Marketprofile: 3 Things To Improve Your Trading

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Every trader can access a wide range of professional tools thanks to state-of-the-art developments implemented in the ATAS trading and analysis platform.
Today we are talking about market profiles, one of the indispensable indicators for volume and market analysis. Of course, it requires a thorough examination of the market just like any other analytical tool. Nevertheless, we can immediately distinguish three main features of the market profiles that can increase the efficiency of your trading. With ATAS as trading software, you have the option to switch between the calculation methods volume, time, trades and TPO under market profiles.

The article is about using the market profile as volume profiles. The terms VAH, VAL, VA and POC differ not in the deffinition but only in the basis of calculation, e.g. time, trades, volume, TPO, etc.

In this article:

  • Key Levels
  • Advantageous location of trades
  • Market context

Key Levels

The most useful feature of the ATAS platform’s Market Profiles indicator is that it displays the most important levels of support and resistance in the form of a chart during the price movement, which consist of the following values:

  • Value Area High (VAH) – the highest price in the value area
  • Value Area Low (VAL) – the lowest price in the Value Area
  • The maximum (Point of Control, POC, VPOC) – the price level at which most of the transactions were carried out during a selected period.

Simply put, this indicator shows the levels at which the future asset could be revalued by market participants. Consequently, these prices can be used by a trader when opening or closing positions.

The value area and the POC clearly show where the market is in balance and where the extreme values of this equilibrium lie.

A market profile that characterizes an out-of-market market as well as its range of values, VAH, VAL and POC are outlined below:

The most important components of the MArket profile
The most important components of the market profile

The market could be considered very cheap by a trader or very expensive in the range of extreme values. However, the market situation could change in the short term at the time of the creation of the market profiles. Consequently, the participants’ perceptions of the very low or very high costs of the asset may also change. These changes affect the position of all the basic elements of the market profiles, such as: Value Range, VAH, VAL, and POC.

The current realtime market profiles or volume profiles and their values are constantly changing – it is Dynamic

The following lines provide examples of how to use VAH and VAL in trade: Strategy for using the footprint using the EUR/USD Future 6E example.

Advantageous location of trades

The balance range, value range, or value area is the price range within which about 70 of all volumes were executed in a selected period. The other 30 of the transactions are executed outside the value range (15 above the VAH and 15 under the VAL). If the price is above or below the value range, there is a high probability that it will return to the balance range. Consequently, when opening stores for sale/purchase, you must always take into account that the price that leaves the value range could most likely return to them.

Graph 1: 15-minute chart of EUR/USD futures (ticker: 6E) in the ATAS platform.

As you can see in Graph 1, the price was based on the VAL and returned to the area several times during the entire trading day on 26 June. The similar situation was re-observed the next day (27 June).

However, the best thing about trading outside the value area is that if the market situation changes, these changes would also be felt outside the value range. This would help the trader who is waiting for the price to return to the balance area to limit the risk size for open trades to the maximum.

The following picture No. 2 shows the area of the picture No. 1 bordered with a grey dashed line in detail. With the footprint chart, you can see in real time who is taking the initiative near the key levels of the market profile. It helps them to quickly close a loss-making business without waiting for a stop loss and to open a new trade in the profitable direction.

Graph 2. 15-minute chart of the EUR/USD Futures (Ticker 6E). The Bid x Ask Footprint Chart of the ATAS platform.

Market profiles and market context

A trader should have an understanding of the current market situation and its context. As a trader, you should ask yourself: “Is the market unbalanced and is it moving with a focus or is it in a balance between supply and demand and in what period of time? What is the market context close to critical support and resistance levels and in what period of time? Do we expect news that could change the current market situation? A strong trend in a smaller unit of time could only be part of the correction in a larger time frame. Therefore, it is always important to know where the main levels of support and resistance are in larger periods.

The market context is quite complex. However, the market profiles can help you systematize market information in a convenient way, even in daily and weekly periods. The main market profile levels in larger periods become a safe area for your trading decisions.

Market profiles are not an easy topic. Further studies are needed. Nevertheless, after downloading the ATAS platform free of charge, you can immediately use the described features from the MarketProfile. In this article, we mentioned only some of the ideas for the efficient application of market profiles in retail. We believe that the MARKET Profile indicator of the ATAS platform will help you to better understand the market. Have fun acting!

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