, why, when, where, who and how” of the price action. This way market profile explains the current market environment which brings more relevant information for the short-term traders and very short-term traders.

Learning Market Profile brings conceptual thinking to traders who want to cultivate the habits of taking better trading decisions even in difficult trading environments.

Market Profile explains,

What is happening in the markets (experience)
Why a particular move should happen (reasoning)
When the anticipated move could happen (time)
Where the price could move – (target)
Who is dominating the markets – (participants)
How the possible price action could happen – (scenario)

8) Market Profile helps trades to build/anticipate the trading scenarios based on the ongoing trading sentiment, visual reference levels, and the ongoing market confidence + price action setups. Market Profile is not just about taking a stop loss and anticipating a target but more of a trading lifestyle.

9) Learning with Market Profile takes its own time. However, the outcome of the learning process is powerful. Market Profile Learning + Continuous effort + deliberate practice is what makes one a successful trader. Dedicated continuous learning + practice is what brings a better trader in yourself.

10) Trading with Market Generated informations using Market Profile helps traders to slow down their thinking, avoids emotional trading decisions, bias-free trading decisions based on a practical visual approach.