How to use Market Profile when trading

If you want to start using Market Profile in your trading, you should start with the following essentials:

  • Point of control (maximum value of volume traded at a certain price)
  • Value area high (upper limit of 70% equilibrium area);
  • Value area low (lower limit of 70% equilibrium area).

Examples of Market Profile patterns

1. For a declining (bearish) trend

If the current trading session opens below the yesterday´s VAL (the lower limit of the value range), returning to VAL is a signal to short sell as well as a possible return to yesterday’s point of control (POC). Stop loss order is supposed to be placed at the VAH (the upper limit of the value range).

2. For a growing (bullish) trend

If the current business session opens above the yesterday´s VAH (the upper limit of the value range), returning to VAH is a signal to open a long position as well as a possible return to yesterday’s point of control (POC). Stop loss order is supposed to be placed at the VAL (the lower limit of the value range).

 

 

The situation is clearly viewed on tradeWinger visualizations Volume Profile and Market Profile Plus as you can see on the picture below: